Directors, Audit and Supervisory Board Members
and Executive Officers
Directors

Yasuo Nakayama

FounderPresident andRepresentative Director

SECOM CO., LTD.

Makoto Iida

Year ended March 31, 2017

Yasuyuki Yoshida

Junzo Nakayama

Ichiro Ozeki

Tatsuro Fuse

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

Senior Executive Director

Executive Director

Executive Director

Executive Director

Tokyo 150-0001, Japan

ANNUAL REPORT 2017

SECOM CO., LTD.

https://www.secom.co.jp/

Tatsuya Izumida

Tatsushi Kurihara

Takaharu Hirose

Hirobumi Kawano

Hajime Watanabe

Director

Director

Outside Director

Outside Director

Outside Director

Audit andSupervisory
Board Members

Executive Team

Takayuki Ito

Directors

Ryohei Komatsu

Yasuo Nakayama

Kenichi Furukawa

Yoichi Sugimoto

Osamu Ueda

Takehiko Senda

Hideki Kato*

President andRepresentative Director

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Makoto Yasuda*

Yasuyuki Yoshida

Masahiro Takeda

Sumiyuki Fukumitsu

Yoshinori Yamanaka

Takashi Nakada

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Teruhisa Yoshimura

Kensuke Shindo

Seiya Nagao

Managing Executive Officer

Executive Officer

Executive Officer

Hideo Morishita

Yasufumi Kuwahara

Noriyuki UematsuManaging Executive Officer

Executive Officer

Executive Officer

Toshiaki Mizuno

Noriyuki Fukuoka

Osamu Nagai

Managing Executive Officer

Executive Officer

Executive Officer

Shokichi Ishimura

Takeshi Akagi

Atsushi KomatsuManaging Executive Officer

Executive Officer

Executive Officer

Keitaro Arai

Sadahiro Sato

Kazuhiro Mitomo

Managing Executive Officer

Executive Officer

Executive Officer

Masao Yokomizo*

Senior Executive Director

Junzo Nakayama
Executive Director*Outside

Ichiro Ozeki
Executive Director

Tatsuro Fuse
Executive Director

Tatsuya Izumida
Director

Tatsushi Kurihara
Director

Executive Officers

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, comfortable and convenient.

FSC ダミー(As of July 31, 2017)87

ANNUAL REPORT 2017

Printed in JapanSECOM Annual Report 2017

セコムアニュアルレポート2017(英語版)

表紙

おもて

三校

Profile

SECOM CO., LTD.,

Since its establishment in 1962,
has sought to offer services that better benefit society, in linewith its mission of helping to achieve a society free from concerns
and its commitment to providing reliable peace of mind.
Credited with creating the “security services” industry in Japan, SECOM has sought to keep
abreast or ahead of the times, developing and advancing acceptance of a wide range ofsystems and services that address diverse social imperatives. These include on-line security
systems for commercial subscribers, home security systems, a mobile personal security systemfor outdoor use and a small autonomous flying surveillance robot.
SECOM, which comprises the parent company and the companies of the SECOM Group,
strives to create services and systems that deliver safety and peace of mind, as well as makelife more comfortable and convenient, whenever and wherever necessary. Accordingly, weare pushing forward with efforts to realize our Social System Industry vision, which describes
a framework of distinctive, integrated services and systems. Today, our business portfolio
encompasses security services, fire protection services, medical services, insurance services,
geographic information services, information and communication related services, and realestate and other services. We are maximizing synergies among these businesses by promoting
the “ALL SECOM” concept, which focuses on rallying Group strengths to broaden our selection of services, as well as reinforcing our relationship with society by alleviating everyday
problems and resolving concerns to provide seamless peace of mind. Through such efforts,
we will continue working to grow together with society.
We have also expanded outside Japan. Currently active in 20 countries and territories,
where we provide uniquely SECOM security services, fire protection services, medical services

Contents

and geographic information services customized to reflect local needs and sensibilities, we
continue to bolster recognition of the SECOM brand and grow our overseas operations.

2 Financial Highlights
4 A Message to Shareholders
8 SECOM’s Vision
9 Special Feature:
The SECOM Group’s Vision for 2030
12 SECOM Today
28 SECOM’s CSR
31 Financial Review
35 Audited Financial Statements
68 Other Financial Data
73 Consolidated Financial Data (Based on Japanese GAAP) (Reference)
77 Nonconsolidated Financial Data (Based on Japanese GAAP) (Reference)
81 Corporate Information
85 SECOM’s Basic Business Areas
87 Directors, Audit and Supervisory Board Members and Executive Officers

SECOM Annual Report 20171

Financial Highlights

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

U.S. GAAP

Japanese GAAPSECOM CO., LTD. and Subsidiaries

In millions of yen

In thousands of U.S. dollars

SECOM CO., LTD. and Subsidiaries

In millions of yen

In thousands of U.S. dollars

For the years ended/as of March 31

Years ended March 31

Year ended March 31

For the years ended/as of March 31

Years ended March 31

Year ended March 31

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

2017

2016

2015

2017

¥1,031,261
130,178
91,387
1,763,278
929,242¥ 983,428
118,905
84,072
1,681,332
865,278¥ 945,238
122,007
80,184
1,525,863
825,969$ 9,207,688
1,162,304
815,955
15,743,554
8,296,803

In yenIn U.S. dollars¥ 367.37
175.003,784.27$ 3.741.25
38.01

Per share of common stock:
Net income attributable to SECOM CO., LTD.
Cash dividends
SECOM CO., LTD. shareholders’ equity¥ 418.71
140.004,257.50¥ 385.19
130.003,964.40

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the approximate rate of ¥112=US$1, the rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2017.
2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares outstanding during each period,
less treasury stock.
3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of each period, lesstreasury stock.
4. Cash dividends per share of common stock are based on dividends approved and paid in each fiscal year. At the general shareholders’ meeting heldon June 25, 2014, shareholders approved a proposal to pay an annual dividend of ¥115.00 per share for fiscal year 2014. Subsequently at the Boardof Directors’ meeting held on November 10, 2014, directors approved a proposal to pay an interim dividend of ¥60.00 per share for the first half ofthe year ended March 31, 2015. Because the interim dividend, the record date for which is September 30, was newly adopted in the year ended
March 31, 2015, the actual amount of dividends paid to shareholders for the year ended March 31, 2015, was the aggregate of the two. The actual
amount of dividends paid to shareholders for the year ended March 31, 2016, was the aggregate of a year-end dividend of ¥65.00 approved at thegeneral shareholders’ meeting held on June 25, 2015, and an interim dividend of ¥65.00 approved at the Board of Directors’ meeting held on
November 9, 2015. The actual amount of dividends paid to shareholders for the fiscal year ended March 31, 2017, is the aggregate of a year-end
dividend of ¥70.00 approved at the general shareholders’ meeting held on June 24, 2016, and an interim dividend of ¥70.00 approved at the Boardof Directors’ meeting held on November 9, 2016. At the general shareholders’ meeting held on June 27, 2017, approval was granted for a proposal
to pay a year-end dividend of ¥75.00 for the year ended March 31, 2017. (For further information, please see Note 18 of the Notes to Consolidated
Financial Statements.)

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

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

2017

2016

2015

2017

¥ 928,098
131,050
147,033
84,1701,650,176
1,013,253¥ 881,028
128,582
134,826
77,0391,568,052
943,144¥ 840,722
123,615
136,688
75,392
1,410,715
907,341$ 8,286,589
1,170,089
1,312,795
751,518
14,733,714
9,046,902

In yenIn U.S. dollars¥ 345.42
175.003,667.33$ 3.441.25
36.49¥ 385.64
140.004,086.87¥ 352.97
130.003,817.82

Note: Cash dividends per share of common stock are based on dividends approved and paid in each fiscal year. At the general shareholders’ meeting held on
June 25, 2014, shareholders approved a proposal to pay an annual dividend of ¥115.00 per share for fiscal year 2014. Subsequently at the Board of
Directors’ meeting held on November 10, 2014, directors approved a proposal to pay an interim dividend of ¥60.00 per share for the first half of theyear ended March 31, 2015. Because the interim dividend, the record date for which is September 30, was newly adopted in the year ended March 31,
2015, the actual amount of dividends paid to shareholders for the year ended March 31, 2015, was the aggregate of the two. The actual amount ofdividends paid to shareholders for the year ended March 31, 2016, was the aggregate of a year-end dividend of ¥65.00 approved at the general shareholders’ meeting held on June 25, 2015, and an interim dividend of ¥65.00 approved at the Board of Directors’ meeting held on November 9, 2015.
The actual amount of dividends paid to shareholders for the fiscal year ended March 31, 2017, is the aggregate of a year-end dividend of ¥70.00
approved at the general shareholders’ meeting held on June 24, 2016, and an interim dividend of ¥70.00 approved at the Board of Directors’ meeting
held on November 9, 2016. At the general shareholders’ meeting held on June 27, 2017, approval was granted for a proposal to pay a year-end
dividend of ¥75.00 for the year ended March 31, 2017.

Net income attributable to
SECOM CO., LTD. (U.S. GAAP)Net income attributable toowners of the parent (Japanese GAAP)(In billions of yen)

(In billions of yen)

100
80

70.6

74.0

80.2

84.1

91.4

80
63.7

41.2

40

77.0

2015

2016

84.2

35.5

20

20
0

69.9

75.4

60

60
40

100

2012

2013

2014

2015

2016

2017

0

2012

2013

2014

2017

Note: In the year ended March 31, 2017, net income attributable to SECOM CO., LTD., advanced ¥7.3 billion, to ¥91.4 billion. Factors behind this result
included an increase in operating income, bolstered by higher sales of on-line security systems and a decrease in impairment loss on long-lived assets,
and a gain on private equity investments.
In the year ended March 31, 2016, net income attributable to SECOM CO., LTD., rose ¥3.9 billion, to ¥84.1 billion. Contributing factors included
increases in operating income in the security services segment—underpinned by higher revenue from on-line security systems—the medical services
segment and the fire protection services segment, as well as reduced income taxes, which reflected a decline in the statutory tax rate.
In the year ended March 31, 2015, net income attributable to SECOM CO., LTD., advanced ¥6.2 billion, to ¥80.2 billion. This result was attributable toan increase in operating income in the insurance services segment, which reflected a decline in losses due to damage caused by natural disasters, as wellas to an increase in operating income in the security services segment, owing mainly to higher revenue from on-line security systems. Another contributing
factor was a decrease in income taxes, a consequence of tax reform in Japan, which lowered the statutory tax rate.

2

SECOM Annual Report 2017

SECOM Annual Report 20173

A Message to Shareholders
The Management

We are endeavoring to ensure sustainable growth and enhance
corporate value by evolving and improving, enabling us to provide
enduring peace of mind to an ever-changing society.

Consolidated Operating Results
In the fiscal year ended March 31, 2017, the Japanese economy remained on a gentle upward trend,
reflecting a recovery in corporate earnings and improved employment levels. Nonetheless, the outlook
remained uncertain, owing to economic conditions in the People’s Republic of China (PRC) and emerging
economies, the United Kingdom’s exit from the European Union and economic and financial policy shifts
in the United States, while the impact of fluctuations in the financial and capital markets continued to
warrant caution.
In this environment, we pushed ahead toward the realization of our Social System Industry vision, inline with our goal of providing safety and peace of mind, as well as comfort and convenience, whenever
and wherever necessary. Efforts continued to focus on responding to the needs of customers through theprovision of high-grade services and systems in our security services segment, as well as in our other segments: fire protection services, medical services, insurance services, geographic information services, information and communication related services, and real estate and other services. We also sought to address
diverse social imperatives, pressing forward with efforts to apply the ALL SECOM concept to reinforce collaboration among our various independent businesses with a view to maximizing synergies, developing
innovative services and systems, and expanding the scope of our operations.
Consolidated net sales and operating revenue advanced 4.9%, or ¥47.8 billion, to ¥1,031.3 billion.
Among principal factors behind this result were the inclusion of a full year of results for subsidiary Asahi
Security Co., Ltd., consolidated on December 1, 2015, and higher revenue from on-line security systems.
Bolstered by increased net sales and operating revenue and a decrease in impairment loss on long-lived
assets, among others, operating income rose 9.5%, or ¥11.3 billion, to ¥130.2 billion. Increases in operating income, gain on private equity investments and other factors pushed net income attributable to
SECOM CO., LTD., up 8.7%, or ¥7.3 billion, to ¥91.4 billion.

Enhancing Returns to Shareholders
We recognize the provision of a fair return to shareholders as a crucial management task. In line with ourbasic policy of ensuring a consistent and stable distribution of profits, we determine our consolidated dividend payout ratio and level of internal reserves based on an overall assessment of efforts to expand ouroperations and of trends in our consolidated operating performance. At the Ordinary General Meeting of
Shareholders, held on June 27, 2017, the payment of a year-end dividend of ¥75.00 per share wasapproved. Together with an interim dividend of ¥70.00, dividends for the full term amounted to ¥145.00
per share, up ¥10.00 from the previous fiscal year.

Understanding and Responding to Change
Needs for safety, peace of mind, comfort and convenience are becoming increasingly varied and sophisticated. We capitalize on our ability to promptly identify latent customer needs, which facilitates the development and provision of optimal services and systems.

4

SECOM Annual Report 2017

Makoto Iida

Yasuo Nakayama

FounderPresident and Representative Director

In our core commercial security services business, we stepped up sales of high-value-added on-line
security systems, including SECOM AX, a remote imaging on-line security system that features advanced
image recognition technologies; SECOM LX, which combines on-line security and access control functions
to help customers manage personnel efficiently, thus reducing costs; and SECOM FX, which features security and facility control functions. Contributions from new SECOM Group members Kumalift Co., Ltd. andAsahi Security, which were acquired in the previous fiscal year, reinforced our operating foundation in thisbusiness. In addition, we expanded our security services and systems for large-scale events by, for example, commencing the full-scale provision of 3-Dimensional Security. 3-Dimensional Security for large-scale
events begins with SECOM 3D Security Planning, which uses high-precision 3D maps to support the formulation of an optimal security plan, and encompasses static guards, venue surveillance from overheadusing a SECOM Aerostat and from the ground using temporarily installed surveillance cameras, wearable
cameras and the SECOM Drone Detection System, among others, to ensure the safety and security oflarge-scale events.
In the area of home security services, we continued to advance acceptance of SECOM Home Security
G-Custom, an on-line residential security system that includes a variety of other useful features, against
a backdrop of growing needs for systems that enhance safety, peace of mind, comfort and convenience.
In addition to commencing distribution of the SECOM Home Security App, which allows subscribers tooperate their SECOM Home Security systems from their smartphones, further enhancing the convenienceof SECOM Home Security, in July 2017 we released SECOM Home Security NEO, a flexible system suited
to modern lifestyles that can be linked with various devices. Concurrently, we launched the SECOM My
Doctor Watch, an emergency medical alert and health management service centered on a wearable
wristband tracker, which is available as an optional service to SECOM Home Security subscribers.
Overseas, we sought to expand sales of SECOM-style security services, a term we use to describe comprehensive on-line security systems that encompass everything from the installation of security equipment
at the subscriber’s premises to the prompt dispatch of emergency response personnel. During the period
under review, our efforts concentrated on expanding sales in the rapidly growing economies of Southeast
Asia and the PRC. On another front, subsidiary Secom plc of the United Kingdom acquired a 100% stake in
Scan Alarms Ltd., a security services company in Northern Ireland, as a result of which Secom plc is now
able to provide services directly to customers across the United Kingdom.
In fire protection services, subsidiaries Nohmi Bosai Ltd. and Nittan Co., Ltd., two of Japan’s leading
names in the area of fire protection services, continued to provide high-grade automatic fire alarm, fire
extinguishing and other systems for a diverse range of applications, including office buildings, plants,
tunnels, structures designated as cultural properties, ships and homes. In the period under review, thetwo companies continued to leverage their respective business foundations and product development
capabilities to secure orders for fire protection systems.
Efforts in our medical services business concentrated on Home Medical Services, which comprise homenursing and pharmaceutical dispensing services, as well as on the operation of residences for seniors, theSECOM Annual Report 2017

5

A Message to Shareholders

The Management

provision of electronic medical reporting systems, sales of medical equipment and pharmaceuticals,
personal care services and support for associated hospitals. In India, we consolidated hospital management company Takshasila Hospitals Operating Pvt. Ltd., which was established in fiscal year 2012 as a
joint venture.
In our insurance services business, sales of our distinctive non-life insurance policies expanded favorably. These include SECOM Anshin My Home, a comprehensive fire insurance policy for homes, and the
Security Discount Fire Policy, a fire insurance policy for commercial premises, both of which extend discounts to subscribers who have installed on-line security systems, recognizing the risk-mitigating factorsof such systems; MEDCOM, an unrestricted cancer treatment policy that covers all treatment costs; andSECOM Anshin My Car, a comprehensive automobile insurance policy that includes access to on-site support services provided by our emergency response personnel in the event of an accident. Subscriptions to
MEDCOM, in particular, rose steadily.
Our geographic information services business centers on the collection of geographic data from commercial satellite images, aerial photography and vehicle/ground surveying, which we integrate, process
and analyze to provide geospatial information services to public sector entities—including national andlocal governments—and private-sector customers in Japan. We also offer these services to government
agencies abroad, including those in emerging economies. In the period under review, we sought to extend
services that respond to increasingly diverse and sophisticated domestic and overseas needs for geospatial
information associated with, among others, the construction and maintenance of critical infrastructure
and the prevention and mitigation of risks and disasters.
We provide a variety of information and communication related services, notably data center services,business continuity planning (BCP) support services, information security services and cloud-based services,
to customers in Japan. In response to increasingly complex and malicious cyber attacks, we commenced
sales of SECOM Premium Net Remote Browser, a cloud-based service that isolates companies’ in-housesystems from web access within individual computers. We also took steps to further expand sales of the
SECOM Anshin My Number Service, which was released in the previous fiscal year.
Our real estate and other services business continued to emphasize the development and sale of condominiums equipped with distinctively SECOM security and disaster preparedness features. Other services
include real estate leasing, construction and installation.
Another highlight of the period under review was the launch of the SECOM Disaster Support Project, a
new initiative that combines long-term support for areas struck by serious earthquakes, flooding or othermajor disasters with efforts to help communities reinforce their disaster preparedness. The project, which
involves close collaboration with local authorities, capitalizes on our technological prowess and know-how
to tailor services to the post-disaster status of individual communities.

encouraging all employees, who share the SECOM philosophy, to cultivate a managerial mindset, that is,
the ability to form judgments and act independently.
To further the creation of a robust managerial mindset, we will continue working to maximize
employee capabilities, creating a virtuous cycle rooted in employee job satisfaction, recognizing that motivating employees to create superior offerings enables us to provide exciting, powerful services that exceed
customers’ expectations. In so doing, we will strive to increase the number of satisfied customers, thereby
enhancing society’s trust in SECOM as a company. This, in turn, encourages employees and inspires themto fulfill their professional ambitions, which drives efforts to provide even better services.
To ensure an efficiently functioning managerial mindset, we continue to promote a fair and impartial
corporate organization that ensures a free and open corporate culture. We are also taking steps tostrengthen the framework whereby customer feedback and market needs are communicated to SECOM
headquarters and incorporated into the development and modification of services and systems and thetransformation of business practices. We are also reviewing employment qualifications with the aim of
securing the diverse human resources that will continue to drive SECOM forward.
As part of our commitment to charting sustainable growth by encouraging a managerial mindset in all
employees, in May 2017 we formulated the SECOM Group’s Vision for 2030, a long-term roadmap for the
SECOM Group between now and 2030. This vision, which positions 2030 as a key milestone, further
defines our future direction with the goal of building pride amongst our employees, inspiring trust amongst
our customers and instilling awareness of our potential amongst all of our stakeholders. Guided by thisvision, we will work to realize the ANSHIN Platform, a service infrastructure anchored in the relationship oftrust that we have cultivated with society. Created in collaboration with partners in industry, government
and academia with the same philosophy, this infrastructure is designed to provide peace of mind to people
in their everyday lives, as well as to society as a whole. Going forward, we will capitalize on the ANSHIN
Platform to alleviate problems and resolve concerns, addressing diverse social imperatives through theseamless provision of services that deliver enduring peace of mind whenever and wherever necessary.
We also recognize the critical role of artificial intelligence (AI), Internet of Things (IoT) and otheradvanced technologies in realizing the SECOM Group’s Vision for 2030. Accordingly, we have created a
dedicated project team and technological task force that will explore the active use of such cutting-edge
technologies.
Looking ahead, we remain committed to providing enduring peace of mind by keeping abreast or—
where possible—ahead of the times. To this end, we will continue to evolve. By thus reinforcing our relationship with society, we will continue working to ensure sustainable growth and enhance corporate
value. In these and all our endeavors, we look forward to the ongoing support of shareholders.
July 7, 2017

Charting Sustainable Growth: The SECOM Group’s Vision for 2030
We see our mission as helping to achieve a society free from concerns. Accordingly, we continue working
to realize our Social System Industry vision against a backdrop of drastic change brought about by technological progress, demographic trends, the shift of the global economic center and increased urbanization, and increasingly severe environmental issues, among other factors. Operating in an environment thus
characterized by change and uncertainty, we recognize that achieving sustainable growth will depend on

6

SECOM Annual Report 2017

Makoto Iida
Founder

Yasuo Nakayama
President and Representative Director

SECOM Annual Report 2017

7

SECOM’s Vision

al System IndustryicoSSecurity
services
Real estateand other services

Fire protection
services

Information andcommunication
related services
Geographic
information
services

Medicalservices

Insuranceservices

In line with our goal of helping to achieve a society free from concerns, we continue to push ahead with efforts to realize our Social System Industry vision. This vision describes a framework of innovative and integrated services and systems
that deliver safety, peace of mind, comfort and convenience.
Having built a broad business portfolio that today encompasses seven segments, we continue to apply our corporate
philosophy to hasten realization of the Social System Industry. This philosophy emphasizes a refusal to be content withthe status quo and a commitment to doing what is appropriate. The first element expresses our determination to extend
novel services and systems by challenging accepted norms, while the second 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.
Our efforts to act in accordance with our corporate philosophy, which guides all aspects of our conduct, have nurtured a”uniquely SECOM identity,” a corporate principle that remains a major driving force behind our growth and evolution.
To accelerate the realization of our Social System Industry, we have formulated the SECOM Group’s Vision for 2030, a longterm roadmap. In line with this vision, we will step up efforts between now and 2030 to respond to social imperatives, acting
boldly and with a firm sense of our uniquely SECOM identity, to broaden our operations, thereby positioning us to capitalize
on new potential.

8

SECOM Annual Report 2017

Special Feature:

The SECOM Group’s Vision for 2030

 Purpose of our new vision

for 2030

 Conceptual framework of

the ANSHIN Platform
Peace of mind, as provided by SECOM,
centers on three key features. The first ofthese is to provide services anytime, anywhere, enabling us to deliver peace ofmind whenever and wherever necessary.
This evokes our commitment to extending services that respond to sophisticatedneeds engendered by social change andthe increasing threats to safety.

lationships
ECOM’s re
S
g
n
i
c
infor
er re
h
t
r
Fu

with customers and society

Enhanced value

C

Connection

ion
at
e
r

The second is to provide optimal
services tailored to individual customer
needs, ensuring that we can deliverpeace of mind for anyone and everyone.
This refers to our understanding of theimportance of daily communication in
grasping what is truly sought by ourcustomers, ensuring our ability to provide services that are carefully tailored totheir needs.
The third feature is to offer services
that enable us to provide seamlesspeace of mind. Society today faces
significant risks associated with issues
such as increasing incidence of crimes,
accidents, cyber attacks, natural disasters, illness and aging. Recognizing theimportance of routine advance preparation, we provide comprehensive services
designed to address potential risks,namely, the ability to accurately grasp

Special FeatureWith the aim of realizing our Social
System Industry vision, we have implemented steady measures to addresssocial imperatives by creating services
and systems optimized to meet the needsof our customers. This has enabled us toamass significant know-how, as well as
to build a solid relationship of trust withcustomers. In light of demographic
change, technological progress, increasingly severe environmental issues and theshift of the global economic center andincreased urbanization as a result of thegrowth of Asian economies, social imperatives are becoming more challenging
and complex. At the same time, individual needs for peace of mind are expanding and diversifying. Operating in anenvironment characterized by drasticchange and increasing uncertainty, we
have formulated the SECOM Group’s
Vision for 2030, which further defines
our direction going forward with theaim of building pride amongst ouremployees, inspiring trust amongst ourcustomers and instilling awareness of
our potential amongst all of our
stakeholders.

form
IN Plat
H
S
N
he A
of t

ALL SECOM

Collaboration

SECOM Annual Report 20179

Special Feature: The SECOM Group’s Vision for 2030

conditions, minimize impact and achieve
prompt restoration.
As part of our vision for 2030, we
created the ANSHIN Platform, a service
infrastructure anchored in the relationship of trust we have cultivated withsociety. Created in collaboration withpartners in industry, government andacademia, in line with our mission ofhelping to achieve a society free fromconcerns, this infrastructure is designed
to provide peace of mind to people intheir everyday lives, as well as to society
as a whole. By enabling us to alleviate
problems and resolve concerns throughthe provision of carefully tailored services
and systems anytime and anywhere,
thus making SECOM an ever-present
part of our customers’ lives, the ANSHIN
Platform will further reinforce ourrelationship with customers.

10

SECOM Annual Report 2017

 Creating the ANSHIN Platform

We are currently promoting the ALL
SECOM strategy, which focuses on
reinforcing collaboration among various
SECOM Group businesses with a view tomaximizing synergies, to develop innovative services and systems. To create the
ANSHIN Platform, we will continue toapply this strategy. In addition, we will
actively advance a strategy of collaboration with various partners, integrating
business ideas and technologies developed through this strategy with proprietary SECOM technologies, know-how
and other resources to accelerate thedevelopment of services and systems
that address the increasingly diverse
needs of customers for peace of mind.
We will also promote a strategy of connection, further strengthening our relationship with our customers and society
by leveraging Big Data analysis, whichmakes use of advanced information

technologies, to respond to latent needs.
In addition, we will pursue a strategy ofenhanced value, working to address
everyday concerns by adding greater
value to services that provide peace ofmind, thereby delivering comfort andconvenience.
The driving forces behind theimplementation of strategies under the
ANSHIN Platform are our key competitive advantages, namely, our humanresources, organization and technologies. To reinforce our human resources,
we will work to ensure that employees
share our corporate philosophy andare capable of acting independently
to maximize their capabilities. We will
also promote diversity, as well as foster
human resources capable of innovationand of functioning in a global businessenvironment.
To strengthen our organization, we
will encourage employees to share the
SECOM philosophy, which emphasizes acommitment to doing what is appropriate and a refusal to be content withthe status quo. We will also ensure an
upbeat and unfettered corporate culture
to promote self-discipline, which will
position us to increase productivity andservice quality, and the use of state-ofthe-art information and communications
technologies (ICT) to yield further
innovations.
On the technological front, we willleverage business models that integratetechnologies to amplify human capabilities. We will also develop technologies
that facilitate the provision of seamlessservices and encourage peace of mind.

 Expanding global initiatives

Supporting achievement ofsustainable growth
We have already kicked off one of the
key strategies aimed at creating the
ANSHIN Platform, which focuses on collaboration with partners. For example,
in developing the SECOM Anshin Health
App we worked together with a major
electronics manufacturer in Japan to add
pedometer, sleep tracking and calorie
expenditure counter features, as well asa health check function, to SECOM My
Doctor Watch, a new emergency medical alert and healthcare management
service centered on a wristband tracker.
We also collaborated with a leading
domestic semiconductor manufacturer
to develop a security framework that
ensures the safety of communications
among devices on the IoT. Additionally,in the PRC, we cooperated with a major

local electric appliance manufacturer tocultivate the local market for home
security systems.
The increasing acceptance of SECOM
services and systems—which underscores our steady efforts to address
evolving social imperatives—has served
to heighten the expectations of our customers, and of society as a whole. We
will continue working to respond to suchexpectations by creating the ANSHIN
Platform, enabling us to provide seamless peace of mind whenever and wherever necessary, and in so doing make
SECOM an ever-present part of customers’ lives. Through these efforts, we will
work to reinforce our relationship withsociety and achieve sustainable growth.

Special Feature

Recognizing the desire for safety, peaceof mind, comfort and convenience assomething that is shared by people
worldwide, we will continue to leverage
our know-how cultivated in Japan, afront runner in addressing critical challenges with global relevance, to offer
services in overseas markets that are
customized to reflect local needs andsensibilities. In Asia—which continues
to benefit from economic growth—and elsewhere, we will continue toencourage acceptance of SECOM-styleon-line security systems, which include
emergency response services, and otherservices that deliver distinctively SECOM
quality. We will also promote further
awareness of the SECOM brand anddeploy the ANSHIN Platform overseas,advancing the use of “ANSHIN” as acommon global descriptor.

 The ANSHIN Platform:

Creating the ANSHIN Platform:
Growth Projection

Enhancedvalue

Connection

Collaboration
ALL
SECOM

2020

2030

SECOM Annual Report 201711

SECOM Today
Commercial Security Services
Leveraging advanced technologies and new ideas, we are working to provide services
and systems that respond to our customers’ diverse security needs.
Competitive advantages of

SECOM’s security services
Our security services business centerson the provision of on-line security
systems, which includes installationof sensors and other equipment andaround-the-clock monitoring by a
SECOM control center via telecommunications circuits. In the event an
intruder, a fire or other irregularity isdetected, control center staff dispatch
emergency response personnel fromthe nearest SECOM emergency depot
and, if necessary, notify the police and/or fire department. Our integrated
framework for providing on-line security
systems, whereby we take responsibility
for everything from R&D to production,marketing, security planning, equipment
installation, around-the-clock monitoring, emergency response services andmaintenance, ensures the exceptional
quality and reliability of our services.
Our ability to provide such distinctive
services derives from the three corecomponents of our operating foundation, namely, our technological prowess,human resources, and operational andcontrol structure. To reinforce technological prowess, the SECOM Intelligent
Systems Laboratory conducts research in
the area of core technologies, while the
SECOM Development Center leverages
these core technologies to realize new
security systems. This unique R&D configuration allows the swift and accurate
development of systems that respond to
the requirements of customers. Having
our own in-house R&D capability also
facilitates smooth cooperation with thediverse companies of the SECOM Groupto develop new systems, as well as

enables us to provide technical support
for collaborative initiatives with partners
in industry, government and academia,
among others, helping to accelerate thedevelopment and commercialization of
new services and systems.
To foster human resources, we provide
training for emergency response personnel, sales staff, administrative staff andother employees at four training centers
across Japan. This enables us to equip
employees with the advanced knowledge
and technical skills they need and ensuresthat they fully understand our corporate
philosophy and observe a code of conduct befitting security professionals.
Our operational and control structure
centers on the know-how and wealthof experience we have built up since ourestablishment. This is reflected in ourswift emergency response services,

On-Line Security Systems
Flashing light

SECOM sticker

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

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

PoliceDept.

SECOM
3 Dispatch
emergency responseusing
1 Alerttelecommunications

personnel

circuits

Fire
Dept.
Gas
Company

Alert emergency
services as necessary

SECOM
Emergency
Depot

SECOM emergency response personnel

12

SECOM Annual Report 20172

Alert SECOM
emergency
response personnel

SECOM
Control CenterSales of on-line security systems

for commercial subscribers
continue to expand
We are committed to providing on-line
security systems that are optimized toaccommodate a wide range of site sizes
and subscriber purposes and which help

address needs engendered by evolvingsocial imperatives. As a consequence,sales of our on-line security systems
for commercial subscribers continue toexpand favorably.
SECOM AX is a remote imaging online security system that employs sophisticated image recognition technology,
enabling image sensors installed at thesubscriber’s premises to detect the presence of an intruder, even in darkness,and transmit an alert, together withimages, to a SECOM control center. This
enables control center staff to swiftly
assess the situation and issue prompt
and accurate instructions to emergency
response personnel. Control center
staff can also broadcast a warning to
intruders using on-premises speakers to
discourage the commission of crimes.
This speedy response—facilitated by

specialized image sensors developed inhouse—continues to earn solid support
from subscribers, as a result of whichsales continue to expand steadily.
We are also seeing firm growth in
the popularity of systems that not only
provide excellent security but also assist
subscribers’ efforts to reduce costs andlower energy consumption. SECOM
LX combines monitoring for intruders
and fires with access control functions.
Because the system uses existing IC
cards, such as employee ID cards, andbecause recorded entry and exit data
can be used for other purposes, SECOM
LX reduces the amount of work involvedin managing employee attendance andcalculating payroll, thereby helping to
improve the efficiency of personnel
management. SECOM FX, designed forunattended facilities and small offices,

SECOM Today

made possible by the prompt decision
making of our control center staff, thequick actions of our trained emergency
response personnel, and our nationwide
network of approximately 2,800 emergency depots, the largest in Japan.
Our rental format, which minimizes
initial costs for commercial security services subscribers, is another strength. This
format means that we take responsibility
for the maintenance and upkeep ofsecurity equipment, guaranteeing boththe quality and stability of our services.

Framework for Providing SECOM On-Line Security Systems

R&D
Emergency
response services
Emergency response
personnel

Intelligent Systems Laboratory
Development Center

Production andassembly of systems
Secom Industries Co., Ltd.

Providing reliable peace of mind

Around-the-clockmonitoring

Marketing andsecurity planning

SECOM control center

Marketing teamInstallation
Technicians

SECOM control center

SECOM Annual Report 201713

SECOM Today

integrates monitoring for intruders andfires with facility control functions thatcan be set to, for example, turn lights,
air conditioners, signage illuminationand security cameras on and off at thesubscriber’s discretion, thereby helping
to reduce consumption of energy andelectricity. Looking ahead, we will continue working to develop and provide
on-line security systems that respond to
the diverse needs of subscribers.
Tight security over broad areas

with 3-Dimensional Security forlarge-scale events
Between now and 2020, Japan will playhost to a wide range of major sporting
events and international conferences.
In light of heightened terrorism andother risks, there is a rising need for
effective security plans and rigorous

security for such events. To support
organizers’ efforts to ensure the safety
and security of large-scale events, wehave commenced the full-scale provisionof 3-Dimensional Security, which seeks
to provide security over wide areas fromboth the ground and the air.
3-Dimensional Security begins withSECOM 3D Security Planning, whichmakes use of high-precision digital relief
maps to determine the positioning of
fixed security cameras, and of simulations using overhead images captured
by a SECOM Airship or SECOM Aerostat
dirigible. This facilitates a firm grasp ofpotential risks and the formulation of an
optimal security plan. SECOM 3D
Security Planning is a proprietary system
integrating building information modeling (BIM) technologies developed by the
SECOM Intelligent Systems Laboratoryand geospatial information technologies
developed by SECOM Group company
Pasco Corporation. This system was used
to provide security for the G7 Ise-Shima
Summit, held in May 2016, where its
effectiveness was amply demonstrated.
With 3-Dimensional Security, images
captured by security cameras on the
ground, wearable cameras borne by
security guards, and SECOM Airship andSECOM Aerostat dirigibles, facilitate theswift and accurate assessment of event
status in real time. It also enables theevent’s security headquarters to collectand integrate such data from multiple
cameras, as well as to use image recognition and other AI technologies toanalyze suspicious circumstances andcrowding, generating information thatis then communicated to security guards
on-site to ensure safety and security.

Secom’s 3-Dimensional Security
Satellite

500km

©DLR

Plane

1,000–2,000m
Helicopter

500–1,000m
SECOM Airship

100m

SECOM Drone

3–10m

Sensors

Ground14

SECOM Aerostat

SECOM Annual Report 2017

SecuritycamerasControl Emergency response
personnelppecenterSurveyingvehicleLooking ahead, we will continue toprovide uniquely SECOM 3-Dimensional
Security services to facilitate the successful staging of major events.
Demonstration tests for new

SECOM Drone patrolling andmonitoring services

Launch of the SECOM Anshin

Guesthouse Owner Package
In recent years, a sharp increase in
the number of foreign visitors toJapan has led to fears of a shortage ofaccommodations in certain areas. This

has led to the emergence of the minpaku
guesthouse business, which offers shortterm paid accommodations in privaterooms, apartments and houses, andto an increase in the needs of minpaku
operators for security systems, as well as
for fire protection solutions, including the
installation of automatic fire alarms. In
response to such needs, we developed
the SECOM Anshin Guesthouse Owner
Package, a comprehensive set of essential
support services for minpaku operatorsthat includes security and fire protection
systems, non-life insurance and renovation services. We will continue to leverage
our unique capabilities to expand the services offered as part of this package withthe aim of providing support for guesthouse owners and management companies to facilitate the smooth start ofminpaku services.

SECOM Today

The SECOM Drone is an autonomous
small flying robot that launches andflies toward an unauthorized vehicle orindividual and captures images, which
it transmits to a SECOM control center,
hastening efforts to track down andcapture trespassers.
In April 2017, we began conducting demonstration tests for a new
patrolling and monitoring service
using the SECOM Drone at the Mine
Rehabilitation Program Center in the cityof Mine, Yamaguchi Prefecture, a private finance initiative (PFI) correctional
facility. With the new service, the drone
is either programmed to launch at a
specified time or launched remotely by
the customer and flies a predeterminedroute. Images captured by the onboard

camera are transmitted to the customer’s monitor room, allowing confirmation in real time. Images are captured
from above, which eliminates blind
spots, helping to realize more effective
security for rooftops and other highplaces. Drones also facilitate monitoringover wide areas, thereby reducing theburden on patrolling security guards.
Going forward, we will focus efforts tomarket SECOM Drone patrolling andmonitoring services to large-scale facilities where patrols are conducted by
security guards.

Contracts for On-Line
Security Systems(As of March 31, 2017)

Home

Commercial

Monitoring images fromSECOM Drone units
Financial services

7.8%

Service industries

7.3%

Retailing/wholesaling

3.9%

Government agencies

3.5%

Manufacturing

3.5%

Other

17.1%

Residences (excluding
condominiums and apartments) 35.6%
Condominiums andapartments

21.3%

SECOM Drone patrolling and monitoring service

SECOM Annual Report 201715

SECOM Today

Home Security Services
We continue promoting a variety of efforts to enhance customer satisfaction,
including releasing new systems and services under the SECOM Home Security label.
Commencement of sales of the

new SECOM Home Security NEO
Since launching Japan’s first-ever home
security system in 1981, we haveworked to develop and introduce services that respond to customers’ needs
and address evolving social imperatives
and provide safety and peace of mind.
One of the most highly rated services
currently offered under the SECOM
Home Security label is SECOM Home
Security G-Custom, which combines
home security with a variety of featuresdesigned to enhance everyday comfort

SECOM Home Security NEO

16

SECOM Annual Report 2017and convenience. In July 2017, welaunched SECOM Home Security NEO,
which features a compact desktop
controller. Customers can also use the
SECOM Home Security App to arm anddisarm their home security systems fromtheir smartphones. The app also enables
customers to visually display a chronological history of system access by family
members coming and going on theirsmartphones, thereby enhancing adaptability and convenience. In addition to
standard home security services, that is,monitoring for intruders and fires andemergency alerts, and optional services
such as medical emergency calls andmonitoring for gas leaks, SECOM Home
Security NEO can be linked with deviceson the IoT, further enhancing safety,
peace of mind, comfort and convenience. Concurrently, we introduced
SECOM My Doctor Watch, a wristbandstyle emergency medical alert andhealth management service.

SECOM Home Security App

Launch of the SECOM MySECOM My Doctor Watch

SECOM My Doctor Watch emergency medical alert and health management service

Doctor Watch wristband-style
emergency medical alert andhealth management service

calorie expenditure counter, and extends
advice for lifestyle improvements bysmartphone.
As a service combining advanced
medical alert and health management
functions, the SECOM My Doctor Watch
will allow us to provide enduring peaceof mind tailored to individual needs.
Looking ahead, we will continue working to provide new services and products with the aim of delivering safety,
peace of mind, comfort andconvenience.

SECOM Annual Report 2017

SECOM Today

Offered as an option to SECOM Home
Security subscribers, SECOM My Doctor
Watch is an emergency medical alertand health management service centered on a wearable wristband tracker.
An advanced option in the SECOM My
Doctor series of emergency medical
alert services, SECOM My Doctor Watch
sends an alert if it detects no movementfrom the wearer, whether he or she isinside or outside the home, notifying
SECOM that assistance is required. The
tracker also detects the impact of situations such as the wearer losing consciousness and falling and automaticallyalerts this to SECOM.
In a super-aged society like Japan,
the safety concerns of seniors-onlyhouseholds are rising, as is awareness ofthe need to promote better health forseniors. SECOM My Doctor Watch also
incorporates features that assist witheveryday health management, including a pedometer, sleep tracking and a

17

SECOM TodayIntroducing the SECOM Parent

Care Anshin Package
For several years, we have offered the
SECOM Overseas Transfer Support
Package, which helps address theconcerns of individuals on overseas
assignments by providing support for
elderly parents or other family members
remaining in Japan. Recognizing theneed in Japan for a similar service to beprovided as a component of employee
welfare, in the period under review wereleased the SECOM Parent Care Anshin
Package. This new package helps ensure
peace of mind for families with elderly

SECOM Parent Care Anshin Package

18

SECOM Annual Report 2017

parents living alone in different partsof the country by combining a numberof services that are usually offeredindependently, including SECOM Home
Security, remote monitoring for seniors
and various lifestyle support services,
into a single easy-to-use set. Companies
subscribe to the SECOM Parent CareAnshin Package and allow subscribers’
employees to choose the services thatbest meet their particular needs. Goingforward, we will continue working
to provide services that respond to avariety of key social imperatives.

Other Security Services
In addition to broadening the scope of the COCO-SECOM mobile security system,
we are promoting market acceptance of the SECOM AED Package Service.
COCO-SECOM: Responding to

the needs of increasingly diverse
customers

Growing market acceptance off

the SECOM AED Package Serviceice
An automated external defibrillator (AED)ED)
is a portable device for treating suddennventricular fibrillation by administering anmelectric shock to the heart with the aim
eof restoring a normal rhythm. With the
SECOM AED Package Service, our fullservice AED rental package, we replacebatteries and other expendables whennecessary and replace AED units in theevent of a malfunction or theft, thereby
ensuring that units are always in operating order. We also offer the SECOM AED
On-line Management Service, an aroundthe-clock service that monitors the operational status of AEDs, and the SECOM
AED Skill Up Service, a workshop thatprovides training in the proper useof AEDs.

SECOM Today

The COCO-SECOM mobile security system uses signals from GPS satellites andcellular phone base stations to pinpoint
the location of dedicated portable transmitters carried by individuals or attached
to objects. If a customer wants to know
where the transmitter is, he or she cantrace it via a dedicated COCO-SECOM
website or contact the COCO-SECOM
Operations Center and ask an operator to search for it. If the operations
center receives a search request, theoperator will dispatch emergency
response personnel and, if necessary,
notify the police and/or fire department. The transmitter is also equippedwith an alert button, which, if pressed,
will instantly notify the COCO-SECOM
Operations Center of an emergency.
Designed as a portable security
system for individuals, COCO-SECOM is
deployed as a way to deter child abductions and track dementia patients who
wander. It can also manage taxi and bus
fleets, prevent the theft of construction
equipment and ATMs, and manage
employee safety.

er
SECOM. We expect this to help furtherm.
encourage the popularity of the system.

COCO-SECOM mobile security system

SECOM AED Skill Up Service, a workshop totrain people in the proper use of AEDs

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

GPS satellite

Positioning
information

COCO-SECOM
Operations
CenterNotification of police(if warranted)

COCO-SECOM services forchildren’s smartphones
To date, COCO-SECOM for locating
children has used portable transmittersand cellular phones. In the period underreview we began providing a version of
the system that can be used withmiraie f smartphones, which aredesigned specially for children. This
enables subscribers with children whowant to switch from cellular phones tosmartphones to continue using COCO-

SECOM
Emergency
Depot

Policedepartment,
emergency
services

Cellular phonebase station
Request forsearch(telephone/Internet)

Subscriber

COCO-SECOM Transmitter Device(vehicle-mounted)

COCO-SECOM
Transmitter Device(portable)

Dispatchemergency
response
personnel(if requested)

SECOM Annual Report 201719

SECOM Today

Overseas Security Services
We continue to promote the steady expansion of our overseas operations. Recent
efforts have included reinforcing our service framework in the United Kingdom
and laying a foundation for the cultivation of new markets in the PRC.
High-grade security services

offered in 12 countries andterritories overseas
We made our overseas debut in 1978,
when we established a presence in
Taiwan. Today, our overseas security
services business encompasses operationsin 12 countries and territories. A distinguishing feature of our overseas security
services is that we offer SECOM-styleon-line security systems, which include
emergency response services, customized
to reflect local needs and sensibilities. The
services we provide overseas, which are of
the same high quality as those provided
in Japan, continue to earn praise fromoverseas customers, as a result of whichmarket acceptance is increasing steadily.

Expanding services while

Augmenting operations in the

Taiwan Secom Co., Ltd., a publicly listedcompany, offers a wide array of security
services, centered on on-line security
systems, to subscribers in Taiwan. In linewith our goal of supporting security andpeace of mind, the company provides
wireless alarm systems for residential
and small-scale commercial applications
and has collaborated with the National
Center for Research on Earthquake
Engineering to develop and begin offering an earthquake alert system.
In the Republic of Korea (ROK), S1
Corporation, which is also publicly
listed, provides on-line security systems
and an extensive selection of otherservices that respond to diverse needs,
making life more convenient andcomfortable and providing safety andpeace of mind. S1 continues to reinforce
its building solutions business throughhigh-value-added services that effectively address market needs, including
the provision of fire protection systems
that make use of advanced video
analysis.
In Thailand, the efforts of Thai
Secom Security Co., Ltd., to provide
high-grade on-line security services have

PRC through alliance witha leading electric appliancemanufacturer

Our U.K. subsidiary Secom plc recently
acquired Scan Alarms, a security services
company in Northern Ireland, theoperations of which encompass the sale,installation and maintenance of on-line
security systems. With this acquisition,
Secom plc has completed the establishment of an extensive configurationthat enables it to provide services
directly to customers across the United
Kingdom, enhancing its ability to supply

We currently provide commercial
security services to subscribers in the
PRC through a network of bases in 25
key coastal and inland cities. With thedemand for security services growing
in all of these locations, the popularity
of security systems is expanding, particularly for commercial subscribers andlarge-scale complexes.
With the aim of cultivating demandfor home security services, we haveentered into a strategic business alliancewith a leading local electric appliancemanufacturer. The agreement brings
together our expertise in the provisionof high-grade security services andour partner’s extensive capabilities inmarketing of products for high-end
condominiums and detached houses.
We will collaborate in such areas asproduct development and the formulation of sales plans. This agreement
thus positions us to promote market
acceptance of home security services in
the PRC.

Control center (Secom plc, United Kingdom)

Emergency response personnel (S1 Corporation)

Reinforcing our service frame-

work in the United Kingdom

20high-grade services, as well as to further
broaden the scope of its operations.

SECOM Annual Report 2017

responding to needs in key
overseas markets

Emergency response personnel(Thai Secom Security Co., Ltd.)In Vietnam, Secom Vietnam Security
Service JSC is working to augment its
operations by providing “SECOM-style”
on-line security systems that respondto the advanced needs of Japanese andother companies in the country.
Joint venture Myanmar Secom Co.,
Ltd., Myanmar’s only provider of on-line
security systems, serves subscribers in
the city of Yangon. The company continues to expand its operations in thispromising market, which is benefittingfrom economic growth, by providing
SECOM-style on-line security systems tooffshore (including Japanese) and local
financial institutions.
Secom Australia Pty. Ltd.’s security
services to major financial institutions
and government agencies continue toearn positive reviews across the board.
The company is working to expand its

provision of security services centeredon on-line security systems not only
to corporate subscribers, but also toAustralian defense facilities andgovernment-affiliated service facilities.
In New Zealand, Secom Guardall NZ
Ltd. continues to provide monitoring
using on-line security systems andmaintenance services to multiple major
global financial institutions and multinational companies.
We recognize that the desire for safety
and peace of mind, as well as for comfort
and convenience, is something shared bypeople the world over. Accordingly, we
will continue to encourage acceptance of
our services and systems in the countries
and territories where we have operations,as well as to cultivate promising new
overseas markets.

SECOM Today

bolstered awareness of “SECOM-style”
services, underpinning steady growthin contracts for the provision of on-line
security systems not only to corporations, but also to national government
agencies, among others. The company
also continues to supply a variety ofmerchandise to health-care facilities.
Secom (Malaysia) Sdn. Bhd. provides
security systems—comprising on-line
security systems and static guard
services—that respond to the needs ofcustomers across Malaysia. Underscoring
the high marks accorded to the company’s proposal-based services, which
are tailored to the needs of prospective
customers, a major financial institution
recently installed SECOM on-line
security systems.
In Singapore, Secom (Singapore) Pte.
Ltd. boasts a diverse menu of services.
These include the provision of on-line
security systems and fire protection
systems, as well as the leasing of safety
deposit boxes.
PT. Secom Indonesia provides on-line
security systems, focusing on the cities
of Jakarta and Surabaya. Secom
Indonesia also offers highly rated
consulting services designed to help
customers prevent insider crimes.

Countries andterritories in which
the SECOM Group
provides security
services

Control center (Myanmar Secom Co., Ltd.)SECOM Annual Report 201721

SECOM Today

Fire Protection Services
We continue to offer high-grade, highly reliable fire protection systems that
respond to the needs of customers in Japan and overseas.
A framework for providing

integrated high-grade fire
protection systems
Our fire protection services businessis spearheaded by subsidiaries Nohmi
Bosai and Nittan, two leading players inJapan’s fire protection industry. The twocompanies have created a framework forproviding integrated services, from R&D,
planning and design through to production, installation and maintenance. The
two companies boast an extensive portfolio of high-grade automatic fire alarms
and fire extinguishing systems that has
earned them high marks both in Japanand overseas.
Focusing on the expansion oforders in the renovations market
The deterioration of older buildings is
stimulating demand for the replacement of outdated automatic fire alarmsystems and other equipment. Nohmi
Bosai is drawing on its wealth of experience and the solid trust of customers to
expand orders in this market by actively
promoting proposal-oriented sales
efforts. The installation of new compact

fire alarm panels with automatic testingand other functions conserves space,increases ease of use for customers andenhances safety and peace of mind.
The new PROTECVIEW SCANNER

Nohmi Bosai recently expanded its
PROTECVIEW line of highly sensitive
smoke detection systems by launching
PROTECVIEW SCANNER, a portablesmoke detection sensor. Designed for use
in areas where PROTECVIEW smoke
detectors have been installed, the newsensor can detect smoke particles before
a fire breaks out and identify the point oforigin. In a data center, for example, thismakes it possible to discover irregularities
without having to disconnect servers.
Looking ahead, Nohmi Bosai will respondto the need for portable sensors of awide range of customers including
operators of server rooms, clean rooms,
facilities with power distribution panels,
and warehouses.
New facility established in

Vietnam to serve Southeast
Asian markets
In light of the expansion of its operations
in Southeast Asia, Nittan completed a
new facility in Vietnam that combines
production and sales functions and has
production lines for fire alarm systems

PROTECVIEW SCANNER (Nohmi Bosai)

22

SECOM Annual Report 2017

New production facility in Vietnam (Nittan)

that comply with Underwriters
Laboratories Inc. (UL) standards for salein Southeast Asian markets. This facility
will enable the low-cost production ofhighly reliable products, contributing tofurther quality improvements and costsavings that will bolster brand value andprofitability.
Reinforcing sales of fire protec-

tion systems for equipment inspecial environments
A key focus for Nittan is sales of fire
detection equipment for special environments whether or not required by law.
Such equipment for special environments, which includes units for use inplants, research laboratories and otherfacilities, facilitates the prompt detectionof fires even in hostile environments inwhich the adherence of dust particles,
water vapor and impurities occurs. Nittan
manufactures built-in systems for largescale computers, control devices,
production equipment for plants andother applications that promptly detectsmoke and immediately cut power supply, thereby minimizing damage. Nittan
will continue to propose comprehensive
solutions, while at the same time actively
promoting market acceptance of fire protection systems for special environments,
for which orders remain robust.

DRD-W fire detection system forspecial environments (Nittan)

Medical Services
Our high-grade medical services range from the provision of home medical services
to the operation of residences for seniors.
g A diverse menu of home m­ edical,personal care, h­ ealthcare andother services provided througha broad ­network

care team, thereby contributing to­effective community medical care.
g Alive Musashino Gotenyama

In Japan, a new comprehensive­community-based healthcare frameworkhas been put forward with the aim of
ensuring that seniors remain connectedwith the local community. We recently
opened Alive Musashino Gotenyama, an
Alive series facility developed in line withthis framework. The facility incorporates
numerous features that contribute to
the local community, including an area
dedicated to interaction with neighbors.

SECOM Today

Believing that protecting the health andlives of people is a natural extensionof our commitment to providing safety
and peace of mind, we launched our
medical services business with the­introduction of home medical services.
Today, our operations in this area have
expanded to also include operation ofresidences for seniors, electronic medical
report services, personal care services
and support for associated hospitals.
Our mainstay home medical services
business centers on our home nursing­services, which are provided through a
network of 34 visiting nurse stations. Our
highly skilled nurses visit homes to provide expert services under the directionof patients’ physicians. Our pharmaceutical dispensing and home delivery service
involves the filling of prescriptions, thedelivery of medications, medical supplies
and hygienic supplies to patients at
home, and advice to patients.
Our highly rated SECOMFORT seriesof residences for seniors, established in
response to needs engendered by Japan’s
superaged society, brings together our
expertise in security, medical service
and personal care. These residences aredesigned with the concept of “comfortable aging,” that is, providing living environments that enable people to age withgrace and serenity. We also operate the
Alive Care Home series of small-scalenursing homes, which provide access toextensive healthcare ­services, day service
centers and home personal care services.
To help hospitals increase operating
efficiency and provide better-quality care,
we offer Hospi-net, a remote image diagnosis support service, whereby magnetic
resonance imaging (MRI), computerized
tomography (CT) and other images aretransmitted from hospitals to our Hospinet Center, where they are examinedby diagnostic experts who provide­consultation services. We also provide
the cloud-based SECOM Ubiquitous­Electronic Medical Report (EMR) system,
which is linked to a SECOM data center,ensuring the safety and security of medical records and facilitating the sharing ofdata among members of the patient’s

Alive Musashino Gotenyama

Home Medical Services
Medical Care
Institution

Prescription

Physician’s guidelines
Nurse’s report

Coordination

Pharmaceutical
Dispensing andHome Delivery Service

Home Nursing
Services(SECOM Visiting
Nurse Station)(SECOM Pharmacy)

Consultation
Prescription
Pharmaceutical delivery

Patient

Nurse visit
Outpatient careHome nursing services

SECOM Annual Report 201723

SECOM Today

Insurance Services
We continue to leverage the comprehensive capabilities of the SECOM Group to
develop and sell distinctive insurance policies.
MEDCOM unrestricted cancer

treatment policy: Comprehensive
coverage to address diverse
needs, underpinning growth insubscriptions
MEDCOM is an unrestricted cancer
treatment policy that provides full coverage for all hospitalization and medical
treatment costs, both those covered
under Japan’s National Health Insurance(NHI) scheme and those for which thepatient usually bears the burden. Policies
that pay a per diem amount for medical
expenses based on the number of days
hospitalized are the most common typeof cancer treatment insurance available. As a non-life insurance provider,we developed a product that provides
coverage similar in nature to unlimited
personal injury protection, an extensionof automobile insurance, enabling subscribers to focus on treatment without
having to worry about the economic
implications. MEDCOM coverage also
extends to outpatient treatment, an
increasingly key component of cancer
care, providing up to ¥10 million per
five-year period. These and otherfeatures are reflected in the popularity

A call center operated by
Secom General Insurance Co., Ltd.

24

SECOM Annual Report 2017of MEDCOM, to which subscriptions
continue to increase.
Extensive coverage attracts

support for SECOM Anshin My
Home
Our diversification into non-life insurance arose from our conviction thataugmenting security services, which
are preventative by nature, with insurance, which looks after people in theevent of a fire or theft, was a way tofurther enhance safety and peace ofmind. One of our highly rated non-life
insurance policies is SECOM Anshin My
Home, a policy for residential customers
that offers a discount on premiums to
subscribers who have installed on-line
security systems, taking into account thefact that such systems mitigate the riskof theft and fire. This policy also offers
discounts on premiums for houses thathave exclusively electrical appliancesand for houses less than 10 years old,
recognizing both as factors that lower
the risk of fire. Another reason for thepolicy’s popularity is the fact that itprovides a variety of services, such as

Headquarters ofSecom General Insuranceorganizing the replacement of windows
and keys in the event of loss or destruction, as well as coverage for security
upgrades, including the purchase of fire
extinguishers, further enhancing peaceof mind. With the growing popularity
of on-line security systems, subscriptions to SECOM Anshin My Home arealso rising. We will continue striving tofurther expand sales. We are also seeing
expanded sales of the Security DiscountFire Policy, a similar policy for commercial customers that offers a discounton premiums to companies that haveinstalled on-line security systems.
SECOM Anshin My Car is backed

by support from emergency
response personnel
Another attractive SECOM non-life
insurance policy is SECOM Anshin My
Car, an automotive insurance policythat includes around-the-clock access to
on-site support by SECOM emergency
response personnel in the event of an
accident.
In addition to conventional approaches,
we continue working to boost sales ofour various non-life insurance policies bymarketing them through banks and overthe Internet.

SECOM Anshin My Car on-site support

Geographic Information Services
In line with its vision, “Measuring the world to create the future,”
Pasco is working to offer distinctive geospatial information services in promising
new business domains.
Supporting self-driving systems

using the MMS

Responding to the increasing

number of projects using thei-Construction program
In April 2016, Japan’s Ministry of Land,
Infrastructure, Transport and Tourism
launched the i-Construction program,an initiative aimed at creating a

The vehicle-mounted MMS and 3D coordinate data

Providing integrated services

that help advance the forestry
industry
In Japan, declining populations and therapid aging of society in rural mountainous areas have resulted in an increasing
number of cases in which confusion overproperty ownership and boundaries inforested areas has hindered efforts byforestry companies to improve productivity. Pasco is providing integrated services
encompassing the use of measuring

technologies to clarify such matters,
cloud-based information sharing andforestry management consulting to companies in the forestry industry, thereby
helping to advance the industry.
Services designed to enhance

productivity in the logistics
sectorJapan’s logistics industry is currently
facing a number of key challenges,
including a critical labor shortage andthe rising age of drivers. By incorporating information on road networks,
positioning of trucks on roadways, andthe experience of dispatchers and drivers
into a proprietary system, Pasco helps
logistics firms enhance productivity byincreasing transport efficiency.

SECOM Today

Subsidiary Pasco Corporation collects
geographic data from satellite images,
aerial photography, and vehicle/groundand shipborne surveying, which it
integrates, processes and analyzes toprovide geospatial information services.
Pasco uses the vehicle-mounted
Mobile Mapping System (MMS) forthe collection of high-precision 3D
spatial information data to create highly
accurate basic maps for roads managed
by local authorities. 3D mapping technologies are also attracting attention foruse in the creation of high-precision 3Droad maps (dynamic maps) crucial to therealization of a self-driving system. We
are working to achieve commercialization of technologies for this purpose
through a new joint venture.

construction system incorporating ICT,
among others. This will involve promoting the use of drones for measuring,with the resulting 3D data used toformulate plans for engineering andexecution, as well as the use of ICT
equipment to reduce labor requirements
for execution and testing. With use of
the i-Construction program expected to
expand not only for civil engineering,
but also for waterway management andthe removal of sediment from riverbeds,
Pasco is stepping up efforts to expand
orders for its 3D mapping technologies
to help improve on-site productivity forsuch projects.

Pasco will continue to foster demandfor its services by properly identifying
and responding to increasingly diverseand sophisticated needs. The company
will also take decisive steps to offer distinctive geospatial information services inpromising new business domains.

3D terrain models created using data collected bydrones (i-Construction project)

Aerial image used to analyze distributionof harvested timber and tree heights inforested areas

SECOM Annual Report 201725

SECOM Today

Information and Communication Related Services
Placing a high priority on security, we are working to address the needs forsafety and peace of mind in an increasingly networked society.
Introducing the SECOM

Premium Net Remote Browser
Recent years have brought an increase in
the incidence of targeted cyber attacks
at companies and government offices
involving the insertion of viruses into
servers and computers to steal confidential information. To protect informationfrom such threats, we began providing
the SECOM Premium Net Remote
Browser. This service facilitates web
access using a browser isolated in a virtual environment within a SECOM data
center facility. Viruses and cyber attacks
are thus contained, preventing themfrom infiltrating customers’ computers.
We also confirm the safety of files downloaded from the Internet before passing
them on to customers to keep suspicious
files out.
Providing diverse services that

increase operating efficiency
SECOM Cloud is a system allowing subscribers to store data at a highly secure

A SECOM data center facility

26

SECOM Annual Report 2017

SECOM data center facility that isaccessed via a network. The SECOM
Anshin My Number Service is a comprehensive support service that enables
companies to collect, manage and,
when necessary, use and destroy theiremployees’ My Number (personal social
security and tax number system) information. The SECOM Anshin Employee
Attendance Management Service is aninternet-based system that facilitates theefficient management of employee timeclock, attendance and other labor-related
data. The e-Kakushin Schedule service,
which can be linked to the SECOM
Anshin Employee Attendance Management Service, capitalizes on expertise
gained through the provision of aroundthe-clock security services to reduce thetime required to prepare shift schedules.
The SECOM Electronic Acceptance
Service transforms notices of employment into electronic format, facilitating
the simultaneous distribution of multiple
documents and enabling employees toindicate acceptance from their computeror smartphone. We continue to see
growth in the number of companies
introducing these services, which promise
to help boost operating efficiency.
An expanding menu of services

for coping with disasters
The frequency of earthquakes and othernatural disasters in Japan is encouraging
companies to reassess their BCPs. We
provide a number of services that assist
in these efforts. The SECOM Safety
Confirmation Service helps subscribers
ascertain the safety of employees andtheir families in the aftermath of a disaster and assess the situation on the
ground. This system has earned solidmarks from users and is one of Japan’s
leading disaster management support
systems. We have further enhanced theconvenience of this system by facilitating its use via the messaging feature ofcommunications apps. We also offer the
Real-Time Disaster Information Service,whereby the SECOM Anshin Information
Center collects and scrutinizes disasterrelated information, enabling it to support subscribers’ decision making
regarding business continuity. We willcontinue working to broaden and diversify our menu of services for coping withSECOM Safety Confirmation Service

disasters, thereby enhancing our ability
to respond effectively to the evolving
safety and security needs of customers.
Providing security for the IoT

In recent years, we have seen an
increase in security breaches involving
attackers taking over connected devices
and using them as a springboard toaccess a company’s servers and otherequipment. We have begun working
with a leading semiconductor manufacturer to ensure the reliability of information exchanged among devices on the
IoT. Our partner will provide technologies for incorporating confidential
information into the semiconductors
mounted in devices, while we will contribute technologies that ensure thesecurity of information through theissuance of digital certificates, physicalsecurity, stringent operational standards
and expertise in key management,
among others.
In response to rising demand for
improving the security of “things,”
we will continue to offer services that
improve the safety and security of IoT
devices to enhance comfort andconvenience for users.

Real Estate and Other Services
SECOM Today

In this business, we provide high-grade condominiums and lifestylesupport services.
Sales begin for the Glorio

Comfort line of compact secure
condominiums
In line with our goal of providing living
spaces that deliver safety and peace ofmind, we develop and sell condominiums under the Glorio brand. We also
provide extensive after-sales services toresidents. In response to rising demand

We currently offer the SECOM My-homeConcierge Service, a region-specificmembership-based service designed tosupport seniors who wish to remain in
their own homes. This service is madepossible through collaboration withother companies, as well as with local
authorities, which allows us to help
seniors and their families resolve
everyday issues of concern.
Our lifestyle support services also
include SECOM Home Service, an
optional suite of services available to
SECOM Home Security subscribers witha diverse menu that enables us to tailor
packages to customer needs. These
include the Housework Support Service,
which provides help with housecleaning,
and the Anshin Support Service,whereby we assist subscribers by, forexample, patrolling around their homes
when they are out.

Glorio Den-en-chofu (Tokyo)

SECOM Home Service

for compact condominiums, we recently
launched the Glorio Comfort series. We
also stepped up efforts to expand sales.
Of note, we opened a secure condominium showroom that enables people
to experience the safety, security, comfort and convenience, of our Gloriobranded condominiums.
Expanding lifestyle support

services to meet the growing
needs of seniors

Glorio Comfort Bunkyo Hon-Komagome (Tokyo)

SECOM Annual Report 201727

SECOM’s CSR

 Basic policies

 Communication with

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

With the aim of ensuring accountability
to stakeholders, we have created a corporate website and publish a variety ofreports, including our annual CSR
report. We are also working to expand
our publication of environment, socialand government (ESG)-related information, including through participation invarious external assessment programs.
Opinions and comments received fromstakeholders are reported at pertinent
meetings and fed back to the appropriate departments to facilitate the sharing
and effective use of information.

Proactive

Leverage our sourcesof competitivenessand unique identity

stakeholders

Strategic CSR

Provide added value
to society Strategic CSR: Addressing

evolving social imperatives

Createvalue

Our strategic CSR initiatives emphasize
capitalizing on the principal sources ofour competitiveness, namely, our technological prowess, human resources,and operational and control structure,and on our ability to make effective useof Big Data, made possible by our network of data center facilities, which
underpins our business infrastructure.
Guided by the ALL SECOM concept,
which focuses on rallying Group
strengths, we continue to create diverse
services and systems.
We continue working to realize the
ANSHIN Platform, a service infrastructure designed to provide enduring peaceof mind to an ever-changing society,with the goal of further reinforcing our
relationships with society and helping toaddress a broad range of social imperatives. Through these and other efforts,
we will strive to grow together withsociety and achieve sustainable growthin corporate value.

 Basic CSR: Earning the trustof stakeholders
Protective28

Adhere to stringent
internal standards
Promote complianceand risk management
Earn the trust of society

SECOM Annual Report 2017

Basic CSR

Earn
trust

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

 Basic CSR initiatives

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

aspect of corporate management andprovide training aimed at enhancing
employees’ understanding thereof.
We also place a priority on ensuringsafety and a favorable work–life balancefor our employees. Accordingly, we have
put in place generous health management and leave programs.

Training for employees to enhanceknow-how and skill levels

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

SECOM Group environmental conference

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

SECOM AED installed at temporary
housing for people displaced by the2016 Kumamoto Earthquake

Fair operating practices
Efforts to strengthen our cooperation
with suppliers, as well as to promotemutual understanding and compliancewith laws and regulations, have enabled
us to create a solid framework forproviding high-grade services andsystems.
We also work to promote awarenessof key components of CSR, including thesafeguarding of human rights, ensuringindustrial safety and employee wellbeing, and protecting the environment,
across our entire value chain.

Corporate Social Responsibility

Environment
In the belief that protecting the environment is essential 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 ouroperations, and our basic environmental
policy among all employees. We are also
implementing measures aimed ataddressing such key issues as global
warming and resource depletion andensuring our operations conform withpertinent laws and regulations.

designed to contribute to communities.
These include offering programs forchildren, women and seniors designed
to raise crime prevention awareness.

Organizational governanceTo increase the efficiency and transparency of management practices, thereby
enabling us to consistently increase ourcorporate value, we have taken steps toenhance our corporate governance system, including the appointment of independent outside directors. We are also
promoting decisive management-led
efforts to strengthen our complianceframework and improve disclosure.

SECOM Annual Report 201729

SECOM’s CSR

CSR Topics
Promoting open innovation

We are committed to promoting open
innovation, which aims to create newservices that address the increasingly
diverse needs of society by leveraging
our management resources, as well as
by promoting strategic collaboration
with other organizations. In line withthis commitment, we hold the SECOM
Open Lab, a workshop for companies
and experts in pertinent fields withpromising ideas and technologies.

Advancing the careers of female

Establishing medium- to long-

employees
We strive to assist employees in balancing the demands of career and family
and to create workplaces that provide
a positive and supportive environment.
In addition, we have established theCommittee to Advance the Careersof Female Employees, a dedicatedsection that is charged with promoting measures across the Company tofurther advance the careers of female
employees.

term targets for reducing greenhouse gas emissions
In accordance with the Paris Agreement,
adopted at the COP21 climate summit,
and Japan’s Plan for Global WarmingCountermeasures, we have augmented
our existing target for reducing greenhouse gas emissions attributable to our
security services business with a specifictarget for the year ending March 31,
2031. We will also endeavor to achievea significant reduction in greenhousegas emissions by 2050.
• Short-term (existing) target
Reduce CO2 emissions by 1.5% annually
until the year ending March 31, 2021

SECOM Open Lab

Committee to Advance the Careers of Female
Employees

Bolstering employee satisfaction

Preventing extreme overwork

Having highly motivated employees who
are actively committed to realizing theirindividual goals is a critical factor behind
our ability to provide high-grade services
that exceed the expectations of customers and earn the trust of society. We
implement various measures to bolster
employee satisfaction, recognizing thisas the source of motivation and a proactive outlook.

Extreme overwork is a significant social
issue in Japan. By positioning an expert
in our personnel department, as wellas in other pertinent departments, we
strive to prevent excessive overtime. We
have also introduced a framework forthe ongoing management and improvement of data pertaining to employee
working hours, including start and finish
times.

• Medium-term target
Achieve a 35% reduction in greenhousegas emissions from the year ended
March 31, 2014, by the year ending
March 31, 2031.
• Long-term objective
Achieve an 80% reduction in greenhouse gas emissions by 2050.

SECOM: An Official Partner of the Olympic and Paralympic Games Tokyo 2020
As an official partner (Security
Services and Planning category),
we will contribute to the safe andsecure staging of the Olympic andParalympic Games Tokyo 2020.
Our history with the Olympics
stretches back five decades. Still in
our infancy, in 1964 we provided
security services for the Olympic
Village at the first Tokyo Olympics,

30

SECOM Annual Report 2017

earning high marks and the trust ofsociety, an achievement that contributed to our subsequent evolution
and growth.
We look forward to helping
ensure the safety and security of
the Olympic and Paralympic GamesTokyo 2020 and will continue working to create innovative services thatwill help us achieve this goal.

Financial Review
Operating Results
Overview
In the fiscal year ended March 31, 2017,
SECOM CO., LTD. and its subsidiaries (collectively, “the Company”) sought to provide high-quality products and services
that respond to the needs of customers in
its core security services segment, as wellas in its fire protection services, medical
services, insurance services, geographic
information services, information andcommunication related services, and realestate and other services segments.
Consolidated net sales and operating
revenue rose 4.9%, or ¥47.8 billion, to¥1,031.3 billion. Principal factors behind
this result were the inclusion of a full yearof results for subsidiary Asahi Security,
consolidated on December 1, 2015, andhigher revenue from on-line security
systems. Bolstered by increased net sales
and operating revenue and a decrease inimpairment loss on long-lived assets,
among others, operating income advanced
9.5%, or ¥11.3 billion, to ¥130.2 billion.
Increases in operating income and gain on
private equity investments and other factors pushed net income attributable to
SECOM CO., LTD., up 8.7%, or ¥7.3
billion, to ¥91.4 billion.
Net Sales and Operating Revenue
Net sales and operating revenue was up
4.9%, or ¥47.8 billion, to ¥1,031.3 billion.
The security services, real estate and otherservices, medical services, insurance services, and information and communication
related services segments reported
increases, while the fire protection services
and geographic information services segments posted declines. (For further details,
please see Segment Information below.)

Operating Income
Operating income advanced 9.5%, or¥11.3 billion, to ¥130.2 billion, equivalent
to 12.6% of net sales and operating revenue, up from 12.1% in the previous fiscal
year. This was due to increased net sales
and operating revenue and a decrease inimpairment loss on long-lived assets,
among others. The Company’s segments,
in order of size of contribution to operating income, were security services, fire
protection services, insurance services,
information and communication related
services, real estate and other services, andmedical services. (For further details,
please see Segment Information below.)
Other Income and Expenses
Other income rose ¥10.5 billion, to ¥18.1
billion, while other expenses declined ¥1.0
billion, to ¥3.1 billion, resulting in net
other income of ¥15.0 billion, up ¥11.5
billion from the previous fiscal year.
Principal factors behind this result includea ¥12.2 billion increase in gain on private
equity investments, to ¥13.9 billion.
Income from Continuing Operations
before Income Taxes and Equity in Net
Income of Affiliated Companies
Income from continuing operations before
income taxes and equity in net income ofaffiliated companies advanced 18.6%, or¥22.8 billion, to ¥145.2 billion, bolsteredby increases in operating income and net
other income.

Income Taxes
Income taxes amounted to ¥47.0 billion,
an increase of ¥6.7 billion, and wereequivalent to 32.4% of income fromcontinuing operations before income taxes
and equity in net income of affiliatedcompanies, compared with 32.9% in theprevious fiscal year.
Equity in Net Income of AffiliatedCompanies
Equity in net income of affiliated companies, at ¥5.2 billion, was down ¥2.0
billion. This result primarily reflected
decreases in equity in net income ofcertain affiliated companies overseas.
Net Income Attributable to
Noncontrolling Interests
Net income attributable to noncontrollinginterests amounted to ¥12.0 billion, up¥6.8 billion from the previous fiscal year,
reflecting increases in gain on private
equity investments and operating incomein the information and communication
related services segment.
Net Income Attributable to SECOM
CO., LTD.
Net income attributable to SECOM CO.,LTD. advanced 8.7%, or ¥7.3 billion, to¥91.4 billion, equivalent to 8.9% of net
sales and operating revenue, comparedwith 8.5% in the previous fiscal year. Net
income attributable to SECOM CO., LTD.
per share was ¥418.71, up from ¥385.19.
At the Ordinary General Meeting of
Shareholders held on June 27, 2017, a
proposal to pay a year-end dividend of¥75.00 was approved. As a consequence,
cash dividends for the period—which also
included an interim dividend of ¥70.00
approved at the Board of Directors’ meeting held on November 9, 2016—rose¥10.00, to ¥145.00 per share. However,
because both the ¥70.00 per share yearend dividend for the year ended March 31,
2016, approved at the Ordinary General
Meeting of Shareholders held on June 24,
2016, and the ¥70.00 per share interim
dividend for the previous fiscal year, determined by the Board of Directors and paid
to shareholders of record as of September
30, 2016, were paid during the period,
cash dividends paid to shareholders in the
period under review—the figure thatappears in the financial statements—
amounted to ¥140.00 per share.

SECOM Annual Report 2017

Financial Review

Costs and Expenses
Total costs and expenses rose 4.2%, or¥36.6 billion, to ¥901.1 billion. Cost of
sales, at ¥710.0 billion, was up 5.3%, or¥35.4 billion, and was equivalent to68.8% of net sales and operating revenue,compared with 68.6% in the previous
fiscal year, owing mainly to the inclusionof a full year of results for subsidiary Asahi
Security, for which the costs of sales ratio
is comparatively high.
Selling, general and administrative(SG&A) expenses, at ¥184.5 billion, wereup 4.7%, or ¥8.2 billion. SG&A expenses
were equivalent to 17.9% of net sales andoperating revenue, level with the previous
fiscal year.

Impairment loss on long-lived assets
amounted to ¥2.7 billion, as the Company
recognized losses on certain businessassets in the geographic information services segment. This represented a declineof ¥9.1 billion from ¥11.8 billion in theprevious fiscal year, which reflected,
among others, losses on certain businessassets in the information and communication related services segment and on certain real estate assets, the use of which it
had reconsidered. The Company also recognized an impairment loss on goodwill of¥1.2 billion, owing to, among others, adecrease in projected cash flows of apreviously acquired security services subsidiary. Additionally, loss on sales anddisposal of fixed assets, net, rose ¥845
million, to ¥2.8 billion.

31

Financial Review

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

Security Services
The security services segment comprises
electronic security services, which center on
on-line security systems; other security services; and merchandise and other. In the
period under review, net sales and operating revenue in this segment advanced
7.6%, or ¥38.4 billion, to ¥546.5 billion.
Excluding intersegment transactions, net
sales and operating revenue in this segment amounted to ¥543.5 billion, representing 52.7% of overall net sales andoperating revenue, up from 51.4% in theprevious fiscal year.
In addition to on-line commercial andhome security systems, electronic security
services include large-scale proprietary
security systems, which center on surveillance services for the subscriber’s premises.
On-line commercial and home security
systems use sensors, controllers and otherequipment installed at the subscriber’s
premises to detect events, including intrusions, fires and equipment malfunctions.
Equipment is linked to a SECOM control
center via telecommunications circuits tofacilitate around-the-clock remote monitoring. Should an irregularity be detected,
relevant information is relayed to the control center, where staff dispatch emergency
response personnel to take appropriate
measures. Control center staff also notify
the police, fire department or other authorities, if necessary. The Company has established an integrated approach, whereby ittakes full responsibility for all aspects of its
on-line commercial and home security systems, from R&D through to equipment
manufacturing, marketing, security planning, installation, monitoring, emergency
response services and equipment maintenance. Net sales and operating revenue
from electronic security services rose 2.4%,
or ¥7.9 billion, to ¥338.7 billion, primarilyreflecting expanded sales of value-added
services that respond to diverse security
needs, which bolstered sales of on-line
security systems, and an increase in revenue
from installation attributable to higher salesof large-scale security systems.
Other security services include static
guard services and armored car services.
Static guard services, which are provided
by highly trained professional security
guards for situations requiring humanjudgment and flexible responsiveness, generated net sales and operating revenue of¥56.4 billion, up 0.9%, or ¥510 million.
Armored car services, which involve thetransport of cash, securities and other valuables using specially fitted armored cars
and security professionals, reported net
sales and operating revenue of ¥57.9 billion, up 75.4%, or ¥24.9 billion, owing
principally to the inclusion of a full year of
results for Asahi Security, consolidated on
December 1, 2015.

32

SECOM Annual Report 2017

The merchandise and other category
encompasses sales of a wide range of security products, including security camera
systems, access control systems, automatedfire extinguishing systems and externalmonitoring systems, which can be freestanding or linked to on-line security systems. Net sales and operating revenue inthis category advanced 6.1%, or ¥5.2 billion, to ¥90.5 billion, owing to the robust
sales of access control systems and theinclusion of a full year of results for
Kumalift, consolidated on August 31, 2015.
Operating income in the security services segment rose 1.6%, or ¥1.8 billion,to ¥112.7 billion. The operating margin
was 20.6%, compared with 21.8% in theprevious fiscal year. Higher operating
income primarily reflected the inclusion ofa full year of results for Asahi Security andhigher net sales and operating revenue foron-line security systems and merchandise.
The decline in the operating margin was
due to an impairment loss on goodwill—
attributable to a decrease in projected cash
flows of a previously acquired security
services subsidiary—and an increase inadvertising and promotional costs.
Fire Protection Services
The fire protection services segment
focuses on high-grade, tailored, automatic
fire alarm systems, fire extinguishing systems and other fire protection systems fora wide range of applications, including
office buildings, plants, tunnels, culturalproperties, ships and residences. In the
period under review, Nohmi Bosai andNittan, two of Japan’s leading domestic fire
protection services providers, sought toleverage their respective business foundations and product development capabilities
to secure orders for fire protection systems.
Net sales and operating revenue in thissegment amounted to ¥129.7 billion,
down 4.3%, or ¥5.8 billion, from the previous period, which benefited from a number of major orders. Operating income
declined 3.8%, or ¥525 million, to ¥13.1
billion, while the operating margin
remained level at 10.1%.
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
for the management of hospitals andhealth care-related institutions. The
segment also includes the operations ofvariable interest entities of which theCompany is the primary beneficiary, which
manage hospitals and health care-related
institutions.
Segment net sales and operating revenue rose 3.2%, or ¥5.3 billion, to ¥169.0
billion. The principal factors behind thisresult were the consolidation of a hospitalmanagement company in India, andincreases in sales and operating revenuesof the aforementioned variable interest
entities and from pharmaceutical dispensing services. Operating income fell 40.7%,
or ¥1.2 billion, to ¥1.7 billion, while theoperating margin declined to 1.0%, from
1.8% owing mainly to the expansion andmodification of hospitals managed by variable interest entities and an increase inimpairment loss on long-lived assets.
Insurance Services
The insurance services segment offers anextensive lineup that includes the Security
Discount Fire Policy, a commercial fire
insurance policy, and SECOM Anshin My
Home, a comprehensive fire insurance
policy for homes—both of which offer
discounts on premiums to customers who
have installed on-line security systems,
recognizing this as a risk-mitigating
factor—and SECOM Anshin My Car, acomprehensive automobile insurance
policy that offers onsite support services
provided by SECOM emergency response
personnel should the policyholder be
involved in an accident. Other offerings
include MEDCOM, an unrestricted cancer
treatment policy that covers the entire costof medical treatment for cancer.
Net sales and operating revenue in thissegment advanced 7.5%, or ¥3.3 billion,to ¥46.9 billion, spurred by favorable salesof the MEDCOM unrestricted cancer treatment policy and the fact that a decline in
net premiums written—a consequence ofthe termination of sales of fire insurance
policies with terms of 10 years or longer in
October 2015—was exceeded by adecrease in provision for policy reserves.
Operating income rose 6.5%, or ¥447
million, to ¥7.3 billion, while the operating
margin edged down to 15.6%, from
15.7% in the previous fiscal year. The principal factor behind the increase in operating income was higher net realized
investment gains.
Geographic Information Services
The geographic information services segment includes the collection of geographic
data from satellite images, aerial photography, and vehicle/ground and other types ofsurveying, which are integrated, processed
and analyzed to facilitate the provision of
geospatial information services to public
sector entities, including national and local
governments, and private sector customers
in Japan. The Company also extends geospatial information services to government
agencies overseas.
Segment net sales and operating revenue decreased 1.7%, or ¥896 million, to¥51.8 billion, owing to a decline in net
sales and operating revenue from services
for overseas customers. The segment
reported an operating loss of ¥944 million,
compared with an operating loss of ¥268
million in the previous fiscal year. The
principal factor behind this result was anincrease in impairment loss on long-lived
assets arising from, among others, agreater risk of decline in the profitability ofsatellite operation software and thereplacement of satellite signal receiving
equipment.
Information and Communication
Related Services
Information and communication related
services focus on data center services, aswell as BCP support services, information
security services and cloud-based services.
Net sales and operating revenue in thissegment advanced 1.7%, or ¥1.0 billion,to ¥56.8 billion, bolstered by, among
others, a full year of contributions fromsales of the SECOM Anshin My Number
service, launched in the previous fiscal year.
Operating income climbed to ¥7.3 billion,

from ¥308 million, while the operating
margin rose to 12.8%, from 0.6% in theprevious fiscal year. A decline in impairment loss on long-lived assets to ¥485
million, from ¥5.6 billion in the previous
fiscal year, together with decreases incharges for electricity and rental expenses
in the data center business—the former
attributable to falling crude oil prices andlatter to the purchase of certain previously
rented facilities—were among factors
contributing to the operating income result.
Real Estate and Other Services
The real estate and other services segment
encompasses the development and salesof, among others, condominiums equippedwith sophisticated security and disaster-

preparedness features, as well as realestate leasing, construction, andinstallation and other services.
Segment net sales and operating revenue rose 12.4%, or ¥5.5 billion, to ¥49.5
billion. Principal factors behind this result
included an increase in the real estatedevelopment and sales business. Operating
income, at ¥5.2 billion, was up 7.0%, or¥341 million. The operating margin slipped
to 10.6%, from 11.1% in the previous
fiscal year. Higher operating income
reflected an improvement in the profitability of construction and installation projects
and an increase in net sales and operating
revenue in the real estate development andsales business.

Financial Position
Total assets as of March 31, 2017,
amounted to ¥1,763.3 billion, ¥81.9 billion higher than at the end of the previous
fiscal year. Total current assets, at ¥773.9
billion, were up ¥68.3 billion, andaccounted for 43.9% of total assets. The
current ratio rose to 2.0 times, from 1.8
times in the previous fiscal year. Cash andcash equivalents totaled ¥299.6 billion, an
increase of ¥70.6 billion, reflecting the factthat net cash provided by operating activities exceeded net cash used in investing
and financing activities. (For further
details, please see Cash Flows, which follows this section.) Notes and accounts
receivable declined ¥1.8 billion, to ¥134.8
billion. Notes and accounts receivable areaffected by the fact that income in the fire
protection services and geographic information services segments tend to be concentrated toward the end of the fiscal
year. Cash deposits for armored car
services rose ¥2.4 billion, to ¥130.6 billion,

with contributing factors including an
increase in service contracts at Asahi
Security. Despite a ¥1.0 billion increase inreal estate for sale, to ¥27.5 billion, inventories declined ¥1.1 billion, to ¥62.7 billion, owing to a ¥1.9 billion decline insecurity merchandise, to ¥7.0 billion,
among others.
Investments and long-term receivablesrose ¥13.2 billion, to ¥349.6 billion, equivalent to 19.8% of total assets. Investment
securities advanced ¥14.8 billion, to¥227.2 billion, a consequence of higher
unrealized gains on securities and otherfactors.
Property, plant and equipment, lessaccumulated depreciation, decreased ¥84
million, to ¥414.1 billion, representing
23.5% of total assets. Buildings andimprovements increased ¥13.1 billion, to¥329.6 billion, owing to the expansion
and modification of hospitals managed byvariable interest entities and the acquisitionof information and communications
assets, including the purchase of certain
previously rented data center facilities. In
contrast, machinery, equipment and automobiles declined ¥11.0 billion, to ¥143.8
billion. These factors led to an increase inproperty, plant and equipment before thededuction of accumulated depreciation of¥3.8 billion, to ¥913.7 billion. Accumulated depreciation rose ¥3.9 billion, to¥499.6 billion.
Other assets totaled ¥225.8 billion, up¥529 million, and accounted for 12.8% of
total assets. Impairment losses, among
others, resulted in a ¥1.3 billion decline ingoodwill, to ¥89.0 billion. Amortizationand other factors pushed other intangible
assets down ¥3.2 billion, to ¥50.7 billion.
In contrast, prepaid pension and severance
costs rose ¥4.5 billion, to ¥35.3 billion,
reflecting increases in the fair value of plan
assets.

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets(Year ended March 31, 2017)(In yen)
5,000(In billions of yen)

4,000

1,600

3,000

1,200

2,000

800

1,000

400

4.8%

4.6%

5.0%
4.3%

16.4%

Financial Review

Percentage of Consolidated
Net Sales and Operating Revenue*

2,000

52.7%

12.2%

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

Fire Protection Services
Insurance Services
Information andCommunication
Related Services00

13 14 15 16 17

13 14 15 16 17* Pie chart shows percentage of consolidated net sales andoperating revenue (excluding intersegment transactions)

SECOM Annual Report 201733

Financial Review

Total current liabilities amounted to¥393.9 billion, an increase of ¥6.1 billion,
and accounted for 22.3% of total liabilities
and equity. Deposits received rose ¥7.1 billion, to ¥112.1 billion, as an increase inservice contracts at Asahi Security pushed
up cash deposits for armored car services.
Bank loans declined ¥13.6 billion, to ¥42.1
billion, while notes and accounts payablerose ¥3.4 billion, to ¥46.3 billion, andaccrued income taxes advanced ¥5.2
billion, to ¥27.6 billion.

Total long-term liabilities, at ¥317.9 billion, were up ¥928 million, representing
18.0% of total liabilities and equity.
Unearned premiums and other insurance
liabilities advanced ¥4.4 billion, to ¥110.0
billion. Long-term debt, at ¥54.1 billion,
was down ¥7.5 billion, owing to the shiftof certain debt to the bank loans category,among others. An increase in unrealized
gains on private equity investments in the
United States was one of several factors
contributing to a ¥7.8 billion increase indeferred income taxes, to ¥33.8 billion.

Total SECOM CO., LTD. shareholders’equity advanced ¥64.0 billion, to ¥929.2
billion. Retained earnings rose ¥60.7 billion, to ¥832.8 billion, with contributing
factors including an increase in net income
attributable to SECOM CO., LTD. and thepayment of dividends. Unrealized gains on
securities rose ¥4.4 billion, to ¥22.5 billion,
underpinning a ¥3.2 billion increase inaccumulated other comprehensive income,to ¥20.1 billion. As a result, the equity
ratio was 52.7%, compared with 51.5%
as of March 31, 2016.

receipt of payments from the Company’s
principal partner in a joint condominium
development and sales project, which
served as lead manager.
Net cash used in investing activities
amounted to ¥47.2 billion. This result wasdue primarily to payments for purchases ofproperty, plant and equipment of ¥51.2
billion, reflecting outlays for security
equipment and control stations—
attributable to an increase in the numberof security services subscribers—and thepurchase of certain previously rented data
center facilities, and other business assets
in the information and communication
related services segment; payments forpurchases of investment securities of¥32.6 billion, primarily in the insurance
services segment and through private
equity investments in the United States;and payments for purchases of intangible
assets of ¥7.3 billion. These outlays werepartially offset by proceeds from sales andredemptions of investment securities of¥43.3 billion.
Net cash used in investing activitieswas ¥85.5 billion lower than in the preceding period. Factors contributing to thisresult included a decline in outlays foracquisitions, net of cash acquired, to ¥167
million, from ¥73.5 billion in the previous
period, a figure that reflected factors suchas the acquisition of Asahi Security.
Net cash used in financing activities
amounted to ¥59.8 billion. This result
reflected dividends paid to SECOM CO.,LTD. shareholders of ¥30.6 billion, repayments of long-term debt of ¥20.1 billion
and a decrease in bank loans, net, of¥13.5 billion, which were partially offset
by proceeds from long-term debt of¥8.4 billion.
Net cash used in financing activitieswas ¥30.8 billion higher than in the preceding period. Factors contributing to thisresult include the ¥13.5 billion decrease inbank loans, compared with an increase of¥8.7 billion in the previous fiscal year,
owing to the repayment of loans undertaken in the previous period to boost
working capital.
The Company’s operating, investing
and financing activities in the period underreview yielded net cash and cash equivalents at end of year of ¥299.6 billion, up¥70.6 billion from net cash and cash
equivalents at beginning of year, whichwere ¥229.0 billion.

Cash Flows
The Company is committed to maintaining
sufficient liquidity to allow flexibility in its
operations and ensure a solid financial
foundation. To the best of its ability, theCompany is also firmly committed tofinancing strategic investments with cash
generated by its operating activities.
In the period under review, net cash
provided by operating activities amounted
to ¥178.6 billion. The principal components of this were net income of ¥103.4
billion and depreciation and amortization,
including amortization of deferredcharges, of ¥78.2 billion, a non-cash item.
Net cash provided by operating activities was ¥35.8 billion higher than in theprevious fiscal year. Factors behind thisincrease included an increase in receivables
and due from subscribers, net of allowances of ¥1.3 billion, down from ¥9.7 billion in the previous fiscal year; a decreasein accrued consumption tax of ¥879 million, compared with a decrease of ¥7.0
billion in the preceding period due to a
consumption tax rate hike; and other, net,
which provided ¥9.3 billion, comparedwith the previous period, when this item
used ¥473 million. Cash provided in theother, net, category primarily reflected thePurchases of Property,
Plant and Equipment
and Intangible Assets

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

–150

0

13 14 15 16 17

13 14 15 16 17

15

16

17

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

34

SECOM Annual Report 2017

AUDITED FINANCIAL STATEMENTS

Contents
Consolidated Financial Statements ............................................ 36
Consolidated Balance Sheets ................................................. 36
Consolidated Statements of Income ...................................... 38
Consolidated Statements of Comprehensive Income.............. 38
Consolidated Statements of Changes in Equity ...................... 39
Consolidated Statements of Cash Flows ............................... 40
Notes to Consolidated Financial Statements........................... 41
Independent Auditors’ Report .................................................... 67

SECOM Annual Report 201735

Consolidated Financial Statements
Consolidated Balance Sheets
SECOM CO., LTD. and Subsidiaries
March 31, 2017 and 2016

In millions of yen

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

March 31

March 31

2016

2017

Current assets:
Cash and Cash equivalents (Notes 5 and 22) .............................................................. ¥ 299,600 ¥ 228,982
Time deposits (Note 13)..............................................................................................
9,562
9,764
Cash deposits for armored car services (Note 6) ..........................................................
130,620
128,267
Short-term investments (Notes 7 and 22)....................................................................
29,224
31,412
Notes and accounts receivable, trade..........................................................................
134,794
136,619
Due from subscribers..................................................................................................
46,46743,748Inventories (Note 8) ....................................................................................................
62,68663,780
Short-term receivables (Notes 9, 13, 20 and 21) .........................................................
26,07430,035
Allowance for doubtful accounts (Note 9) ..................................................................
(1,821)(1,782)
Deferred insurance acquisition costs (Note 14)............................................................
6,440
6,766
Deferred income taxes (Note 17) ................................................................................
12,611
12,082Other current assets ...................................................................................................
17,595
15,862$ 2,675,000
85,375
1,166,250
260,929
1,203,518
414,884
559,696
232,804(16,259)
57,500112,598
157,098

ASSETS

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

773,852

705,535

6,909,393

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

227,245
57,922
42,407
15,675
10,510(4,178)212,485
56,69940,851
15,753
15,234(4,625)2,028,973
517,161
378,634
139,956
93,839(37,304)

349,581

336,397

3,121,259

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 ............................................................................................

115,210
329,631317,352
143,789
7,683

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

1,028,661
2,943,134
2,833,500
1,283,830
68,598

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

913,665(499,597)

909,857(495,705)

8,157,723(4,460,687)

414,068

414,152

3,697,036

42,606
88,95050,72635,282
8,213

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

380,411794,196452,911315,018
73,330225,777

225,248

2,015,866

Total assets ......................................................................................................... ¥1,763,278 ¥1,681,332$15,743,554

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.

36

2017

SECOM Annual Report 2017

LIABILITIES AND EQUITY

In millions of yen

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

March 31

March 31

2016

2017

2017

Current liabilities:
Bank loans (Notes 6 and 13) ....................................................................................... ¥ 42,099 ¥ 55,659
Current portion of long-term debt (Notes 13, 19 and 21) ...........................................
19,615
17,926
Notes and accounts payable, trade .............................................................................
46,28042,905
Other payables ...........................................................................................................
38,612
39,635
Deposits received (Note 6) ..........................................................................................
112,053
104,996
Deferred revenue .......................................................................................................
38,732
39,737
Accrued income taxes ................................................................................................
27,61522,410Accrued payroll ..........................................................................................................
32,08431,506
Other current liabilities (Note 17) ................................................................................
36,822
32,991$

375,884
175,134
413,214344,750
1,000,473
345,821
246,563286,464
328,768

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

393,912

387,765

3,517,071

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

54,14932,52929,636
15,444110,018
27,69133,815
14,616

61,64033,63730,06816,350105,569
29,802
25,982
13,922

483,473
290,438
264,607
137,893982,304
247,241
301,920
130,500

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

317,898

316,970

2,838,376

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

711,810

704,735

6,355,447

66,37873,102
10,632
832,785

66,37873,118
10,526772,061

592,661
652,696
94,9297,435,580

22,529—(3,492)
1,039

18,152—(7,891)
6,652

201,152—(31,179)
9,277

20,076

16,913

179,250

Commitments and contingent liabilities (Note 24)
Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
Authorized—900,000,000 shares,
issued 233,288,717 shares in 2017 and 2016 .......................................................
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 ................................................................

15,028,470 shares in 2017 and 15,026,824 shares in 2016 .....................................

(73,731)(73,718)(658,313)

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

929,242865,278

8,296,803

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

122,226

111,319

1,091,304

Total equity ......................................................................................................... 1,051,468

976,597

9,388,107

Total liabilities and equity .................................................................................... ¥1,763,278 ¥1,681,332$15,743,554

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201737

Financial Section

Common stock in treasury, at cost:Consolidated Statements of Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 20172017

In millions of yen

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

Years ended March 31

Year ended March 31

2015

2017

Net sales and operating revenue (Notes 14 ,18 and 22)¥1,031,261 ¥983,428 ¥945,238
Costs and expenses:
Cost of sales (Note 8) .........................................................................................................
709,962
674,533
644,196
Selling, general and administrative expenses (Notes 2 (17), 2 (18), 2 (19) and 4).................
184,487
176,269
168,563
Impairment loss on long-lived assets (Note 11) ...................................................................
2,689
11,814
6,591
Impairment loss on goodwill (Note 12) ...............................................................................
1,193
—
1,314
Loss on sales and disposal of fixed assets, net ....................................................................
2,752
1,907
2,567
901,083
864,523
823,231
Operating income..................................................................................................
130,178
118,905
122,007
Other income:Interest and dividends ........................................................................................................
1,286
1,440
1,412
Gain on sales of securities, net (Notes 7 and 18) ................................................................
391
1,480
56
Gain on private equity investments (Note 22) .....................................................................
13,8871,718
4,062
Other (Notes 16, 18 and 23) ..............................................................................................
2,571
3,041
3,763
18,135
7,679
9,293
Other expenses:
Interest .............................................................................................................................
1,369
1,388
1,394
Loss on other-than-temporary impairment of investment securities (Notes 18 and 22) ........
77
402
154
Other (Note 16) ................................................................................................................
1,644
2,333
1,895
3,090
4,123
3,443
Income from continuing operations before income taxes and equity
in net income of affiliated companies ..................................................................
145,223
122,461
127,857
Income taxes (Note 17):
Current .............................................................................................................................
43,44939,13546,837
Deferred ............................................................................................................................
3,563
1,177
(865)
47,01240,31245,972
Income from continuing operations before equity in net income ofaffiliated companies.............................................................................................
98,211
82,14981,885Equity in net income of affiliated companies (Note 18) ..................................................
5,178
7,162
5,759
Income from continuing operations .......................................................................
103,389
89,31187,644
Income (loss) from discontinued operations, net of tax (Note 25) .................................
——
814
Net income............................................................................................................
103,389
89,31188,458Less: Net income attributable to noncontrolling interests .............................................
(12,002)(5,239)(8,274)
Net income attributable to SECOM CO., LTD. ....................................................... ¥ 91,387 ¥ 84,072 ¥ 80,184$9,207,688

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

2016

38

SECOM Annual Report 201712,223688
14,67927,5901,296,634
387,937
31,813419,750
876,884
46,232
923,116—
923,116(107,161)$ 815,955
Translation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2017

2016

2015

2017

¥418.71—418.71¥140.00¥385.19—385.19¥130.00¥363.643.73
367.37¥175.00

$3.74
—
3.74
$1.25

In millions of yen

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

Years ended March 31

Year ended March 31

SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2017

See accompanying notes to consolidated financial statements.

11,483
3,491
123,991
22,955
161,920

In yenConsolidated Statements of Comprehensive Income

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. ......................................................

6,338,946
1,647,205
24,00910,652
24,572
8,045,384
1,162,304

2017

2016

2015

2017

¥103,389¥89,311¥ 88,458$923,116

4,600
—
4,675
(5,726)
106,938(12,388)¥ 94,550(7,823)
13,588(9)(8)(6,402)
7,194(3,234)
12,17971,843
121,411(3,820)(9,986)¥68,023 ¥111,425

41,072—
41,741(51,125)
954,804(110,608)$844,196

Consolidated Statements of Changes in Equity
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2017

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Balance, March 31, 2014 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Note 18) ..............................................................................
—
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—¥66,378¥73,781¥10,316¥674,585¥ 1,721(¥73,682)¥753,099¥107,257———

80,184——80,1848,274

88,458

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

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

—
—
—
—

—
—
—

—
—
—

—
—
85

(38,197)
—
(85)

—
—
—

—
—
—

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

584
(4)
380
752
9,986
—
(3,763)—

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

—
—
—

(339)
0
—

—
—
—

—
—
—

—
—
—

—
—
(19)

(339)
0
(19)

(282)
—
—

(621)
0
(19)

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

66,37873,442

10,401

716,487

32,962(73,701)

825,969

113,198

939,167———

84,072——

84,072

5,239

89,311

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

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

—
—
—
—

—
—
—

—
—
—

—
—
125

(28,373)
—
(125)

—
—
—

—
—
—

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

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

—
—
—

(324)
0
—

—
—
—

—
—
—

—
—
—

—
—
(17)

(324)
0
(17)

(2,756)——(3,080)0(17)Balance, March 31, 2016 ..................................................... 233,288,717
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..................................................
—

66,37873,118

10,526772,061

16,913(73,718)

865,278

111,319

976,597———

91,387——

91,387

12,002

103,389

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

4,376
—
4,400
(5,613)

—
—
—
—

—
—
—

—
—
—

—
—
106

(30,557)
—
(106)

—
—
—

—
—
—

4,376
—
4,400
(5,613)
94,550(30,557)
—
—

224
—
275
(113)
12,388—(2,941)
—

4,600
0
4,675
(5,726)
106,938(30,557)(2,941)
—

—
—
—

(16)
0
—

—
—
—

—
—
—

—
—
—

—
—
(13)

(16)
0
(13)

1,460
—
—

1,444
0
(13)

Balance, March 31, 2017 ..................................................... 233,288,717¥66,378¥73,102¥10,632¥832,785¥20,076(¥73,731)¥929,242¥122,226¥1,051,468

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costNumber ofsharesissuedCommonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests

Total¥ 860,356

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

Commonstock

Additional
paid-in
capitalLegalreserve$93,982 $6,893,402

Balance, March 31, 2017 ......................................................................... $592,661 $652,696$94,929 $7,435,580$151,009 ($658,196)

Total$7,725,697$ 993,920$8,719,617—

815,955——

815,955

107,161

923,116

—
—
—
—

—
—
—
—

39,071—
39,286(50,116)

—
—
—
—

—
—
947

(272,830)
—
(947)

—
—
—

—
—
—

39,071—
39,286(50,116)
844,196(272,830)
—
—

2,001
—
2,455
(1,009)110,608—(26,259)—

41,072—
41,741(51,125)
954,804(272,830)(26,259)
—

—
—
—

—
—
—

—
—
—

—
—
(117)

(143)
0
(117)

13,035——

12,892
0(117)$179,250 ($658,313)$8,296,803$1,091,304$9,388,107

See accompanying notes to consolidated financial statements.

SECOM Annual Report 2017

39

Financial Section

Balance, March 31, 2016
$592,661 $652,839
Comprehensive income:Net income .............................................................................................
——
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities ............................................................
——
Unrealized gains on derivative instruments .........................................
——
Pension liability adjustments ..............................................................
——
Foreign currency translation adjustments ...........................................
——
Total comprehensive income ...................................................................
Cash dividends paid to SECOM CO., LTD. shareholders ................................
——Cash dividends paid to noncontrolling interests ............................................
——
Transfer to legal reserve ...............................................................................
——
Equity transactions with noncontrolling interests and other(Notes 18) ..................................................................................................
—(143)
Gains on disposal of treasury stock ..............................................................
—
0
Net changes in treasury stock.......................................................................
—
—

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests

Consolidated Statements of Cash Flows
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 20172017

In millions of yen

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

Years ended March 31

Year ended March 31

2016

2015

Cash flows from operating activities:
Net income .......................................................................................................................... ¥103,389 ¥ 89,311 ¥ 88,458
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) ...........................................................................................
78,183
72,481
68,864
Accrual for pension and severance costs, less payments ....................................................
754(2,246)(4,495)
Deferred income taxes, including discontinued operations ................................................
3,563
1,177
2,505
Loss on sales and disposal of fixed assets, net, including discontinued operations .............
2,712
1,815
958
Impairment loss on long-lived assets, including discontinued operations (Note 11) ............
2,689
11,814
6,591
Write-down on real estate inventories (Note 8) .................................................................
1,164
1,463
1,565
Gain on private equity investments (Note 22) .................................................................... (13,887)(1,718)(4,062)
Impairment loss on goodwill (Note 12)..............................................................................
1,193
—
1,314
Gain on sales of securities, net (Notes 7 and 14) ...............................................................
(1,500)(2,101)(243)
Loss on other-than-temporary impairment of investment securities (Notes 14 and 22) .......
182
549
172
Equity in net income of affiliated companies .....................................................................
(5,178)(7,162)(5,759)Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits for armored car services .........................................
(2,352)
3,642
8,202(Increase) decrease in receivables and due from subscribers, net of allowances..............
(1,268)(9,741)
1,731(Increase) decrease in inventories ..................................................................................
187(2,445) (11,120)
Increase in deferred charges ......................................................................................... (15,887) (15,501) (17,248)
Increase (decrease) in notes and accounts payable ........................................................
3,435
646
(3,900)
Increase (decrease) in deposits received .........................................................................
6,627
2,985
(1,601)
Decrease in deferred revenue ........................................................................................
(1,560)(515)(251)
Increase (decrease) in accrued income taxes ..................................................................
4,334
959
(6,862)
Increase (decrease) in guarantee deposits received ........................................................
(1,023)(1,070)(147)
Increase in unearned premiums and other insurance liabilities .......................................
4,449
5,984
865
Increase (decrease) in accrued consumption tax ............................................................
(879)(7,003)
8,891
Other, net .....................................................................................................................
9,296
(473)
479
Net cash provided by operating activities .................................................................. 178,623 142,851 134,907
Cash flows from investing activities:(Increase) decrease in time deposits.......................................................................................
(70)
(517)
538
Proceeds from sales of property, plant and equipment ..........................................................
1,465
3,030
3,580
Payments for purchases of property, plant and equipment .................................................... (51,222) (59,454) (56,303)
Payments for purchases of intangible assets ..........................................................................
(7,338)(8,409)(8,409)Proceeds from sales and redemptions of investment securities (Note 7) .................................
43,29055,03638,237
Payments for purchases of investment securities ................................................................... (32,613) (49,361) (51,573)(Increase) decrease in short-term investments ........................................................................
(2,283)(241)
2,039
Acquisitions, net of cash acquired (Note 4)............................................................................
(167) (73,540)(58)(Increase) decrease in short-term receivables, net ..................................................................
(62)
(7)
20
Payments for long-term receivables .......................................................................................
(760)
(639)
(1,076)
Proceeds from long-term receivables .....................................................................................
1,721
1,218
3,164
Other, net .............................................................................................................................
839
190
553
Net cash used in investing activities .......................................................................... (47,200) (132,694) (69,288)
Cash flows from financing activities:
Proceeds from long-term debt ..............................................................................................
8,407
9,357
17,470
Repayments of long-term debt.............................................................................................. (20,059) (15,197) (16,029)
Increase (decrease) in bank loans, net ................................................................................... (13,528)
8,691(8,636)
Increase (decrease) in investment deposits by policyholders ...................................................
(2,112)(469)
740
Dividends paid to SECOM CO., LTD. shareholders ................................................................. (30,557) (28,373) (38,197)
Dividends paid to noncontrolling interests .............................................................................
(3,556)(2,208)(3,763)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders ...................................................................................................................
(489)
(846)
(735)
Proceeds from sales of shares of consolidated subsidiaries to noncontrollinginterest holders ...................................................................................................................
618——
Increase in treasury stock, net ...............................................................................................
(13)
(16)
(19)
Other, net .............................................................................................................................
1,464
65
24
Net cash used in financing activities .......................................................................... (59,825) (28,996) (49,145)
(980)
(806)
1,401
Effect of exchange rate changes on cash and cash equivalents .......................................
Net increase in cash and cash equivalents ..........................................................................
70,618(19,645)
17,875
Cash and cash equivalents at beginning of year ................................................................ 228,982 248,627 230,752
Cash and cash equivalents at end of year .......................................................................... ¥299,600 ¥228,982 ¥248,627
See accompanying notes to consolidated financial statements.

40

SECOM Annual Report 20172017

$ 923,116
698,063
6,732
31,81324,21424,00910,393(123,991)
10,652(13,393)
1,625(46,232)(21,000)(11,321)1,670(141,848)
30,67059,170(13,929)
38,696(9,134)39,723(7,848)82,9981,594,848(625)
13,080(457,339)(65,518)
386,518(291,188)(20,384)(1,491)(554)(6,786)
15,366
7,492(421,429)
75,063(179,098)(120,786)(18,857)(272,830)(31,750)(4,366)
5,518(116)
13,070(534,152)(8,749)630,518
2,044,482$2,675,000

Notes to Consolidated Financial Statements
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2017

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the businesses of security services,
fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services. With these
services combined, the Company is focusing on the establishmentof a Social System Industry, a network of integrated services andsystems, targeted at the needs of people and business.
The Company’s principal business activities are security services,
including on-line security systems for commercial and residential
premises, static guard services, armored car services for cash collection and deposit and sales of security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services and the operations of variable interest entities of which theCompany is the primary beneficiary through managing hospitals
and health care-related institutions; non-life insurance services;
geographic information services using geographic information
systems (GIS) and surveying and measuring technology; informationand communication related services, which center on data center
services and also include business continuity plan support, information security services and cloud-based services; real estate and otherservices, including the development and sale of condominiums
equipped with security and contingency planning features, lease ofreal estate, construction and installation services and other services.
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:(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:(3) Revenue Recognition
The Company generates revenue principally through the sales ofmerchandise and services in the areas of security services, fire protection services, medical services, insurance services, geographic
information services, information and communication related services, and real estate and other services under separate contractual
arrangements. The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred or services
have been rendered, title and risk of loss have been transferredto the customer, the sales price is fixed or determinable, andcollectibility is probable.
Revenue from term service contracts, including security services,
is recognized over the contractual period or, in the case of specificservices, when such services are rendered. Subscribers are generally
requested to prepay a portion of service charges, especially forsecurity services, which are credited to deferred revenue and recognized in income ratably over the covered service period. Revenue
from the installation of security equipment used to provide on-line
centralized security services is deferred and recognized over thecontractual period of security services after completion of the installation. The related installation costs are also deferred and amortizedover the contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security services. The Company allocates revenue to eachelement based on its relative fair value if such element meets criteria for treatment as a separate unit of accounting as prescribed in
ASC 605, “Revenue Recognition.” Otherwise, revenue is deferred
until the undelivered elements are fulfilled as a single unit ofaccounting.
Revenue from sales of merchandise and software is recognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.

SECOM Annual Report 2017

Financial Section(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 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 ¥73,742 million ($658,411 thousand)and ¥85,325 million ($761,830 thousand), respectively, at March
31, 2017, and ¥75,847 million and ¥84,809 million, respectively, atMarch 31, 2016. 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 ¥29,778 million ($265,875 thousand) and¥28,628 million ($255,607 thousand), respectively, at March 31,
2017, and ¥30,315 million and ¥29,631 million, respectively, atMarch 31, 2016. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2017 and 2016 were ¥5,997 million ($53,545
thousand) and ¥5,558 million, respectively.

41

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

42

SECOM Annual Report 2017

Other investments in non-public companies, except for private
equity investments, are recorded at cost as fair value is not readily
determinable. The Company periodically evaluates the values ofother investments in non-public companies for possible impairment
by taking into consideration the financial and operating conditionsof the issuer, the general market conditions in the issuer’s industry
and the period of the decline in the estimated fair value and otherrelevant factors. If the impairment is determined to be other-thantemporary, other investments in non-public companies are written
down to their impaired value through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the investment has declined below thecarrying value.
The carrying value of private equity investments was ¥49,738
million ($444,089 thousand) and ¥34,852 million at March 31,2017 and 2016, 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 ¥53,677 million ($479,259 thousand), ¥50,098 million and¥47,582 million for the years ended March 31, 2017, 2016 and2015, 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 March 31,2017 and performed efforts to establish the best estimate. However,the scope and the amount of execution of the obligation cannot bereasonably estimated. Therefore, an asset retirement obligation forthat building lease is not recognized.
(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment used to provide on-line security
systems. The installation costs are deferred and amortized using
the straight-line method over the contractual period of security
services after completion of the installation. Amortization expense
was ¥15,596 million ($139,250 thousand), ¥15,129 million and¥14,759 million for the years ended March 31, 2017, 2016 and2015, respectively.

(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 each fiscal year.
(15) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of insurance
contracts and are earned on a pro-rata basis over the remaining
contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment expenses, which are estimates of payments to be made on reported claims and incurred but
not reported claims, which are computed based on past experience
for unpaid losses.
(16) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases, and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in whichthose temporary differences and carryforwards are expected to berealized or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are recorded toreduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized.
The Company recognizes in the consolidated financial statements
the impact of a tax position, if any, based on the technical meritsof the position, when that position is more likely than not to besustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that has greater than
50 percent likelihood of being realized upon settlement with theappropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.
(17) Research and Development
Research and development costs are charged to income
as incurred. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2017, 2016 and 2015 were ¥6,491 million ($57,955 thousand),¥6,771 million and ¥7,354 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.

(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,

SECOM Annual Report 201743

general and administrative expenses for the years ended March 31,
2017, 2016 and 2015 were ¥5,072 million ($45,286 thousand),¥4,388 million and ¥3,550 million, respectively.
(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2017, 2016
and 2015 were ¥1,220 million ($10,893 thousand), ¥1,213 millionand ¥1,223 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 the 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, 2017, 2016 and 2015 was 218,261
thousand shares, 218,263 thousand shares and 218,265 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2017, 2016 or 2015.
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

44

SECOM Annual Report 2017

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 andobligations related to employee benefits, asset retirement
obligations, income tax uncertainties, and other contingencies.
(23) Recent Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue fromContracts with Customers.” This accounting standard requires
an entity to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods orservices. This accounting standard also requires an entity to disclose
sufficient information to enable users of financial statements tounderstand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. Both qualitative and quantitative information is required. This accounting standard was originally planned to be effective for fiscal years beginning
after December 15, 2016, however, in August 2015, the FASB
issued ASU No. 2015-14, which defers the effective date of ASU
No. 2014-09 for one year. Early adoption as of the original effective
date is permitted. This accounting standard may be applied retrospectively to each prior period presented or retrospectively with the
cumulative effect recognized at the date of initial application. The
Company is currently evaluating the transition method, the timingof its adoption and the effect of adopting this accounting standard
on its consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02,“Amendments to the Consolidation Analysis.” This accounting
standard modifies the evaluation of whether reporting entities
should consolidate limited partnerships and similar legal entities,
and addresses whether fees paid to a decision maker or service
provider are variable interests in a VIE, and whether variable interests in a VIE held by related parties of the reporting entity require
the reporting entity to consolidate the VIE. A reporting entity may
choose a modified retrospective approach or a full retrospective
approach to applying the amendments. This accounting standard iseffective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period, and was adopted
by the Company in the fiscal year beginning April 1, 2016. The
adoption did not have a material impact on the Company’s
consolidated results of operations or financial position.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying
the Presentation of Debt Issuance Costs.” This accounting standard
requires that debt issuance costs related to a recognized debt
liability be presented in the balance sheets as a direct deduction
from the carrying amount of that debt liability, consistent withdebt discounts. This accounting standard is effective for fiscal years
beginning after December 15, 2015, including interim periods
within that reporting period, and was adopted by the Company
in the fiscal year beginning April 1, 2016. The adoption did nothave a material impact on the Company’s consolidated results ofoperations or financial position.
In May 2015, the FASB issued ASU No. 2015-09, “Disclosuresabout Short-Duration Contracts.” This accounting standard requires

In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity
Transfers of Assets Other Than Inventory.” This accounting standard
eliminates the exception for an intra-entity transfer of an asset
other than inventory which prohibits the recognition of current anddeferred income tax until the asset has been sold to an outside
party and requires an entity to recognize the income tax consequences when the transfer occurs. This accounting standard iseffective for fiscal years beginning after December 15, 2017,
including interim periods within that reporting period, and will be
adopted by the Company in the fiscal year beginning April 1, 2018.
In January 2017, the FASB issued ASU No. 2017-04, “Simplifying
the Test for Goodwill Impairment.” This accounting standard eliminates Step 2 from the goodwill impairment test. Instead, theamendments require an entity to perform its annual, or interim,
goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount and recognize an impairment charge
for the amount by which the carrying amount exceeds the reporting unit’s fair value. This accounting standard is effective for fiscal
years beginning after December 15, 2020, including interim periods
within that reporting period, and will be adopted by the Company
in the fiscal year beginning April 1, 2021.
(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 year ended March 31, 2015 wasreclassified in the accompanying consolidated financial statements.
(25) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2016 and 2015 havebeen reclassified to conform to the presentation used for the year
ended March 31, 2017.
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 ¥112=US$1,
the approximate rate prevailing on the Tokyo Foreign Exchange
Market on March 31, 2017. These translations should not be
construed as representing that the yen amounts actually constitute,or have been or could be converted into U.S. dollars at that rate.
4. Acquisitions
Acquisition of Asahi Security Co., Ltd.
On December 1, 2015, the Company acquired 100% of commonshares outstanding of Asahi Security Co., Ltd. for ¥81,000 million in
cash. Asahi Security Co., Ltd. has built diversified client networks,
service infrastructure and operational know-how through provisionof cash collection and delivery services for its clients, mainly retailers
and restaurants and operation of 24-hour centers for those services. The purpose of this acquisition is to provide higher quality
services for a wider range of clients and enhance corporate value
through collaboration utilizing the business infrastructure of the
SECOM Group.

SECOM Annual Report 2017

Financial Section

an entity to disclose liability for unpaid claims, claim adjustment
expenses, significant changes in methodologies and assumptions
used to calculate the liability for unpaid claims and claim adjustment expenses, including reasons for the change and the effects on
the financial statements. This accounting standard is effective forfiscal years beginning after December 15, 2015, including interim
periods within that reporting period, and was adopted by theCompany in the fiscal year beginning April 1, 2016. The adoption
did not have a material impact on the Company’s consolidated
results of operations or financial position.
In September 2015, the FASB issued ASU No. 2015-16, “Business
Combinations: Simplifying the Accounting for Measurement-Period
Adjustments.” This accounting standard requires an acquirer in abusiness combination to recognize adjustments to provisionalamounts that are identified during the measurement period in thereporting period in which the adjustment amounts are determined.
This accounting standard is effective for fiscal years beginning after
December 15, 2015, including interim periods within that reporting
period, and was adopted by the Company in the fiscal year beginning April 1, 2016. The adoption did not have a material impact
on the Company’s consolidated results of operations or financial
position.
In November 2015, the FASB issued ASU No. 2015-17, “Balance
Sheet Classification of Deferred Taxes.” This accounting standard
requires deferred tax assets and liabilities be classified as noncurrent
on the balance sheet. This accounting standard is effective for fiscal
years beginning after December 15, 2016, and will be adopted by
the Company in the fiscal year beginning April 1, 2017. The
Company is currently evaluating the effect of adopting thisaccounting standard on its consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, “Recognition
and Measurement of Financial Assets and Financial Liabilities.” Thisaccounting standard significantly changes the income statement
impact of equity investments, and the recognition of changes in fairvalue of financial liabilities when the fair value is elected. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2017, including interim periods within that reporting
period, and will be adopted by the Company in the fiscal year
beginning April 1, 2018. The Company is currently evaluating theeffect of adopting this accounting standard on its consolidated
financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases.”This accounting standard requires lessees to recognize almost alllease assets and lease liabilities on the balance sheet that arise fromlease contracts which are classified as operating leases. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2018, including interim periods within that reporting
period, and will be adopted by the Company in the fiscal year
beginning April 1, 2019.
In June 2016, the FASB issued ASU No. 2016-13, “Measurementof Credit Losses on Financial Instruments.” This accounting standard replaces the current incurred loss methodology that delays
recognition of the full amount of credit losses until the loss wasprobable of occurring with a methodology that reflects expectedcredit losses and requires consideration of a broader range ofreasonable and supportable information to inform credit loss
estimates. This accounting standard is effective for fiscal years
beginning after December 15, 2020, including interim periods
within that reporting period, and will be adopted by the Company
in the fiscal year beginning April 1, 2021.

45

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 ............................................
Cash deposits for armored car services ..........................
Other current assets ......................................................
Investments and long-term receivables ..........................
Property, plant and equipment ......................................
Intangible assets, including goodwill .............................
Total assets acquired ..................................................

¥ 11,565
81,514
5,247
2,270
15,562
71,978188,136

Current liabilities ...........................................................
Long-term liabilities.......................................................

92,764
14,372

Total liabilities assumed ..............................................
Net assets acquired ....................................................

107,136¥ 81,000Intangible assets of ¥13,922 million subject to amortization
include customer relationships of ¥13,214 million with a 15-year
useful life. The goodwill of ¥58,056 million represents expectedexcess earnings power based on the future business operations. It
is not deductible for tax purposes and has been assigned to thesecurity services segment.
The Company recorded acquisition costs of ¥296 million related
to this acquisition in selling, general and administrative expenses
for the year ended March 31, 2016.
The following unaudited pro forma information shows theCompany’s consolidated results of operations for the years ended
March 31, 2016 and 2015 as if the newly consolidated subsidiaries
acquired in the year ended March 31, 2016, were consolidated on
April 1, 2014.
In millions of yen
Years ended
March 31
Unaudited

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

2016

2015

¥1,017,642 ¥990,295
85,524

81,635In yenYears ended
March 31

Unaudited

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

2016

2015

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2017 and 2016 comprisethe following:

March 31

March 312017

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

2016

2017

¥281,433 ¥213,752
18,004
12,194
—
—
163
3,036
¥299,600 ¥228,982$2,512,795
160,750—
1,455$2,675,000

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate fair value. The
Company has not experienced any losses through default of thefinancial institutions and does not anticipate default of any
outstanding agreements.
6. Cash Deposits for Armored Car Services
The Company operates cash collection and deposit services forfinancial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection anddelivery services for entities other than financial institutions. Cashdeposit for armored car services balances are segregated from cash
and cash equivalents and are restricted as to use by the Company.
The Company funds most of the cash for such operations throughbank overdrafts and deposits. Bank loans and deposits received,
which relate to these operations, were ¥22,704 million ($202,714
thousand) and ¥107,878 million ($963,196 thousand), respectively,
at March 31, 2017, and ¥26,923 million and ¥101,306 million,
respectively, at March 31, 2016. As part of its fee arrangement, theCompany is reimbursed for the interest cost of the related
overdrafts.
7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcosts pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2017 and 2016 are as follows:
In millions of yen
March 31, 2017
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 28,051
Held-to-maturity:—
Debt securities .............
¥ 28,051
Investment securities:
Available-for-sale:
Equity securities ........... ¥ 33,892
Debt securities ............. 88,199
Held-to-maturity:
Debt securities ............. 13,058¥135,149

SECOM Annual Report 2017

In thousands of
U.S. dollars¥391.84 ¥374.02

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

46

In millions of yen

Gains

LossesFair value¥ 1,174¥1¥ 29,224—¥ 1,174¥—1—¥ 29,224¥27,885
5,347

¥ 57
231

¥ 61,720
93,315

1,404¥34,636—¥288

14,462¥169,497

In thousands of U.S. dollars

In millions of yen

March 31, 2017

March 31, 2016
Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses$ 7,464
139,250$146,714

$ 375
2,071
$2,446

$—
—
$—

$—
—
$—

$

$

$—

$—

Gross unrealized
Cost

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

Gains

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

¥

—
3

3,008
¥ 31,412¥20,878
7,020

¥461
153

¥ 51,750
107,965

1,607¥29,505—¥614

10,274¥169,989

In thousands of U.S. dollars
March 31, 2017
Gross unrealized
Cost

Gains

Short-term investments:
Available-for-sale:
Debt securities ......... $ 250,455 $ 10,483 $Held-to-maturity:——
Debt securities .........
$ 250,455 $ 10,483 $LossesFair value

9$ 260,929—
9—$ 260,929

Investment securities:
Available-for-sale:
Equity securities ....... $ 302,607 $248,973 $ 508
Debt securities .........
787,491
47,742 2,062
Held-to-maturity:
116,587
12,538—Debt securities .........
$1,206,685 $309,253 $2,570$ 551,072
833,171
129,125$1,513,368

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, 2017 are as
follows:
In millions of yen
March 31, 2017

Available-for-sale:
Equity securities...........
Debt securities.............

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses¥ 836
15,596¥16,432

¥ 42
232
¥274

¥—
—
¥—

¥—
—
¥—

¥

¥ —

¥—

¥—

—

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

——

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, 2017.
At March 31, 2017, 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, 2017
are as follows:
In millions of yen
March 31, 2017
Available-for-saleDue within 1 year .....
Due after 1 year
through 5 years ......
Due after 5 years
through 10 years ....
Due after 10 years ...

Held-to-maturity

Cost

Fair value

Cost¥ 28,051¥ 29,224

59,622

63,174

1,510

1,577

10,878
17,699¥116,250

11,396
18,745¥122,539—
11,548¥13,058—
12,885¥14,462¥—

Fair value¥—

In thousands of U.S. dollars
March 31, 2017
Available-for-sale
Cost

Held-to-maturity

Fair value

Due within 1 year ..... $ 250,455 $ 260,929
Due after 1 year
through 5 years ......
532,339564,054
Due after 5 years
through 10 years ....
97,125
101,750
Due after 10 years ...
158,027
167,367$1,037,946 $1,094,100

Cost

$

—

Fair value$—

13,482

14,080—103,105$116,587—
115,045$129,125

During the years ended March 31, 2017, 2016 and 2015, 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 ¥4,377 million ($39,080 thousand),decreased by ¥7,412 million and increased by ¥13,004 million,
respectively.

SECOM Annual Report 2017

Financial Section

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

Less than 12 months

Available-for-sale:
Equity securities...........
Debt securities.............

47

Proceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2017, 2016 and 2015 were ¥15,574 million($139,054 thousand), ¥21,397 million and ¥13,800 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, 2017, 2016 and 2015 are as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2017

2016

2015

2017

Gross realized gains ........... ¥1,623
Gross realized losses ..........
72¥1,921110¥269
1$14,491
643

The Company maintains long-term investment securities, issued
by a number of non-public companies, included as investment securities in the consolidated balance sheets. The aggregate carrying
amount of the investments in non-public companies, at cost net ofother-than-temporary impairment, was ¥9,414 million ($84,054
thousand) and ¥9,251 million at March 31, 2017 and 2016,
respectively. The corresponding fair value at that date was notcomputed as such estimation was not practicable and no significant
events or changes that might have affected the fair value of theinvestments were observed.
8. Inventories
Inventories at March 31, 2017 and 2016 comprise the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

Security-related products................... ¥ 6,961 ¥ 8,888
Fire protection-related products ........ 18,135
18,178
Real estate ........................................ 27,507
26,552Other-related products ...................... 10,083
10,162¥62,686 ¥63,780

2017$ 62,152
161,920
245,598
90,026$559,696

Work in process for real estate inventories at March 31, 2017 and2016, amounting to ¥22,284 million ($198,964 thousand) and¥23,025 million, respectively, are included in real estate.
Costs on uncompleted construction contracts at March 31, 2017and 2016, amounting to ¥9,053 million ($80,830 thousand) and¥9,083 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, 2017, 2016 and 2015
were ¥1,164 million ($10,393 thousand), ¥1,463 million and¥1,565 million, respectively.
9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
four categories: “lease receivables,” “loans receivable resulting frommedical services,” “other loans receivable” and “other.” Financing
receivables classified as “lease receivables” are resulting from leasetransactions of security merchandise and security systems.
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 to

48

SECOM Annual Report 2017

determine 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, 2017 and 2016 are as follows:
In millions of yen
Year ended March 31, 2017
Loans
receivable
resulting fromLease
medicalreceivables
services

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

Other
loans
receivable

Other

Total

368
(71)
59
—

¥1,995
395
—
—

¥ 705
64
(7)
(64)

356

2,390

698

850

4,294

133

2,390

698

850

4,071

223

¥

—

¥

0

¥1,688 ¥ 4,756
(124)
264
(714)
(662)
0
(64)

¥

—

¥

223

Financing receivables:
Individually
evaluated ............... ¥ 152
Collectively
evaluated ............... 52,287¥5,856¥ 803¥1,098¥ 7,909

546

932

149

53,914¥52,439¥6,402¥1,735¥1,247¥61,823* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.
In millions of yen
Year ended March 31, 2016
Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

423
9
(64)
—

¥2,204(0)—(209)¥3,102(33)(2,133)(231)¥1,61825—
45¥ 7,347
1(2,197)
(395)

368

1,995

705

1,688

4,756

80

1,995

705

1,688

4,468

288

¥

Lease
receivables

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

—

¥

0

¥

—

¥

288

Financing receivables:
Individually
evaluated ............... ¥96
Collectively
evaluated ............... 48,167¥6,098
1,009

1,381

152

50,709¥48,263¥7,107¥2,228¥4,050¥61,648¥ 847¥3,898¥10,939* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

In thousands of U.S. dollars

In thousands of U.S. dollars

Year ended March 31, 2017
Loans
receivable
resulting fromLease
medical Other loans
receivables
services receivable

Allowance for
doubtful accounts:
Balance at
beginning of year........ $ 3,286
Provision (Reversal) ...
(634)
Charge off ................
527
Other* .....................
—
Balance at
end of year .................
3,179
Individually
evaluated ...............
1,188
Collectively
evaluated ............... $ 1,991$17,812
3,527
—
—

Other

March 31, 2017
Loans
receivable
Other
resulting from
loans
Lease
medicalreceivables
services receivable

Total$ 6,295 $15,071 $ 42,464
571(1,107)2,357(63) (6,375) (5,911)
(571)
0
(571)

21,339

6,232

7,589

38,33921,339

6,232

7,589

36,348

Other

Total

Current ........................... $466,848
Overdue..........................
1,357$56,804 $ 8,830 $ 7,857 $540,339
357
6,661
3,277
11,652

Total:
Financing receivables .... $468,205$57,161 $15,491 $11,134 $551,991

Financing receivables
on nonaccrual status ..... $$—63 $ 7,169 $— $ 7,232

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2017 and 2016 are as follows:
In millions of yen

$

—

$

0

Financing receivables:
Individually
evaluated ............... $ 1,357
Collectively
evaluated ............... 466,848$52,286
4,875

8,321

$468,205$57,161$15,491$ 7,170$— $ 1,991

March 31, 2017
Loans
receivable
resulting from
Other
Lease
medicalloans
receivables
services receivable$ 9,803 $ 70,616
1,331

481,375$11,134 $551,991

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

Other

Total

¥152

¥5,856¥803¥1,098¥7,909

133

2,390

698

850

4,071

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

In millions of yen
March 31, 2016

The Company considers receivables are past due and the financial
position of the debtor to be credit quality indicators and classifies
financing receivables into Overdue and Current. Financing receivables determined to have no prospects for collecting contractualinterest on the basis of being past due and other factors are placedon nonaccrual status.
The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2017 and2016 are as follows:

Loans
receivable
Other
resulting from
loans
Lease
medicalreceivables
services receivable

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

Other

Total

¥96

¥6,098¥847¥3,898¥10,939

80

1,995

705

1,688

4,468

In thousands of U.S. dollars
March 31, 2017

In millions of yen
Loansreceivable
resulting from
Other
Lease
medicalloans
receivables
services receivable

March 31, 2017
Loans
receivable
resulting from
Other
Lease
medicalloans
receivables
services receivable

Other

Total

Current ...........................
Overdue..........................

¥52,287
152¥6,362
40

¥ 989
746

¥ 880
367

¥60,518
1,305

Total:
Financing receivables ....

¥52,439¥6,402¥1,735¥1,247¥61,823

Financing receivables
on nonaccrual status .....

¥

¥

¥ 803

¥

¥

—

7

—

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

¥48,16796¥7,06839¥1,433795¥1,154
2,896¥57,822
3,826

Total:
Financing receivables ....

¥48,263¥7,107¥2,228¥4,050¥61,648

Financing receivables
on nonaccrual status .....

¥

¥

¥ 847

¥

¥

—

7

—

854

$70,616

1,188

21,339

6,232

7,589

36,348¥124¥5,977

¥825

Other

Total

¥2,498¥9,424

Financial Section

Average amounts of
impaired receivables ......

Current ...........................
Overdue..........................

$9,803Loans
receivable
resulting from
Other
medicalloans
Leaseservices receivable
receivables

March 31, 2016

Total

$7,170In millions of yen

810

Other

Total

$52,286

The average amounts of impaired receivables for the year ended
March 31, 2017 are as follows:

In millions of yen
Loansreceivable
resulting from
Other
Lease
medicalloans
receivables
services receivable

Other$1,357In thousands of U.S. dollars
Loans
receivable
Other
resulting from
loans
Lease
medicalreceivables
services receivable

Average amounts of
impaired receivables ......

$1,107$53,366

Other

Total

$7,366 $22,303$84,142

SECOM Annual Report 201749

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 28.7 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a28.8 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.4 percent owned affiliate, which islisted on the Second Section of the Tokyo Securities Exchange.
Combined financial information for the affiliated companies
accounted for under the equity method is as follows:

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

2017

2016

2015

2017

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

¥1,455¥1,398¥1,774$12,991

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

¥4,749¥5,527¥4,417$42,402

In millions of yen

In thousands of
U.S. dollars

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

March 31

March 31

2016

2017

2017

2016

2017

Current assets ................................ ¥104,780 ¥ 94,932
Noncurrent assets .......................... 183,063 194,312$ 935,536
1,634,491

Notes and accounts
receivable, trade ............................. ¥ 526¥ 559$ 4,696

Total assets................................. ¥287,843 ¥289,244$2,570,027

Loans receivable................................ ¥ 693¥ 737$ 6,188

Current liabilities ............................ ¥ 68,683 ¥ 74,724
Long-term liabilities........................
39,47735,674Equity ............................................ 179,683 178,846$ 613,241352,473
1,604,313

Notes and accounts payable.............. ¥2,668¥2,245$23,821

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

¥ 100

$

Total liabilities and equity ........... ¥287,843 ¥289,244$2,570,027

In millions of yen

In thousands of
U.S. dollars

The Company’s equity in undistributed income of affiliates at
March 31, 2017 and 2016 included in retained earnings was¥34,888 million ($311,500 thousand) and ¥32,634 million,
respectively.

Years ended
March 31

Year ended
March 31

2015

2017

Net sales ....................... ¥255,263 ¥289,131 ¥262,726$2,279,134

Gross profit ................... ¥ 78,246 ¥ 89,152 ¥ 82,753$ 698,625

Net income
attributable toaffiliated companies .... ¥ 17,320 ¥ 25,012 ¥ 17,825$ 154,643

2017

2017

2016

Dividends received from affiliated companies for the years ended
March 31, 2017, 2016 and 2015 were ¥3,036 million ($27,107
thousand), ¥3,614 million and ¥3,160 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥48,971 million($437,241 thousand) and ¥49,290 million at March 31, 2017 and2016, respectively, had a quoted market value of ¥133,190 million($1,189,196 thousand) and ¥130,157 million at March 31, 2017and 2016, respectively.
The amounts of goodwill included in the carrying amount ofinvestments in affiliated companies were ¥4,600 million ($41,071
thousand) and ¥4,763 million at March 31, 2017 and 2016,
respectively.

50

11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses oncertain idle assets of the geographic information services segment
for the year ended March 31, 2017, on certain business assets of
the information and communication related services segment andcertain real estate included as corporate items for the year ended
March 31, 2016, and on certain business assets of the informationand communication related services segment for the year ended
March 31, 2015. The fair value was determined based on theestimated present value of future cash flows or appraisal value.
Impairment losses on long-lived assets by business segment for
the years ended March 31, 2017, 2016 and 2015 are as follows:2017

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

Security services .................... ¥ 42 ¥— ¥ 111
Fire protection services ..........
62——
Medical services ....................
556
329
—
Insurance services .................
———
Geographic information
services ............................... 1,473
1,152
154
Information andcommunication related
services ...............................
485
5,637 4,796
Real estate andother services ......................
71—
132
Corporate items ....................
—
4,696 1,398
Total .............................. ¥2,689 ¥11,814 ¥6,591

50

SECOM Annual Report 2017

446

2017

$

375
554
4,964
—
13,152

4,330
634—$24,00912. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2017 and 2016 are as follows:

The changes in the carrying amount of goodwill by businesssegment for the years ended March 31, 2017 and 2016 are as
follows:

In millions of yen

In millions of yen

March 31, 2017
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥50,386
Other ............................................ 33,115¥83,501(¥29,699)(7,299)(¥36,998)¥20,687
25,816¥46,503

Unamortized intangible assets........... ¥ 4,223¥¥ 4,223—

In millions of yen
March 31, 2016
Gross
carrying
amountAccumulated
amortization

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

Unamortized intangible assets........... ¥ 4,122¥¥ 4,122—In thousands of U.S. dollars
March 31, 2017
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... $449,875
Other ............................................ 295,670$745,545($265,170) $184,705(65,170) 230,500($330,340) $415,205

Unamortized intangible assets........... $ 37,706$

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Goodwill ............... ¥ 4,296 ¥1,942 ¥9,399 ¥4,580
Accumulated
impairment
losses .................. (1,723)— (5,350)(738)
March 31, 2015 .... 2,573
1,942 4,049
3,842
Goodwill acquired
during the year ... 58,646———
Disposal ................
————
Impairment
losses ..................
————
Translation
adjustment .........
(65)
—
—
—
Goodwill ............... 62,877
1,942 9,399
4,580
Accumulated
impairment
losses .................. (1,723)— (5,350)(738)
March 31, 2016 .... 61,154
1,942 4,049
3,842
Goodwill acquired
during the year ...
110
—
—
—
Disposal ................
————
Impairment
losses .................. (1,156)——(37)
Translation
adjustment .........
(246)
—
—
(3)
Goodwill ............... 62,741
1,942 9,399
4,577
Accumulated
impairment
losses .................. (2,879)— (5,350)(775)
March 31, 2017 ... ¥59,862 ¥1,942 ¥4,049 ¥3,802

Real estateand otherservices

Total¥17,643¥1,962 ¥39,822(175)
17,468

(135)
1,827

(8,121)
31,701————58,646
—

—

—

—

—
17,643

—
1,962

(65)
98,403(175)
17,468

(135)
1,827

(8,121)90,282

—
—

—
—

110
—

—

—

(1,193)—
17,643

—
1,962

(249)
98,264(175)(135) (9,314)¥17,468 ¥1,827 ¥88,950
In thousands of U.S. dollars— $ 37,706

Aggregate amortization expense for the years ended March 31,
2017, 2016 and 2015 was ¥8,910 million ($79,554 thousand),¥7,254 million and ¥6,522 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 thousands of
U.S. dollars¥8,767
7,678
6,490
4,793
3,056

$78,277
68,55457,946
42,79527,286Fire
protection
services

Real estateand otherservices

Total

Goodwill ............... $561,402 $17,339 $83,920 $40,893 $157,527 $17,518 $878,599
Accumulated
impairment
losses .................. (15,384)— (47,768) (6,589)(1,563) (1,205) (72,509)
March 31, 2016 .... 546,018 17,339 36,152 34,304 155,964 16,313 806,090
Goodwill acquired
during the year ...
982
—
—
—
—
—
982
Disposal ................
—
—
—
—
—
—
—
Impairment
losses .................. (10,321)
—
—
(331)
—
— (10,652)
Translation
adjustment ......... (2,197)
—
—
(27)
—
—
(2,224)
Goodwill ............... 560,187 17,339 83,920 40,866 157,527 17,518 877,357
Accumulated
impairment
losses .................. (25,705)— (47,768) (6,920)(1,563) (1,205) (83,161)
March 31, 2017 ... $534,482 $17,339 $36,152 $33,946 $155,964 $16,313 $794,196

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 201751

Financial Section

2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................

In millions of yen

Security
services

Information
Geographic
andMedical information communication
services
services related services

13. Bank Loans and Long-Term Debt
Bank loans of ¥42,099 million ($375,884 thousand) and ¥55,659
million at March 31, 2017 and 2016, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 0.87 percent and 0.84 percent at March 31, 2017 and2016, 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, 2017, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($35,714 thousand). The line ofcredit expires in March 2021. Under the agreement, Nohmi Bosai
Ltd. is required to pay commitment fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2017, the Company had overdraft agreements with 35 banks andits unused lines of credit amounted to ¥54,914 million ($490,304
thousand). The Company incurs no fee on the unused portion ofthese overdraft agreements. The overdraft agreements expire in
the period from April 2017 to March 2018. The Company has theability and intent to extend these overdraft agreements undersimilar terms and conditions.
Long-term debt at March 31, 2017 and 2016 comprises thefollowing:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

2017

Loans, principally from banks due
2016–2033 with interest rates
ranging from 0.01% to 14.00%:
Secured............................................ ¥16,799 ¥21,123
Unsecured........................................ 24,435 22,728
0.81% unsecured bonds due 2016 ......
—
100
0.52% unsecured bonds due 2016 ......
—
40
0.43% unsecured bonds due 2018 ......
100
100
0.38% unsecured bonds due 2021 ......
486
500
Unsecured bonds due 2016–2027
with floating interest rates basedon 6-month Japanese yen TIBOR ........ 7,752 10,094
Obligations under capital leases,
due 2016–2043 (Note 19).................. 24,192 24,881................................................ 73,764 79,566
Less: Portion due within one year ......... (19,615) (17,926)................................................ ¥54,149 ¥61,640$149,991
218,170
—
—
893
4,339
69,214
216,000
658,607(175,134)$483,473

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2017 and 2016 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

Time deposits ....................................... ¥ 1,654 ¥ 1,592
Short-term and long-term receivables ... 6,209 5,943
Investment securities ............................. 1,321 1,289
Property, plant and equipment .............. 49,575 53,854
Other intangible assets.......................... ¥ 818 ¥ 818$ 14,768
55,438
11,795442,634$ 7,304

2017

52

SECOM Annual Report 2017

The aggregate annual maturities on long-term debt at March 31,2017 are as follows:
Years ending March 31

2018.....................................................
2019.....................................................
2020.....................................................
2021.....................................................
2022.....................................................
Thereafter .............................................
............................................................

In millions of yen

In thousands of
U.S. dollars¥19,615
16,845
12,105
9,160
3,935
12,104¥73,764$175,134
150,402108,080
81,78635,134
108,071$658,607

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 the premiumpaying period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas under U.S. GAAP, those liabilities arecomputed 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 the lapse
and surrender over the contract period.
In addition, under certain property and casualty insurance contracts with a refund clause and long-term insurance policies 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, 2017 and 2016was ¥73,757 million ($658,545 thousand) and ¥67,193 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, 2017,2016 and 2015 were gains of ¥1,004 million ($8,964 thousand),¥473 million and ¥194 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2017, 2016 and 2015 were ¥105 million ($938
thousand), ¥147 million and ¥18 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, 2017, 2016 and 2015 are as follows:2017

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2017

Net periodic pension andseverance costs:
Service cost ......................... ¥7,889 ¥7,739 ¥5,357
Interest cost ........................
349
718
936
Expected return onplan assets ........................ (2,919) (2,756) (2,533)
Amortization of priorservice benefit ...................
(966) (1,504) (1,584)
Recognized actuarial loss.....
754
714
989
Net periodic pension
and severance costs....... ¥5,107 ¥4,911 ¥3,165

In thousands of
U.S. dollars

March 31

March 31

2017

2016

2017

¥35,282¥30,797$315,018(29,636) (30,068)¥ 5,646 ¥ 729(264,607)$ 50,411

Other changes in plan assets and benefit obligations recognizedin other comprehensive income (loss) for the year ended March 31,2017 are summarized as follows:
In millions of yen

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

(¥6,067)(754)
966(¥5,855)

In thousands of
U.S. dollars($54,170)(6,732)
8,625($52,277)

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2017 and 2016 consist of:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

(26,063)

2017(8,625)
6,732$45,598

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2017

2017

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

In millions of yen$70,438
3,116

The changes in benefit obligation, plan assets and funded status
are as follows:$ 991,357
70,438
3,116(19,545)(48,652)—
996,714997,866
60,68820,920(32,349)

Actuarial loss .....................................
Prior service benefit............................
Net amount recognized ..........

2016

2017

¥8,635 ¥15,456(79) (1,045)¥8,556 ¥14,411$77,098(705)$76,393

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 ¥303 million ($2,705 thousand) and¥272 million ($2,429 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥111,278 million ($993,554 thousand) and ¥110,544 million atMarch 31, 2017 and 2016, 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 ¥47,779 million($426,598 thousand), ¥47,425 million ($423,438 thousand) and¥25,367 million ($226,491 thousand), respectively, at March 31,
2017, and ¥46,761 million, ¥46,450 million and ¥23,971 million,
respectively, at March 31, 2016.
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, 2017 and 2016 are as follows:
March 31

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

2017

2016

0.4%
2.7%

0.3%
2.6%

1,047,125$

50,411

SECOM Annual Report 2017

53

Financial Section

Change in benefit obligation:
Benefit obligation
at beginning of year ............... ¥111,032 ¥101,161
Service cost ..............................
7,889
7,739
Interest cost .............................
349
718
Actuarial (gain) loss ..................
(2,189)5,176
Benefits paid ............................
(5,449)(5,511)
Acquisition ...............................
—
1,749
Benefit obligation
at end of year ........................ 111,632
111,032
Change in plan assets:
Fair value of plan assets
at beginning of year ............... 111,761
110,524
Actual return on plan assets .....
6,797
(440)
Employer contribution ..............
2,343
5,553
Benefits paid ............................
(3,623)(3,876)
Fair value of plan assets
at end of year ........................ 117,278
111,761
Funded status
at the end of year ...................... ¥ 5,646 ¥729

Amounts recognized in the consolidated balance sheets at March
31, 2017 and 2016 consist of:In millions of yen

Weighted-average assumptions used to determine net pension
and severance costs for the years ended March 31, 2017, 2016 and2015 are as follows:
Years ended March 31
2017

2016

2015

0.3%
3.0%
2.6%

0.8%
3.0%
2.7%

1.1%
3.0%
2.7%

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

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.
The Company’s investment policy is designed to ensure that sufficient plan assets are available to provide future payments of pension benefits to the eligible plan participants. The policy uses target
allocations for the individual asset categories. Plan assets areinvested primarily in equity and debt securities, and pooled fundswith the objective to minimize risk and achieve the expected rate of
return. The investment results are periodically checked and asset
allocation is adjusted as necessary.
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2017 and 2016. The three levels of
inputs used to measure fair value are more fully described in Note 22.

March 31, 2016
Level 1

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

¥ 1,359

Level 2¥—

Level 1

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

¥ 6,482

Level 2¥—

Level 3

¥

—

Total

¥

6,482

25,495424—

25,919

3,626

—

—

3,626

2,128

571

—

2,699

—
731
—
—
—
¥38,462

2,055
32,977
3,256
12,251
231¥51,765—
26,273——778¥27,051

2,055
59,981
3,256
12,251
1,009¥117,278* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds are all foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 60% in equity securities, 30% in debt
securities and 10% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as Level 3.

54

SECOM Annual Report 2017

¥

Total

—

¥

1,359

22,479424—

22,903

2,544

—

—

2,544

2,325

983

—

3,308

—
1,555
—
—
—
¥30,262

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

In millions of yen
March 31, 2017

Level 3

March 31, 2017
Level 1

Level 2

Level 3

Cash and cash
equivalents ............... $ 57,875 $— $—Equity securities
Japanesecompanies ............ 227,634
3,786—
Foreigncompanies ............
32,375——
Debt securities
Government
bonds ...................
19,0005,098—
Non-government
bonds ...................
—
18,348—Pooled funds...............
6,527
294,437 234,581
Call loans ....................
—
29,071—
Insurance contracts .....
—
109,384—
Other ..........................
—
2,063
6,946
$343,411 $462,187 $241,527

Total

$

57,875
231,420
32,37524,09818,348535,545
29,071
109,384
9,009$1,047,125* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds are all foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 60% in equity securities, 30% in debt
securities and 10% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as Level 3.

The following table represents the changes in Level 3 investments
for the years ended March 31, 2017 and 2016.
Level 3 investments, mainly in unquoted certificates of beneficial
interests in securities investment trust included in the plan’s pooled
funds, are at the discretion of the administrator of the fund. Theirfair values are estimated based on unobservable inputs provided by
the administrator of the fund.
In millions of yen
Year ended March 31, 2017
Debt securities

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

Nongovernment
bonds

Pooled
funds

Other

Total

¥—

¥26,749¥465¥27,214

—

595

54

649

—

(1,849)(25)(1,874)

—
—
¥—

473
305
¥26,273

284
—
¥778

757
305
¥27,051

In millions of yen
Year ended March 31, 2016

The following benefit payments, which reflect future service, as
appropriate, are expected to be paid.
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 4,983
5,503
5,213
5,463
5,551
29,118$ 44,491
49,13446,545
48,77749,563259,9822018.....................................................
2019.....................................................
2020.....................................................
2021.....................................................
2022.....................................................
2023–2027 ...........................................

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, 2017, 2016 and 2015
were ¥2,192 million ($19,571 thousand), ¥1,796 million and¥1,772 million, respectively.
16. Exchange Gains and Losses
Other expenses for the years ended March 31, 2017 and 2016
include net exchange losses of ¥454 million ($4,054 thousand) and¥557 million, respectively. Other income for the year ended March
31, 2015 include net exchange gains of ¥574 million.
17. Income Taxes
Total income taxes for the years ended March 31, 2017, 2016
and 2015 are allocated as follows:

Debt securities

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

Nongovernment
bonds

Pooled
funds

Other

Total

¥613

¥26,276¥323¥27,212

(508)

262

42

(204)

534

(1,038)

101

(403)

(639)
—
¥ —

1,207
42
¥26,749

(1)
567
—
42
¥465 ¥27,214

In thousands of U.S. dollars
Year ended March 31, 2017
Debt securities
Nongovernment
bonds

Other

Total

$— $238,831 $4,151 $242,982
—

5,313

—

(16,509)

482

5,795

(223) (16,732)—
4,223 2,536
6,759
—
2,723
—
2,723
$— $234,581 $6,946 $241,527

The Company expects to contribute ¥2,200 million ($19,643
thousand) to its domestic defined benefit plans in the year ending
March 31, 2018.

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

Consolidated income taxes
from continuing
operations .......................... ¥47,012 ¥40,312 ¥45,972
Consolidated income taxes
from discontinued
operations ..........................
——
651
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities .................... 1,244 (3,447) 6,240
Unrealized gains
on derivative
instruments .....................
—
(5)
(5)
Pension liability
adjustments .................... 1,876 (2,926) 3,771
Foreign currencytranslation
adjustments ....................
(358)(783) 1,020..................................... ¥49,774 ¥33,151 ¥57,649

2017$419,750—

11,107—
16,751(3,196)$444,412
Financial Section

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

Pooledfunds

2017

In millions of yen

The parent company and its domestic subsidiaries are subject toa number of income taxes. As a result of revisions to domestic laws
during the third quarter ended December 31, and the fourth quarters ended March 31, 2014 and 2015, the statutory income tax ratein Japan, which was approximately 35.4 percent for the year ended
March 31, 2015, decreased to approximately 32.9 percent and 30.7
percent for the years ended March 31, 2016 and 2017, respectively.

SECOM Annual Report 201755

Reconciliations of the differences between income taxes computed
at statutory tax rates and consolidated income taxes from continuing
operations are as follows:2017

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

Income taxes computed
at statutory tax rate ............ ¥44,584 ¥40,290 ¥45,261
Increase (decrease)resulting from:
Reversal of valuation
allowance ....................... (1,048) (3,697)(927)
Per capita tax ....................
867
845
863
Provision of valuation
allowance .......................
714
1,104
1,152
Net effect of changes incorporate tax rates ..........
512
464
(648)
Other, net ......................... 1,383
1,306
271
Consolidated income
taxes from continuing
operations ................... ¥47,012 ¥40,312 ¥45,972

2017$398,071(9,357)
7,741
6,375
4,572
12,348$419,750

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, 2017, 2016 and2015 was an increase of ¥599 million ($5,348 thousand), and adecrease of ¥1,514 million and ¥3,410 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, 2017 and 2016.
Net deferred tax assets (liabilities) at March 31, 2017 and 2016
are reflected in the accompanying consolidated balance sheets
under the following captions:

The significant components of deferred tax assets and liabilities at
March 31, 2017 and 2016 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

2017

Deferred tax assets:
Loss carryforwards ....................... ¥ 9,393 ¥ 8,274$ 83,866
Accrued pension andseverance costs ..........................
8,851
8,817
79,027
Property, plant and equipment .....
8,300
9,027
74,107
Deferred revenue .........................
7,328
7,622
65,429Adjustment of book value atthe date of acquisition—
Land and buildings ...................
5,995
6,195
53,527
Other assets .............................
402
242
3,589
Accrued bonus .............................
5,623
5,617
50,205
Vacation accrual ...........................
3,585
3,231
32,009Allowance for doubtful accounts..
1,831
1,612
16,348Intangible assets...........................
1,772
1,563
15,821
Write-down on real estate
inventories .................................
837
1,000
7,473
Other ...........................................
10,975 10,058
97,991Gross deferred tax assets ..........
64,892 63,258
579,392
Less: Valuation allowance .........
(25,647) (25,048)(228,991)
Total deferred tax assets ...........
39,245 38,210
350,401
Deferred tax liabilities:
Adjustment of book value atthe date of acquisition—
Intangible assets .......................
(7,858) (7,907)(70,161)
Land and buildings ...................
(4,211) (4,175)(37,598)
Other assets .............................
(868)
(894)
(7,750)Prepaid pension and(10,820) (9,413)(96,607)
severance costs ..........................
Unrealized gains on securities.......
(9,419) (8,058)(84,098)
Investments in affiliatedcompanies ..................................
(5,303) (5,856)(47,348)
Deferred installation costs ............
(5,276) (5,409)(47,107)
Other ...........................................
(10,000) (4,958)(89,287)
Gross deferred tax liabilities ......
(53,755) (46,670)(479,956)
Net deferred tax assets(liabilities) .......................... (¥ 14,510) (¥ 8,460) ($129,555)
56

SECOM Annual Report 2017

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

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2017

2016

2017

¥12,611¥12,082$112,598

8,213

7,098

73,330(1,519)(1,658)(13,563)(33,815)(25,982)(301,920)(¥14,510) (¥ 8,460)($129,555)

The Company has not recognized deferred tax liabilities for a
portion of undistributed earnings of foreign subsidiaries of ¥30,161
million ($269,295 thousand) totaling ¥555 million ($4,955 thousand) at March 31, 2017 as they are not expected to be remitted in
the foreseeable future.
At March 31, 2017, the operating loss carryforwards of domestic
subsidiaries amounted to ¥19,810 million ($176,875 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

2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
2023......................................................
2024......................................................
2025......................................................
2026......................................................
..............................................................

In millions of yen

¥

961
5,791
589
221
2,306
1,293
2,288
3,620
2,741
¥19,810In thousands of
U.S. dollars

$

8,580
51,705
5,259
1,973
20,58911,545
20,42932,321
24,474$176,875

The operating loss carryforwards of overseas subsidiaries at
March 31, 2017 amounted to ¥9,580 million ($85,536 thousand), apart of which will begin to expire in the year ending March 31, 2018.

The total amount of unrecognized tax benefits for the years
ended March 31, 2017, 2016 and 2015 was insignificant. Also,
there were no significant movements in the gross amounts of unrealized tax benefits and the amounts of interest and penalties recognized due to the unrecognized tax benefits during the years ended
March 31, 2017, 2016 and 2015.
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,
2017, 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
2012. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2016, 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,
2017, 2016 and 2015 are as follows:
In thousands ofIn millions of yen
U.S. dollars
Years ended
March 31
2017

2016

2015

Net income attributable
to SECOM CO., LTD. ............. ¥91,387 ¥84,072 ¥80,184
Net transfers from (to)noncontrolling interests ......
(16)
(324)
(339)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests ........ ¥91,371 ¥83,748 ¥79,845

Year ended
March 312017

$815,955(143)$815,812(3) Common Stock in Treasury
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act. There are certain restrictions on payment of dividends in connection with the treasury stock
repurchased.
(4) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the years
ended March 31, 2017, 2016 and 2015 are as follows:
In millions of yen

For the year ended March 31, 2017:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period .............
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
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..........................
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
Foreign currencytranslation adjustments ...................
Other comprehensive
income (loss) ...........................

Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount¥7,048(¥1,586)¥5,462(1,204)

342

(862)

—

—

—

—

—

—

6,656

(1,869)

4,787

(105)

(7)

(112)

(6,084)358(5,726)¥6,311(¥2,762)¥3,549SECOM Annual Report 2017

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 ¥548,166 million($4,894,339 thousand) at March 31, 2017.

Subsequent to March 31, 2017, the parent company’s Board of
Directors declared a year-end cash dividend of ¥75 ($0.67) per
share, totaling ¥16,370 million ($146,161 thousand), to shareholders of record on March 31, 2017. The dividend declared wasapproved at the general shareholders’ meeting held on June 27,
2017. Dividends are recorded in the year they are declared.
The Company has made it a basic policy to distribute dividends
twice a year, the interim dividend whose record date is September
30 each year and commenced from the year ended March 31,
2015, and the year-end dividend whose record date is March 31
each year. The interim dividend is determined by the Board of
Directors and the year-end dividend is determined by the General
Meeting of Shareholders.
Cash dividends per share are computed based on dividends paid
for the year.

57

In millions of yen
Pre-tax
amount

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

Tax(expense)or benefit

Net-of-tax
amount¥2,991 (¥ 6,765)

456(1,058)

—

—

5

(9)

2,551

(6,060)

375

(342)

783

(3,234)¥7,161 (¥17,468)

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

58

SECOM Annual Report 2017

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

For the year ended March 31, 2017:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ..........
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................
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.......................
Pension liability adjustments—
Unrealized gains or losses
arising during the period ..........
Less: Reclassification
adjustment for gains
or losses realized
in net income ...................
Foreign currencytranslation adjustments ................
Other comprehensive
income (loss) ........................

Tax(expense)or benefit

Net-of-tax
amount$62,929 ($14,161) $48,768(10,750)

3,054(7,696)

—

—

—

—

—

—

59,429(16,688)

42,741

(937)

(63)

(1,000)(54,321)3,196(51,125)$56,350 ($24,662) $31,688

Reclassification adjustments for gains or losses realized in net
income (pre-tax amount) included in the consolidated statements
of income for the years ended March 31, 2017, 2016 and 2015 are
as follows:

2017

Unrealized gains on
securities—
Net sales andoperating revenue ........... (¥1,007)
Gain on sales of(268)
securities, net ..................
Loss on other-thantemporary impairment ofinvestment securities .......
71
Unrealized gains onderivative instruments—
Other income ....................
—
Pension liability
adjustments—
Net periodic pension
and severance costs(Note 15) ........................
(212)
Equity in net income ofaffiliated companies ............ ¥ 107

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2015

2017

(¥981)(¥306)($8,991)

(929)

(33)

(2,393)

396

147

634

(14)

(25)

—

(790)

(595)

(1,893)

¥ 73

¥ 99

$ 956

19. Lessee
The Company leases certain office space, employee residential
facilities, equipment for armored car services and transportationequipment. Some leased buildings, and equipment for armored car
services and transportation equipment are held under capital leases.
Other leases are classified as operating leases.
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 ($64,366 thousand) has been recorded in the buildings andimprovements account. The portion of the lease relating to the landhas been classified as an operating lease. The future minimum lease
payment for the site at March 31, 2017 was ¥4,654 million($41,554 thousand).
A summary of leased assets under capital leases at March 31,2017 and 2016 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2017

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

2016

2017

¥ 8,452 ¥ 8,452$ 75,464

31,930 41,795
125
310

285,089
1,116(20,816) (30,040)¥19,691 ¥20,517(185,857)$175,812

Depreciation and amortization expenses for assets under capitalleases for the years ended March 31, 2017, 2016 and 2015 were
¥6,785 million ($60,580 thousand), ¥3,495 million and ¥2,746
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, 2017:
Years ending March 31

In thousands of
U.S. dollars¥ 6,748
5,374
4,096
2,650
1,576
11,80432,248(8,056)$ 60,250
47,982
36,571
23,661
14,071
105,394
287,929(71,929)

24,192(6,181)

216,000(55,187)¥18,011$160,813

Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 9,467
8,536
8,476
7,848
6,890
26,624$ 84,527
76,21475,67970,071
61,518
237,714¥67,841$605,723

2018........................................................
2019........................................................
2020........................................................
2021........................................................
2022........................................................
Thereafter ................................................
Total future minimum lease
payments ...........................................

20. Lessor
The Company’s leasing operations consist principally of leasingof security merchandise, security systems and real estate for offices
and medical institutions. Most of the security merchandise andsecurity systems on lease are classified as sales-type leases or directfinancing leases. Other leases are classified as operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2017 and 2016 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

¥62,137 ¥56,952(4,787) (4,982)(4,911) (3,707)
52,439 48,263(16,769) (15,344)¥35,670 ¥32,919$554,795(42,741)(43,849)468,205(149,723)$318,482

2017

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

The following is a schedule by year of future minimum lease
payments to be received under sales-type leases and directfinancing leases at March 31, 2017:
Years ending March 31

2018........................................................
2019........................................................
2020........................................................
2021........................................................
2022........................................................
Thereafter ................................................
Total future minimum lease
payments to be received ....................

In millions of yen

In thousands of
U.S. dollars¥19,280
16,254
12,266
7,586
4,369
2,382

$172,143
145,125
109,518
67,73239,00921,268¥62,137$554,795

Financial Section

2018........................................................
2019........................................................
2020........................................................
2021........................................................
2022........................................................
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

On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial
reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, the annual lease payment for thesite is approximately ¥1,312 million ($11,714 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, 2017 are as follows:

Rental expenses under operating leases for the years ended
March 31, 2017, 2016 and 2015 were ¥25,359 million ($226,420
thousand), ¥24,619 million and ¥22,898 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.

SECOM Annual Report 201759

A summary of investment in property under operating leases andproperty held for lease at March 31, 2017 and 2016 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 312017

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

2016

2017

¥33,754 ¥34,715
32,160 32,293
662
662$301,375
287,143
5,911(12,572) (11,751)¥54,004 ¥55,919(112,250)$482,179

The future minimum rentals under noncancelable operatingleases at March 31, 2017 are as follows:
Years ending March 31

2018........................................................
2019........................................................
2020........................................................
2021........................................................
2022........................................................
Thereafter ................................................
Total future minimum rentals ...............

In millions of yen

In thousands of
U.S. dollars¥2,033
162
162
162
162
2,909
¥5,590$18,152
1,446
1,446
1,446
1,446
25,975$49,911

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

60

SECOM Annual Report 2017

(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from financial institutions.
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, 2017 and 2016 are as follows:
In millions of yen
March 31
2017
Carrying
amountNon-derivatives:
Assets—Long-term receivables
including current
portion (Less allowancefor doubtful accounts) .... ¥56,638
Liabilities—
Long-term debt
including current
portion ........................... 73,764
Investment deposits
by policyholders ............. 27,691
Derivatives:
Assets—Forward exchange
contract(Other current assets) .....
2
Liabilities—
Interest rate swaps(Other long-term
liabilities) ........................
59

Estimated
fair value

2016
Carrying
amountEstimated
fair value¥57,440 ¥54,040¥54,596

73,79479,566

79,612

29,02329,802

31,402

2

—

—

59

97

97

In thousands of U.S. dollars
March 31, 2017
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—Forward exchange contract(Other current assets) .............................
Liabilities—
Interest rate swaps (Other long-term
liabilities) ................................................

Estimated
fair value$505,696 $512,857
658,607658,875

247,241

259,134

18

18

527

527

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

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, 2017 and 2016. Transfers between levels are recognizedat the end of the respective reporting periods.
In millions of yen
March 31, 2017
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents ..... ¥163
Short-term
investments andinvestment
securities ...............
152,088
Derivatives(Other current
assets) ...................
—
Total assets ................. ¥152,251

31,74649,738233,5722¥31,748—¥49,7382¥233,737

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

¥
¥

¥
¥

¥
¥

—
—

¥

—

59
59

¥

—

—
—

¥

163

59
59

In millions of yen
March 31, 2016
Level 1

Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥——Level 3

¥ 2,681¥

30,405¥33,086

34,852¥ 34,852

¥
¥

97
97

¥
¥

—

—
—

March 31, 2017
Level 1

Level 2

Level 3Liabilities:
Derivatives(Other long-term
liabilities) ............... $Total liabilities ............. $

— $
— $

527 $
527 $

3,036

222,566¥225,602

¥
¥

— $
— $

527
527

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are not active.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market prices in active markets
with sufficient volume and frequency of transactions.
Level 2 assets comprise principally debt securities, which arevalued using quoted prices for similar assets in active markets,or quoted prices for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date. The fair value is determined byusing a valuation technique, such as the discounted cash flow
model, which best reflects the nature, characteristics and risks ofeach asset. These significant unobservable inputs contain discountrates, exit timing and an EBITDA multiple. An increase (decrease) inthe discount rates, the later (earlier) exit and a decrease (increase)in the EBITDA multiple would result in a decrease (increase) in thefair value of non-marketable securities.
The Company’s Level 3 investment securities that are measured
at fair value on a recurring basis at March 31, 2017 and 2016,
amounting to ¥49,738 million ($444,089 thousand) and ¥34,852
million, respectively, are primarily private equity investments.
The valuation technique and significant unobservable inputs
are as follows:
March 31, 2017

Total

¥

Total

Assets:Cash equivalents ..... $1,455 $
— $
— $
1,455
Short-term
investments andinvestment
securities ............... 1,357,928 283,446 444,089
2,085,463
Derivatives(Other current
assets) ...................
—
18
—
18
Total assets ................. $1,359,383 $283,464 $444,089 $2,086,936

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2017–2020
1.1x–42.2x

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2017–2020
5.0x–96.8x

Financial Section

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

Level 2In thousands of U.S. dollars

March 31, 2016

97
97

SECOM Annual Report 201761

Derivative Financial Investments
Derivative financial instruments comprise forward exchange
contracts, interest rate swaps and others. These derivative instruments are valued using observable market data and classified as
Level 2 liabilities.
The following table represents the changes in Level 3 assets
measured on a recurring basis for the years ended March 31, 2017and 2016.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2016

2017

Balance at beginning of year .............. ¥34,852 ¥26,784
Total gains or losses(realized and unrealized):
Included in earnings ................... 14,016 2,237
Included in othercomprehensive income .............
—(92)
Purchases .......................................
1,132 6,950
Sales ..............................................
(99)—
Redemptions ..................................
——
Cancellation of contract .................
— (1,010)
Foreign currency translation
adjustments .................................
(163)
(17)
Balance at end of year ....................... ¥49,738 ¥34,852

2017$311,179

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
Included in earnings ................... ¥15,051 ¥ 1,288

125,142—
10,107(884)——(1,455)$444,089$134,384

Total gains or losses (realized or unrealized) related to short-term
investments and investment securities are primarily included in
net sales and operating revenue or gain/loss on private equity
investments, in the consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of¥9,424 million ($84,143 thousand) were written down to their fairvalue of ¥9,414 million ($84,054 thousand), resulting in an otherthan-temporary impairment charge of ¥10 million ($89 thousand),
which was included in earnings for the year ended March 31, 2017.
For the year ended March 31, 2016, non-marketable equity
securities with a carrying amount of ¥9,257 million were written
down to their fair value of ¥9,251 million, resulting in an otherthan-temporary impairment charge of ¥6 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.

62

SECOM Annual Report 201723. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rates. The Company assesses interest rate risk by continuallymonitoring changes in the exposure and by evaluating hedging
opportunities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company is also
exposed to credit-related losses in the event of non-perfomance bycounterparties to derivative financial instruments, but it is notexpected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognizedfinancial institutions and contracts are diversified amongst anumber of major financial institutions.
(2) Risk Management
The Company has exposure to the market risk of changes ininterest rates which relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements tomanage fluctuations in cash flows resulting from changes in interest
rates. Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate proceeds and makes fixed interest rate payments,
thereby effectively creating fixed-rate debt.
(3) Cash Flow Hedges
The Company designates interest rate swap agreements as cash
flow hedges for variability of cash flows originating from floating
rate borrowings. The interest rate swap agreements matured atvarious dates through 2015. The effective portion of changes in fairvalues of derivative instruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The
ineffective portion of changes in fair values are reported in income
immediately. The sum of the amount of hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the year ended March 31, 2015 as
the critical terms of most of the interest rate swap agreements
match the terms of the hedged debt obligations. At March 31,
2015, the notional principal amounts of interest rate swap agreements designated as cash flow hedges was ¥726 million. At March
31, 2017 and 2016, the Company did not enter into any interest
rate swap agreements designated as cash flow hedges.
(4) Derivative Instruments Not Designated as Hedges
The Company enters into interest rate swap agreements to reduce
exposure to fluctuations in interest rates relating primarily to debt
obligations and other agreements. Changes in fair value of thesederivative financial instruments, which are not designated ashedges, are reported in current income.

Fair values of derivative instruments reflected in the consolidatedbalance sheets as of March 31, 2017 and 2016 are as follows:
Derivatives not designated as hedging instruments

Assets:Forward exchange
contract
Liabilities:
Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Location

2017

2016

2017

Other current
assets

¥ 2

¥—

$ 18

Other long-term
liabilities

59

97

527

Effects of derivative instruments on the consolidated statements
of income for the years ended March 31, 2017, 2016 and 2015 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

2017

2016

2015

2017

¥—

¥—

¥6

$—

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

LocationInterest rate swaps Other income

Location

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

In millions of yen

In thousands of
U.S. dollars

In millions of yen

Years ended
March 31

Year ended
March 31

Years ended
March 31

2017

2016

2015

2017

¥—

¥14

¥25

$—

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Derivatives not designated as hedging instruments

Forward exchange
contract
Other income
Interest rate swaps Other income

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2017
for the purchase of property, plant and equipment of approximately¥2,311 million ($20,634 thousand).
The Company provides guarantees to third parties mainly withrespect to bank loans extended to its affiliated companies and otherentities. Such guarantees are provided to enhance the credit standing of the affiliated companies and other entities. For each guarantee provided, the Company would have to perform under theguarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
maximum amount of undiscounted payments the Company would
have to make in the event of default amounts to ¥2,344 million($20,929 thousand) at March 31, 2017. The carrying amounts of
the liabilities recognized as the Company’s obligations under theseguarantees at March 31, 2017 and 2016 were deemed insignificant.
It is not anticipated that damages, if any, resulting from legal
actions will have a material impact on the Company’s consolidated
financial statements.

2017

2016

2015

2017

¥ 2
38

¥—
16

¥—
23

$ 18
339

2015

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

¥ 598

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

¥ 814

(149)
1,614
(651)

Income (loss) from discontinued operations, net of tax, bybusiness segment for the year ended March 31, 2015 is as follows:
In millions of yen
Years ended
March 312015

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

¥814
¥814
Financial Section

SECOM Annual Report 201763

26. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:2017

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2017

2016

Cash paid during theyear for:
Interest ............................ ¥ 1,379 ¥ 1,408 ¥ 1,403
Income taxes ...................
40,165 38,832 50,673
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases .......
6,035
2,543
2,318
Increase in land, buildings
and improvements byoffsetting long-term
receivables ....................
—
—
3,179
Significant acquisitions(Note 4)—
Assets acquired .............
— 188,136—
Liabilities assumed ........
— (107,136)—
Considerations forequity .........................
— 81,000—
Cash and cash
equivalents on hand ...
— (11,565)—
Total considerations ...... ¥— ¥ 69,435 ¥—64

SECOM Annual Report 2017

$ 12,313
358,616

53,884

—
—
—
—

$

—
—

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

Information by business and geographic segments for the years
ended and as of March 31, 2017, 2016 and 2015 is as follows:

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2017

(1) Business Segment Information

2017

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2017

2016

Net sales andoperating revenue:
Security services—
External customers ...... ¥ 543,524 ¥ 505,058 ¥487,063
Intersegment ...............
2,968
3,028
2,963
................................
546,492
508,086 490,026
Fire protection services—
External customers ......
126,232
131,743 121,189
Intersegment ...............
3,459
3,764
5,127
................................
129,691
135,507 126,316
Medical services—
External customers ......
168,819
163,538 155,884
Intersegment ...............
182
178
153
................................
169,001
163,716 156,037
Insurance services—
43,78040,654
38,259External customers ......
Intersegment ...............
3,094
2,945
3,226
................................
46,874
43,59941,485
Geographic information
services—
51,60952,55352,760External customers ......
Intersegment ...............
231
183
177
................................
51,84052,73652,937
Information andcommunication related
services—
External customers ......
49,681
48,29447,412
Intersegment ...............
7,126
7,550
6,527
................................
56,80755,84453,939Real estate andother services—
47,616
41,58842,671
External customers ......
Intersegment ...............
1,923
2,479
2,245
................................
49,53944,06744,916
Total............................... 1,050,244 1,003,555 965,656
Eliminations ...................
(18,983)(20,127) (20,418)
Total net sales andoperating revenue ..... ¥1,031,261 ¥ 983,428 ¥945,238$4,852,893
26,5004,879,393
1,127,071
30,884
1,157,955
1,507,313
1,625
1,508,938
390,893
27,625418,518

460,795
2,063
462,858

443,580
63,625507,205

425,143
17,169442,312
9,377,179(169,491)$9,207,688

2017

2016

Operating income (loss):
Security services ............ ¥112,734 ¥110,919 ¥107,073
Fire protection
services .......................
13,12913,654
12,510
Medical services ............
1,732
2,921
1,521
Insurance services..........
7,289
6,842
8,042
Geographic information
services .......................
(944)
(268)
2,442
Information andcommunication
related services............
7,288
308
894
Real estate and
5,241
4,900
5,080
other services ..............
Total.............................. 146,469
139,276
137,562
Corporate expenses
and eliminations..........
(16,291)(20,371)(15,555)
Operating income ......... ¥130,178 ¥118,905 ¥122,007
Other income ................
18,135
7,679
9,293
Other expenses .............
(3,090)(4,123)(3,443)
Income before income
taxes and equity in net
income of affiliatedcompanies ............... ¥145,223 ¥122,461 ¥127,857

117,223
15,46465,080(8,429)65,071
46,795
1,307,759(145,455)$1,162,304
161,920(27,590)$1,296,634

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

¥ 707,640 ¥ 659,526$ 6,318,214

2017

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

$1,006,555

148,642
185,799
230,455

141,981
186,068
219,635

1,327,161
1,658,920
2,057,634

69,042

66,501

616,446

115,537

115,108

1,031,580

130,365
134,936
1,587,480 1,523,755
117,876
100,878

1,163,973
14,173,928
1,052,465

57,922
56,699¥1,763,278 ¥1,681,332

517,161$15,743,554

Financial Section

SECOM Annual Report 2017

65

2017

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

2015

2017

2016

¥54,770¥ 50,007¥47,425$489,018

1,837
8,433
1,521

1,663
8,293
1,319

1,694
7,209
1,140

16,40275,295
13,580

3,011

2,998

3,022

26,884

6,824

6,592

6,746

60,929868
77,264919

951
71,823658

992
68,228636

7,750
689,858
8,205¥78,183¥ 72,481¥68,864$698,063¥39,956¥130,686¥37,183$356,750

4,678
9,646
2,087

5,026
14,9082,307

3,608
20,372
1,897

41,76886,125
18,634

1,904

2,124

3,318

7,686

7,708

233
66,190856¥67,046

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

2015

2017

¥338,744 ¥330,843 ¥326,300$3,024,500

2017

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

2016

56,41755,90753,788503,723

57,87332,99021,010516,723

90,49085,31885,965807,947¥543,524 ¥505,058 ¥487,063$4,852,893(2) Geographic Segment Information
Net sales and operating revenue attributed to countries basedon the geographical location of customers for the years ended
2017, 2016 and 2015 and long-lived assets as of March 31, 2017and 2016 were as follows:
In millions of yen

In thousands of
U.S. dollars

17,000Years ended
March 31

Year ended
March 31

2015

2017

4,160

68,625229
162,988409

258
70,796
1,098

2,080
590,982
7,643

Net sales andoperating revenue:
Japan ..................... ¥ 985,366 ¥936,392 ¥901,079
Other .....................
45,89547,03644,159Total ................... ¥1,031,261 ¥983,428 ¥945,238$8,797,911
409,777$9,207,688¥163,397¥71,894$598,625

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2016

2017

¥606,302 ¥611,331
10,55812,280¥616,860 ¥623,611$5,413,411
94,268$5,507,679

2017

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

2016

2017

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

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
28. Subsequent Events
The Company has evaluated subsequent events through July 28,
2017, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

66

SECOM Annual Report 2017

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, 2017 and 2016, 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, 2017, 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, 2017 and 2016, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2017, in accordance with U.S. generally accepted accounting principles.
Convenience Translations
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2017 arepresented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Financial Section

Tokyo, Japan
July 28, 2017

SECOM Annual Report 201767

OTHER FINANCIAL DATA

Contents
Summary of Selected Financial Data ........................................... 69
Common Stock Data.................................................................. 71

68

SECOM Annual Report 2017

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

In millions of yen
2017

2016

2015

2014

2013

2012

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue ..................................................... ¥1,031,261 ¥983,428 ¥945,238 ¥921,146 ¥858,406 ¥769,609
543,524
505,058
487,063
472,449443,231425,427
Security services: .........................................................................
As a percentage of net sales and operating revenue ........
52.7%
51.4%
51.5%
51.3%
51.6%
55.3%
Electronic security services .......................................................
338,744
330,843
326,300
318,116
307,477
300,208
As a percentage of net sales and operating revenue ........
32.8
33.6
34.5
34.5
35.8
39.0
Other security services—
Static guard services ............................................................
56,41755,90753,78851,68147,877
46,689As a percentage of net sales and operating revenue ........
5.5
5.7
5.7
5.6
5.6
6.1
Armored car services............................................................
57,87332,99021,01020,767
20,532
20,610As a percentage of net sales and operating revenue ........
5.6
3.4
2.2
2.3
2.4
2.7
Subtotal .......................................................................
114,290
88,897
74,79872,44868,40967,299Merchandise and other ...........................................................
90,49085,31885,96581,88567,34557,920As a percentage of net sales and operating revenue ........
8.8
8.7
9.1
8.9
7.8
7.5
Fire protection services ................................................................
126,232
131,743
121,189
122,046
114,130
80,678As a percentage of net sales and operating revenue ........
12.2
13.4
12.8
13.3
13.3
10.5
Medical services ..........................................................................
168,819
163,538
155,884
150,535
140,957
134,550
As a percentage of net sales and operating revenue ........
16.4
16.6
16.5
16.3
16.4
17.4
Insurance services........................................................................
43,78040,654
38,25937,01135,86433,558As a percentage of net sales and operating revenue ........
4.3
4.1
4.1
4.0
4.2
4.4
Geographic information services .................................................
51,60952,55352,76054,697
51,19450,173As a percentage of net sales and operating revenue ........
5.0
5.4
5.6
5.9
6.0
6.5
Information and communication related services .........................
49,681
48,29447,412
46,99229,541
17,735
As a percentage of net sales and operating revenue ........
4.8
4.9
5.0
5.1
3.4
2.3
Real estate and other services .....................................................
47,616
41,58842,671
37,41643,48927,488As a percentage of net sales and operating revenue ........
4.6
4.2
4.5
4.1
5.1
3.6
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD .................................. ¥ 91,387
Cash dividends paid (2) .....................................................................
30,557
SECOM CO., LTD. shareholders’ equity ...........................................
929,242
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 ...............................................................

¥ 80,184
38,197
825,969¥ 73,979
22,918753,099¥ 70,580
19,645679,176¥ 41,237
19,623612,855

4.0
1.9
0.7
4.5
11.1
88.9
100.0

5.6
1.8
0.8
5.3
13.5
86.5
100.0

4.7
1.4
0.9
4.9
11.9
88.1
100.0

6.0
1.8
0.9
4.6
13.3
86.7
100.0

5.0
2.2
1.1
5.1
13.4
86.6
100.0

5.7
3.1
1.4
3.8
14.0
86.0
100.0

5.2
9.8

5.0
9.7

5.3
9.7

5.1
9.8

5.3
10.4

3.5
6.7

7.6
2.5

7.4
2.5

7.3
2.4

7.2
2.4

7.0
2.1

7.5
2.1

63.2
2.49
107.1

62.8
2.38
89.2

61.6
2.38
93.8

60.8
2.34
90.4

60.0
2.24
78.8

63.4
2.49
51.8

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

SECOM Annual Report 2017

69

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

¥ 84,072
28,373865,278

2017

2015

2014

2013

2012

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
15,028,470 15,026,824 15,024,812 15,022,012 15,018,951 15,017,691

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

218,260,247 218,261,893 218,263,905 218,266,705 218,269,766 218,271,026

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

¥ 418.71
140.00¥ 385.19
130.00¥ 367.37
175.00¥ 338.94
105.00¥ 323.36
90.00¥ 188.97
90.00

4,257.50
631.91
1.87
19.03
12.61
7,969

3,964.40
582.27
2.11
21.72
14.37
8,366

3,784.27
557.88
2.12
21.84
14.38
8,025

3,450.36
529.35
1.72
17.54
11.23
5,946

3,111.64
496.34
1.56
15.00
9.77
4,850

2,807.77
365.28
1.44
21.43
11.09
4,050

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

70

2016

SECOM Annual Report 2017

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2017, cash dividends of ¥16,370 million (¥75
per share) were approved at the general shareholders’ meeting on June 27,2017 (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:
Financial institutions ..............................................
Securities firms ......................................................
Other domestic corporations .................................
Foreign investors ...................................................
Individuals and others............................................
Treasury stock........................................................
Total ..................................................................

2017

2016

2015

2014

2013

2012

25,20024,97524,852

27,054

27,62829,11835.05%
3.89
2.51
43.42
8.69
6.44
100.00%32.50%
3.52
2.92
44.46
10.16
6.44
100.00%29.89%
3.43
3.16
44.95
12.13
6.44
100.00%31.28%
4.88
2.56
42.32
12.52
6.44
100.00%30.86%
5.58
3.63
41.33
12.16
6.44
100.00%29.88%
6.08
3.68
41.25
12.67
6.44
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2015

2016

2017

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

¥9,041
8,510
8,630
8,781
8,830
8,050
8,630
8,812

¥7,857
7,038
7,064
7,307
7,167
7,392
7,293
7,969

¥20,868.03
20,841.97
20,012.40
18,450.98
17,572.49
17,081.98
19,494.53
19,633.75¥19,034.84
16,930.84
17,722.42
14,952.61
14,952.02
15,106.98
16,251.54
18,787.99

Financial Section

SECOM Annual Report 201771

COMMON STOCK ISSUES

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

June 15, 1974
Dec. 21, 1974
May 21, 1975
May 21, 1975
Dec. 1, 1975
May 31, 1976
June 1, 1976
Dec. 1, 1976
Nov. 30, 1977
Dec. 1, 1977
Dec. 1, 1978
June 1, 1981
Dec. 1, 1981
Jan. 20, 1983
Nov. 30, 1983
Nov. 30, 1984
Nov. 30, 1985
Jan. 20, 1986
Nov. 30, 1986
Nov. 30, 1987
Jan. 20, 1988
Nov. 30, 1988
Nov. 30, 1989
Jan. 19, 1990
Mar. 31, 1990
Mar. 31, 1991
Mar. 31, 1992
Mar. 31, 1993
Mar. 31, 1994
Mar. 31, 1995
Mar. 31, 1996
Mar. 31, 1997
Mar. 31, 1998
Mar. 31, 1999
Nov. 19, 1999
Mar. 31, 2000
Mar. 31, 2001
Mar. 31, 2002
Mar. 31, 2003
Mar. 31, 2005
July 27, 2017

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
1

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
233,290¥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
66,385,263—
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
Issue of new shares as restricted stock compensation

Note: 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.
*One share was split into two.

72

SECOM Annual Report 2017

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

Contents
Condensed Consolidated Balance Sheets(Based on Japanese GAAP)....................................................... 74
Condensed Consolidated Statements of Income(Based on Japanese GAAP)....................................................... 76
Consolidated Statements of Comprehensive Income(Based on Japanese GAAP)....................................................... 76

SECOM Annual Report 201773

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

In millions of yen

ASSETS

2017

2016

2015

2014

2013

2012

Current assets:
Cash on hand and in banks ............................................... ¥ 302,364 ¥
130,619
Cash deposits for armored car services ..............................
—
Call loans ..........................................................................
119,801
Notes and accounts receivable, trade.................................
33,090Due from subscribers.........................................................
29,387
Short-term investments .....................................................
43,974
Lease receivables and investments in leased assets .............
11,915Merchandise and products ................................................
5,223
Real estate inventories .......................................................
4,913
Work in process ................................................................
8,979
Costs on uncompleted construction contracts ...................
22,283Work in process for real estate inventories .........................
8,385
Raw materials and supplies................................................
14,003
Deferred income taxes.......................................................
4,942
Short-term loans receivable ...............................................
23,684
Other ..............................................................................
(1,766)
Allowance for doubtful accounts .......................................
761,804
Total current assets .................................................

228,458 ¥ 232,221 ¥ 210,514 ¥ 175,427 ¥ 182,412
128,267
50,39558,59756,08954,011—
15,50020,50046,50028,000122,048
114,071
115,318
106,638
85,74431,812
26,31625,17424,05924,83034,44828,517
12,955
14,723
19,93639,542
39,242
33,18827,56914,605
13,09914,163
14,186
12,321
9,597
3,527
3,063
33
12,944
9,082
5,557
4,031
4,602
4,526
2,527
9,070
9,460
8,983
7,563
5,671
23,024
21,05815,396
13,34833,276
8,579
7,913
7,573
6,430
5,950
12,72812,80813,254
14,384
11,383
4,086
2,268
2,699
4,158
4,389
27,375
21,111
17,62318,453
13,489(1,883)(1,997)(2,026)(2,302)(1,428)689,744
600,146558,574
542,836
503,479

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

150,254
69,569116,825
39,886
376,536

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

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

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

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

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

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

112,131

119,505

49,41153,59655,07925,043

Investments and others:
280,974
264,400
284,322
246,233
189,042
177,655
Investment securities......................................................
38,40339,40142,90445,70142,33846,197Long-term loans receivable ............................................
Prepaid pension and severance costs..............................
————
19,572
19,130Net defined benefit asset ...............................................
35,28230,79635,01017,612
—
—
9,592
8,602
4,874
13,521
11,711
14,793
Deferred income taxes ...................................................
Other.............................................................................
51,43654,97849,382
48,48643,70642,376
Allowance for doubtful accounts ...................................
(15,990)(15,698)(17,525)(16,352)(16,742)(17,584)
399,698
382,482
398,969
355,203289,629
282,568
Total investments and others ..................................
888,367
878,293
810,541
769,633
706,241
598,359
Total fixed assets.....................................................
Deferred assets ..................................................................
4
14
26
17
32
45
Total assets ............................................................. ¥1,650,176 ¥1,568,052 ¥1,410,715 ¥1,328,226 ¥1,249,110 ¥1,101,884

74

SECOM Annual Report 2017

In millions of yen

LIABILITIES

2017

2016

2015

2014

2013

2012

Current liabilities:
Notes and accounts payable, trade ..................................... ¥ 44,635 ¥ 41,794 ¥ 43,160 ¥ 49,409 ¥ 43,684 ¥ 30,731
44,96955,28344,96552,12042,35047,985
Bank loans .........................................................................
1,460
2,582
1,414
4,640
4,487
5,983
Current portion of straight bonds .......................................
4,752
4,724
503
579
537
354
Lease obligations ................................................................
33,84931,316
31,406
27,627
Payables—other .................................................................
37,46938,37627,55722,34121,06327,74429,282
14,688
Accrued income taxes ........................................................
5,765
6,611
12,878
4,151
4,377
3,833
Accrued consumption taxes................................................
4,653
4,625
4,571
4,169
Accrued expenses...............................................................
5,315
5,562
107,878
101,306
16,945
17,76524,862
21,920
Deposits received for armored car services ..........................
30,552
31,38931,34831,02730,88030,834
Deferred revenue ...............................................................
15,447
15,524
14,652
14,437
14,031
12,739Accrued bonuses ................................................................
2,532
1,397
1,612
1,981
1,714
834
Provision for loss on construction contracts ........................
20,707
16,883
15,691
14,076
Other .................................................................................
25,596
20,738353,933
347,633
247,755
256,684
247,879
215,780
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 ..........................................................

7,003
14,123
11,77733,907
21,943—8,251
20,033
11,95435,002
14,026—

8,413
20,602
3,712
36,00013,554—

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

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

1,306
22,4281,387
22,816

1,415
18,504

1,635
18,569

2,443
—

2,509
—

166,155
4,342
282,989
636,922

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

141,099
2,918
241,171497,856

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

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

NET ASSETS
Shareholders’ equity:
Common stock................................................................... ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377
80,29780,32680,26583,054
83,054
83,054
Capital surplus ...................................................................
797,493743,353694,688656,286
609,275
565,261Retained earnings ..............................................................
(73,731)(73,717)(73,701)(73,682)(73,664)(73,659)
Common stock in treasury, at cost ......................................
870,437
816,340
767,630
732,036
685,042
641,034
Total shareholders’ equity ........................................

25,125(30)(7,954)
4,423
21,563

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

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

11,783(41)(27,760)—(16,018)

4,559
(28)
(37,556)—(33,026)

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

121,253

109,859

106,895

100,253

95,11463,509943,144907,341
830,369
764,139
671,517
Total net assets ........................................................ 1,013,253
Total liabilities and net assets ................................... ¥1,650,176 ¥1,568,052 ¥1,410,715 ¥1,328,226 ¥1,249,110 ¥1,101,884

SECOM Annual Report 201775

Financial Section

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

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

In millions of yen
2017

2016

2015

2014

2013

2012

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

¥928,098 ¥881,028 ¥840,722 ¥822,228 ¥765,635 ¥679,173
5.3%
4.8%
2.2%
7.4%
12.7%
2.3%

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

621,412
67.0

586,53966.6

557,884
66.4

542,94966.0

504,006
65.8

458,452
67.5

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

306,686
33.0

294,48833.4

282,83733.6

279,278
34.0

261,62934.2

220,720
32.5

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

175,63618.9

165,906
18.8

159,22218.9

159,259
19.4

153,258
20.0

139,642
20.6

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

131,050
14.1

128,582
14.6

123,61514.7

120,018
14.6

108,370
14.2

81,078
11.9

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

22,371
6,388

11,3805,136

18,366
5,293

13,1006,441

11,171
5,922

12,9706,209

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

147,033
15.8

134,826
15.3

136,68816.3

126,677
15.4

113,618
14.8

87,83912.9

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

516
5,697

1,584
15,003

1,962
11,384

2,025
3,876

984
2,623

287
11,558

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

141,852
15.3

121,40813.8

127,265
15.1

124,82615.2

111,980
14.6

76,567
11.3

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

43,3262,369

39,150(526)

43,156(37)

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

32,0234,600

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

96,15682,784

84,14678,451

69,021

39,943

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

11,986

5,745

8,754

8,574

5,363

4,454

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

84,170
9.1
9.3

77,0398.7
2.2

75,3929.0
7.9

69,8768.5
9.8

63,6588.3
79.4

35,4895.2(41.7)

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

76

In millions of yen
2017

2016

2015

2014

2013

2012

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

¥ 96,156¥ 82,784¥ 84,146¥78,451¥69,021¥39,943

5,324—(3,539)
4,698(7,103)—(1,616)(6,163)

15,058
—
9,527
8,581

543
—
11,787
—

7,500
—
6,222
—

2,318
8
(2,262)—(1,327)(2,743)

3,676

6,649

4,402

(1,281)

Total other comprehensive income (loss) .........................

5,155(17,626)

36,843

18,98018,124(1,217)

Comprehensive income..........................................................

101,31265,157

120,990

97,43187,14638,726Comprehensive income attributable to:
Owners of the parent company ..........................................
Noncontrolling interests .....................................................

88,78912,522

61,1683,989

110,128
10,861

87,4809,950

80,666
6,480

34,473
4,253

SECOM Annual Report 2017

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

Contents
Condensed Nonconsolidated Balance Sheets(Based on Japanese GAAP)....................................................... 78
Condensed Nonconsolidated Statements of Income(Based on Japanese GAAP)....................................................... 80

SECOM Annual Report 201777

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

In millions of yen

ASSETS

2017

2016

2015

2014

2013

2012

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

¥ 87,387
37,869621
16,48010,650
3,088
—
5,312
1,722
2,323
3,710
27,5391,804(117)
198,394¥ 45,433
40,877592
16,22910,996
4,454
3,444
6,453
1,676
2,172
3,736
22,255
1,698(152)
159,867¥ 93,569
48,396640
16,066
11,202
3,054
437
6,694
1,379
2,210
4,415
20,4231,772(216)
210,048¥ 80,908
56,818683
14,991
9,960
2,699
437
5,489
1,303
2,109
4,382
20,6532,031(221)
202,248¥ 54,136
53,551700
14,856
9,691
2,528
1,048
5,585
1,012
2,332
5,268
19,237
4,819(248)
174,521¥ 82,631
52,386720
14,324
10,039
2,159
456
5,152
1,470
2,253
4,269
15,574
1,632(268)
192,804

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

16,282709
65,997
179
3,173
21,9782,195
69
110,585

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

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

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

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

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

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

—
6,125
400
6,526

—
5,794
574
6,369

—
4,644
730
5,375

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

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

3,350
5,487
1,586
10,42423,083

20,58829,72523,78921,58323,906

323,993

325,104

239,120

239,008

236,309

190,305

2,098
134,796
7,559
20,847
21,643
—
4,294
2,560
(5,532)535,344
652,456¥850,851

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

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

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

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

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

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

78

SECOM Annual Report 2017

In millions of yen

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

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

¥

3,604
22,703215
14,476
4,018
14,3452,883
697
15,187
20,6296,278
4,014
109,053

2016

¥

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

2015

¥

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

2014

¥

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

2013

¥

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

2012

¥

2,400
27,65980
13,756
4,343
3,938
2,062
716
20,453
22,3406,116
2,253
106,1212,477
16,804
6,642
2,506

2,601
17,038
6,213
2,835

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

2,747
17,622
307
3,555

2,449
17,859
788
4,051

2,217
18,099
—
3,945

—
103
28,533
137,587—378
29,068
147,768—
408
26,998145,646—459
24,692
145,668857
25
26,031150,205

1,294
10
25,568
131,689¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,0540
83,054

83,0540
83,054

83,0540
83,054

83,0540
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
618,887
630,927(73,731)706,629800
2,212
586,082
598,122(73,717)673,836800
2,212
556,013568,053(73,701)
643,784

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

800
2,212
478,914490,954(73,659)
566,727

6,634

4,518

6,347

2,473

2,905

1,031

6,634
713,263¥850,851

4,518
678,355¥826,124

6,347
650,132¥795,778

2,473
627,242¥772,910

2,905
599,112¥749,317

1,031
567,758¥699,448

SECOM Annual Report 2017

Financial Section

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

2017

79

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

In millions of yen
2017

80

2016

2015

2014

2013

2012

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

¥382,476 ¥376,044 ¥370,663 ¥364,280 ¥355,393 ¥345,476
1.7%
1.5%
1.8%
2.5%
2.9%
4.9%
322,338
317,764
314,068
309,499
305,300
299,523
1.4
1.2
1.5
1.4
1.9
3.2
60,13758,28056,59454,78150,09245,952
3.2
3.0
3.3
9.4
9.0
17.7

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

227,204
59.4
184,22557.2
42,97871.5

223,18959.4
181,59757.1
41,591
71.4

221,44159.7
180,850
57.6
40,59071.7

215,849
59.3
177,33957.3
38,50970.3

210,790
59.3
174,33157.1
36,45872.8

203,38658.9
169,92856.7
33,45872.8

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 .............................

155,27140.6
138,11242.8
17,15928.5

152,855
40.6
136,166
42.9
16,68828.6

149,22140.3
133,21742.4
16,00328.3

148,43140.7
132,159
42.7
16,272
29.7

144,60340.7
130,969
42.9
13,63427.2

142,08941.1
129,595
43.3
12,49427.2

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

78,988
20.7

77,191
20.5

76,04620.5

75,521
20.7

74,651
21.0

71,893
20.8

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

76,28319.9

75,66420.1

73,17419.8

72,90920.0

69,952
19.7

70,19620.3

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

13,3893,130

13,6392,691

11,714
3,316

10,2694,295

10,173
3,789

8,048
3,032

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

86,54322.6

86,61223.0

81,57222.0

78,884
21.7

76,33621.5

75,21221.8

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

651
100

3,064
6,733

1,670
2,805

491
1,604

1,219
1,052

23,001
40,695

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

87,09422.8

82,94322.1

80,43721.7

77,771
21.3

76,502
21.5

57,518
16.6

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

23,83327.4

24,50029.5

22,94528.526,27333.8

27,37435.8

30,69953.4

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

63,26016.5
8.2

58,44215.5
1.7

57,492
15.5
11.6

51,49714.1
4.8

49,128
13.8
83.2

26,8187.8(40.4)

SECOM Annual Report 2017

Corporate Information(As of June 30, 2017)

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

(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)(61.7)(100.0)
60.0
50.0
51.0
(100.0)(100.0)
66.7
100.0
82.0
100.0
100.0
51.7
100.0
(100.0)100.0(70.0)
100.0

Lines of business(As of June 30, 2017)

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

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

Financial Section

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

Issued capital(In millions of yen)(Continued )SECOM Annual Report 201781

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)<Fire protection services>
Nohmi Bosai Ltd.

(50.4)%

Lines of business

28
30
20
80
20
30
32
20
50
10
20
40
20
20
20
20
20
2,303

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

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.
Consilium Nittan Marine Ltd.

60
10
10
10
10
10
10
10
10
10
10
42

(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(50.0)<Medical services>
Secom Medical System Co., Ltd.
Mac Corp.
Yoshikikaku Co., Ltd.
Kensei Co., Ltd.
Secomfort Tama Co., Ltd.
Alive Medicare Co., Ltd.
Secomfort Co., Ltd.
Secomfort West Co., Ltd.
US Chemical Co., Ltd.
Secom Medipharma Co., Ltd.

100
95
20
100
100
50
100
100
3
10

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

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

82(As of June 30, 2017)

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

Ichibou Co., Ltd.
Kyushu Nohmi Co., Ltd.
Chiyoda Service Co., Ltd.
Nohmi Engineering Corp.
Nohmi System Co., Ltd.
Iwate Nohmi Co., Ltd.
Tohoku Nohmi Co., Ltd.
Aomori Nohmi Co., Ltd.
Nissin Bohsai Co., Ltd.
Chiba Nohmi Co., Ltd.
Shikoku Nohmi Co., Ltd.
Nohmi Techno Engineering Co., Ltd.
Akita Nohmi Co., Ltd.
Fukushima Nohmi Co., Ltd.
Niigata Nohmi Co., Ltd.
Hokkaido Nohmi Co., Ltd.
Yashima Bosai Setsubi Co., Ltd.
Nittan Co., Ltd.

¥13,302

Percentageof equity/
voting rights

SECOM Annual Report 2017

(Continued )MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights¥ 100
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 Image Marketing Corp.

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

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.

13,37950.9

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

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

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

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

Lines of business(As of June 30, 2017)

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 201783

MAJOR CONSOLIDATED SUBSIDIARIES

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

Issued capital

Percentageof equity/
voting rights

Lines of business£44,126 thousand£20 thousand£50 thousand¥5,550 million
US$2,000 thousand
Rmb50,000 thousand
US$2,500 thousand

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

Security services
Holding company
Security services
Holding company
Security services
Security services
Security services

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

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Comprehensive building management services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Sales of security equipment
Security services
Security services
Security services

US$14,300 thousand(100.0)

NT$15,000 thousand(96.3)

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

Nittan Europe Ltd.
Nittan Fire Protection System (Zhongshan) Co., Ltd.
Nittan Asean Co., Ltd. – Vietnam Headquarters
Secom Medical System (Singapore) Pte. Ltd.
Takshasila Hospitals Operating Pvt. Ltd.
Takshasila Healthcare and Research Service Pvt. Ltd.
Pasco Philippines Corp.
Pasco China Corp.
Suzhou Super Dimension Earth Science Researchand Development Co., Ltd.
Pasco (Thailand) Co., Ltd.
PT. Nusantara Secom InfoTech£1,194 thousand
US$1,400 thousand
US$3,236 thousand
S$51,330 thousand
INR3,659 million
INR15 million
PHP50,400 thousand
Rmb22,320 thousand
Rmb1,000 thousand(100.0)(100.0)(100.0)(100.0)(49.7)(99.3)(100.0)(99.0)(92.0)

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

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

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

Geographic information services
Geographic information services 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.

84

SECOM Annual Report 2017

(As of June 30, 2017)

Profile

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

Static Guard Services

On-Line Security Systems

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

Armored Car Services

Security Services
On-Line Security Systems
Commercial Use:

SECOM AXSECOM AX is an on-line security ­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.
SECOM DXSECOM DX is an on-line security system developed to meet the needs of shops,
offices, warehouses, factories and other commercial and industrial
establishments.
SECOM TXSECOM TX is an on-line security system for commercial ­buildings with more than
one tenant.
HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.
SECOM LX
SECOM LX is an on-line security system that includes an access control function.
SECOM FXSECOM FX is a system that combines monitoring for intruders and fire withfacility control functions.
SECOM DRONE
Working in tandem with an on-line security system, this small autonomous
flying surveillance robot flies toward unauthorized individuals or vehicles,
choosing the optimal angles from which to capture images, which are thensent to a control center.
SECOM 3D SECURITY PLANNING
SECOM 3D Security Planning makes use of high-precision digital relief maps to
conduct multifaceted, multidimensional risk assessments, thereby facilitating
sophisticated security planning.

SECOM CO., LTD.,

Since its establishment in 1962,
has sought to offer services that better benefit society, in linewith its mission of helping to achieve a society free from concerns
and its commitment to providing reliable peace of mind.

Contents
2 Financial Highlights
4 A Message to Shareholders
8 SECOM’s Vision
9 Special Feature:
The SECOM Group’s Vision for 2030
12 SECOM Today
28 SECOM’s CSR
31 Financial Review

SECOM
Emergency
Depot

SECOM
Control Center
SECOM emergency
2 Alertresponse personnel

Residential Use:

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
around-the-clock ­intrusion- and fire-prevention services, emergency call services,
gas leak monitoring and medical emergency call ­services. The new SECOM Home
Security NEO is an advanced version that features a desktop controller and canbe operated from a smartphone. This service can also be linked with device on
the IoT, facilitating access to a variety of new services.
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 WATCH
SECOM My Doctor Watch is a wearable wristband-style emergency medical alertand health management services. This service is offered as an option to SECOM
Home Security subscribers.
SECOM MY DOCTOR PLUS
SECOM My Doctor Plus is an emergency medical alert system for seniors
featuring an exclusive portable device that incorporates a GPS locator and a

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

Large-Scale Proprietary Security Systems

TOTAX ZETATOTAX ZETA integrates networking capabilities and a security system into acomprehensive local control ­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.

Merchandise

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

Insurance Services

Information and Communication Related Services

SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that f­ eatures
reduced premiums for subscribers to commercial security systems.
SECOM ANSHIN MY HOME
SECOM Anshin My Home is a comprehensive fire insurance policy that­features reduced premiums for subscribers to home security systems.
MEDCOM
MEDCOM is an unrestricted treatment policy that covers the cost of cancer
treatment not covered by Japan’s national health insurance scheme, as well as
the patient’s portion of the cost of medical care covered by the national healthinsurance scheme. MEDCOM also provides hospital referrals and ­treatmentrelated ­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.

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.

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

三校

1

Fire
Dept.

Alert using
telecommunications
circuits

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 CLUB KENKO
SECOM Health Care Club KENKO is a membership-based club that provides
access to a variety of health management services, including testing with a
PET/CT scanner. The club is offered through an alliance with Yotsuya Medical
Cube, a cutting-edge clinic in Tokyo.

77 Nonconsolidated Financial Data (Based on Japanese GAAP) (Reference)ウラ

personnel

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.

Medical Services

73 Consolidated Financial Data (Based on Japanese GAAP) (Reference)

表紙

SECOM
3 Dispatch
emergency response

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

68 Other Financial Data

セコムアニュアルレポート2017(英語版)

SECOM AED Package Service
PoliceDept.

Fire Protection Services

35 Audited Financial Statements

85

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

SECOM Annual Report 2017

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

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

SECOM Annual Report 201786

Directors, Audit and Supervisory Board Members
and Executive Officers
Directors

Yasuo Nakayama

FounderPresident andRepresentative Director

SECOM CO., LTD.

Makoto Iida

Year ended March 31, 2017

Yasuyuki Yoshida

Junzo Nakayama

Ichiro Ozeki

Tatsuro Fuse

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

Senior Executive Director

Executive Director

Executive Director

Executive Director

Tokyo 150-0001, Japan

ANNUAL REPORT 2017

SECOM CO., LTD.

https://www.secom.co.jp/

Tatsuya Izumida

Tatsushi Kurihara

Takaharu Hirose

Hirobumi Kawano

Hajime Watanabe

Director

Director

Outside Director

Outside Director

Outside Director

Audit andSupervisory
Board Members

Executive Team

Takayuki Ito

Directors

Ryohei Komatsu

Yasuo Nakayama

Kenichi Furukawa

Yoichi Sugimoto

Osamu Ueda

Takehiko Senda

Hideki Kato*

President andRepresentative Director

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Makoto Yasuda*

Yasuyuki Yoshida

Masahiro Takeda

Sumiyuki Fukumitsu

Yoshinori Yamanaka

Takashi Nakada

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Teruhisa Yoshimura

Kensuke Shindo

Seiya Nagao

Managing Executive Officer

Executive Officer

Executive Officer

Hideo Morishita

Yasufumi Kuwahara

Noriyuki UematsuManaging Executive Officer

Executive Officer

Executive Officer

Toshiaki Mizuno

Noriyuki Fukuoka

Osamu Nagai

Managing Executive Officer

Executive Officer

Executive Officer

Shokichi Ishimura

Takeshi Akagi

Atsushi KomatsuManaging Executive Officer

Executive Officer

Executive Officer

Keitaro Arai

Sadahiro Sato

Kazuhiro Mitomo

Managing Executive Officer

Executive Officer

Executive Officer

Masao Yokomizo*

Senior Executive Director

Junzo Nakayama
Executive Director*Outside

Ichiro Ozeki
Executive Director

Tatsuro Fuse
Executive Director

Tatsuya Izumida
Director

Tatsushi Kurihara
Director

Executive Officers

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, comfortable and convenient.

FSC ダミー(As of July 31, 2017)87

ANNUAL REPORT 2017

Printed in JapanSECOM Annual Report 2017

セコムアニュアルレポート2017(英語版)

表紙

おもて

三校

Directors, Audit and Supervisory Board Members
and Executive Officers
Directors

Yasuo Nakayama

FounderPresident andRepresentative Director

SECOM CO., LTD.

Makoto Iida

Year ended March 31, 2017

Yasuyuki Yoshida

Junzo Nakayama

Ichiro Ozeki

Tatsuro Fuse

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

Senior Executive Director

Executive Director

Executive Director

Executive Director

Tokyo 150-0001, Japan

ANNUAL REPORT 2017

SECOM CO., LTD.

https://www.secom.co.jp/

Tatsuya Izumida

Tatsushi Kurihara

Takaharu Hirose

Hirobumi Kawano

Hajime Watanabe

Director

Director

Outside Director

Outside Director

Outside Director

Audit andSupervisory
Board Members

Executive Team

Takayuki Ito

Directors

Ryohei Komatsu

Yasuo Nakayama

Kenichi Furukawa

Yoichi Sugimoto

Osamu Ueda

Takehiko Senda

Hideki Kato*

President andRepresentative Director

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Makoto Yasuda*

Yasuyuki Yoshida

Masahiro Takeda

Sumiyuki Fukumitsu

Yoshinori Yamanaka

Takashi Nakada

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Teruhisa Yoshimura

Kensuke Shindo

Seiya Nagao

Managing Executive Officer

Executive Officer

Executive Officer

Hideo Morishita

Yasufumi Kuwahara

Noriyuki UematsuManaging Executive Officer

Executive Officer

Executive Officer

Toshiaki Mizuno

Noriyuki Fukuoka

Osamu Nagai

Managing Executive Officer

Executive Officer

Executive Officer

Shokichi Ishimura

Takeshi Akagi

Atsushi KomatsuManaging Executive Officer

Executive Officer

Executive Officer

Keitaro Arai

Sadahiro Sato

Kazuhiro Mitomo

Managing Executive Officer

Executive Officer

Executive Officer

Masao Yokomizo*

Senior Executive Director

Junzo Nakayama
Executive Director*Outside

Ichiro Ozeki
Executive Director

Tatsuro Fuse
Executive Director

Tatsuya Izumida
Director

Tatsushi Kurihara
Director

Executive Officers

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, comfortable and convenient.

FSC ダミー(As of July 31, 2017)87

ANNUAL REPORT 2017

Printed in JapanSECOM Annual Report 2017

セコムアニュアルレポート2017(英語版)

表紙

おもて

三校