ANNUAL REPORT 2019Year ended March 31, 2019

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 more secure,convenient and comfortable.

Profile

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Established in 1962, SECOM is recognized as Japan’s first security services provider. Since then, the Company has sought to develop and advancea wide range of services and systems that respond to evolving social imperatives and benefit society. These include on-line security systems
for commercial subscribers; home security systems; COCO-SECOM, a mobile security system for outdoor use; and the SECOM Drone, a small
autonomous flying surveillance robot.
Today, the business portfolio of SECOM, which comprises the parent company and the companies of the SECOM Group, encompasses security services, fire protection services, medical services, insurance services, geospatial information services, business process outsourcing andinformation and communications technology (BPO and ICT) services, and real estate and other services.
To accelerate the realization of its Social System Industry vision, in May 2017, SECOM formulated the SECOM Group’s Vision for 2030. Guided
by this vision, the Group is working to create the ANSHIN* Platform, a service infrastructure designed to provide peace of mind to people intheir everyday lives, as well as to society as a whole. Going forward, the Group will continue to capitalize on the ANSHIN Platform with the aimof delivering enduring peace of mind to an ever-changing society and helping to address key social imperatives. Through such efforts, we willcontinue growing together with society.
SECOM has also expanded outside Japan. Currently active in 18 countries and territories, the Group works to provide uniquely SECOM security
services, fire protection services, medical services, geospatial information services, and BPO and ICT services customized to reflect local needs
and sensibilities, and to encourage awareness of the SECOM brand worldwide.
*ANSHIN is Japanese for “peace of mind.”Contents
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Financial
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30
44
46
55
59
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97

SECOM Today
Sustainability
ESG Initiatives
Financial Review
Audited Financial Statements
Other Financial Data
Consolidated Financial Data
(Based on Japanese GAAP) (Reference)
101 Nonconsolidated Financial Data
(Based on Japanese GAAP) (Reference)
105 Corporate Information
109 SECOM’s Basic Business Areas
1 1 1 Directors, Audit and Supervisory Board Members andExecutive Officers

SECOM Annual Report 20191

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
For the years ended/as of March 31

In millions of yen

In thousands of U.S. dollars

Years ended March 31

Year ended March 31

SECOM CO., LTD. and Subsidiaries
For the years ended/as of March 31

2019

2018

2017

2019

Total assets¥1,111,600
123,71189,686
1,879,710¥1,082,792
140,11196,623
1,838,945¥1,031,261
127,395
91,387
1,763,278$10,014,414
1,114,514
807,982
16,934,324

Revenue

Total SECOM CO., LTD. shareholders’ equity

1,044,184

1,000,277

929,242

9,407,063

Total assets

Net sales and operating revenue
Operating income
Net income attributable to SECOM CO., LTD.

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

In yenIn U.S. dollars¥ 410.91
160.0080.00
4,784.12

Cash dividends(Interim dividend)
SECOM CO., LTD. shareholders’ equity¥ 442.70
150.0075.00
4,582.96¥ 418.71
140.0070.00
4,257.50$ 3.70
1.44
0.72
43.10

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the approximate rate of ¥111=US$1, the rate prevailing on
the Tokyo Foreign Exchange Market on March 31, 2019.
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, lesstreasury 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, less treasury 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 held on
June 26, 2019, approval was granted for a proposal to pay a year-end dividend of ¥85.00 for the year ended March 31, 2019. (For further information, please
see Note 18 of the Notes to Consolidated Financial Statements.)

2018

2017

2019

¥1,013,823
130,213
144,889
92,0091,765,105
1,125,954¥ 970,624
135,448
144,318
86,993
1,715,123
1,081,213¥ 928,098
131,050
147,033
84,1701,650,176
1,013,253$ 9,133,541
1,173,090
1,305,306
828,910
15,901,847
10,143,730

In yenIn U.S. dollars¥ 385.64
145.0070.00
4,086.87$ 3.80
1.49
0.72
41.10

80

74.0

80.2

84.1

Per share of common stock:¥ 421.56
165.0080.00
4,562.08

Net income
Cash dividends(Interim dividend)
Net assets

Note: Cash dividends per share of common stock are based on dividends the record dates for which fall in each fiscal year. The consolidated dividend payout ratio for
the fiscal year ended March 31, 2019, was 39.1%.

96.6

89.7

100
80

60

60

40

40

20

20

0

2014

2015

2016

2017

¥ 398.58
155.0075.00
4,364.63(In billions of yen)

(In billions of yen)

91.4

Year ended March 31

Net income attributable toowners of the parent (Japanese GAAP)Net income attributable to
SECOM CO., LTD. (U.S. GAAP)100

In thousands of U.S. dollars

2019

Per share of common stock:
Net income attributable to SECOM CO., LTD.

In millions of yen
Years ended March 31

2018

2019

0

69.9

2014

75.4

77.0

2015

2016

84.2

2017

87.0

2018

92.0

2019

Note: In the year ended March 31, 2019, net income attributable to SECOM CO., LTD., was down ¥6.9 billion, to ¥89.7 billion. Principal factors contributing to this result
included the application of a new accounting standard whereby gains or losses on equity investments are now charged to income for the period, which resulted in
an increase in loss on other-than-temporary impairment of investment securities; investments to reinforce SECOM’s operating foundation with the aim of ensuring
sustainable growth; and the impact of multiple major natural disasters on results in the insurance services segment.
In the year ended March 31, 2018, net income attributable to SECOM CO., LTD., advanced ¥5.2 billion, to ¥96.6 billion. This result was attributable to higher
operating income in six segments, including security services.
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 increasein 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.

2

SECOM Annual Report 2019

SECOM Annual Report 20193

A Message to Shareholders

Sharing the same philosophy and view of SECOM in the future,
the entire SECOM Group continues working to address increasingly diverse social imperatives
with the aim of further enhancing corporate value and growing together with society.

Our new president, Mr. Ozeki, who has extensive knowledge of digital and other advanced technologies, will
exercise strong leadership in promoting measures to enhance the efficiency of systems, enabling us to continue
responding flexibly to major socioenvironmental changes and in so doing to expand existing businesses. We
will also accelerate the creation of vital new services. As chairman, Mr. Nakayama will endeavor to strengthen
external activities, as well as to further promote environmental, social and governance (ESG) initiatives. Guided
by our new management team, we will thus continue working to achieve sustainable growth.

Consolidated Operating Results

Priority Challenges and Focused, Forward-Looking Investments

In the fiscal year ended March 31, 2019, the Japanese economy remained on a gentle upswing, underpinned by

As a company that sees its mission as being to help achieve a society free from concerns, in May 2017 we

consistently high corporate earnings and improved employment levels. Nonetheless, uncertainties persisted

formulated the SECOM Group’s Vision for 2030. Guided by this vision, we are working to create the ANSHIN

regarding, among other factors, international trade issues, the economic outlook for the People’s Republic ofPlatform, a service infrastructure designed to provide peace of mind to people in their everyday lives, as well as

China (PRC) and emerging economies in Asia, and a lack of clarity around the United Kingdom’s exit fromto society as a whole. In May 2018, we devised the SECOM Group Road Map 2022 to clarify the principal chal-

the European Union. These and other economic and political trends overseas, together with the impact oflenges we must address to achieve this vision, namely technological advances and a declining labor force.

fluctuations in the financial and capital markets, continued to warrant caution.

While technological advances, notably in artificial intelligence (AI) and the Internet of Things (IoT), have led toAgainst this backdrop, we pressed forward with ongoing efforts to realize our Social System Industry vision,qualitative improvements in lifestyles, ensuring security is a prerequisite to enjoying the convenience of every-in line with our goal of providing safety and peace of mind, as well as making life more comfortable and con-day life. Accordingly, needs related to physical and cyber security continue to expand. Japan’s declining laborvenient, whenever and wherever necessary, for anyone and everyone. Efforts continued to concentrate onforce is causing labor shortages and rising labor costs, driving up companies’ need to enhance productivity

responding to the needs through the provision of high-grade services and systems in our security services, fireand seek reliable partners to which they can outsource work. This situation is also leading to the expansion ofprotection services, medical services, insurance services, geospatial information services, BPO and ICT services,

needs related to care for children and seniors, owing to the growing prevalence of seniors-only households

and real estate and other services businesses.

and families in which both parents work outside the home.

Bolstered by the inclusion of a full year of results from TMJ, Inc., acquired in October 2017, and an increase in

Anticipating that such needs will yield major business opportunities and believing in the importance ofthe medical services segment, underpinned by a rise in the number of patients at associated hospitals, consoli-

accelerating growth, we have embraced the challenge of self-change—a process we have dubbed “SECOM-

dated net sales and operating revenue in the period under review rose 2.7%, or ¥28.8 billion, to ¥1,111.6 billion.

Transformation”—in the two years ending March 31, 2020, we are promoting focused investments in human

Nonetheless, operating income declined 11.7%, or ¥16.4 billion, to ¥123.7 billion, owing to the occurrence of mul-resources and systems. In addition to enhancing our ability to secure individuals with the high-level experience

tiple major natural disasters and an increase in loss on other-than-temporary impairment of investment securi-

and skills necessary to work in IT and global business, investments in human resources emphasize the creationties, as a result of which the insurance services segment reported an operating loss, as well as to the impact ofof positive working environments, enhancing our training programs and reinforcing our recruitment of front-

investments to reinforce our operating foundation with the aim of ensuring sustainable growth. Net incomeline staff. Investment in systems centers on building next-generation core systems, as well as introducing AI,

attributable to SECOM CO., LTD. at ¥89.7 billion, was down 7.2%, or ¥6.9 billion.

IoT and robotic process automation (RPA) to bolster operational quality and efficiency. In addition, we areadvancing R&D to realize new services and systems that leverage the latest technologies. By promoting such

Enhancing Returns to Shareholders

investments, which aim to facilitate the creation of a strong foundation, we are driving the creation and

Seeing the provision of fair returns to shareholders as a crucial management task, we determine our consolidated

growth of new businesses and expanding existing business.

dividend payout ratio and internal reserves based on an overall assessment of efforts to expand our operations
and trends in our consolidated operating performance, in line with our policy of ensuring a consistent and stable

Major Business Initiatives

distribution of profits. At the Ordinary General Meeting of Shareholders held on June 26, 2019, the payment of a

Customer needs for security and peace of mind continue to increase and diversify, owing to dramatic societal

year-end dividend of ¥85.00 per share was approved. As a consequence, dividends for the full term, which alsochange, a trend that is expected to drive the further expansion of the security services market. Against thisincluded an interim dividend of ¥80.00, amounted to ¥165.00, up ¥10.00 from the previous fiscal year.

backdrop, in our commercial security services business, we continued to provide on-line security systems andstatic guard and armored car services, as well as a variety of merchandise, including access control and security

4

A New Management Teamcamera systems. In Japan, ensuring the effective use of human resources and enhancing productivity are

On May 14, 2019, the Board of Directors passed a resolution to implement personnel changes to reinforce

increasingly urgent issues in light of persistent labor shortages. In this environment, we continued to offer aour management structure with the objective of accelerating the implementation of initiatives in line with thevariety of solutions that respond to needs for reduced labor requirements and advanced automation achieved

SECOM Group Road Map 2022 as we work to achieve the SECOM Group’s Vision for 2030. Accordingly, effective

through greater efficiency.

from June 26, 2019, Yasuo Nakayama was appointed chairman and representative director, and Ichiro Ozeki

SECOM LX, for example, combines an on-line security system with access control functions, and uses

was appointed president and representative director. Our former president steadily advanced efforts torecorded entry and exit data to manage employee attendance, helping improve the efficiency and lower theenhance employee motivation and promote management reforms from a medium- to long-term perspective.

cost of personnel management. In addition to partnering with a major retail group to reduce the workload of

SECOM Annual Report 2019

SECOM Annual Report 20195

A Message to Shareholders

static guards at large-scale facilities, we began offering SECOM Supply Chain Security Select, a service thatIn the area of insurance services, we worked to expand sales of our distinctive non-life insurance policies.

assists companies in securing safety certification for their supply chains. Other achievements that make use of

These include fire insurance policies that extend discounts to customers who have installed on-line security

advanced technologies include development of the AI-powered Virtual Security Guard System, featuring asystems, recognizing this as a risk-mitigating factor, and MEDCOM, an unrestricted cancer treatment policy that

virtual character who performs security and receptionist duties, and the launch of service using SECOM Robotcovers entire cost of medical treatment for cancer.

X2, an autonomous patrol robot.

Our geospatial information services business continued to focus on the collection of geographic data fromWe also continued to provide a variety of security solutions designed to ensure the safety and security ofcommercial satellites, aircraft and proprietary vehicles, among others, which is integrated, processed andlarge-scale events. These include facial recognition systems that utilize AI and the SECOM Aerostat, a dirigible

analyzed to provide geospatial information services to public-sector entities—including national and local

that captures images from above.

governments—and customers in the private sector in Japan. We also offer these services to government

In addition to protection against burglary, theft and fire, Japan’s home security market is seeing growing
needs for services that assist with care for seniors living alone and for children at home alone, an increasing

agencies in emerging and developing economies.
BPO and ICT services encompass the provision of data center services, support for business continuity plansconcern given the growing prevalence of families where both parents work outside the home. We continued(BCPs), information security services, cloud-based services and BPO services. In response to heightened cyber-to see robust sales of new mainstay SECOM Home Security NEO, a system that can be armed and disarmed

security needs, we expanded our information security services, including by launching the Cryptocurrency

remotely from a smartphone and which notifies subscribers when the system is accessed by family members

Wallet Service, which makes use of our extensive know-how in the secure management of private keys fromentering or leaving the home. Boasting outstanding connectivity, SECOM Home Security NEO can also be

cryptoasset exchanges. We also began offering SECOM Shift Scheduler, which automatically generates shift

linked with a variety of devices on the IoT. In the period under review, the service was linked with a uniqueschedules, assisting the efforts of restaurants and retailers to enhance productivity.

communication robot, creating a new style of security services that provides seamless peace of mind. In

Our real estate and other services business continued to concentrate on the development and sale of con-

April 2019, we launched the SECOM Senior Care Phone Service, which combines the SECOM My Doctor Plus

dominiums equipped with distinctive security and disaster preparedness features. Other services include real

emergency medical alert system for seniors with a safety confirmation function and does not require a homeestate leasing, construction and installation.

security services contract. In line with our goal of ensuring automated external defibrillators (AEDs) are available for use whenever and wherever needed, we launched SECOM MyAED, Japan’s first on-line package service

Creating the ANSHIN Platform

centering on home-use AEDs.

Operating in an environment characterized by significant, continuous upheaval, we will continue to makeOverseas, we continued working to expand the provision of SECOM-style security services, a term we usedsecurity to deliver safety and peace of mind, as well as to make life more comfortable and convenient, and thatrity equipment at the subscriber’s premises to the prompt dispatch of emergency response personnel whenremains in close proximity to customers. To the more than 1.06 million commercial subscribers to which weneeded, with efforts focused particularly on Southeast Asia and the PRC. In addition, we created a systems

provide security services across Japan, we will continue to leverage our robust operating foundation, which

integration (SI) team, positioning us to capitalize on demand arising from the increasing construction of large-

includes one of Japan’s largest data centers, to provide innovative high-value-added services. To our domestic

scale facilities in high-growth countries and territories, as well as made a full-scale entry into the market forhome security subscribers, who number in excess of 1.34 million, we will respond to rising needs for help withhome security services in major Asian urban centers. We also sought to fortify our regional sales configurations

looking after vulnerable members of society by broadening our offerings to include not only services that

by, among others, accelerating sales of AEDs in Asia. In February 2019, we established a consolidated subsidiaryfeature emergency responses when needed but also systems that make use of various advanced technologies.

in Turkey with a major local conglomerate.

6

use of the latest technologies to evolve as a provider of services that go beyond the conventional ideas of

to describe comprehensive on-line security systems that encompass everything from the installation of secu-

As a provider of services that fuse people and technologies, of which our on-line security systems are theIn fire protection services, SECOM Group companies Nohmi Bosai Ltd. and Nittan Co., Ltd., two of Japan’s

best-known, we recognize that our ability to offer services that deliver such invisible qualities as security andleading names in this field, continued to earn consistently high marks from customers for their superior auto-

peace of mind, as well as to make life more comfortable and convenient, depends not only on technologicalmatic fire alarm, fire extinguishing and other fire protection systems, which they provide for a variety of appli-

capabilities, but also on the capabilities of SECOM employees on the front lines. Japan’s shrinking labor force

cations, including office buildings, plants, tunnels, structures designated as cultural properties, ships andcontinues to underscore the promotion of automation, enhancing efficiency and securing talented humanhomes. In the period under review, the two companies continued working to secure new orders by leveraging

resources as crucial management issues that we must prioritize going forward. To reduce the workload of

their respective business foundations and product development capabilities to address the needs of a broad

frontline employees, thereby improving productivity and reinforcing our competitiveness, we will review

range of customers.

business processes and systems rather than insisting on established routines.

Efforts in our medical services business emphasize Home Medical Services, which comprise home nursing

We will also continue working to maximize employees’ latent capabilities and inspire them to fulfill theirand pharmaceutical dispensing services, support for affiliated medical institutions, sales of medical equipment

potential by creating a virtuous circle rooted in employee job satisfaction, and will step up the promotion

and pharmaceuticals, the operation of residences for seniors, personal care services, and the provision of elec-of efforts in line with the Tri-ion Initiative, which seeks to ensure that SECOM’s Philosophy fully penetrates

tronic medical reporting and other ICT-based systems in Japan, as well as the operation of a hospital in India.

every aspect of our operations. In addition, we will fortify efforts to encourage a managerial mind-set among

In the period under review, we launched the SECOM Vitalook service, a remote medical support platform

all employees, that is, on fostering employees who share SECOM’s Philosophy, understand our mission andthat leverages our extensive know-how in home medical services, as well as our data center capabilities andare capable of forming judgments and acting independently. At the organizational level, we will allocate

advanced technologies. This service allows physicians, nurses and other healthcare professionals to review

greater authority to officers in charge to accelerate decision making and improve the efficiency of businessthe electrocardiogram, blood pressure and other biometric data of home medical care patients remotely.

management.

SECOM Annual Report 2019

SECOM Annual Report 20197

A Message to Shareholders

Our organization, which comprises individuals who share SECOM’s Philosophy, the unfaltering foundationof everything we do, who are highly adaptable to change, able to create value and committed to contributing
to society, and which underpins our efforts to achieve SECOM Group’s Vision for 2030, is an incomparable intangible asset. Going forward, we will capitalize on this organization to hasten the implementation of our businessstrategy, which centers on measures consistent with four concepts crucial to creating the ANSHIN Platform, aservice infrastructure essential to the SECOM Group’s Vision for 2030: “ALL SECOM,” “Collaboration,” “Connection”
and “Enhanced Value.” We will also promote mergers and acquisitions (M&As) to acquire businesses essential to
the ANSHIN Platform, thereby reinforcing overall Group strengths.
Overseas, we will also take steps to further strengthen our operations and accelerate growth. To these ends,
we will actively pursue the development of services tailored to the local business environment by leveraging
but not being limited by our experience in Japan.
Since our establishment, we have emphasized contributing to society through our business activities. In 2019and 2020, Japan will host a number of major events, including global sports tournaments. The entire SECOM
Group family is committed to working as one to help ensure the safe and secure staging of these events.
As we continue to promote initiatives in line with the SECOM Group Road Map 2022 with the ultimate goalof achieving SECOM Group’s Vision for 2030, we will remain committed to providing enduring peace of mind toan ever-changing society by helping to address increasingly complex and diverse social imperatives, thereby
ensuring sustainable growth for society and ourselves and bolstering corporate value. In addition, we will­continue to value communication with stakeholders, sharing information on our vision and management
strategies with investors and engaging in constructive dialogue. In these and all of our endeavors to expand
the operations of the SECOM Group, we look forward to the ongoing ­support and guidance of shareholders.
June 26, 20198

Makoto Iida

Yasuo Nakayama

Ichiro Ozeki

Founder

Chairman and
Representative Director

President andRepresentative Director

SECOM Annual Report 2019

Corporate Philosophy

MissionMissionOur role and raison d’êtreWe see our mission as being to help achieve a society free fromconcerns. Accordingly, throughout our history we have sought
to create services and systems that benefit society as a whole.

VisionOur ideal view of SECOM in the future

VisionIn 1989, we declared our commitment to the Social System
Industry. We continue to promote bold initiatives with the aim ofrealizing this vision.

Values
Our shared beliefs and guiding principles

ValuesSince our establishment, we have adhered to SECOM’s Philosophy,
which emphasizes contributing to society through our businessactivities. Ideas and principles of conduct, including this philosophy,
which are shared by all employees, guide everything to do and havenurtured a uniquely SECOM identity that remains crucial to ourcompetitive edge.

The Social System Industry
Our Social System Industry vision describes a framework of innovative and integrated services and systems that deliver safety, peace of mind,
comfort and convenience.

SECOM’s Philosophy
SECOM’s Philosophy has been passed down through generations of employees since our establishment and continues to be the driving force
behind all we do. This philosophy emphasizes a refusal to be content with the status quo and a commitment to doing what is appropriate. The
first element expresses our determination to provide innovative 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. We
have published SECOM’s Philosophy in the form of a handbook, which has been distributed to employees in Japan and overseas, and continue
to capitalize on training and other opportunities to share the philosophy and advance its implementation.

SECOM Annual Report 20199

Milestones(Net sales and operating revenue)(In billions of yen)

Established as Japan’s first security services company, SECOM has pioneered the creation of services that deliver

1,200Real estate and other services

safety and peace of mind. Going forward, we will continue to develop and provide innovative services and systems

Q2000

Secom Home Life Co., Ltd. commences real estate development and sales

that accelerate the realization of our Social System Industry vision, an original concept unparalleled anywhere else in
the world.

Geospatial information services
Q1999 Invests in Pasco Corporation, a leading provider of aerial surveying services
Q2007 Launches ground surveying services using

1,000

synthetic aperture radar (SAR) satellite images

Insurance services
QSecurity services

QInsurance services

QOverseas security services

QGeospatial information services

QFire protection services

QBPO and ICT services

QMedical services

QReal estate and other services

Q1998 Invests in Toyo Fire and Marine Insurance Co., Ltd. (currently Secom General Insurance Co., Ltd.)
Q2001 Launches MEDCOM, Japan’s first unrestricted cancer treatment policy

1989 Q
Declares 1989 the first year of theSocial System Industry vision
Q1974

Q1978

Q1983

Lists on the Second
Section of the Tokyo
Stock Exchange

Moves up the First
Section of theTokyo Stock Exchange

Changes name from
Nihon Keibi Hosho Co., Ltd.
to SECOM CO., LTD.

Medical services
Q1991 Begins providing visiting nurse services

Q2014

800

Opens Sakra World Hospital,a general hospital, in India

Q1994 Begins offering Japan’s first remote image diagnosis support service
Q1996 Commences management of residences for seniors

BPO and ICT services
Q1998 Launches certification
authority businessQ1983 Begins providing informationand communications-related services
Q1985 Launches information
security services

Provides security services at
the Olympic Village during
the first Tokyo Olympics

Q2000 Establishes

Q2004

Q2012

Launches SECOM Safety
Confirmation Service

Acquires At Tokyo Corporation, Acquires BPO
one of Japan’s leading dataservices firm TMJ, Inc.
center services firm

the Secure Data Center

Q2017

600

Fire protection services
Q1974

Q2006

Q2012

Forms business alliance with Nohmi Bosai Kogyo Co., Ltd.
(currently Nohmi Bosai Ltd.), Japan’s top provider offire protection services

Acquires newly issued shares in
Nohmi Bosai, which becomesa consolidated subsidiary

Acquires all outstanding shares in Nittan Co., Ltd.,
Japan’s third-largest fire protection services provider,making the company a consolidated subsidiary

Overseas security services

Develops SP Alarm,
Japan’s first on-line security system

Q1978 Establishes joint venture Taiwan Secom Co., Ltd.,

Q1988

Q1991 Establishes presence in the United Kingdom and Malaysia

in Taiwan, its first overseas market

Establishes
Q1981 Establishes joint venture Korea presence inThailand
Security System Co., Ltd. (currently
SI Corporation) in the Republic of Korea (ROK)

Q2006

Q2011 Establishes presence in New Zealand

Establishes presencein Vietnam

Q1992 Establishes presence in the PRC, Singapore and Australia

Q2014 Establishes presence in Myanmar
Q2019

Q1994 Establishes presence in Indonesia

400

Establishes presence in Turkey

Security Services
Q1962

Q1981

Q2001

Q2007

Established as Japan’s firstcommercial security services provider

Introduces My Alarm (currently SECOM Home
Security), Japan’s first home security system

Develops and releases COCOSECOM mobile security system

Commences operation of private financeinitiative (PFI) correctional facility

200
Q1975
Q2004

Commences operation of the world’s firstcomputerized security system (CSS)Q1966

Introduces the SECOM AED Package Service
Q2015

Q1964

Acquires Asahi Security Co., Ltd., a leading providerof cash collection and delivery services, whichbecomes consolidated subsidiary

0
1962

1965

1970

1975

Security service industry

1980

1985

Safety ( “ANZEN ”)
industry

1990

1995

2000

2005

2010

2015

2019

Social System Industry

Note: As indicated in the legend, this graph shows net sales and operating revenue for each fiscal year at the time of announcement. Figures have not been readjusted.
However from the fiscal year ended November 30, 1978 through the fiscal year ended March 31, 2004, the Company reported “revenue and other income.” Owing
to a change in the Company’s settlement date, the fiscal year ended March 31, 1990, was a transitional four-month period. Data for periods up to and including the
fiscal year ended November 30, 1977, is nonconsolidated revenue for SECOM CO., LTD., calculated using Japanese GAAP.

10SECOM Annual Report 2019

SECOM Annual Report 201911

SECOM at a Glance
Segment

Security Services

Percentage of consolidated
net sales and operating revenue*

50.8%

Principal operations

On-line security systems
Static guard services
Q Armored car services
Q Merchandise and other
Q

Q

Q

Q

Principal initiatives

Fire Protection
Services

12.6%

Competitive advantages

Pages 30-35

Fire alarm systems
Fire extinguishing systems
Q Maintenance services

Integrated approach to providing on-line security systems
Robust technological foundation made possible by proprietary research and development configuration
Q Nationwide network of 2,800 emergency depots, facilitating swift response in the event of an emergency andappropriate operational control
Q Rental format that minimizes initial costs for subscribers and enables SECOM to take responsibility forequipment maintenance and upkeep
Q Solid income foundation (attributable to stable recurring revenue) and robust customer base
Q Overseas operations centered on the provision of on-line security systems with emergency response services

Q

Q

Two Group companies with the largest and third-largest shares of the Japanese fire protection market

Q

Q

Comprehensive lineup of services that respond to a broad range of customer needs

Q

Integrated service configuration encompassing R&D and planning, equipment design and production,
installation and maintenanceQ

Stable demand for equipment that complies with Japan’s Fire Service Act

Q

Ability to extend renovation proposals that draw on a wealth of experience

Q

Expertise in fire extinguishing systems for tunnels and other large-scale structures

Q

Conviction that protecting health and life is the ultimate expression of the SECOM commitment to delivering safety

Principal initiatives

Pages 36-37

Home medical services
Operation of residences for seniors
Q Medical services that leverage ICT
Q Sales of medical equipment and pharmaceuticals
Q Support for affiliated medical institutions
Q

16.3%

Q

Experience and extensive know-how in the provision of diverse medical services

Q

Strong collaboration with local communities aimed at realizing effective comprehensive community healthcare systems

Q

Belief in the need for both security services, which are preventative by nature, and non-life insurance,
which looks after people in the event of misfortune

Q

Development and provision of unique policies that take into account the risk mitigating factors of on-line security systems

Q

Development and provision of an automotive insurance policy that includes access to emergency response services

Q

Development and provision of a cancer treatment policy that features full coverage for all treatment costs

Q

Q

Service configuration overseen by the leading company in Japan’s aerial surveying and geographic information system (GIS) markets

Q

Q

Ability to provide geospatial information based on geographic data collected by commercial satellites, aircraft, vehicles and ships

Q

Technological capabilities and expertise in the integration, processing and analysis of geographic and related data
to provide geospatial information

Q

Active efforts to cultivate new geospatial information services

Principal initiatives

Fire insurance policies
Automobile insurance policies
Q Cancer treatment policies
Q

3.8%

Principal initiatives

Geospatial
Information Services

4.6%

7.9%

Real Estate andOther Services

4.0%

Highly secure facilities and equipment and tailored support, as well as data center facilities boasting excellent connectivity
that are among Japan’s largest
Q One of Japan’s leading disaster management support services
Q Seamless information security services encompassing the formulation of strategies, monitoring, implementation of countermeasuresand restoration
Q ICT services that reflect technological prowess, operational capabilities and know-how that facilitates the construction and operationof network systems that leverage extensive experience in the provision of security services
Q Provision of high-grade contact center and other BPO services that deliver security and peace of mind

Real estate development and sales
Real estate leasing
Q Construction and installation services
Q Home services

Q

Development and sale of condominiums that incorporate sophisticated SECOM security as standard features

Q

Q

Provision of diverse lifestyle support services that deliver safety and security and make life more comfortable
and convenient* Pie charts show percentage of consolidated net sales and operating revenue (excluding intersegment transactions) for the year ended March 31, 201912

SECOM Annual Report 2019

Nittan Co., Ltd.

Secom Medical System Co., Ltd.

Secom General Insurance Co., Ltd.

Pasco Corporation***

Secom Trust Systems Co., Ltd.,At Tokyo Corporation,
TMJ, Inc.

Pages 41-42

Q

Principal initiatives

Nohmi Bosai Ltd.***,Q

Data center services
Q Large-scale disaster preparedness services
Q Information security services
Q Cloud-based services
Q BPO services
Principal initiatives

Secom plc

Pages 40

Q

BPO and ICT Services

Asahi Security Co., Ltd.,

Pages 39

Public sector services
Private sector services
Q Overseas operations

Principal initiatives

Secom Joshinetsu Co., Ltd.****,

Pages 38

Q

Insurance Services

SECOM CO., LTD.***,and peace of mind

Q

Medical Services

Principal Group companies**

Secom Home Life Co., Ltd.

Pages 43** For more information, please see pages 105–108.
*** Listed on the First Section of the Tokyo Stock Exchange**** Listed on the Second Section of the Tokyo Stock Exchange

SECOM Annual Report 201913

SECOM’s Core Competitive Advantages
We continue to leverage three core competitive advantages to deepen our ties with customers
and ensure sustainable growth.

A high market share and a robust brand associated with safety and peace of mind

A pioneer in Japan’s security services
industry, we have continuously updated

Emerging as a pioneering providerof security services

and evolved our services in line with social

customers’ needs for safety and peace ofmind and swiftly provide solutions, thereby
enhancing our reputation for reliability. Atchange over more than five-and-a-half

In 1966, we developed the first on-line

present, contracts for our on-line commercial

decades since our founding, achieving

security system in Japan, SP Alarm. At theand home security systems number more

steady growth as the industry leader andtime, contracts for security patrol and static

than 2.29 million, and we continue to enjoy anurturing the SECOM name as a trusted

guard services rose steadily, but having rec-significant share of the Japanese market. Our

brand.

ognized the superiority of SP Alarm andaccumulated experience and know-how inviewing on-line systems as the future of

the provision of safety and peace of mind

security services we eliminated our security

to a diverse range of customers and thepatrol services and shifted our focus to SP

reputation we enjoy for reliability have con-

Alarm. Although this dramatic transforma-

tributed to the rise of SECOM as a powerful,

SECOM was established in 1962 as Japan’stion was not without its difficulties, ourvaluable brand.

first security company. At first, our services

employees were united in their determina-

consisted of random patrols of subscribers’

tion to broaden the popularity of on-line

unattended premises at night and static

security systems and succeeded in achieving

guard services, whereby security guards are

steady growth in contract volume.

An early opportunity for dramatic
progress: The 1964 Olympics

Securing human resources capable ofbuilding brand value

Since our establishment, we have also

We remain committed to achieving asought to ensure that all employees sharesociety free from concerns by providing

SECOM’s Philosophy, the unfaltering

widely accepted high-grade services that

The goal of the security services businessfoundation of everything we do, and todeliver safety and peace of mind. By refusing

is to provide safety and peace of mind. A

encourage them to personify the philosophy,

to be content with the status quo, we willcompany’s ability to offer high-grade services

recognizing employees as a vital source ofcontinue to be critical to earning the trust of

depends on having employees who are

our competitiveness. In recent years, wecustomers and increasing the value of thehighly adaptable to change, able to create

have promoted efforts in line with the Tri-ion

SECOM brand.

value and committed to contributing toInitiative*, which seeks to confirm thatsociety. Our reputation as the leader of Japan’s

SECOM’s Philosophy fully penetrates every

security services industry and our outstanding

aspect of our operations and that employees

growth potential position us well to secure

are able to act independently in a mannerand foster the talented human resources who

consistent with this Philosophy.

will be responsible for providing our various
services in the years ahead, allowing us to* For further information on the Tri-ion Initiative,
please refer to page 27.

maintain an edge over the competition.

A recurring revenue–based business model that underpins sustainable growthposted at subscribers’ premises. In 1964, we

In subsequent years, we succeeded insecured the contract to guard the athletes’

making on-line security systems available tovillage at the Olympic Games in Tokyo.

a broad range of customers by extending

Thanks to our success in fulfilling this con-high-grade services at appropriate prices

A distinguishing feature of our operating

revenue–based businesses. As an example,

customers are content to leave contracts intract, recognition of the SECOM namethrough a national network. By maintaining

income is the fact that it is generated largely

the initial contract period for on-line security

place over the long term, all employees, from

improved greatly and our contract volume

a close proximity to the community, we

by long-term contracted services such assystems is five years, after which the contract

emergency response personnel to sales,rose substantially.

ensured our ability to promptly grasp

on-line security systems and other recurring

is automatically renewed annually. To ensuretechnology and administrative department

New contract is secured

Variable and Fixed Costs for On-Line Security Systems
Variable costs
Subscriber

Security equipment isprovided on a rental basis(SECOM assets)

Increased customer satisfaction ensures thatthe contract continues over the long term
Diversification of services bolsters
per-customer income

Fixed costs

3

SECOM
Emergency
Depot(Approximately
2,800 across Japan)
Securing the contract to guard the athletes’ village at the 1964 Tokyo
Olympics gave SECOM a significant boost

14

SECOM Annual Report 2019using
1 Alerttelecommunications

Dispatch SECOM emergency
response personnel

Continuous income expansion

circuits

Reinvestment in growth
SECOM
2 Alertemergency
response personnel

SECOM
Control Center(47 across Japan)

Increased competitiveness andsustainable growth

The well-known red SECOM sticker: Providing security and peace of mind
across JapanSECOM Annual Report 201915

SECOM’s Core Competitive Advantages

staff, work to increase customer satisfaction

Expanding use of our recurring
revenue–based business model

Building a stable cycle of investment
and growth

faction staff, who visit customers in person to

We have applied our recurring revenue–

Going forward, we will continue striving tofurnish useful information and gain feedback,based business model in various SECOM

bolster our earnings by expanding applica-

which we use to incorporate into ourGroup business areas. In addition to on-linetion of this recurring revenue–based busi-

unceasing efforts to improve systems andsecurity systems, our security services seg-ness model and remaining in close proximity

services and grasp latent needs.

ment includes two recurring revenue–based

to customers. We will also continue to rein-

businesses, namely, static guard services andvest in growth using cash generated byarmored car services. In the fire protection

these businesses to further enhance oursegment, we view post-installation regularcompetitive edge and ensure sustainable

maintenance and inspection services andgrowth.

by providing services that exceed theirGroup strengths backed by a strong financial baseexpectations. We also have customer satis-

Ongoing investment toreinforce competitivenessOur ability to ensure the stable, reliable pro-replacement, which is carried out after a set

vision of on-line security systems is under-

period of time, to essentially be recurring

pinned by a robust infrastructure centered

revenue–based businesses. Our medical ser-on control centers, which monitor the status

vices segment includes home medical ser-of subscribers’ premises, the IT systems thatvices, as well as services that leverage ICT,

support these facilities and emergency

notably an electronic medical report system

depots, which provide emergency response

and remote image diagnosis support ser-services. Having established a configuration

vices. Most of the businesses in our insurance

that enables us to provide on-line systems

services segment, including fire insurance

across Japan, we promote ongoing invest-

and cancer treatment insurance, are recur-

ments aimed at improving quality and func-

ring revenue–based businesses. In the geo-

tionality, thereby further reinforcing our

spatial information services segment, which

competitiveness.

has traditionally focused on outsourced
work, we are promoting the expansion ofcontinuous contract services. The BPO andICT service segment primarily consists ofrecurring revenue–based businesses, including data centers, large-scale disaster
response services, cloud-based services and
BPO services.

16

SECOM Annual Report 2019

At present, the SECOM business portfolio

Investments to realize our visionencompasses seven segments: security

reinforcing our ICT business. In 2015, leading
cash collection and delivery services provider

services, fire protection services, medical

Efforts to create the ANSHIN Platform center

Asahi Security became a consolidated sub-services, insurance services, geospatial infor-on two key strategies. The “ALL SECOM” strat-

sidiary, allowing us to propose solutions

mation services, BPO and ICT services, andegy focuses on rallying Group strengths,

combining security services with cash collec-

real estate and other services. In all of thesewhile the “Collaboration” strategy emphasizes

tion and delivery services, while in 2017 weareas, we endeavor to help resolve our cus-working with various partners who share ouracquired TMJ, a provider of contact center

tomers’ concerns by rallying SECOM Groupphilosophy. We also see M&As as a viable

and other BPO services, enhancing ourstrengths to provide a diverse range of tai-

approach to creating the ANSHIN Platform,

responsiveness to the rising need to be ablelored services and products that deliver

and, as stated in the SECOM Group Road

to rely on others, a consequence to Japan’s

safety and peace of mind and make life more

Map for 2022, we will seek to invest in key

declining labor force.

comfortable and convenient. Looking ahead,

growth businesses, namely, physical security,

we will also continue working to drive inno-

cyber security, BPO and ICT services andvation by combining these various services

healthcare, as well as in start-ups withand products into tailored packages.

advanced technological capabilities. We have

Deepening ties with customers
and ensuring sustainable growthallocated ¥200 billion for M&As over five

By enhancing SECOM Group strengths, weyears (April 2018–March 2023). Active invest-

are expanding opportunities for customers

ments in growth, including in M&As, areto use SECOM services. While continuing toWith the aim of realizing our vision forpossible thanks to our stable financial base,value our relationship with each and every

the future—the Social System Industry—

which reflects stable cash flows from

customer, we will continue working to offer

we formulated the SECOM Group’s Vision forrecurring revenue-based businesses.

services optimized to suit their needs,

The ANSHIN Platform

2030, as part of which we are working tocreate the ANSHIN Platform, a service infra-

thereby helping to resolve concerns andM&As to reinforce Group strengths

structure through which we are striving tofurther reinforcing our bond with society.
Guided by our mission of helping to achievedeliver peace of mind to people in their

We have a long history of investing in M&As

a society free from concerns, we will press

everyday lives and to society as a whole.

with the aim of further reinforcing theahead with efforts to ensure sustainable

We provide comprehensive services

strengths of the SECOM Group. In 2006, wegrowth in a rapidly evolving society bydesigned to address risks including crimes,

acquired Nohmi Bosai, Japan’s largest pro-swiftly identifying needs and offering a broad

accidents, cybercrime, natural disasters,

vider of fire protection services, while in 2012

range of services.

illnesses and aging by helping prepare in

Japan’s third-largest fire protection services

advance, ensure an accurate grasp of condi-

provider, Nittan, joined the Group, enablingtions, minimize impact and achieve restora-

us to extend joint security services and firetion. These four steps comprise the SECOM

protection services proposals. The same year,

ANSHIN Flow, through which we endeavor to

we also acquired At Tokyo, one of Japan’s top

ensure the seamless provision of services

data center services firms, positioning us tothat deliver peace of mind.

begin offering services using Big Data andSECOM Annual Report 201917

The Value Creation Processssue

We remain committed to providing enduring peace of mind by keeping abreast or where possible ahead of the times.

i

olut

By reinforcing our relationship with society and addressing increasingly diverse social imperatives, we continue workingRes

to maximize our corporate value and grow together with society.

f is
on o

MissionEnhancedvalue

Help achievea society freefrom concerns

Connection

Collaboration

ALL SECOMThe SECOM Group’s Vision for 2030

SECOM Group Road Map 2022

Values

A uniquely SECOM identity(Philosophy, code of conduct, corporate culture)

Management foundation and strengths
Demographic change

Organization

Technological evolution

Q An integrated portfolio thatmarshals diverse businesses

Crimes/accidents

CybercrimesSecurity
Real estate services
andother services

Shift of global economic
center/urbanization

Fire
protection
servicesbusiness areas**
Q Operations in 18 countries

Technologies

and territories overseas

Q Business model that fuses

A corporate philosophy
shared by all employees
Q 63,080 Group employees*
Q

people and technologies
Q Approximately 2,800

emergency depots in Japan
Q Around 60,000,000 security

sensors installed at
subscribers’ premises

Megatrends continue
to drive the evolutionof social imperatives
Illness/
aging

Human
Resources

Q 195 Group companies in seven

BPO and ICT
services

Medicalservices

Performance
Q Close ties with society

Naturaldisasters

Geospatial
information
servicesand a strong track record
Q More than 3,300,000
security service subscribers
Q Over 6,700,000 SECOM
Safety Confirmation
Service users

Insuranceservices

Knowledge

Q Know-how cultivatedin Japan
Q Deployment of initiatives
developed in Japan, a front
runner in addressing
challenges associated witha super-aged society andnatural disasters

VisionRealize theSocial System Industry

Increasingly severe
environmental issues

ESG initiatives(Growth of Asian economies)* Employees of SECOM Group companies (excluding variable interest entities),
as of March 31, 2019** The parent company, consolidated subsidiaries and equity-method companies,
as of March 31, 201918

SECOM Annual Report 2019

SECOM Annual Report 201919

The SECOM Group’s Vision for 2030

To accelerate the realization of our Social System Industry vision, in May 2017, we formulated
the SECOM Group’s Vision for 2030, which positions 2030 as an important milestone and further
defines our direction going forward. One year later, in May 2018, we devised the SECOM Group
Road Map 2022 to clarify the challenges we must address to achieve this vision.

Strategies for creating the ANSHIN Platform
To create the ANSHIN Platform, we areuse of advanced information technologies,

life more comfortable and convenient.

currently promoting initiatives in line withto respond to latent needs, while our

These strategies continue to guide ourfour core strategies. The “ALL SECOM”“Enhanced value” strategy revolves

efforts to create services and systems thatstrategy focuses on rallying SECOM Grouparound addressing everyday concerns byaddress increasingly diverse needs forstrengths to maximize synergies. Throughadding greater value to services that makesecurity and peace of mind.

our “Collaboration” strategy we are en-

Conceptual framework of the ANSHIN Platform

deavoring to integrate the business ideas
and technologies of various partners who

Guided by the SECOM Group’s Vision forsociety as a whole through collaboration withassociated with crimes, accidents, cybershare our mission. Our “Connection” strat-

2030, we are working to create the ANSHIN

partners in industry, government and aca-

crimes, natural disasters, illnesses and aging.

egy emphasizes strengthening relation-

Platform, a service infrastructure throughdemia who share our mission to help achieve

In addition to recognizing the importanceships with our customers and society bywhich we strive to provide services thata society free from concerns and who haveof routine advance preparation, we provide

leveraging Big Data analysis, which makes

deliver seamless peace of mind for anyone

diverse technologies and expertise.

comprehensive services designed to addressand everyone whenever and whereverFor both companies and individuals, thenecessary.

Connection

Enhanced value

potential risks by helping customers accu-

occurrence of an unanticipated crime or

rately grasp conditions, minimize impact anddisaster can interrupt daily rhythms. For com-achieve restoration. These four approaches,

we have cultivated with society, the ANSHIN

panies, productivity can fall sharply. More-which comprise what we call the SECOM

Platform seeks to provide peace of mind toover, the greater the damage is, the longer it

ANSHIN Flow, enable us to provide seamlesspeople in their everyday lives, as well as totakes to recover. Society faces significant risks

peace of mind.

Anchored in the relationship of trust thatlationships with customers and society
SECOM’s reforcing
n
i
e
r
ther
Fur

Platform
NSHIN
the A
f
o
n
tio
ea
Cr

ALL SECOM

Collaboration

Tha ANSHIN Platform Service Infrastructure

The SECOM Anshin Flow
<Value>Security andpeace of mind
Life/health/assets/informationIn
everydaylife

AdvancepreparationInthe event of Grasp
an emergency the situationInthe event of Minimize
an emergency damage

AI, IOT and Big Data

After
Restorean emergency operations

Targeting sustainable growth: Devising the SECOM Group Road Map 2022

Operations/emergency response services

Real-world

Crimes and accidents
Diverserisks

Cyber crimes
Natural disasters

Risks
isks mayoccur
simultaneously
neously

Rather than stand-alone services, we strive toprovide integrated packages that deliver seamless security andpeace of mind and provide added value that makes life
more comfortable and convenient

SECOM’s significant competitive edge

Illnesses/aging<Added value>

Comfort andconvenience
Issues to be addressed

20

SECOM Annual Report 2019In
everydaylife

Need to improve efficiency

E
Extensive
coverage

In May 2018, we used backcasting* to devise

and society in general, these issues can

the SECOM Group Road Map 2022 with the

become threats if not addressed properly.

intention of clarifying the challenges we

Accordingly, we believe that anticipatingmust address to achieve the SECOM Group’s

evolving needs for solutions will lead to

Vision for 2030. The road map identifies

major business opportunities that will allow

technological advances and a declining labor

us to contribute to the improvement offorce as priority issues in today’s rapidlysocial productivity.

* Backcasting is a planning method that starts withenvisioning a desirable future and working backwardfrom there to identify steps necessary to attain that
future.

changing society. For both companies

Everyday concerns

Need to reduce costs

Need to rely on others

SECOM Annual Report 201921

The SECOM Group’s Vision for 2030

Targeting sustainable growthseek to contribute to society. Specifically, weto create positive working environments andsecurity, BPO and ICT services and health-

are improving our ability to attract and foster

boost job satisfaction.

care, as well as in startups with advanced

We place a particular emphasis on the sus-

pursued service innovations that create

priority. We will continue working tirelessly

talented, experienced personnel, including

The SECOM Group Road Map 2022 also

tainability of society and our businesses andvalue. This is rooted in our fundamental com-

to enhance our ability to make effective use

IT specialists and individuals with global busi-

includes a strategy for making effective use

thus see related expenditures not as costs

mitment to offering services that anticipateof these intangible assets, positioning us toness skills. In addition, we make investmentsof capital assets. This includes allocating

but rather as investments that enable us towhat is needed to ensure sustainability for

cement our competitive edge and earn the

aimed at helping employees fulfill their¥200 billion over the investment and high-integrate changes in our operating environ-society, rather than simply providing services

trust of our customers and society, thereby

potential, including the enhancement of our

growth phases for M&As in promising

ment into our operations over the long term.

that will sell in any market. This is why people

growing sustainably.

various training programs and other effortsbusinesses, namely, physical security, cyber

Since our establishment, we have tirelessly

and technology will always be given top

technological capabilities.

SECOM Group Road Map 2022
Forecasts for the fiscal year ending March 31, 2023 (Japanese GAAP) (Provided for reference only)

Responding to demand related to the need for security in a connected society and the need to rely on others
Technological advances have brought an

demand related to the need for security in asuch as falling birthrates, the graying ofincrease in the variety of connected devices.

connected society, which involves the fusion

Japanese society and the prevalence ofThis is driving a variety of profound changes,of physical and cyber security.

families in which both parents work outside

including the realization of connected vehi-

Owing to a declining labor force, com-cles, the expanded use of drones and robots,

panies face a growing need to outsource

related to the need to rely on others, wethe advent of unattended retail facilities andnoncore functions, which enables them towill continue working to extend distinctive

a cashless society, and the rising popularity

concentrate on core businesses—the prin-services that provide safety and peace ofof smart homes, that is, homes equipped

cipal source of their competitiveness. We aremind, as well as make life more comfortablewith wireless smart locks and smart speak-also seeing an increase in needs related toand convenient, thereby helping to address

ers. Such changes are expected to push up

care of children and seniors, owing to factors

key social imperatives.

1.1trillion

Consolidated
revenue: ¥155.0billion

Consolidated
operating profit: ¥Under the SECOM Group Road Map 2022, weand reinforcing functions with the goal ofby technological progress and a declining

have positioned the two-year period ending

improving service quality and productivity

labor force.

March 31, 2020, as an investment phase andby reducing labor requirements and enhanc-

the three-year period ending March 31, 2023,

ing employee capabilities. We also invest

size the reinforcement of critical capabilities

as a high-growth phase.

actively in areas that help bolster the qualitythat cannot be replaced with technology.

and efficiency of our operations, including

Accordingly, we are stepping up efforts toInvestment phase

40%—45%High-growth phase

Consolidated revenue

Consolidated operating profit

Consolidated revenue ¥1.1 trillion
Consolidated operating profit ¥155.0 billion

Consolidated revenue ¥970.6 billion
Consolidated operating profit ¥135.4 billion

CAGR

2015

2016

2017

2018

Investment phase

2019

2020

0%
ox. 6.
Appr
:
)
t
fi
pro
ating
(oper

2021

AI, the IoT and RPA, as well as in efforts toenhance our human capital by securingresources. Investments in systems center

drive R&D targeting innovative services andhuman resources who have the ability to

on building next-generation core systems

products that respond to needs engenderedadapt to change and create value and who

2022(Years ended/2023 ending March 31)

High-growth phase

Investments in human resources empha-

focused investments in systems and human

SECOM Annual Report 2019

Dividend
payment ratio:

the home. In response to expanding demand

Investments in future growth under the SECOM Group Road Map 2022

22

8% plus

Note: Figures do not reflect the impact of new M&As.

: 3.09%g profit)
peratin(oR
GAC

During the investment phase, we promote

ROE:

Japan
Q Invest in human resources

Q Leverage investments to introduce new services
Q Promote more active collaboration with partners

Q Invest in systems

Overseas
Q Expand services in countries and territories

where SECOM has a presence
Q Actively establish operations in promising

new markets

SECOM Annual Report 201923

Initiatives Aimed at Achieving the Goals of the SECOM Group Road Map 2022
With the aim of achieving the goals of the SECOM Group Road Map 2022, we are promoting focused, forward-looking
investments and steadily implementing ambitious strategies for creating and growing new businesses and enhancing
existing businesses.

Japan

Overseas

Responding to demand related to the need to be able to rely on others and to the need for security in a connected societyCountries/territories where we havea presence and new countries/territories

Q Begins providing SECOM Supply Chain Security Select,

Q Inaugurates SI team

Q Commences provision of Xperia Hello!, aa service that assists companies
to secure safety certification for
supply chains (June 2018)

communication robot that can be linked
to SECOM Home Security (October 2018)

Q Makes full-scale entry into local

home security services markets

Page 33

Q Commences sales of new

Q Adds solutions to the SECOM Supply Chain Security Select lineup

to support the efforts of companies to qualify for certification ofphysical security measures designed to prevent the contaminationof food (December 2018)
Page 31

Q Releases the SECOM Senior Care Phone Service

emergency monitoring service for seniors(April 2019)
Pages 33 – 34

Q Cooperates with financial institutions to broaden the popularity ofmeasures to improve the security of food-related facilities.
Page 31

Thailand and Malaysia

Q Starts selling the SECOM MyAED on-line
nePage 35

home AED service (December 2018)

Q

Commences provision of ANSHIN Browser-b, a cyber security
package that combines entrance and exit protections withinsurance against the threat of targeted cyber attacks (February 2019)

Q Begins providing the SECOM Robot X2Page 35

Q Expands into the Turkish market(February
2019)
Q Begins offering SECOM Vitalook, a remote medical support

platform (July 2018)

Q Launches the new SECOM IP Camera surveillance camera system

Page 32(June 2019)

Q Collaborates with major retail group to respond to the need toreduce the workload of static guards

Q Develops the AI-powered Virtual

Security Guard System, which performs
security and receptionist duties

Q Conducts demonstration test using drones (used in stadium

Page 32 ), service to prevent damage to crops
security (caused by vermin, others)

Page 31

Q

Commences provision of the SECOM Shift Scheduler automatic
shift generating system (September 2018)
Pages 41– 42

QBegins providing SECOM Call on Duty Service, an outsourced
telephone receptionist service (June 2019)
Page 42

Page 32

Tri-ion Initiative, employee job satisfaction surveys, application of RPA to operations and others
Investment in human resources with advanced and specialized expertise

SECOM Annual Report 2019

Page 35

Page 38

Expansion andevolution of services

Growth ofcustomer base
Increase inopportunities forcustomers to
use services(Maximization)
Per-customer
incomeNumber ofcustomers

Provision of services
that exceed
customers’
expectations

Increase in value
provided tocustomers

Continuation ofcontracts

Q Develops new commercial security systems

autonomous patrol robot (June 2019)24

home security system
Pages 34 – 35
in Thailand
Q Fortifies planning and promotional structure by establishing
Innovation Center in the PRC
Q Reinforces sales of AEDs in

Launches the Cryptocurrency Wallet Service, developed to protect
crypto assets (June 2018)
Page 41

Q

Page 35

Q Works with a major retail group

Promotion of efforts
to reduce labor
requirements

to propose facility management
and administration services that
help reduce labor requirements
Page 35

Optimization of
cost structure

Maximizationof income

Improvement of
performance
Increasein efficiency

Improvement of
capital efficiency

Improvement ofskills and capabilities

Increase inreliability

Increase in motivationand discipline

Increase inproductivity

SECOM Annual Report 201925

Special Feature 1

Human Resources: The Driving Force Behind SECOM’s GrowthDiverse human resources who share SECOM’s Philosophy and thrive in a free and open corporate culture are our most

The Tri-ion Initiative

important assets and the driving force behind our growth.

Encouraging a managerial mindset and enhancing employees’ ability
to cope with change
A company’s ability to transform itself in

We also acknowledge that a high degree

In 2018, the year we formulated the SECOM

employees’ passion, encourage them toaccordance with the philosophy are essential

Group Road Map 2022, we also beganshare their excitement—a powerful

to a healthy corporate culture, which in turnpromoting efforts in line with the Tri-ion Ini-

emotion—and bolster motivation (the “ion”

is critical to enhancing society’s recognition

tiative, a project that seeks to ensure thatin the initiative’s name is the last three lettersof SECOM as a trustworthy brand. Accord-

SECOM’s Philosophy fully penetrates everyof “passion,” “emotion” and “motivation”)

ingly, having employees who thrive in a free

aspect of the SECOM Group’s operations

and to nurture employees who personify

and open corporate culture is the principal

and in so doing to bolster recognition of the

SECOM’s Philosophy. This is because we

factor behind our brand image.

SECOM brand. This initiative seeks to arouserecognize that employees who act inemployee job satisfaction, will support our

response to dramatic changes in the operat-of job satisfaction is crucial to the success ofing environment hinges on its ability to adapt.

our managerial mindset. We are thus work-

efforts to ensure sustainable growth.

We recognize that this depends on encourag-ing to create a virtuous circle, recognizing

ing a managerial mindset among all employ-that improving job satisfaction makes it

ees, that is, on fostering employees who sharepossible for employees to demonstrate their

SECOM’s Philosophy, understand our mission

personal ambitions at a higher level, which

and are capable of forming judgments andhelps raise the quality of the services weacting independently. To bolster the function-

provide. This enhances customer satisfac-

ing of this mindset, we continue to promotetion and society’s perception of SECOM as

Incomparable intangible assets

a fair and impartial organization that ensures

a trustworthy brand, which in turn drives em-

Diverse human resources who share SECOM’s Philosophy and thrive in a free and open corporate culture

a free and open corporate culture andployees’ efforts to devise and provide evenmotivates employees to perform.

better services. This virtuous circle, rooted in

Penetration of SECOM’s Philosophy

Tri ion

Passion Emotion Motivation

Initiative

Employees who
personify SECOM’s
Philosophy

A stronger
A well-establishedcorporate culture
brand

Trust of society• Increased contracts with customers• Improved assessment by society• Optimized operations

SECOM employees work to provide services worthy ofcustomers’ trust

Sustainable growth

SECOM’s Philosophy: The unfaltering foundation of our corporate culture
Handed down since our establishment,

Philosophy, our employees are committed

services and systems that benefit society and

SECOM’s Philosophy has provided an essential

to keeping abreast of change and keen to

draw on a corporate culture, the unfaltering

spiritual anchor for both our diverse humancontribute to society.

foundation of which is SECOM’s Philosophy.

Promoting diversity
Understanding the importance of welcom-

and respect for all employees, regardless ofworking environments conducive to job

resources and the SECOM Group as a whole,

We have translated SECOM’s Philosophy

ing a broad spectrum of individuals withattributes such as gender, nationality or age,satisfaction for female employees. These

guiding the efforts of employees to maintain

into multiple languages and work to advancewide-ranging values and leveraging theand to ensuring inclusive working environ-include fostering female leaders and intro-

a managerial mindset and enabling us toawareness thereof among employees over-capabilities of such individuals to create newments that maximize the capabilities of all

ducing flexible work styles that make itmaximize the power of our organization. This

seas. We view human resources who sharevalue, we actively promote diversity. In

employees. Prior to this, on March 1, 2016,

easier to balance competing responsibilities,

philosophy emphasizes a refusal to be con-this philosophy and thrive in a free and open

October 2017, we established the Declaration

we announced the Action Plan on Women’s

thereby increasing our ability to retain female

tent with the status quo and a commitment

corporate culture as incomparable intangibleof Promoting Diversity and Inclusions, which

Active Participation, which outlines a variety

employees.

to doing what is appropriate and continues toassets and a vital source of competitiveness.

enshrines our commitment to acceptanceof initiatives aimed at creating positivebe the driving force behind our growth andWe will continue to prioritize these assets

evolution. Acting in compliance with SECOM’s

as we work to develop and provide original
SECOM’s Philosophy guides the actions of
SECOM employees

26

SECOM Annual Report 2019

SECOM Annual Report 201927

Special Feature 2

SECOM Security Services for Large-Scale Events

With Japan playing host to an increasing number of large-scale events, including major sports tournaments andinternational conferences, the need for sophisticated security solutions is rising. We provide advanced security
systems that contribute to the safe and secure staging of such events.

3-Dimensional Security
To help ensure the safety and security of

SECOM 3D Security Planning makes use of

Ensuring the safe and secure staging of major sports tournaments
In March 2019, we provided advanced secu-

employs AI technologies to analyze images

security for all 15 matches at Tokyo Stadiumrity systems that ensured the safety andfrom surveillance cameras to effectively

and International Stadium Yokohama, which

security of organizers and participants in theassess emergency situations and detect sus-include the opening match and the final.

Tokyo Marathon 2019. With approximately

picious objects; SECOM Aerostat, which cap-

38,000 runners, this annual event is Japan’stures images from above; and a roadsidelargest marathon. As an official partner of thissecurity system, whereby security guards

event, we have provided security services

posted along the marathon course usebase. The On-Site Center’s monitor facilitatesencompassing all principal areas of the mara-smartphones to capture images and share
information with relevant parties in the eventof an irregularity.

large-scale events, we offer 3-Dimensional

high-precision 3D maps to prepare simula-

the collection of image data and assessment

thon course since 2015. At the 2019 race, we

Security, which provides security over wide

tions, facilitating a firm grasp of potentialof event status in real time, ensuring swift

also conducted verification testing for num-areas from both the ground and the air torisks and the formulation of an optimal secu-

on-site command support at large-scale

ber of services that leverage innovative tech-

We have also been designated as an

ensure the safe, secure staging of large-scalerity plan. Based on the plan, images captured

events.

nologies, contributing to the safe and secure

official sponsor of Rugby World Cup 2019™,

events held in major stadiums and hotels

by temporarily installed security cameras,staging of the event. These included anwhich is scheduled to begin in September

and at multiple dispersed venues.

wearable cameras borne by security guards

AI-based image recognition system that2019. As such, we will be responsible for

3-Dimensional Security begins with the prep-

and SECOM Airship and SECOM Aerostat

aration of efficient, accurate security plans

dirigibles are coordinated by a vehicle-

using high-precision geospatial information.

mounted On-Site Center mobile monitoring©Tokyo Marathon Foundation
Roadside security for the Tokyo Marathon 2019

Preparing for the Olympic and Paralympic Games Tokyo 2020
With the aim of contributing to the safe andservices for the games. As a joint representa-

but also for multiple facilities—including

secure staging of the Olympic and Paralympic

tive of the consortium, we will play a key role

the Olympic Stadium, which will host theGames Tokyo 2020, which kick off in July 2020,

in ensuring the safe and secure staging of

opening and closing ceremonies and other

we participated in the establishment of thethis seminal event.

events, and the Olympic Village—during

Olympic and Paralympic Games 2020 Security

We are also responsible for security plan-

Consortium, an association of private-sector

ning and security services not only for Tokyo

security companies that will oversee security

2020-related facilities during construction,

the games.

SECOM’s 3-Dimensional Security
Satellite

500km

©DLR

An Official Partner of the Olympic and Paralympic Games Tokyo 2020

Plane

1,000~2,000m

A new-model On-Site Center
Helicopter

500~1,000m
SECOM Airship

SECOM Aerostat

100m

As an official partner (Security Services andthe trust of society, an achievement that

Planning category), we will contribute tocontributed to our subsequent evolution

the safe and secure staging of the Olympic

and growth.

and Paralympic Games Tokyo 2020.
SECOM Drone

3~10m
Sensors

GroundSecuritycamerasControl
centerEmergency response
personnel

SurveyingvehicleWe look forward to helping ensure the

Our history with the Olympics

safety and security of the Olympic andstretches back five decades. Still in our

Paralympic Games Tokyo 2020 and will

infancy, in 1964 we provided security

continue working to create innovative

services for the Olympic Village at the firstservices that will help us achieve this goal.

Tokyo Olympics, earning high marks and28

SECOM Annual Report 2019

SECOM Annual Report 201929

SECOM Today

is also crucial, allowing us to swiftly leverage
JNet sales and operating revenue (Left scale)
J Operating income (Right scale)(In billions of yen)

(In billions of yen)

600

200
565.4

Security Services

550

those determined to be optimal. We willcontinue to place a high priority on R&D in
the years ahead, recognizing technologicalprowess as a key management resource

567.2

546.5

critical to maintaining our competitive edge

150in the security services market.
114.5

110.4

110.1

To foster human resources, we provide

500

100

450

50

training for emergency response personnel, sales staff, administrative staff and other

2017

2018

2019

employees at four training centers acrossJapan. This enables us to equip employeeswith the advanced knowledge and technicalBusiness summary

Laboratory, which conducts research in theskills they need and ensures that they fullyarea of core technologies, and the SECOM

understand our corporate philosophy andOur security services business centers on theDevelopment Center, which capitalizes on

observe a code of conduct befitting security

provision of on-line security systems, whichthese core technologies to develop new

professionals, yielding a robust service frame-

includes the installation of sensors and othersecurity systems. These facilities form awork and facilitating the provision of high-monitoring equipment and around-the-robust R&D configuration that facilitates thegrade, distinctively SECOM services.

clock monitoring by a SECOM control cen-swift and appropriate development andter via telecommunications circuits. In themodification of systems that respond to the

supported by extensive know-how accumu-

event an intruder, fire or other irregularity isrequirements and views of customers, con-lated since our establishment, the prompt

detected, control center staff dispatch emer-

tributing to improvements in the quality ofdecision making of our control center staff

gency response personnel from the nearest

our on-line security systems. In an era ofand swift actions of our highly trained emer-

SECOM emergency depot and, if necessary,

rapid technological advances, our R&D

gency response personnel, and our nation-

notify the police and/or fire department.

team’s ability to grasp the latest trends andwide network of 2,800 emergency depots,

appropriately evaluate various technologies

the largest in Japan.

A key competitive advantage of our on-

Our operational and control structure isline security systems is our integrated service
framework, whereby we take responsibility

On-Line Security Systems

for everything, including R&D, production,marketing, security planning, equipment
installation, around-the-clock monitoring,
emergency response services and maintenance, which ensures the exceptional quality
and reliability of our services.

Flashing lightLight flashes if the system detects anirregularity to warn people inthe vicinity and to guide
SECOM emergency response
personnel dispatched to thesubscriber’s premises.

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

Subscriber

Our ability to extend integrated on-line
security systems derives from the threecomponents of our operating foundation,
namely, our technological prowess, human

PoliceDept.

SECOM
3 Dispatch
emergency responseusing
1 Alerttelecommunications

personnel

circuitsresources, and operational and control struc-

SECOM
セコム
・
Emergency
緊急発進拠点Depot

SECOM
2 Alertemergency
response personnel

30

SECOM Annual Report 2019

Gas
Company

Alert emergency
services as necessary

ture. Our technological prowess is underpinned by the SECOM Intelligent Systems

Fire
Dept.

セコム
・
SECOM
コントロールControl
Centerセンター

New service joins the SECOM Supply
Chain Security Select lineup
In recent years, demands have increased for

Reinforcing our ability to propose
solutions in the area of facility
managementQfood-related facilities to implement mea-line security systems for commercial sub-Helping reduce labor requirements
for facility management
Ensuring the effective use of humanscribers, we work actively to respond toresources and improving productivity in the

In response, we have expanded the scope ofthe diverse needs of companies in a wide

area of facility management, which includes

SECOM Supply Chain Security Select, whichrange of industries. In the fiscal year ended

security services, maintenance and clean-assists companies in securing food safety

March 31, 2019, we continued to see favorable

ing, have become urgent challenges incertification across their supply chains, tosales of high-value-added offerings, nota-

recent years, owing to a shortage of labor

include solutions to support the efforts of

bly SECOM AX, a remote imaging on-line

and rising personnel costs, a consequence ofcompanies to qualify for certification by

security system; SECOM LX, which combines

Japan’s declining labor force and superaged

the SGS Group* of physical security mea-

monitoring for intruders and fires with accesssociety. We have partnered with a facility

sures designed to prevent intentional

control services, thereby reducing the labor

management services company that is partcontamination of food, which seek torequirements of personnel management;of a major retail group and are collaborating

enhance the visibility of physical security

and SECOM FX, which integrates monitor-

to promote efforts aimed at reducing labormeasures crucial to food defense. Earning

ing for intruders and fires with facility con-requirements and facilitating the unattended

this certification enables food-related

trol functions. We are currently working tomanagement and administration of large-

facilities to proffer objective evidence of the

combine function-specific security systems

scale facility management. To this end, we

implementation status of physical security

and to develop and provide packages com-are taking steps to reduce the workload of

measures to clients, thereby enhancing suchbining multiple systems that are tailored tostatic guards by, among others, partiallyfacilities’ reputation for reliability. We also

the varied needs of subscribers.

automating access control and store open-

promote the acquisition of certification ining and closing procedures. Looking ahead,cooperation with financial institutions rooted

we will further expand such efforts with thein Japan’s agricultural, forestry and fisheries

aim of creating new business models.

cooperatives.

Operating highlights
J Commercial security services

Q

Capitalizing on our extensive lineup of on-sures to defend the safety of food against
intentional contamination and other issues.

*The SGS Group, headquartered in Geneva, Switzerland,is the world’s leading inspection, verification, testing
and certification company.

Contracts for On-Line
Security Systems(As of March 31, 2019)

Home

Commercial

Financial services

7.2%

Service industries

7.1%

Retailing/wholesaling

3.6%

Manufacturing

3.3%

Government agencies

3.2%

Other

17.0%

Residences (excluding
condominiums and apartments) 36.4%

Condominiums andapartments

22.2%
SECOM control center

SECOM Annual Report 201931

SECOM Today

ration with a view to commercializing thisDemonstration tests for drone-based
stadium security service meets withsuccess
In collaboration with a leading telecommuni-

system in 2020. This will enhance our ability

cations carrier and a leading drone operator,

force, demand in Japan for services thatto help make society safer and more secure,

we completed a successful demonstration

improve productivity and reduce laboras well as more comfortable and convenient.

test of a drone that combines 4G LTE net-

Advancing the use of AI, drone, robot
and other advanced technologies

services company and a leading telecom-

AI-powered Virtual Security Guard
System is developed
Against the backdrop of a declining labor

involved in this initiative will step up collabo-

Q

munications carrier. The four companies

Q

work compliance and a human detection

requirements is rising in many industries. The

function and is designed to provide security

In response, SECOM has developed the

SECOM Robot X2 is unveiled
In June 2019, we began providing secu-

AI-powered Virtual Security Guard System,

rity services at Narita International Airport

In the test, the drone was used for wide-

which features a life-sized virtual character

using autonomous patrol robot SECOM

area monitoring from a high altitude andthat appears on a large stationary mirror dis-

Robot X2, an updated version of SECOM

automatically detected and located suspi-

play and performs security and receptionist

Robot X, which was developed in 2005. We

cious individuals in real time using an

duties. Images captured by the virtual secu-

already offer a variety of services at the air-AI-based detection function. In addition,rity guard and information on the guard’sport, including patrol and monitoring ser-another drone patrolling at a low altitude

surroundings are transmitted in real time tovices by static guards and access control. By

automatically flew toward the suspicious

the subscriber’s on-site disaster prevention

providing advanced services that combine

individual when receiving map-linked direc-

center, in response to which security guards

the capabilities of humans and robots andtions, promptly notifying the stadium’son duty respond as necessary. Use of thisimproving efficiency, we will work not only

operations center.

system thus facilitates more efficient staffing

to reduce the workload of static guards, but

Thanks to the development of a new

and reduces operating costs.

also to address the issue of a declining labor

operational management system that uses

force, a key social imperative.

AI and boasts an information provision func-

security services industry is no exception.

Combining human capabilities andQover wide areas for use in sports stadiums.

advanced technologies, the Virtual Security

tion, the new drone is expected to find appli-

Guard System was realized through open

cation not only in the area of security

innovation integrating our accumulated

services, but also in various fields wheresecurity services know-how with technolo-

drones are playing an increasingly important

gies of a major glass manufacturer, an ITrole, including equipment inspection anddisaster response efforts.

AI enables the Virtual Security Guard System
to greet visitors

32

SECOM Annual Report 2019

SECOM Robot X2

A drone airborne above a sports stadium

J Home Security Services

features fall detection, automatically sensing

and disarming of the home security system,

if the wearer has fallen due to a loss of con-subscriber voice-controlled display of the

SECOM Home Security NEO, a new main-

sciousness or any other reason and alerting

system’s current status and a robot prompt

stay in our home security services lineup, is

SECOM. SECOM My Doctor Watch’s healthto program when the subscriber returns

a system that can be armed and disarmed

management function includes a pedom-home or goes to bed.

remotely from a smartphone. The systemeter, sleep tracking and a calorie expenditurealso includes a push notification* feature thatcounter and enables the wearer to accessin emergency monitoring with the enter-enables subscribers to receive alerts on theiradvice regarding lifestyle improvements bytainment value of a robot that one can havesmartphone when the system is accessed

smartphone.

conversations with, communications func-

This was followed by SECOM Anshin Homeby family members entering or leaving the

Combining our accumulated expertise

tions that bring family members together,home. Enhanced convenience continues to

Delivery Box. Connected to SECOM Homeand discreet monitoring using facial recogni-

underscore steady growth in the popularity

Security, this secure container includes moni-tion and remote imaging, this service repre-of this system. In addition to standard hometoring for unauthorized opening and a smart-sents a truly innovative approach to peace

security, including monitoring for intruders

phone-based delivery notification serviceof mind.

and fires and emergency alerts, and optionalthat ensures the safe and secure delivery of

Going forward, we will continue working

services such as medical emergency calls,

packages even if the recipient is not at home.

to provide services that deliver fun and con-monitoring for gas leaks and safety monitoring, SECOM Home Security NEO can be linked*Push notification is the automatic delivery of
information to a device with images or sound.

venience, as well as security and peace ofmind, by keeping watch over subscribers
both in everyday life and in the event of anwith devices on the IoT to facilitate use of a

Responding to rising needs
for monitoring services

emergency.

Q

Q

medical alert and health management ser-Communication robot-based discreet
remote monitoring service premiers
In response to demand driven by ris-

vice based on a wearable wristband-syle

ing needs for monitoring, in October 2018

SECOM Senior Care Phone Service. Whenunit. SECOM My Doctor Watch sends an alert

we premiered a third offering under our

the user presses the device’s safety confirma-

if it senses no movement from the wearer“Connection” strategy, a new home security

tion in response to a prompt, an email verify-

regardless of whether he or she is inside orservice that links SECOM Home Security withing the user’s safety is automatically sent tooutside the home, notifying SECOM that

the Xperia Hello! communication robot. Key

registered individuals. If the user does notassistance is required. The tracker alsofunctions include voice-activated arming

respond to the prompt, family members orvariety of new services.
The first offering launched under theumbrella of our “Connection” strategy,
SECOM My Doctor Watch, is an emergency

SECOM Senior Care Phone Service
targets a diverse range of customers
In April 2019, we introduced the brand-new

Hello! Please arm
my SECOM.

Your system
is armed.

SECOM Home Security NEO

Xperia Hello!

*Xperia Hello! supports only the Japanese language.

Note: Xperia Hello! is a product of Sony Mobile Communications Inc.

SECOM Senior Care
Phone Service

SECOM Annual Report 201933

SECOM Todayother registered individuals can request theand cellular phone base stations to pinpoint

dispatch of emergency response personnel.

the location of dedicated portable transmit-

J Overseas security services

ters carried by individuals or attached to

We made our overseas debut in 1978, whencan summon help simply by pulling theobjects. If a customer wants to locate a trans-

we established a presence in Taiwan. Today,

device’s strap, which sends an alert to SECOM

mitter, he or she can trace it via a dedicatedour overseas business encompasses opera-

and, if deemed necessary, triggers the dis-

COCO-SECOM website or by contacting thetions in 13 countries and territories. A dis-

patch of emergency response personnel.

COCO-SECOM Operations Center. Upontinguishing feature of our overseas security

If emergency services are called, prereg-

receiving a search request from a customer,

services is that we offer on-line security

istered emergency contacts and informa-

operations center operators dispatch emer-

systems with SECOM-style services custom-tion on chronic illnesses can be displayed

gency response personnel and, if necessary,ized to reflect local needs and sensibilities.

on the device so that such information is

notify the police or the fire department.

The services we provide overseas, which are

immediately available to ambulance atten-

Users can also notify the COCO-SECOM

of the same high quality as those offered indants and other emergency services per-Operations Center if they are concernedJapan, continue to earn praise from over-sonnel. We offer this service, which does not

for their physical safety by pushing theseas customers, as a result of which market

require a home security services contract, totransmitter’s emergency alert button.

acceptance is increasing steadily.

Should an emergency arise, the user

a diverse range of customers, with the aim

COCO-SECOM was originally developedof helping resolve the concerns of elderly

to deter child abductions and track dementia

Co., Ltd., in Taiwan, and S1 Corporation, in

individuals and their families.

patients who wander, as well as to prevent

the ROK, are among the largest providers of

the theft of cars and motorcycles. Since then,security systems in their respective markets.

use has diversified and expanded, bolstered

Both companies continue working toby high marks given the system’s conve-

expand their operations by providing a wide

nience. Today, COCO-SECOM is also used torange of security services with a focus on

COCO-SECOM, a mobile security system for

manage taxi and bus fleets, avert the thefton-line security systems.

outdoor use, uses signals from GPS satellites

of ATMs and manage employee safety.

J Other security services

Publicly listed subsidiaries Taiwan SecomIn the PRC, we have established a network of bases in 25 key coastal and inland
cities through which we are working togradually grow demand for commercial andhome security systems, among others.
In Southeast Asia, which continues to see

COCO-SECOM Mobile Security Systemeconomic growth, the efforts of Group com-

(Location and Emergency Response)

Positioning
information

GPS satellite

COCO-SECOM
Operations
CenterCellular phonebase station
Request forsearch(telephone/Internet)

Subscriber

COCO-SECOM Transmitter Device(vehicle-mounted)
COCO-SECOM
Transmitter Device(portable)

Notification of police(if warranted)

panies are bolstering acceptance of SECOMstyle on-line security systems in Thailand,
Malaysia, Singapore, Indonesia, Vietnam

SECOM
Emergency
Depot

Policedepartment,
emergency
services

Dispatchemergency
response
personnel(if requested)

Control center in the PRC (Beijing Jingdun Secom
Electronic Security Co., Ltd.)34

SECOM Annual Report 2019and Myanmar. We have also made a full-high-grade SECOM-style security services to

not disturb family members by unlocking

scale entry into the market for home security

Turkish customers.

and locking doors early in the morning andsystems in major Asian urban centers and

The desire for safety and peace of mind,late at night. Going forward, we will step up

in Bangkok have commenced sales of aas well as for comfort and convenience, isefforts to market this convenient and highly

new-model smartphone-controlled homeglobal. Accordingly, we will continue work-

adaptable system to diverse customers.

security system.

ing to expand acceptance of SECOM-style

Zealand provide security services to major

we have established a presence, as well as tofinancial institutions and other customers,

enter promising new overseas markets. We

SECOM MyAED on-line home-use AED
package service is released
In 2004, we began offering the SECOM AED

earning high marks from customers.

will also deploy the ANSHIN Platform over-

Package Service, which encompasses theseas and promote the term ANSHIN as alease and maintenance of AEDs, including

universally recognized and accepted term.

the replacement of expendables. Our efforts

Group companies in Australia and New

Subsidiary Secom plc provides highgrade, highly rated security services toservices in countries and territories where

to ensure that AEDs are available for use incustomers across the United Kingdom.

the event of an emergency have earned us

We continue to promote a variety of collaborative efforts overseas. In one example,

Q

J Other new services

a significant share of the general market,
which excludes hospitals and the fire depart-

we are working with a major retail group to

ment. Recognizing the fact that sudden car-tration services for large commercial com-

SECURILOCK Smart launches
A recent addition to our lineup isplexes that help reduce labor requirements

SECURILOCK Smart, a smart lock systemhaving AEDs available to use should some-in the PRC, Vietnam and Malaysia, amongthat allows users to activate and deactivate

one in the home suffer cardiac arrest, inothers. We are also reinforcing our sales offront door, main entrance and other locks

December 2018 we launched SECOM MyAED,

AEDs in Thailand and Malaysia. In addition,

remotely using a dedicated smartphone app.

an on-line package service centering on

we are taking steps to strengthen our SI

The absence of keys and key cards reduces

home-use AEDs that includes repairs in theservices business. To this end, we haverisks associated with the loss thereof. In addi-

event of a malfunction and the replacement

created an SI team, positioning us to offertion, usage is logged at a secure data centerof expendables when necessary, ensuring

detailed proposals for various large-scale

facility, making it possible to confirm whothat units are always in working order. We

facilities under development in Asian markets.

activated or deactivated the system from awill continue working to promote the

Recognizing considerable potential for

smartphone and when. This system also

installation of AEDs in commercial spaces,

growth in the security services market ineliminates the need for owners to hand overas well as in homes, with the aim of ensuring

Turkey, which continues to see robust eco-and collect keys for minpaku guest houses,

these lifesaving kits are available to anyone

nomic growth, in February 2019 we estab-temporary rental offices and members-onlyand everyone whenever and wherever theylished a joint venture with a major local

facilities. Used in homes, SECURILOCK Smart

are needed.

conglomerate. This will enable us to provide

ensures that visiting nurses, for example, willpropose facility management and adminis-

Entering the Turkish market

Q

SECURILOCK Smartdiac deaths often occur at home and that

SECOM MyAEDSECOM Annual Report 201935

SECOM Today

features, including an easy-to-read 15-inch
JNet sales and operating revenue (Left scale)
JOperating income (Right scale)(In billions of yen)

(In billions of yen)

180

Fire Protection
Services

30
129.7

120

Nohmi Bosai will continue to propose

20
13.1

15.7

2017

2018

10

Rail Mist, designed to help ensure thestable operation of trains in summer,
commences operation
Nohmi Bosai’s Rail Mist system, which lever-0ages its Dry Mist* cooling system technolo-

Q

14.2

60

0

building fire safety officers. Looking ahead,solutions centered on this new core offering.

144.1

140.7

display, have earned the system praise from2019

gies to stop rails from expanding due to highsummer temperatures, has been installed atmarket, Nohmi Bosai and Nittan continued

stations along the above-ground portions of

to draw on their solid track record and theTokyo subway lines and commenced opera-

The evolution of society continues to drive

trust of customers to actively promote pro-tion. By cooling the railroad switches, Raildemand for increasingly diverse and sophis-

posal-oriented sales efforts. In fire extinguish-

Mist prevents sticking locks and other mal-ticated fire protection services. In this envi-

ing equipment, major orders rose steadily.

functions, thereby helping ensure the stable

Operating highlights

operation of trains in the summer months.

ronment, subsidiaries Nohmi Bosai andNittan, two of Japan’s leading fire protection
extensive experience to extend innova-

New integrated GR System for mediumand large-scale premises is launchedNohmi Bosai recently launched R-26C, antive and optimized services tailored toautomatic integrated analog GR fire alarm

customer needs that encompass systemsystem optimized for medium- and large-

planning, manufacturing, installation andscale commercial facilities and other prem-

maintenance.

ises. R-26C expands the maximum number

service providers, are capitalizing on theirQ

the success of this project to market Rail Mistto railway operators across Japan.
* Dry Mist sprays tap water in a fine mist, absorbing
heat from the ground as it vaporizes, cooling the area
sprayed by between 2° and 3° C.

In the area of automatic fire alarms,of system units that can be built into thesales focused on securing orders for alarms

control panel to an industry-high 20, which

Local Area Emergency Information
Network System is unveiled

for new buildings. At the same time, withmakes it possible to connect an increased

Another new addition to Nohmi Bosai’s port-

the deterioration of existing systems fuel-number of devices to a single control panel,

folio is the Local Area Emergency Information

ing replacement orders in the renovations

sufficient for large facilities. User-friendly

Network System. This system facilitates swift

R-26C integrated GR system (Nohmi Bosai)

36

Nohmi Bosai looks forward to capitalizing on

SECOM Annual Report 2019

Q

Rail Mist (Nohmi Bosai)

responses in the event of an emergency byQQ

sensors detect a fire or an equipment-related

Next-generation fire protection system
for large-scale facilities is developed
Nittan has developed a next-generation

irregularity. By promoting the use of this sys-

fire protection system for large-scale facili-

and production facility in Vietnam spearheadtem, which is suitable for installation in resi-

ties that integrates a fire monitoring func-

efforts to develop products that comply withdential neighborhoods, structures classified

tion and positioning information for people

Underwriters Laboratory (UL) and European

as cultural properties and production facili-

and objects. In addition to promptly indicat-

Norm (EN) standards, which the company

ties, Nohmi Bosai will continue working to

ing where fire has broken out, the system

supplies to a variety of customers, including

contribute to safety and peace of mind for acommunicates the locations of people andgovernment facilities, banks, high-rise build-wide range of local communities.

objects in real time, thereby making it pos-

ings and hotels, around the world. In thesible to effectively guide evacuations. The

period under review, the company focusedCompact dual optical spot-type
smoke detector debuts
A popular choice for hotels, dormitories andsystem also provides accurate information to

on expanding sales in emerging economies

the fire department, thereby assisting within Southeast Asia, Southwest Asia and Africa,

lifesaving efforts. Making use of positioning

where demand for fire protection systems isother types of accommodations, the dual

information on an everyday basis enables

rising. In Vietnam, the company expanded its

optical spot-type detector distinguishes

subscribers to ensure the optimal manage-

production facility and supply configuration.

between smoke and steam. Recent years

ment of people and objects in the event ofSales of fire protection systems were robust

have seen an increase in demand froman emergency.

in Sweden and Norway.

sending an email to a designated recipient if

Qdesign-conscious customers for smoke

Demonstration tests for this system con-detectors designed with the interior ofducted at multiple facilities illuminated vari-

hotel rooms and other types of accom-

ous needs, with many customers expressing

modations in mind. In response, Nittan has

high hopes that use of the system will con-debuted a compact dual optical spot-type

tribute to smooth operations in the event ofsmoke detector that complements indoor

a fire. Nittan will continue seeking to address

spaces. Sales of this new offering continue tothese needs by promoting modifications to

expand, reflecting a favorable response forthe system.

Operations in overseas markets
see brisk growth
Nittan’s subsidiary in the United Kingdom

the unit as a detector that responds to theneeds of various types of accommodations.

Compact
model

Dual optical spot-type smoke detector (Nittan)

Fire protection systems installed at important facilities
overseas (Nittan)

SECOM Annual Report 201937

SECOM Today

JNet sales and operating revenue (Left scale)
JOperating income (Right scale)(In billions of yen)

(In billions of yen)

210

9
169.0

Medical Services

181.9

175.5

5.8

140

6

4.0
70

3
1.7

0

2017

2018

2019

0

pressure, weight and arterial blood oxygen saturation, is collected and stored at a data centerin real time, allowing physicians, nurses, caregivers and other professionals to monitor the
status of home medical care patients remotely.
Other features of the system include an automatic alert function that notifies a designatedperson via email if the patient’s heart rate rises
too high or drops too low and enables physician–patient videocalls. Looking ahead, we willcontinue to actively expand our selection of
ICT-based medical services.

Comprehensive agreement is signedwith the NCVC
We recently signed a comprehensive agreement with Japan’s National Cerebral andCardiovascular Center (NCVC) as part of anopen innovation initiative aimed at improving healthcare and medical care services
organized by the institution that involves
collaboration among industry, academia andgovernment. The NCVC provides world-classadvanced care and conducts research in thearea of cardiovascular medicine. The institution
previously established the Open Innovation
Center to promote joint R&D in the areas ofadvanced treatments and medical technologies. Under our comprehensive agreementwith the NCVC, we will work to create a framework for regional cooperation that targets theprevention, treatment and research in the areaof cardiovascular disease, thereby contributing
to better community healthcare.
Q

Operating highlights
Believing that protecting health and life is
the ultimate expression of our commitment
to delivering true safety and peace of mind
to customers, we have capitalized on ICT tocreate a seamless menu of medical services
encompassing medical care, nursing careand healthcare.
Our mainstay home medical services
business provides care to patients in the
comfort of their homes. This category
includes pharmaceutical dispensing andhome delivery, which involves filling prescriptions and delivering medications
needed by patients at home; medical supplies such as infusion lines, including central venous catheters for home parenteralnutrition (HPN) and syringes; and extending
advice to patients at home. Our home nursing services, which are offered through anationwide network of 36 visiting nurse stations, support medical care at home by dispatching visiting nurses to provide expert
services in the patient’s home under the
direction of his or her physician.
Our medical services business also
includes support for affiliated medical
institutions, sales of medical equipment, theoperation of residences for seniors, personalcare services and electronic medical support
services in Japan, as well as the operation ofa hospital in India.

Provision of SECOM Vitalooksystem begins
Japan’s Ministry of Health, Labour and Welfare
promotes home medical care with the aimof enabling seniors, even those requiring ahigh level of care, to remain in their community. However, because this requires visiting
patients’ homes to provide care, physicians’
workload can increase significantly in theevent of a sudden change in a patient’s status.
To address the need for support that reduces
this workload and enhances the quality ofcare, we began offering the SECOM Vitalooksystem, a remote medical support platformthat leverages our extensive know-how inhome medical services and ICT, as well as ourrobust operating foundation. With this system, patients’ biometric data, including electrocardiogram, heart rate, temperature, blood
Q

Home Medical Services
Medical Care
Institution

Prescription

Physician’s guidelines

Cooroordinadinationtion

Nurse’s report

Home Nursing
Services

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

Consulta
onsultation
tion
Prescription
Pharmaceutical delivery

Nurse visit

Patient
Outpatient care

38

SECOM Annual Report 2019

on-line security systems in which premiums
JNet sales and operating revenue (Left scale)
JOperating income (Right scale)(In billions of yen)

(In billions of yen)

24

60
47.7

46.9

20

16
7.3

benefits of such systems. We continue to see
an increasing number of new commercial
and home security subscribers for choosing

44.8

40

Insurance Services

are discounted to reflect the risk-mitigating8

6.2

to also sign up for fire insurance policies atthe same time. Against this backdrop, we
continue to expand sales of these policies.

0

0
–4.9

2017

2018

2019

SECOM Anshin My Car: Backed byon-site support from emergency
response personnel
SECOM Anshin My Car is an automotiveQ–8

key component of cancer care, provid-

insurance policy that includes around-the-ing up to ¥10 million per five-year period.

clock access to on-site support by SECOM

We believe that both security services, which

These features continue to attract atten-

emergency response personnel in the eventare preventative by nature, and non-lifetion, underpinning the expansion ofof an accident, helping to resolve concerns.

insurance, which looks after people should

subscriptions.

This feature, which also includes emergency

Operating highlights

response personnel contacting the police

misfortune strike, are essential to our ability

expand the scope of this business by offer-

Fire insurance policies with distinctively
SECOM discounts
SECOM Anshin My Home is a fire insurance

ing a variety of distinctive insurance policies

policy for residential customers that offers athat we market actively through diverse

discount on premiums for subscribers who

sales channels.

have installed on-line security systems,

to deliver uninterrupted safety and peace ofmind. In line with this belief, we continue toQand ambulance services and photographing the accident site, continues to earn highmarks from subscribers.

reflecting our belief that such systems

MEDCOM: An unrestricted cancer
treatment policy that covers
all inpatient hospital treatment costs
MEDCOM is an unrestricted cancer treatment
Q

reduce the risk of theft and fire. The Security
Discount Fire Policy is a similar policy forcommercial customers who have installed

policy that provides coverage for costs associated with all inpatient hospital treatments,
including those covered under Japan’s
National Health Insurance (NHI) scheme,
those for advanced medical care, and thosefor which the individual usually bears theburden. This enables the subscriber to concentrate on treatment without having toworry about the economic implications
thereof. MEDCOM coverage also extends
to outpatient treatment, an increasingly

SECOM General Insurance headquarters

SECOM Anshin My Car on-site support

SECOM Annual Report 201939

SECOM Today

JNet sales and operating revenue (Left scale)
JOperating income (loss) (Right scale)(In billions of yen)

(In billions of yen)90

Geospatial
Geospatial
Information Services

60

4.5
51.8

51.9

51.1
1.7

30

3.0
1.9
1.5
0.0

0
–1.1

2017

Operating highlights
Subsidiary Pasco collects geographic data fromcommercial satellites, aircraft, drones, proprietary vehicles and ship-mounted sensors,among others, which it integrates, processes
and analyzes to provide a variety of geospatial
information services to public-sector entities—
including national and local governments—
and private-sector customers in Japan, thereby
assisting efforts to address a variety of social
imperatives. Pasco also extends services togovernment agencies overseas. Services fornational and local governments in Japanaccount for approximately 80% of segment
net sales and operating revenue.
In the area of services for public-sector entities in Japan, Pasco promoted efforts in the
period under review to enhance national resilience to the risk of natural disasters attributable to climate change. In addition to disasterprevention and mitigation, including conducting risk assessments and proposing countermeasures in landslide hazard hotspots andpromoting services designed to enhance river

2018

2019

–1.5

management and counter risks that makeuse of 3D measurement technologies, thecompany promoted services for road administrators aimed at supporting the renewal of
aging infrastructure. Pasco also provided services that assist in ensuring appropriate forest
management, regional industry promotion
and support the sustainable management ofwater-related businesses.
In services for domestic private-sector
customers, Pasco worked to address issues
in the logistics industry, and develop newtechnologies and services that help enhance
productivity on construction sites. Efforts inthe area of services for overseas government
agencies focused on improving the soundness of operations in a manner that aligns
with the unique market environments ofindividual overseas subsidiaries, as well as on
expanding Japan’s official development assistance (ODA)-related orders from the Japan
International Cooperation Agency (JICA).
Going forward, Pasco will work to create a private-sector-led satellite utilization
business. To this end, the company will takeadvantage of its experience and know-how
in this area, which the company entered inearnest in 2005.

services providers face a variety of challenges,
including a shrinking labor force, the need
to normalize working hours and restrictions
governing greenhouse gas emissions. Pasco
recently formed a business alliance with amobile navigation services provider andintroduced a new service designed to help
logistics services providers realize more efficient, more advanced transport and delivery
operations. This service involves Pasco preparing a delivery plan designed to facilitate
efficient conveyance to the final destination
and, based on the plan, extending support byusing mobile navigation to accurately predictarrival times, thereby improving efficiency.

Sales of drone-mounted green laser
scanners commence
Following the successful completion ofresearch aimed at commercializing a dronemounted green laser scanner, in March 2019
Pasco acquired marketing rights for this newunit. Green laser scanners enable 3D topographical measurement of bodies of water,
including both the beds and above-ground
portions, facilitating the efficient creation ofhighly precise 3D data.
In the current fiscal year, ending March
31, 2020, Pasco began providing a comprehensive surveying services business that
includes sales of green laser scanners, support for handling and measuring operations,the provision of data management softwareand the processing and analysis of 3D data.
The company looks forward to these services
helping to increase efficiency and improve
precision in river management and fields
included in the i-Construction* program.
Q* The i-Construction program was launched by Japan’s
Ministry of Land, Infrastructure, Transport and Tourism(MLIT) as an initiative aimed at deploying ICT inconstruction and civil engineering to help overcome
persistent labor shortages.

Business alliance in the logistics field isformed with mobile navigation services
providerLogistics services in Japan are increasingly broad and complex, owing to the rising popularity of online shopping and thediversification of consumer needs. Logistics
Q

Aerial photograph of areas damaged in the 2018
Hokkaido Eastern Iburi Earthquake

40

SECOM Annual Report 2019

Green laser scanner mounted on a drone

at suppliers and quickly grasp the degree
JNet sales and operating revenue (Left scale)
JOperating income (Right scale)(In billions of yen)

(In billions of yen)

15

120
101.3

BPO and ICT Services

76.8

80
56.8 7.2of damage to production facilities, allowing
them to take effective steps to restore normal operations. These services continue togarner praise, as a result of which contracts

9.4

10

8.1

with large companies and public-sector entities have grown steadily. At present, these

40

5

0

0

services are used by approximately 7,300
companies employing around 6.7 million
individuals.

2017

2018

2019

To assist customers’ efforts to prepare fordangers such as disasters, targeted cyberattacks and system failures, Secom Trust
Systems offers comprehensive informationof subsidiaries Secom Trust Systems Co.,

Large-scale disaster preparedness,
information security and cloud-based
services
Secom Trust Systems provides a variety ofLtd., which offers ICT services that resolve a

services that assist subscribers in formulat-

als to monitoring/operation and response

variety of issues faced by customers, provid-

ing BCPs to ensure preparedness, as well as

services in the event an issue arises. The

ing safety and peace of mind and making

the ability to implement effective immedi-

Cryptocurrency Wallet* Service, which pro-lives more comfortable and convenient; At

ate response measures and promptly restarttects cryptoassets, capitalizes on our robust

Tokyo, one of Japan’s largest data center

operations in the aftermath of a major disas-

secure data center capabilities and know-

operators; and TMJ, which offers BPO ser-ter. The SECOM Safety Confirmation Service,

how in the management of private keys

vices, including contact center and backone of Japan’s foremost disaster manage-

that we have accumulated as a certification

office support services.

ment support services, helps subscribers

authority. This service is attracting attention

swiftly ascertain the safety of employees andfrom a variety of companies.

Operating highlights
This segment encompasses the operations

Q

security services, ranging from advancediagnostics and the formulation of countermeasures by information security profession-

their families in the event of an earthquake

Secom Trust Systems also extends cloud-or other disaster or the failure of key infra-

based services, which leverage ICT to makestructure. The SECOM Safety Confirmation

customers’ business processes more efficient.

Service SCM makes it possible for subscribers

By digitizing documents and processes, theto confirm the safety of individuals in charge

SECOM Anshin Eco Document Digitization
Service realizes significant improvementsin efficiency and reduces costs. The SECOM
Anshin Employee Attendance Management
Service works with SECOM LX, an on-line
security system that includes an access control function, to enable the efficient management of entry and exit data, allowing
companies to efficiently manage employee
attendance. SECOM Shift Scheduler, whichmakes use of AI, is a service that automatically generates shift schedules and makes
staffing recommendations, as well as makes
it possible to check shifts from anywhereat any time. Inquiries regarding this system

Information for the Real-Time Disaster Information Service is collected and analyzed
at the SECOM Anshin Information Center

SECOM Annual Report 201941

SECOM Today

have been steady from restaurants and retail-a significant impact on society and major

Recognizing an expanding need forers, as well as from interested parties in a

global corporations. To describe its vision

receptionist services among companies in

number of other industries.

of its role as a data center services special-

such an operating environment, TMJ recently

ist in the future, At Tokyo devised the phrase

began providing the SECOM Call on Duty

“Continue. Connect. Co-Create: The data

Service, an outsourced telephone recep-* A cryptocurrency wallet is a system of managing
private keys that is crucial for cryptoasset transactions.

center solutions that create and share values

tion service that enhances the productivity

Data center services
The increasing pervasiveness of cloud ser-through uninterrupted connectivity.” Theof staff in departments responsible for cus-company will continue to expand its data

tomer service support. TMJ is also acceler-

vices and smartphones and the expanding

center business by leveraging its ability toating efforts to expand use of AI in contact

use of AI and IoT continue to yield a steadyprovide connectivity to a wide range of ser-center services in response to companies’

stream of new services that make use ofvice providers and other customers to createneeds to swiftly address customer issues andadvanced technologies. Companies and indi-

the platforms necessary to realize diverse

encourage customers to call for assistance,

viduals using services connected with dataservices for an advanced information society.

as well as to enhance the precision andQcenters often access such services unconsciously, underscoring the fact that data

efficiency of back office support services
by increasing the automation of procedures.

centers today have become a key social

BPO services
Japan’s declining labor force has led to acuteinfrastructure.

labor shortages in many industries. Against

will continue working to realize superior

Data center operator At Tokyo capitalizes

this backdrop, the need to rely on others iscustomer experiences and drive digital trans-

on its many years of experience and opera-

spurring robust demand for BPO services.

formation with the goal of providing its cus-tional know-how to offer a diverse range of

TMJ provides high-grade, highly rated

tomers with high-grade BPO services that

customers uninterrupted, around-the-clock

contact center and back office support ser-world-class data center services that respondvices tailored to the needs of leading finan-

to diverse needs and have earned a reputa-

cial institutions and other companies. Thetion for quality and reliability. The data centercompany strives continuously to enhanceservices market continues to expand, bol-the quality of its services by promoting qual-

stered by the increasing number of custom-

ity control circle activities, efforts that haveers using cloud-based services. At Tokyo has

contributed to its ability to ensure long-terma broad customer base that includes leading

contracts with customers.

Q

By leveraging advanced technologies, TMJ

enjoy a solid reputation.

companies for which downtime could have

SECOM data center facility

42

SECOM Annual Report 2019

TMJ contact center

Q

JNet sales and operating revenue (Left scale)
JOperating income (Right scale)(In billions of yen)

(In billions of yen)

15

60

Real Estate andOther Services

49.5

Q

5.2

2017

5.1

2018

subscribers with a diverse menu that enables
resolve concerns in everyday life. Services
offered range from housework support to

6.9

0

Operating highlights

10

40

20

services available to SECOM Home Security
us to tailor packages that help customers

46.6

45.5

Home services

SECOM Home Service is an optional suite of

2019

5

patrolling around subscribers’ homes when
they are out.

0

Real estate leasing

Our real estate leasing business focuses on

Real estate development and sales

advantageous locations in central Tokyo.

We continue to promote the development

This business comprises extensive, highlyand sales of the Glorio Residence series ofrated maintenance and management that

condominiums, which boast exceptional,

are used by diverse companies in various

distinctively SECOM security features thatindustries.

Q

reflect the concepts of security, peace ofmind and reliability, and the Glorio Comfort

Q

series of highly secure compact urban

We have created a configuration for provid-

condominiums. We also offer the Glorio

ing a wide range of high-value-added ser-

Scelto series of condominiums for lease andvices, from the design and installation of

pre-owned condominiums that have been

air conditioning, plumbing and electricalrenovated to improve functionality. Looking

systems to building maintenance.

Construction and installationahead, we will continue striving to meet thediverse needs of customers as a partner inthe provision of living spaces that deliversafety and peace of mind.

Glorio Residence Shonan Hiratsuka

SECOM Home Service

SECOM Annual Report 201943

Sustainability

Since our establishment, we have sought toresources and the opinions and expecta-

Group in-house newsletter. We also respondfulfill our responsibility to society throughtions of our stakeholders. We classify CSR

to requests for information from stakeholders

our business activities, acknowledging theinitiatives designed to help address socialand continue to expand our ESG-related

importance of sustainability for ourselves

imperatives through our businesses as

disclosure via our corporate website and by

and for society. In promoting corporate social“strategic” and those aimed at earning the

responding to questionnaires from ESG

responsibility (CSR) initiatives, we abstract

trust of stakeholders as “basic.”

assessment organizations.

a broad range of social imperatives, which

To encourage employee awareness of our

we examine in light of our management

CSR initiatives, we share information via ourSocial trends/imperatives(Demographic change, technological progress, shift of global economic center/urbanization, aggravation of environmental issues)

Opportunities
and risksCommunication withstakeholders

Strategic CSR Goal: Provide enduring peace of mind toan ever-changing society by creating
the ANSHIN Platform

Basic CSRSECOM’s management resources/foundation(Human resources, organization, technologies, performance, knowledge)

Key areas of focus: Consumer issues, human rights
and labor practices, the environment, community
involvement and development, fair businesspractices, organizational governance

The SDGs* and the UNGC; Support for the TCFD**
Our basic policy of contributing to society

for society. Seeking to further our goal ofthrough our business activities has many

helping to achieve sustainability for society,for the Task Force on Climate-related

aspects in common with the United Nations’on May 2, 2018, we became a signatory to the

Financial Disclosures (TCFD).

Sustainable Development Goals (SDGs) in

United Nations Global Compact (UNGC).

In July 2019, we announced our support

terms of focus on achieving sustainability** The TCFD was established in 2015 under the auspiceof the Financial Stability Board (FSB) to develop basic
principles for disclosing the impact of climate-related
factors on companies’ income and cash flows.

* The SDGs were adopted at the UN Sustainable Development Summit in September
2015 as goals essential to sustainable development for the planet to be attainedby 2030.

44

SECOM Annual Report 2019

Basic CSR initiatives
Taking into account the key areas of focus inserve as our basic operating principle, while

responsibility, including offering programsISO 26000, the international standard for

the SECOM Group Code of Employee

for children, women and seniors designedsocial responsibility, we have organized ourConduct sets forth specific standards to be

to raise crime prevention awareness. In thebasic CSR initiatives into six key categories.

observed.

fiscal year ended March 31, 2019, such efforts

1. Consumer issues

safety and a favorable work–life balance forprevention awareness seminars for women,

To guarantee that the quality of our services

our employees. Accordingly, we have put inheld 133 times and 35 times, respectively, atis consistently worthy of the SECOM name,place generous health management andlocations across Japan. Our social contribu-

we have established a framework in ourleave programs. In addition, we have estab-tion activities include extending support tosecurity services business that ensureslished a dedicated website and a sexual

areas devastated by natural disasters.

exceptional safety and reliability across all

harassment hotline that enable employees

processes, from R&D through to mainte-

to anonymously consult with professionals

5. Fair business practices

nance, and conduct practical training for

regarding problems or concerns.

Efforts to strengthen our cooperation withWe also place a priority on ensuring

employees that aims to enhance their knowhow and skill levels.
We also work to further enhance service
quality by paying heed to feedback fromOnce annually, we conduct employee

included child safety classes and crime

suppliers, as well as to promote mutual

satisfaction surveys. Survey findings areunderstanding and compliance with laws

published in-house and reflected in improve-and regulations, have enabled us to create

ments to various systems and programs.

a solid framework for providing high-grade
services and systems.

customers. We have positioned staff acrossJapan who specialize in promoting customer

3. Environment

satisfaction and who are charged with visit-

In the belief that protecting the environ-Group CSR Guidelines for Suppliers—which

ing customers to gain feedback. Throughment is essential to our ability to provide

sets forth issues that we require suppliers to

SECOM customer service centers we respondsecurity and support comfortable lifestyles,

address, including organizational gover-to various requests and inquiries received

we continue to promote awareness of ournance and fair operating practices, humanby telephone regarding services, systems

environmental philosophy, which is torights and labor practices, consumer issues

and products.

incorporate consideration for the environ-and the environment—and strive to pro-ment into all areas of our operations, and of

mote awareness of CSR across our entire

2. Human rights and labor practices

our basic environmental policy. We are also

value chain, as well as to reinforce responses.

In line with our belief that creating working

implementing measures aimed at address-

environments conducive to job satisfaction

ing such key issues as global warming

6. Organizational governanceand helping employees fulfill their potential

and resource depletion and ensuring our

To increase the efficiency and transparency

are key to driving growth for SECOM, we

operations conform with pertinent laws andof management practices, thereby enablingattach importance to diversity. We also

regulations.

us to consistently increase our corporate

We have also formulated the SECOM

value, we are taking steps to enhance ourrecognize respect for human rights as ancorporate governance system. As well, we

and provide training aimed at enhancing

4. Community involvement anddevelopment

employees’ understanding thereof.

We recognize contributing to the com-efforts to strengthen our complianceframework and improve disclosure.

essential aspect of corporate management

Our commitment to respect for humanmunity through the provision of safety andrights is proclaimed in The Constitutions ofpeace of mind as an important responsibility.

the SECOM Group, a set of 10 provisions that

We promote a variety of efforts to fulfill thisare promoting decisive management-led

For more information, please visit:www.secom.co.jp/english/csr/

SECOM Annual Report 201945

ESG Initiatives

Environmental initiatives
Combating global warming
We have positioned the reduction of CO2

environmental performance of service

reducing greenhouse gas emissions attribut-

emissions as a key performance indicator (KPI)

vehicles, we are working to replace all four-

able to our security services business by 35.0%

since 2008. In the fiscal year ended March 31,

wheeled vehicles with fuel-efficient alterna-from the level in the year ended March 31,

2019, initiatives implemented in relation totives by the year ending March 31, 2021. We are2014, by the year ending March 31, 2031.

SECOM service vehicles and offices with thealso promoting environment-friendly and safe

goal of preventing global warming reduced

driving through education and efforts toin global average temperature, we will

emissions of greenhouse gases by 3,564.0

advance awareness.

endeavor to achieve an 80.0% reduction

In line with the Paris Agreement and themetric tons. Total emissions of greenhousegases in the period under review amounted

Japanese government’s plan for reducing

to 169,892.0 metric tons. To improve thegreenhouse gases, we have set a target forGreenhouse Emissions: Actual Results and Medium-Term Target
JActual results JTarget (35.0% reduction from the level

Seeking to do our part to curb increasesof our greenhouse gas emissions by 2050.

Greenhouse Gas Emissions
per Unit of Sales by the SECOM Groupin the fiscal year ended March 31, 2014)(Metric tons of CO2)

100,000

Base year

7.4% decrease(Average annual
decrease: 1.5%)

90,000(Metric tons of CO2 /million yen)

0.4

80,000Target for the year ending
March 31, 2031:

70,00035.0% reduction(Average annual
decrease: 2.5%)

60,0000.192 0.179

0.2
0.204
0.1

50,00040,000

0.3

0.346
0.350

80,871

78,907

79,29581,50876,751

74,912

52,566

2014

2015

2016

2017

2018

2019

2031

0

2015

2016

2017

2018

2019

(Years ended March 31)(Years ended/ending March 31)* Greenhouse gas emissions for each fiscal year are calculated in terms of metric tons of CO2 equivalent.
** Scope of reporting: SECOM CO., LTD. and 27 principal subsidiaries in the security services business.

Creating a zero resource-waste, low-carbon business model
Our integrated framework for providing

and eliminating hazardous substances. To

on-line security systems, whereby we takethis end, we have distributed the SECOM

responsibility for the entire life cycle ofGreen Design Guidelines to our 122 suppliers

equipment, from R&D and production

and are promoting their use across our entire

through to installation, operation, collection

supply chain.

and disposal, has enabled us to create a zero

From the perspectives of environmental

resource-waste, low-carbon business model,preservation and effective resource use, wethat is, a business model that enhances

repair and reuse security equipment collected

recycling rates and energy efficiency.

from subscribers, or carefully dismantle such

To advance environment-friendly equip-

equipment and separate constituent materi-ment design, that is, design that minimizes

als. In the period under review, these efforts

impact on the environment, including by

yielded 1,499.0 metric tons of resources with

reducing consumption of electricity and size,

marketable value.

facilitating reuse, encouraging long-time use

46

SECOM Annual Report 2019

Breakdown of CO2 Emissions
by the SECOM Groupin the Year Ended March 31, 2019
Other 2.4%

Burningof fuel by
vehicles29.0%

Use ofelectricity
68.6%

Social initiatives
Disaster mitigation and support for affected areas
We provide long-term on-site support for

called the “Heavy rain of July, Heisei 30”), for

We also cooperate enthusiastically inrecovery and reconstruction in areas struck by

example, we capitalized on our distinctive

volunteer fire brigade activities, the corner-

geographically extensive disasters. As well, we

technological prowess and know-how tostone of community fire prevention efforts.

seek to assist with everyday efforts to enhanceprovide extensive support for local residents.

Our efforts include encouraging employees

disaster preparedness.

Pasco used satellite images and aerial photog-

who want to register as volunteer firefighters.

In areas damaged by torrential rains insouthwestern Japan in July 2018 (officiallyraphy, among others, to capture images toswiftly gauge the extent of damage.

In the community
We recognize that we have an obligation toheadquarters is located. Under the agree-

raise awareness of the importance of being

contribute to the communities we serve

ment, we work with ward authorities toprepared for disasters.

in multiple ways, including by creatingpromote a variety of efforts aimed at enhanc-

employment opportunities and supportinging Shibuya’s appeal to people who live, work

Agreement with Toshima Ward

community development. Accordingly, we

and play there. These include advancing

In June 2018, we concluded the Agreement oncollaborate with various partners, including

urban development that emphasizes a highSafe and Secure Community-Driven Urban

national and local governments, companies

level of disaster preparedness, supporting

Development with Toshima Ward, another ofand nongovernmental organizations (NGOs).

efforts to promote better health for a super-Tokyo’s 23 wards. Under this agreement, weaged society and furthering awareness ofprovide support for crime-prevention efforts

Agreement with Shibuya Ward

diversity-related issues. For example, forand disaster-preparedness training, as well as

In August 2016, we concluded the Shibuya

three consecutive years we have sponsoredpromote first aid at various events.

Social Action Partner Agreement withand had a booth at SHIBUYA BOSAI FES, aTokyo’s Shibuya Ward, where our corporate

comprehensive annual disaster drill held to

Employee training and education
In line with our belief that the power of ancomponent to promotion examinations,the protection of confidential information,organization is the sum of its parts, we devote

the content of which ranges from corporate

prevention of insider trading and eliminationconsiderable resources to fostering humanprinciples and the SECOM Group Code ofof all types of harassment by not simply man-

resource. We have developed training and

Employee Conduct to social norms, CSR,

dating study but also conducting exams to

educational programs tailored to different

business policies and product knowledge.

ascertain comprehension, thereby reinforcing

growth stages and job classifications. In

We have also developed an e-learningawareness.

addition, we have added an e-learning

program for all employees that addresses

Supporting work–life balance
We view work–life balance, including suf-

Accordingly, we have introduced systems that“refresh” vacation every 10 years. In addition,

ficient physical and mental rest and a fulfill-allow employees to take a “flex” vacation of

we actively encourage employees to takeing private life as essential to the ability to

up to 10 consecutive days annually—in theory

annual paid vacation days.

approach one’s work with energy and focus.

at any time of the year—and a two-week

SECOM Annual Report 201947

ESG Initiatives

To assist employees in balancing the

Employees Taking Childcare Leave

demand of career and home, we have created

Percentage of Annual Paid Vacation Days
Taken by Employees

childcare and nursing care leave programs(%)(Number ofpeople)and continue to promote measures to encour-

60

200

age their use. In addition, we have also created

53.3

the SECOM Life support program, whereby
we endeavor to provide long-term support

JMale employees (right scale)

47.8

120

16
138

137

126

12
10

for career advancement by considering locations and work styles that accommodate each

20

160

50.0

50

(Number ofpeople)JTotal (left scale)

9

80

8

40

employees specific circumstances.

4

40
30

2017

2018

0

2019

2017

4

2018

0

2019

(Years ended March 31)(Years ended March 31)* Scope: SECOM CO., LTD.
Owing to a change in the method of calculation used,figures for previous fiscal years have been adjusted.

* Scope: SECOM CO., LTD.
Owing to a change in the method of aggregation used,figures for previous fiscal years have been adjusted.

Advancing diversity and inclusion
Understanding the importance of welcoming
a broad spectrum of individuals with wideranging values, without regard for considerations such as gender, nationality or age, andOverall

Non-security areas

(%)

(%)

15

2.5

of leveraging the capabilities of such individuals to create new value, we actively promote

Percentage of Labor Force Accounted forby Individuals with Disabilities

Female Employees
in Management Positions

10

9.6

9.9

10.7

11.0

11.5

diversity in our labor force. In October 2017,
we established the Declaration of Promoting
Diversity and Inclusions, which enshrines our

2.29

2.0
5

7.0

7.2

2015

2016

7.8

8.1

8.1

2017

2018

2019

1.99

2.09

2.02
1.96

commitment to respecting all employees andenabling each individual to maximize his or
her capabilities by creating positive work environments, as well as to advancing the careers0

2015/6 2016/6 2017/6 2018/6 2019/6(As of June 1 of each year)(Years ended March 31)* Scope of reporting: SECOM CO., LTD.

of female employees, providing job and other* Scope of reporting: SECOM CO., LTD., Secom Trust
Systems Co., Ltd. and Secom Business Plus Co., Ltd.

opportunities for individuals with disabilities

employees to participate in J-Win programs,

and encouraging the effective deployment of

which are aimed at cultivating skills andthe parent company is 60, employees can beolder employees.

helping female employees build networks.

rehired up to the age of 65. We have also

While the mandatory retirement age at

Prior to this, in line with our belief in the

To create opportunities for individuals with

developed systems that enable employees

importance of changing the mindsets of bothdisabilities to find employment and participate

over 50 to shorten their working hours andmale and female employees, on March 1, 2016,

more fully in society, we have created special

facilitate the rehiring of employees over 65

we announced the Action Plan on Women’s

subsidiary* Secom Business Plus Co., Ltd., and

who want to continue working, as well as

Active Participation, which outlines a variety ofare stepping up recruiting efforts. We also takethe Second Stage Promotion System, which

initiatives aimed at creating positive working

steps to ensure working environments thatallows employees themselves to determine

environments conducive to job satisfaction foraccommodate specific needs, including

the timing of their retirement between thefemale employees. With the aim of actively

arranging for sign language interpreters andages of 50 and 60.

fostering female leaders, we are a member ofproviding assistive devices and software.

the Japan Women’s Innovative Network(J-Win), an NPO. We dispatch two female

48

1.5

SECOM Annual Report 2019

*A special subsidiary is a company established with theobjective of promoting the employment of individuals
with disabilities.

Corporate governance
Basic philosophy
In line with Japan’s Corporate GovernanceWith the aim of earning the support of ouractively to disclose information to sharehold-customers, shareholders, clients, employees,

Code and at the direction of top manage-ers and other stakeholders and strengthen

local communities and other stakeholders as ament, outside members of the Board of

our compliance framework.

company with value that is worthy of trust, weDirectors and Audit & Supervisory Board

strive to maximize corporate value over theprovide independent oversight of themedium to long term and recognize themanagement team’s performance in a man-importance of fulfilling our responsibilities as

ner that takes into account the interest ofa corporate citizen and achieving sustainable

stakeholders and ensures the appropriate

growth and development.

execution of business activities. We also work

Initiatives to strengthen corporate governance
Area

Establishment ofcorporate governancesystem
Separation of management and execution
Number of directors
designated in the Articles
of Incorporation
Term of service of
directors

1986

2000

2005

2010

2015

2019

Q 1986: Creates SECOM’s Philosophy
Q 2006: Formulates basic rules of management for SECOM Group companies
Q 2010: Establishes the SECOM Group Management Committee

Q 2004: Institutes an executive officer system

Up to 2004: Maximum of 40
Q From 2005: Maximum of 20

Up to 2003: 2 years
Q From 2004: 1 year
Q 2000–2001: 28–29

Number of directors

Q 2002–2003: 22–23
Q From 2004: 10–13

Up to 2010: 4
Number of auditors
Q From 2011: 5
Q 2013–2015: 2

Number ofoutside directors
Number ofoutside auditors

Q From 2016: 3

Up to 2002: 2
Q From 2003: 3
Q 2016:

Remuneration for/appointment of
directors

Establishes Nomination andCompensation Committee
Q 2017:Adopts performance-linked
remuneration system

SECOM Annual Report 201949

ESG Initiatives

Outline of corporate governance system
We are a company with an Audit &the Audit & Supervisory Board, which includes

Supervisory Board. The Board of Directors,

three outside members, and the Board ofCommittee has been established as internal

which includes three outside members,

Directors coordinate with the internal audit

committee of the Board of Directors. This com-makes decisions pertaining to businessdepartments to audit and supervise directors’

mittee, which is responsible for presenting can-execution and other corporate matters.

and executive officers’ discharge of theirdidates for the position of director to the Board

Executive officers, led by the President andduties. We believe that this enables us to con-of Directors and for ensuring the appropriate-

Representative Director, are responsible forduct independent oversight of management

ness of remuneration for directors, comprises

business execution. We have adopted an

and ensure appropriate business execution.

five directors, three of whom are outside.

The Nomination and Compensation

Audit & Supervisory Board System, whereby

Corporate governance organization
General Meeting of Shareholders
Appointment/
dismissal

Board of Directors(10 members, three of whom areoutside directors)
Selection/
oversight

Appointment/
dismissal

Proposal of candidates forthe position of director
Authorization/consultation
regarding remuneration
Determination/submission ofdecisions regarding remuneration

Nomination andCompensation
Committee

Audit & Supervisory Board(Five members, three of whom
are outside)
Office of Audit & Supervisory Board:
Three employees(Operational, accounting andcompliance audits)

Reporting on important matters

Chairman and
Representative Director

Internal audit
departments

President andRepresentative Director

Coordination

Legal Affairs Department

Enhancement of compliance/internal auditing

Executive Officers

Deliberation

Organizational
Culture Committee

Audit by independent
public accountants
Accounting audit

50

Board of Directors

Executive Officers

Audit & Supervisory Board

The Board of Directors comprises 10 directors andin principle meets monthly, with five members of
the Audit & Supervisory Board also in attendance.
The Board of Directors is responsible for deciding
overall management policies and businessexecution policies, as well as for monitoring theperformance of duties by directors, and strives topromote the active exchange of opinions with theaim of ensuring effective and swift decision
making. Six of the 10 members are responsible forbusiness execution, with the remaining four
members (the founder and the three outside
directors) having no involvement.

We have adopted an executive officers system,
whereby the Board of Directors is responsible fordecision making and the executive officers are
responsible for business execution. This was donewith the aim of strengthening field divisions andenhancing customer service systems by clarifying
responsibilities and authority and expediting
business execution. We currently have 29
executive officers, six of whom are also directors.

The Audit & Supervisory Board comprises fivemembers, two of whom are full-time and three ofwhom are outside. In principle, the Audit &Supervisory Board meets monthly. Individuals
well-versed in our businesses and internal affairs, aswell as in finance and accounting, are appointed toserve as full-time members, while individuals whoare independent of the management team, haveextensive knowledge of corporate management,
legal, financial and other matters and are capableof providing effective oversight and monitoring of
the management team, are appointed to serve as
outside members.

SECOM Annual Report 2019

Nomination of candidates forappointment to the Board of Directors
and the Audit & Supervisory Board

activities, as well as those of subsidiaries andmeetings as necessary, for the purpose ofaffiliates, in accordance with annual audit plans.

exchanging opinions and information. Audit &In accordance with the policy for appoint-

Principal activities of the
Audit & Supervisory Boardin the fiscal year ended March 31, 2019

tions and exchange opinions regarding

Participation in meetings of theBoard of Directors

100%

act as witnesses during audits conducted byParticipation in meetings of the
Audit & Supervisory Board

100%

ment set forth by the Board of Directors,
candidates for appointment to the Board of
Directors and the Audit & Supervisory Board
are decided through deliberation by the
Board of Directors. Candidates for the Boardof Directors are nominated from among
candidates determined through discussion
by the Nomination and Compensation
Committee, the majority of whom are outside directors. Candidates for the Audit &Supervisory Board are nominated with theSupervisory Board members receive explanaannual audit plans and audit results. If necessary, Audit & Supervisory Board members also

Information sessions with directors
and other executives of subsidiaries 69 times
and affiliated companies
Audits conducted by Audit &Supervisory Board members at
remote locations

the accounting auditors at remote locations
and during audit reviews (33 times in the fiscal
year ended March 31, 2019).

Collaboration with internal audit andother departments

106

Audit & Supervisory Board members holdlocations

regular (monthly) meetings with the Audit
and Compliance Department, during which

agreement of the Audit & Supervisory Board.

they receive reports and exchange opinions

Internal audits and cooperation
among boards and offices

Regular meetings between the representative director and Audit & Supervisory
Board members

Audits by the Audit & Supervisory Board

Audit & Supervisory Board members hold

SECOM Group companies from and exchange

Audit & Supervisory Board members attend

regular (monthly) meetings with theopinions and information with the Group

important meetings, including those of theRepresentative Director, during which they

Governance Department. If necessary, toBoard of Directors, to exchange opinions on

exchange opinions on important manage-

ensure the efficiency of audits, Audit &overall corporate management, as well as toment-related issues, including the results ofSupervisory Board members ask the internal

collect reports on the discharge of duties fromaudits, to ensure common understanding.

audit departments to conduct investigations.

regarding the results of internal audits and, as
appropriate, receive reports on inspections of

directors and other pertinent individuals andrence of violations of laws, regulations, theMeetings between Audit & Supervisory
Board members and accounting auditors

Articles of Incorporation and/or shareholders’Audit & Supervisory Board members meetinterests. The Audit & Supervisory Board also

regularly (six times annually) with theconducts audits of our overall businessaccounting auditors, as well as additional

conduct audits focused on the possible occur-

Outside directors and outside Audit & Supervisory Board members
We appoint individuals who have extensive

members, who are essentially independent

in operations. As a consequence, we believe

knowledge of corporate management toof the management team). We have alsothat we fulfill our responsibility to conduct

serve as outside directors, thereby incorporat-

established an auditing organization (includ-

independent oversight of management per-ing a broad range of external perspectives not

ing the Office of Audit & Supervisory Board

formance in a manner that takes into accountconstrained by the internal affairs. We have

Members) that operates independent of day-the interests of stakeholders.

thus structure that ensures the transparency

to-day operations and a process (including

We appoint outside directors and outside

and objectivity of management.

periodic meetings between the Representa-

Audit & Supervisory Board members on the

We appoint Audit & Supervisory Board

tive Director, among others, and the Audit &basis of pertinent requirements set forth inmembers who have a wealth of knowledge

Supervisory Board members). This insures thatJapan’s Companies Act and the standards con-of corporate management, legal, financial

Audit & Supervisory Board members’ objective

cerning independence set forth by financial

and other matters (including three outside

and neutral opinions are reflected promptly

instruments exchanges.

SECOM Annual Report 2019

51

ESG Initiatives

Outside directors and outside Audit & Supervisory Board members

Outsidedirectors

Attendance at
Audit &
Supervisory
Board
meetings

Name

Principal activities

Attendance atBoard ofDirectors’
meetings

Takaharu Hirose

Mr. Hirose offers advice and suggestions at meetings of the Board of Directors
based on experience and insights gained in the foundation and managementof multiple enterprises and industry organizations. He also asks questions andstates opinions to clarify issues.

12/12

—

Hirobumi Kawano

Mr. Kawano offers advice and suggestions at meetings of the Board of Directors based on experience and insights gained through the holding of important positions in government. He also asks questions and states opinions toclarify issues.

12/12

—

Hajime Watanabe

Mr. Watanabe offers advice and suggestions at meetings of the Board of
Directors based on experience and insights gained through his many years ofexperience in corporate management. He also asks questions and states
opinions to clarify issues.

12/12

—

Hideki Kato

Mr. Kato offers advice and suggestions at meetings of the Board of Directors
based on experience gained through the execution of national policies andinsights gained as a result of his accomplishments at a policy think tank. He
also asks questions and states opinions to clarify issues.

12/12

13/13

Makoto Yasuda

Mr. Yasuda offers advice and suggestions at meetings of the Board of Directors
based on experience and insights gained in the management of a global
enterprise. He also asks questions and states opinions to clarify issues.

12/12

13/13

Masao Yokomizo

Mr. Yokomizo offers advice and suggestions at meetings of the Board of
Directors based on experience and insights gained through the holding ofimportant positions in government. He also asks questions and states opinions
to clarify issues.

12/12

13/13

Outside Audit &Supervisory
Board members

Note: Information on attendance at meetings of the Board of Directors and Audit & Supervisory Board is for the fiscal year ended March 31, 2019.

Remuneration for directors and Audit & Supervisory Board members

52

Remuneration for directors consists ofresults and individual contribution. Outside

to promote the further sharing of value withpecuniary remuneration and stock compen-

directors receive basic remuneration only.

shareholders.

sation (shares with restrictions on transfer).

Stock compensation is determined by

Remuneration for Audit & Supervisory

Outside directors are eligible for pecuniary

discussion of the Board of Directors, taking into

Board members, which comprises pecuniary

remuneration only.

account deliberations by the Nomination andremuneration only, is determined throughPecuniary remuneration is determined byCompensation Committee within the limit

discussion involving Audit & Supervisory

the Nomination and Compensation Committee,

resolved at the Ordinary General Meeting ofBoard members in amounts commensurate

which has received authorization from the Board

Shareholders set separately from that set forwith individual duties. Remuneration for Audit

of Directors, within the maximum limit resolved

pecuniary remuneration. In addition to incen-& Supervisory Board members is set withinat the Ordinary General Meeting of Sharehold-tives offered with the goal of driving sustain-

the maximum limit resolved at the Ordinary

ers. Pecuniary remuneration for directors com-able growth in corporate value, directors other

General Meeting of Shareholders.

prises basic remuneration and bonuses, the latterthan those who are outside receive shares withof which is linked to consolidated operating

restrictions on transfer, the objective of which is

SECOM Annual Report 2019

Remuneration for directors and Audit & Supervisory Board members (Fiscal year ended March 31, 2019)
Position

Total remuneration(Millions of yen)

Breakdown of total remuneration(Millions of yen)Basicremuneration

Bonus

Restricted stock

Number ofentitled individuals

Directors (excluding outside directors)

327

265

46

14

8

Audit & Supervisory Board members(excluding outside members)

45

45

–

–

3

Outside directors

28

28

–

–

3

Outside Audit & Supervisory Board members

25

25

–

–

3

Total

426

365

46

14

17

Evaluation of the Board of Directors’ effectivenessEvaluation process

board were seen from the 2018 survey’s results.

full-time and outside directors and Audit &In January 2019, the Board of Directors conducted a survey, after which it interviewed
additional pertinent individuals as necessary.
Responses were collated by the Board’s secretariat in early March and a summary of findings subsequently discussed at a meeting of
the Board of Directors.

Opinions were also expressed regarding,Supervisory Board members is carried out

among others, the further diversification ofsmoothly. This shows that the monitoring

the Board’s composition and the amendment

function of the Board of Directors is judged toof materials to invigorate discussions.

be sufficient overall. Constructive opinions
were also expressed regarding the need for

Monitoring function of the Board of
Directors

further efforts to make use of external experts
and for further discussions regarding manage-

In an atmosphere that encourages members

ment and personnel strategies that reflect

Summary of findings

to speak, both outside directors and outsidechanges in the business environment andComposition of the Board of Directors
and frequency of meetings

Audit & Supervisory Board members actively

associated risks.

The diversity of the Board of Directors isbalance between execution and monitoring.

Future initiatives

guaranteed. The Board is an appropriate size

Matters deemed particularly critical by the

To further enhance corporate value and real-

to ensure swift decision making. In principle,

Board of Directors are discussed by the board

ize an even more effective Board of Directors,

the Board of Directors meets monthly, withprior to resolution and pending matters are

we will continue to promote efforts toadditional meetings held as necessary toreported on at the Board of Directors meeting

improve the board’s functions based on

ensure swift discussion and decision making

subsequent to resolution, thereby facilitating

evaluations and opinions expressed.

for critical matters. The matters handled by theappropriate judgment by directors and Audit

Board of Directors are selected appropriately.

& Supervisory Board members. In addition,

Improvements in the administration of thewhere necessary, consensus building between

express their views, ensuring an appropriate

SECOM Annual Report 201953

ESG Initiatives

Compliance
Basic policy and system
We provide security services, the objective of

We view compliance as encompassing notcontrol for departments under their control,

which is to protect the lives and assets of our

only observing laws, regulations and ourwhile the President and Representative Director

customers from legal violations or malfea-

Articles of Incorporation, but also operating inprovides control for the Company as a whole.

sance by third parties. As such, we recognize

a manner that adheres to the spirit thereof.

Each director analyzes and evaluates busi-

the importance of discharging duties in good

Accordingly, compliance forms an integral

ness and frauds risk annually in the businessfaith to earn the trust of our customers and ofcomponent of our day-to-day operations. This

area for which he or she is responsible, reportssociety as a whole. To this end, we have for-approach is notable in that it does not involve

findings to the President and Representative

mulated the SECOM Group Code of Employee

the establishment of a dedicated system

Director, appropriately reviews internal regula-

Conduct, which prescribes ideals covering

overseen by a specific department or director.

tions and various manuals formulated and, if

official and private affairs and standards to be

Each and every employee is on the front line ofnecessary, implements corrective measures. In

followed in the discharge of duties for all

promoting the SECOM Group Code of

addition, a new Risk Management Committee,

directors and employees. We take advantage

Employee Conduct, including compliance, withchaired by the Risk Management Officer, hasof various opportunities to promote thedirection provided by individuals in charge inbeen established to conduct Companywide risk

unqualified observance of the code.

each department. Directors provide further

assessments and formulate countermeasures.

Initiatives aimed at ensuring fair operating practices
The SECOM Group Code of Employee Conduct

a pretense of kindness; the pride of being

the prohibition of individual transactions andcontains rules regarding, among others, theincorruptible by overcoming the temptation

the lending or borrowing of money involving

maintenance of a mindset that refuses to be

to hinder others’ discharge of their duties; andcustomers or affiliated companies. We work

tempted to commit graft, which begins withthe prevention of bribery, including throughactively to enforce the observance of these rules.

To ensure our ability to provide same level ofmultiple different languages and work toGroup companies and employees from Japan

service in overseas markets as we do in Japan,

advance awareness thereof. We also provide

taking up overseas postings that focuses on

we have translated SECOM’s Philosophy and thecompliance training tailored to local circum-

obeying laws and regulations, preventing bribery

SECOM Group Code of Employee Conduct into

stances for senior management at overseas

and ensuring effective information management.

Global compliance training

Operation of whistle-blowing system

54

We have established a whistle-blowing sys-

circumstances make submitting a reportsubmitted via these help lines is kept confi-

tem that enables individuals to seek advice

difficult, employees and executives can reportdential and necessary investigations andregarding or report issues of non-compliance.

to the Audit and Compliance Department

appropriate measures are undertaken swiftly.

Employees and executives becoming aware

directly via the Hot Helpline. We have alsoThis protects whistle-blowers from anyof a violation of the SECOM Group Code ofestablished the Group Head Office Helpline,

adverse impacts. Help line reports received

Employee Conduct are obliged to submit awhich enables employees and executives of

totaled 48 in the fiscal year ended March 31,

report to his or her superior. However, in thesubsidiaries to report compliance violations

2019, 60 in the fiscal year ended March 31, 2018

event that no corrective measures are taken

directly to the Group Governanceand 60 in the fiscal year ended March 31, 2017.

after the submission of a report, or if

Department. The content of reports

SECOM Annual Report 2019

Financial Review
Operating Results
Overview
In the fiscal year ended March 31, 2019,
SECOM CO., LTD. and its subsidiaries (collectively, “the Company”) sought to provide highquality products and services that respond to
the diverse needs of customers in its core
security services segment, as well as in its fire
protection services, medical services, insurance services, geospatial information services,
BPO and ICT services, and real estate andother services segments.
Thanks to the inclusion of a full year of
results for TMJ, acquired in October 2017, andan increase in the medical services segment,
bolstered by a rise in the number of patientsat associated hospitals, among others, consolidated net sales and operating revenue in the
period under review rose 2.7%, or ¥28.8 billion, to ¥1,111.6 billion. Nonetheless, operating income declined 11.7%, or ¥16.4 billion, to¥123.7 billion, owing to a variety of factors,
including the occurrence of multiple major
natural disasters and a greater loss on otherthan-temporary impairment of investment
securities, as a result of which the insurance
services segment reported an operating loss,
and the impact of forward-looking investments to reinforce the Company’s operating
foundation with the aim of ensuring sustainable growth. Net income attributable to
SECOM CO., LTD., was down 7.2%, or ¥6.9
billion, to ¥89.7 billion.
Net Sales and Operating Revenue
Owing to the inclusion of a full year of resultsfor TMJ, acquired in October 2017, and anincrease in the medical services segment,
underpinned by a rise in the number ofpatients at associated hospitals, among others, consolidated net sales and operating revenue in the period under review rose 2.7%, or¥28.8 billion, to ¥1,111.6 billion. (For further
details, please see Segment Information
below.)
Cost and Expenses
Total costs and expenses advanced 4.8%, or¥45.2 billion, to ¥987.9 billion. Cost of salesrose 4.4%, or ¥33.0 billion, to ¥784.9 billion,
and was equivalent to 70.6% of net sales andoperating revenue, up from 69.4% in theprevious fiscal year. Principle factors behind
this result included an increase in cost of
sales in the insurance services segment,
which reflected the occurrence of multiple
major natural disasters and a greater loss onother-than-temporary impairment of investment securities, and the inclusion of a fullyear of results for TMJ, which has a comparatively high cost of sales ratio. Owing to theapplication of a new accounting standard,“Recognition and Measurement of Financial
Assets and Financial Liabilities,” whereby
equity investments are recognized at fairvalue at end of year, effective from the period
under review gains or losses on equity
investments are charged to income forthe period.
Selling, general and administrative (SG&A)
expenses rose 5.0%, or ¥9.5 billion, to ¥200.9
billion, reflecting an increase in up-front
expenses, accounted for 18.1% of net sales
and operating revenue, up from 17.7% in thepreceding period. Impairment loss on longlived assets declined to ¥595 million, from¥841 million. Additionally, the Company
reported a loss on sales and disposal of fixed
assets, net, of ¥1.4 billion, compared with a
net gain of ¥1.5 billion in the previous fiscal
year attributable to income from real estate
sales and other factors.
Operating Income
Operating income decreased 11.7%, or¥16.4 billion to ¥123.7 billion, despite higher
net sales and operating revenue, as boththe cost of sales and SG&A expense ratios
rose. The operating margin slipped to 11.1%,
from 12.9%.
Other Income and Expenses
Other income declined ¥2.2 billion, to¥11.2 billion. This was attributable largely
to a ¥1.2 billion decrease in gain on private
equity investments to ¥4.7 billion. Other
expenses amounted to ¥6.4 billion, up ¥3.6
billion, reflecting a ¥3.9 billion increase inloss on other-than-temporary impairmentof investment securities, to ¥4.0 billion. As aconsequence, net other income was ¥4.9
billion, down ¥5.8 billion from the previous
fiscal year.
Income from Continuing Operations
before Income Taxes and Equity in Net
Income of Affiliated Companies
The aforementioned results yielded income
from continuing operations before income
taxes and equity in net income of affiliatedcompanies of ¥128.6 billion, down 14.7%, or¥22.2 billion, from the preceding period.

Equity in Net Income of
Affiliated Companies
Equity in net income of affiliated companies
edged down ¥177 million, to ¥7.0 billion.
Net Income Attributable to
Noncontrolling Interests
Net income attributable to noncontrollinginterests amounted to ¥10.8 billion, down
¥2.5 billion. Principal factors behind this result
included a decline in operating income in
the fire protection services segment, an
operating loss in the insurance services
segment and a decrease in gain on private
equity investments.
Net Income Attributable to
SECOM CO., LTD.
Net income attributable to SECOM CO., LTD.,at ¥89.7 billion, declined 7.2%, or ¥6.9 billion.
Net income attributable to SECOM CO., LTD.,
as a percentage of net sales and operating
revenue was 8.1%, compared with 8.9% in theprevious fiscal year. Net income attributable
to SECOM CO., LTD. per share was ¥410.91,
down from ¥442.70.
At the Ordinary General Meeting of
Shareholders held on June 26, 2019, a proposal to pay a year-end dividend of ¥85.00
was approved. As a consequence, cash dividends for the period—which also included
an interim dividend of ¥80.00 approvedat the Board of Directors’ meeting held on
November 8, 2018—amounted to ¥165.00
per share, an increase of ¥10.00. However,
because both the ¥80.00 per share year-end
dividend for the year ended March 31, 2018,
approved at the Ordinary General Meetingof Shareholders held on June 26, 2018, andthe ¥80.00 per share interim dividend for thepreceding period, determined by the Board of
Directors and paid to shareholders of record
as of September 30, 2018, were paid during
the period, cash dividends paid to shareholders in the period under review—the figurethat appears in the financial statements—
amounted to ¥160.00 per share.

Income Taxes
Income taxes totaled ¥35.1 billion, a decreaseof ¥13.0 billion. This was equivalent to 27.3%
of income from continuing operations before
income taxes and equity in net income ofaffiliated companies, compared with 31.9% in
the previous fiscal year, owing to a reversal ofthe valuation allowance and other factors.

SECOM Annual Report 201955

Financial Review
Segment Information(For further details, please see note 27 of 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 edged up 0.3%, or¥1.8 billion, to ¥567.2 billion. Excluding intersegment transactions, net sales and operating
revenue in this segment amounted to ¥563.7
billion, representing 50.8% of overall net sales
and operating revenue, compared with 51.9%
in the previous fiscal year.
In addition to on-line commercial andhome security systems, electronic security
services include large-scale proprietary
security systems, which focus on surveillanceservices for the subscriber’ premises. On-line
commercial and home security systems use
sensors, controllers and other equipment
installed at the subscriber’s premises to detect
events, including intrusions, fires and equipment malfunctions. Equipment is linked to a
SECOM control center via telecommunications circuits to facilitate around-the-clockmonitoring. Should an irregularity be
detected, relevant information is relayed
to the control center, where staff dispatch
emergency response personnel to takeappropriate measures. If necessary, control
center staff also notify the police, fire
department or other emergency services.
The Company employs a rental format,
whereby it maintains ownership of security
equipment and provides it to subscribers ona rental basis. This minimizes initial costs forsubscribers and guarantees the quality andstability of its services. The initial contract
period for security services is five years, with
contracts renewed automatically eachsubsequent year. Depreciation for security
equipment is computed using the decliningbalance method principally over five years.
The Company takes full responsibility for
all aspects of its on-line commercial andhome security systems, from R&D throughto equipment manufacturing, sales, security
planning, installation, monitoring, emergency
response services and equipment maintenance. This integrated approach leverages
the Company’s half-century-plus of experience and knowhow in providing electronic
security services, together with its R&D team’s
ability to recognize and address false alarms,
to ensure highly efficient operations.
Net sales and operating revenue fromelectronic security services rose 0.9%, or¥3.1 billion, to ¥344.3 billion. Despite adecline in large-scale installations, among
others, sales of on-line security systems
advanced, bolstered by expanded sales ofhigh-value-added commercial security services that respond to diverse security needs
and of SECOM Home Security NEO and other
home security systems that addresses growing needs for help in caring for vulnerable
members of society.

56

SECOM Annual Report 2019

Other security services include static guard
services and armored car services. Net sales
and operating revenue generated by static
guard services, which are provided by highly
trained professional security guards for systems requiring human judgment and flexible
responsiveness, rose 12.3%, or ¥7.2 billion, to¥66.3 billion, reflecting contributions from
Secom Tosec Co., Ltd., in which we acquired
an 80.1% stake in August 2018 and firm
demand for these services. Armored car services, which involve the transport of cash,
securities and other valuables using speciallyfitted armored cars and security professionals,
generated net sales and operating revenue of¥62.4 billion, up 2.2%, or ¥1.3 billion. Principal
factors behind this result included an increasein sales at Asahi Security, which principally
provides cash collection and delivery services.
The merchandise and other category
encompasses sales of a wide range of security
products, including security camera systems,
access control systems, automated fire extinguishing systems and external monitoring
systems, which can be freestanding or linked
to on-line security systems. Net sales andoperating revenue in this category were
down 10.1%, or ¥10.2 billion, to ¥90.8 billion,
owing mainly to the absence of large-scale
sales-type leases, which pushed up results inthe preceding period.
Operating income in the security services
segment declined 3.8%, or ¥4.3 billion, to ¥110.1
billion. The operating margin slipped to 19.4%,
from 20.2% in the previous fiscal year. These
results primarily reflected forward-looking
investments to reinforce the Company’s operating foundation with the aim of ensuring sustainable growth and to absence of large-scale
sales-type leases, a key factor in the previous
fiscal year.
Fire Protection Services
The fire protection services segment focuseson high-grade, tailored, automatic fire alarmsystems, fire extinguishing systems and otherfire protection systems for a wide range ofapplications, including office buildings,
plants, tunnels, cultural properties, ships
and residences. In the period under review,
Nohmi Bosai and Nittan, two of Japan’s leading domestic fire protection services providers, sought to leverage their respective
business foundations and product development capabilities to secure orders for fire
protection systems.
Net sales and operating revenue in thissegment amounted to ¥144.1 billion, up 2.4%,
or ¥3.4 billion, underpinned by contributions
from major projects, a result of robust sales
efforts, and other factors. Operating income
decreased 9.8%, or ¥1.5 billion, to ¥14.2 billion,
a consequence of factors such as a cluster ofprojects with a higher cost of sales ratio thanin the preceding period and an increase in
SG&A expenses, reflecting higher R&D andpersonnel costs. The operating margin was

9.8%, down from 11.2% in the previous
fiscal year.
Medical Services
The medical services segment emphasizes
Home Medical Services, which comprise
home nursing and pharmaceutical dispensing
services, support for affiliated medical institutions, sales of medical equipment and pharmaceuticals, the operation of residences forseniors, personal care services, and the provision of electronic medical reporting and other
ICT-based systems in Japan, as well as theoperation of a hospital in India. The segment
also includes the operations of variable interest entities (VIEs) of which the Company is theprimary beneficiary, which manage hospitals
and health care-related institutions.
Segment net sales and operating revenue
advanced 3.6%, or ¥6.4 billion, to ¥181.9 billion, owing to an increase in the net sales andoperating revenue of VIEs, bolstered by a risein the number of patients at associated hospitals, among others. Despite an increase in thecost of sales ratio accompanying the revisionof drug prices in Japan, operating income
climbed 43.3%, or ¥1.7 billion, to ¥5.8 billion
and the operating margin improved to 3.2%,
from 2.3% in the previous fiscal year, reflecting
an improvement in the profitability of
hospitals managed by VIEs.
Insurance Services
The insurance services segment continued to
expand sales of an extensive lineup of distinctive non-life insurance policies, including 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 extend discounts
on premiums to customers who have installed
on-line security systems, recognizing this as arisk-mitigating factor—and SECOM Anshin My
Car, a comprehensive automobile insurance
policy that offers onsite support services provided by SECOM emergency response personnel should the policyholders be involvedin an accident, and MEDCOM, an unrestricted
cancer treatment policy that covers the entire
cost of medical treatment for cancer.
Net sales and operating revenue in thissegment declined 6.2%, of ¥3.0 billion, to¥44.8 billion, despite robust sales of MEDCOM
and fire insurance policies. This result was
attributable mainly to the application of the
new “Recognition and Measurement of
Financial Assets and Financial Liabilities”
accounting standard, which resulted in an
increase in loss on other-than-temporary
impairment of investment securities. The
segment reported an operating loss of ¥4.9
billion, compared with operating income of¥6.2 billion in the preceding period, owing
primarily to increases in losses incurred as aresult of the aforementioned major natural
disasters and loss on other-than-temporary
impairment of investment securities.

Geospatial Information Services
The geospatial information services segment
centers on the collection of geographic datausing commercial satellites, aircraft and surveying using proprietary vehicles, among
others, which is integrated, processed andanalyzed to provide geospatial information
services to public-sector entities—including
national and local governments—and customers in the private sector in Japan. These
services are also offered to government
agencies overseas.
Net sales and operating revenue in thissegment edged up 1.6%, or ¥814 million, to¥51.9 billion, bolstered by an increase in sales
to domestic customers. Operating income
rose 12.1%, or ¥202 million, to ¥1.9 billion,
thanks to an improved cost of sales ratio inJapan and a decline in SG&A expenses. The
operating margin improved to 3.6%, from
3.3% in the previous fiscal year. The name ofthis segment was changed to geospatial

information services, from geographic information services, effective from the period
under review. This change did not entail any
reclassification of reportable segments.
BPO and ICT Services
BPO and ICT services encompass the provision of data center services, BCP support
services, information security services,cloud-based services and BPO services.
Segment net sales and operating revenue
climbed 31.8%, or ¥24.4 billion, to ¥101.3 billion, owing to contributions from TMJ, whichbecame a consolidated subsidiary in October
2017, and higher revenue from the data center services, among others. Operating income
was up 15.5%, or ¥1.3 billion, to ¥9.4 billion,
and the operating margin decreased to 9.3%,
from 10.6%. This reflected comparatively
profitable systems development projects, theinclusion of a full year of results for TMJ and a
decline in impairment loss on long-lived

assets, as well as the fact that TMJ has acomparatively lower operating margin.
Real Estate and Other Services
The real estate and other services segment
includes the development and sale of, among
others, condominiums equipped with distinctive security and disaster preparedness
features, as well as real estate leasing, construction and installation, and other services.
Net sales and operating revenue in thissegment rose 2.4%, or ¥1.1 billion, to ¥46.6
billion, with contributing factors including an
increase in the construction and installation
business, as well as to the sale of blocks ofrenovated pre-owned condominiums.
Operating income fell 26.4%, or ¥1.8 billion, to¥5.1 billion, owing to the absence of income
from real estate sales reported in the preceding period. The operating margin declined to
10.9%, from 15.2% in the previous fiscal year.

Financial Position
Total assets as of March 31, 2019, amounted
to ¥1,879.7 billion, an increase of ¥40.8 billion
from the end of the preceding period. Total
current assets rose ¥62.4 billion, to ¥870.3 billion, and accounted for 46.3% of total assets.
The current ratio edged up to 2.1 times, from
2.0 times. Cash and cash equivalents totaled¥349.7 billion, up ¥33.0 billion, reflecting thefact that 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, trade,climbed ¥12.2 billion, to ¥156.9 billion, owing
to factors such as an increase attributable tothe application of a new accounting standard,“Revenue from Contracts with Customers,”
as well as to higher net sales and operating
revenue. Notes and accounts receivable areaffected by the fact that income in the fire

protection services and geospatial information segments tend to be concentrated
toward the end of the fiscal year. Cash deposits for armored car services advanced ¥6.5
billion, to ¥142.3 billion, with contributing
factors including the expansion of cash collection and delivery service contracts. Inventories
were down ¥16.1 billion, to ¥65.9 billion, as
the application of the new “Revenue fromContracts with Customers” accounting standard resulted in a decrease in costs related toincomplete construction contracts, leading
to declines of ¥8.3 billion in inventories of fire
protection-related products, to ¥12.2 billion,and ¥7.8 billion in inventories of real estate forsale, to ¥36.6 billion.
Investments and long-term receivables
decreased ¥16.8 billion, to ¥341.4 billion. This
represented 18.2% of total assets. Investment
securities, at ¥212.6 billion, were down ¥14.6

billion. This was due to the reclassification of
corporate bonds and other debt securities
due within one year in current assets, as wellas to a greater loss on other-than-temporary
impairment of investment securities.
Property, plant and equipment, at ¥416.2
billion, was down ¥3.9 billion, equivalent to22.1% of total assets. Land rose ¥2.6 billion, to¥116.5 billion, reflecting an increase in realestate for lease.
Other assets declined ¥8.7 billion, to ¥251.8
billion, and accounted for 13.4% of total
assets. Goodwill was up ¥1.6 billion, to ¥108.1
billion and other intangible assets rose ¥865
million, to ¥57.9 billion. Deferred charges
decreased ¥17.1 billion, to ¥25.2 billion, aconsequence of the application of the new“Revenue from Contracts with Customers”
accounting standard. Deferred income taxes
advanced ¥8.8 billion, to ¥22.1 billion, with

Percentage of Consolidated
Net Sales and Operating Revenue*

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets(Year ended March 31, 2019)(In yen)(In billions of yen)

5,000

2,000

4,000

1,600

3,000

1,200

2,000

800

1,000

400

7.9%

4.0%

4.6%
3.8%
16.3%

50.8%

12.6%
Security Services
Medical Services
Geospatial Information Services
Real Estate and Other Services

Fire Protection Services
Insurance Services
BPO and ICT Services00

15 16 17 18 19

15 16 17 18 19* Pie chart shows percentage of consolidated net sales andoperating revenue (excluding intersegment transactions)

SECOM Annual Report 201957

Financial Review
contributing factors including a reversal of thevaluation allowance.
Total liabilities as of March 31, 2019,
amounted to ¥703.8 billion, a decline of ¥3.8
billion from the end of the previous fiscal year,
and accounted for 37.4% of total liabilities andequity. Total current liabilities were ¥405.4 billion, an increase of ¥5.7 billion, and accounted
for 21.5% of total liabilities and equity. Deposits
received rose ¥8.7 billion, to ¥127.6 billion, as
the expansion of service contracts pushed up
cash deposits for armored car services.
Total long-term liabilities, at ¥298.4 billion,
were down ¥9.5 billion, and represented 15.9%of total liabilities and equity. Long-term debt
declined ¥5.0 billion, to ¥45.3 billion, owing to
repayments, as well as to the transfer of certain debt to “bank loans” in current liabilities,
among others. Deferred income taxes fell
¥10.5 billion, to ¥16.0 billion, reflecting areversal of the valuation allowance.
Total SECOM CO., LTD. shareholders’ equity
increased ¥43.9 billion, to ¥1,044.2 billion.
Retained earnings climbed ¥71.1 billion, to¥967.7 billion, with contributing factors
including net income attributable to SECOM
CO., LTD. and the payment of dividends, aswell as cumulative-effect adjustment fromunrealized gains on securities to retained
earnings at the beginning of the fiscal yearof ¥20.8 billion. Accumulated other comprehensive loss was ¥78 million, compared withaccumulated other comprehensive income of¥27.2 billion in the preceding period, owing to
a decrease in unrealized gains on securities,
which was a significant factor in the previous
fiscal year. As a result, the equity ratio was
55.6%, compared with 54.4% at the end of theprevious fiscal year.

declines in inventories of real estate for saleand of fire protection-related products, thelatter reflecting a decrease in costs related toincomplete construction contracts.
Net cash used in investing activities was¥64.4 billion. This result was despite proceedsfrom sales and redemptions of investment
securities of ¥43.6 billion and was a consequence of payments for purchases of property, plant and equipment of ¥56.4 billion,
owing to outlays for security equipment andforward-looking investments to reinforce theCompany’s operating foundation; paymentsfor purchases of intangible assets of ¥11.5 billion, attributable to forward-looking investments to reinforce the Company’s operating
foundation; and payments for purchases ofinvestment securities of ¥36.7 billion, primarily
in the insurance services segment andthrough private equity investments in the
United States.
Net cash used in investing activities was¥3.0 billion higher than in the fiscal year
ended March 31, 2018, despite a decline inoutlays for acquisitions, net of cash acquired,
which rose in the previous period as a resultof the acquisition of TMJ, among others.
Factors behind this result included cash

generated by an increase in short-term
investments and net proceeds from sales andredemption of investment securities of ¥2.7
billion, compared with ¥17.1 billion in the preceding period, and an increase in outlays forpurchases of property, plant and equipment
and of intangible assets.
Net cash used in financing activities was¥60.3 billion. This was due primarily to dividends paid to SECOM CO., LTD. shareholdersof ¥34.9 billion, and repayments of long-term
debt of ¥20.2 billion.
Net cash used in financing activities was¥5.3 billon higher than in in the fiscal year
ended March 31, 2018. This primarily reflected
dividends paid to noncontrolling interests
arising from the purchase of treasury stock by
subsidiary Secom Joshinetsu Co., Ltd., adecline in proceeds from long-term debt andthe increase in dividends paid to SECOM CO.,LTD. shareholders.
The Company’s operating, investing andfinancing activities in the period under review
yielded net cash and cash equivalents of¥349.7 billion, up ¥33.0 billion from net cash
and cash equivalents at the beginning of theperiod, which were of ¥316.7 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, the Company
is also firmly committed to financing strategic
investments with cash generated by its
operating activities.
In the period under review, net cash provided by operating activities amounted to¥158.3 billion. The principal components ofthis were net income of ¥100.4 billion, anddepreciation and amortization, including
amortization of deferred charges, a non-cash
item, of ¥75.3 billion, which were partially offset by an increase in receivables and due fromsubscribers, net of allowances, of ¥17.4 billion
and an increase in deferred charges of ¥10.7
billion. Deferred charges consisted primarily of
costs related to the installation of equipment
for on-line security systems. (For further
details, please see note 2 (12) of the Notes to
the Consolidated Financial Statements.)
Net cash provided by operating activitieswas ¥25.1 billion higher than in the fiscal year
ended March 31, 2018. Factors behind thisincrease included a ¥4.3 billion decrease ininventories, compared with an ¥18.6 billion
increase in the previous fiscal year, owing toDepreciation andAmortization

Purchases of Property,
Plant and Equipment
and Intangible Assets

Cash Flows(In billions of yen)

(In billions of yen)

(In billions of yen)

100

80

200

75

60

50

40

150
100
50
0
25

-50

20

-100
0

-150

0

15 16 17 18 19

15 16 17 18 19

17

18

19

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

58

SECOM Annual Report 2019

AUDITED FINANCIAL STATEMENTS

Contents
Consolidated Financial Statements ............................................................................ 60
Consolidated Balance Sheets.................................................................................... 60
Consolidated Statements of Income ................................................................... 62
Consolidated Statements of Comprehensive Income.............................. 62
Consolidated Statements of Changes in Equity ........................................... 63
Consolidated Statements of Cash Flows .......................................................... 64
Notes to Consolidated Financial Statements ................................................. 65
Independent Auditors’ Report ........................................................................................ 91

SECOM Annual Report 201959

Consolidated Financial Statements
Consolidated Balance Sheets
SECOM CO., LTD. and Subsidiaries
March 31, 2019 and 2018
Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2019

2018

2019

Current assets:
Cash and Cash equivalents (Notes 5 and 22) ........................................................................................................ ¥ 349,730
Time deposits (Note 13)......................................................................................................................................................
10,619Cash deposits for armored car services (Note 6).................................................................................................
142,336
Short-term investments (Notes 7 and 22) ...............................................................................................................
25,294
Notes and accounts receivable, trade........................................................................................................................
156,869
Due from subscribers ...........................................................................................................................................................
63,012Inventories (Note 8) ...............................................................................................................................................................
65,945
Short-term receivables (Notes 9, 13, 20 and 21)..................................................................................................
27,111
Allowance for doubtful accounts (Note 9)..............................................................................................................
(1,738)Deferred insurance acquisition costs (Note 14)...................................................................................................
6,809
Other current assets ..............................................................................................................................................................
24,301¥ 316,729
9,593
135,80917,211
144,657
49,78982,05827,930(1,807)
6,540
19,368$ 3,150,721
95,667
1,282,306
227,874
1,413,234
567,676
594,099244,243(15,658)
61,342
218,927ASSETS

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

870,288807,877

7,840,431

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

212,641
63,69740,095
17,245
11,952(4,218)227,255
64,62043,281
17,264
10,086(4,298)

1,915,685
573,847
361,216
155,360
107,676(38,000)

341,412358,208

3,075,784

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

116,540
351,947
337,756
155,944
6,759

113,916
340,822329,655
150,528
7,479

1,049,910
3,170,694
3,042,847
1,404,901
60,892

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

968,946(552,719)

942,400(530,052)

8,729,244(4,979,450)

416,227

412,348

3,749,794

25,220108,12257,89238,48922,06042,325
106,51257,02741,40913,239227,207974,072
521,549
346,748
198,739

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

251,783

260,5122,268,315

Total assets ...................................................................................................................................................................... ¥1,879,710¥1,838,945$16,934,324

See accompanying notes to consolidated financial statements.

60

In millions of yen

SECOM Annual Report 2019

LIABILITIES AND EQUITY

In millions of yen

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

March 31

March 31

2018

2019

2019

Current liabilities:
Bank loans (Notes 6 and 13)............................................................................................................................................. ¥ 38,658
Current portion of long-term debt (Notes 13, 19 and 21).............................................................................
18,447
Notes and accounts payable, trade.............................................................................................................................
46,606
Other payables .........................................................................................................................................................................
44,208Deposits received (Note 6) ...............................................................................................................................................
127,619
Deferred revenue....................................................................................................................................................................
35,947
Accrued income taxes .........................................................................................................................................................
22,904
Accrued payroll ........................................................................................................................................................................
37,987
Other current liabilities (Note 17) .................................................................................................................................
32,992¥38,96919,632
44,901
41,546
118,897
38,39525,99436,531
34,792$

348,270
166,189
419,874
398,270
1,149,721
323,847
206,342
342,225
297,225

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

405,368

399,657

3,651,963

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

45,342
31,88730,913
11,623
124,30923,615
16,041
14,71050,29932,10929,384
15,194
114,814
25,20826,53014,445

408,486
287,270
278,495
104,712
1,119,901
212,748
144,514132,523

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

298,440

307,983

2,688,649

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

703,808

707,640

6,340,612

66,39373,166
10,783
967,679

66,385
73,133
10,733
896,586

598,135
659,153
97,144
8,717,829

2,309
(742)
(1,645)

22,797
1,578
2,814

20,802(6,685)(14,820)(78)

27,189(703)

Commitments and contingent liabilities (Note 24)
Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
Authorized—900,000,000 shares, issued 233,292,219 shares in 2019
Authorized—900,000,000 shares, issued 233,290,441 shares in 2018 .............................................
Additional paid-in capital ..................................................................................................................................................
Legal reserve ..............................................................................................................................................................................
Retained earnings...................................................................................................................................................................
Accumulated other comprehensive income (loss):
Unrealized gains on securities (Note 7)...............................................................................................................
Pension liability adjustments (Note 15)...............................................................................................................
Foreign currency translation adjustments ........................................................................................................
Common stock in treasury, at cost:
15,031,867 shares in 2019 and 15,030,573 shares in 2018 ..........................................................................

(73,759)(73,749)(664,495)

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

1,044,184

1,000,277

9,407,063

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

131,718

131,028

1,186,649

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

1,175,902

1,131,305

10,593,712

Total liabilities and equity ...................................................................................................................................... ¥1,879,710¥1,838,945$16,934,324

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201961

Consolidated Statements of Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 20192019

In millions of yen

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

Years ended March 31

Year ended March 31

2017

2019

Net sales and operating revenue (Notes 14 ,18 and 22)¥1,111,600 ¥1,082,792 ¥1,031,261
Costs and expenses:
Cost of sales (Note 8) ........................................................................................................................................................................
784,918
751,944711,511
Selling, general and administrative expenses (Notes 2 (17), 2 (18), 2 (19) and 4) .......................................
200,932
191,389
185,721
Impairment loss on long-lived assets (Note 11) ..............................................................................................................
595
841
2,689
Impairment loss on goodwill (Note 12) ................................................................................................................................
—
11
1,193
Gain and loss on sales and disposal of fixed assets, net .............................................................................................
1,444(1,504)
2,752
987,889
942,681
903,866
Operating income...........................................................................................................................................................
123,711140,111
127,395
Other income:Interest and dividends .....................................................................................................................................................................
1,807
1,637
1,286
Gain and loss on sales of securities, net (Notes 7 and 18) .........................................................................................
—
237
391
Gain on private equity investments (Note 22)..................................................................................................................
4,673
5,884
13,887
Other (Notes 15, 16, 18 and 23)..................................................................................................................................................
4,766
5,696
5,354
11,246
13,454
20,918Other expenses:
Interest .......................................................................................................................................................................................................
1,184
1,236
1,369
Gain and loss on sales of securities, net (Notes 7 and 18) .........................................................................................
115——
Loss on other-than-temporary impairment of investment securities (Notes 18 and 22) ......................
3,959
57
77
Other (Note 16) ....................................................................................................................................................................................
1,136
1,482
1,644
6,394
2,775
3,090
Income from continuing operations before income taxes and equity
in net income of affiliated companies .............................................................................................................
128,563
150,790145,223
Income taxes (Note 17):
Current .......................................................................................................................................................................................................
47,21054,22543,449Deferred ....................................................................................................................................................................................................
(12,086)(6,118)3,563
35,124
48,10747,012
Income from continuing operations before equity in net income ofaffiliated companies ....................................................................................................................................................
93,439102,683
98,211Equity in net income of affiliated companies (Note 18) ...........................................................................................
7,002
7,179
5,178
Net income..........................................................................................................................................................................
100,441
109,862
103,389
Less: Net income attributable to noncontrolling interests...................................................................................
(10,755)(13,239)(12,002)
Net income attributable to SECOM CO., LTD. ............................................................................................... ¥ 89,686 ¥ 96,623 ¥ 91,387$10,014,414

Per share data (Note 2 (21)):
Net income attributable to SECOM CO., LTD. ...................................................................................................................
Cash dividends per share (Note 18) ..........................................................................................................................................

2018

62

SECOM Annual Report 201910,666
1,036
35,667
10,23457,603
1,158,225
425,315(108,883)
316,432$

841,793
63,081
904,874(96,892)
807,982

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

Years ended March 31

Year ended March 31

2018

2017

2019

¥410.91¥160.00¥442.70¥150.00¥418.71¥140.00

$3.70
$1.44

In millions of yen

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

Years ended March 31

Year ended March 31

Consolidated Statements of Comprehensive Income

See accompanying notes to consolidated financial statements.

16,278—42,09942,937
101,3142019

SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2019
Comprehensive income:Net income .............................................................................................................................................................................................
Other comprehensive income (loss), net of tax:
Unrealized gains on securities ..............................................................................................................................................
Pension liability adjustments ................................................................................................................................................
Foreign currency translation adjustments....................................................................................................................
Total comprehensive income......................................................................................................................................................
Less: Comprehensive income attributable to noncontrolling interests.....................................................
Comprehensive income attributable to SECOM CO., LTD. .............................................................................................

7,071,333
1,810,198
5,360—
13,0098,899,900
1,114,514

2019

2018

2017

2019

¥100,441¥109,862¥103,389$904,874

274(2,566)(4,908)93,241(10,060)¥ 83,181

256
5,376
1,952
117,446(13,710)¥103,736

4,600
4,675
(5,726)
106,938(12,388)¥ 94,550

2,468(23,117)(44,216)
840,009(90,631)$749,378

Consolidated Statements of Changes in Equity
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2019
In millions of yen
Number ofsharesissuedCommonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’equityNoncontrollinginterests

Balance, March 31, 2016 ......................................................................................
Comprehensive income:Net income...............................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities..............................................................
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 ..............................................................................

233,288,717¥66,378¥73,118¥10,526¥772,061¥16,913(¥73,718)¥ 865,278¥111,319¥ 976,597

Total

—

—

—

—

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
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 ......................................................................................
Comprehensive income:Net income...............................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities..............................................................
Pension liability adjustments ................................................................
Foreign currency translation adjustments ...................................
Total comprehensive income .......................................................................
Issuance of new stocks..............................................................................................
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)
Changes in the scope of application of the equity method .............
Gains on disposal of treasury stock ...................................................................
Net changes in treasury stock ..............................................................................

233,288,717

66,37873,102

10,632

832,785

20,076(73,731)929,242

122,226

1,051,468

—

—

—

—

96,623——96,623

13,239109,862

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

268
5,070
1,775

—
—
—

1,724
—
—
—

7
—
—
—

7
—
—
—

—
—
—
101

—
(32,738)
—
(101)

—
—
—
—

—
—
—
—

268
5,070
1,775
103,736
14(32,738)
—
—

(12)
306
177
13,710——(5,381)
—

256
5,376
1,952
117,446
14(32,738)(5,381)
—

—
—
—
—

—
—
—
—

24
—
0
—

—
—
—
—

—
17
—
—

—
—
—
—

—
—
—
(18)

24
17
0
(18)

473
—
—
—

497
17
0
(18)

Balance, March 31, 2018 ......................................................................................
Cumulative effect adjustments resulting from adoption of
new accounting standards, net of tax (Note 2 (23)) .............................
Comprehensive income:Net income...............................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities..............................................................
Pension liability adjustments ................................................................
Foreign currency translation adjustments....................................
Total comprehensive income .......................................................................
Issuance of new stocks..............................................................................................
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)
Changes in the scope of application of the equity method .............
Gains on disposal of treasury stock ...................................................................
Net changes in treasury stock ..............................................................................

233,290,441

66,385

73,133

10,733

896,586

27,189(73,749)

1,000,277

131,028

1,131,305

—

—

—

—

16,379(20,762)—(4,383)(421)(4,804)

—

—

—

—

89,686——

89,686

10,755

100,441

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

274
(2,320)(4,459)

—
—
—

1,778
—
—
—

8
—
—
—

7
—
—
—

—
—
—
50

—
(34,922)
—
(50)

—
—
—
—

—
—
—
—

274
(2,320)(4,459)83,181
15(34,922)
—
—

—
(246)
(449)
10,060——(6,252)—274(2,566)(4,908)93,241
15(34,922)(6,252)
—

—
—
—
—

—
—
—
—

26
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
(10)

26
—
—
(10)

(2,697)———(2,671)——(10)

Balance, March 31, 2019 ...................................................................................... 233,292,219¥66,393¥73,166¥10,783¥967,679

78)(¥73,759)¥1,044,184¥131,718¥1,175,902(¥

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

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’equityNoncontrollinginterests

Total

Balance, March 31, 2018 .........................................................................................
Cumulative effect adjustments resulting from adoption of
new accounting standards, net of tax (Note 2 (23)) .............................
Comprehensive income:Net income..................................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities.................................................................
Pension liability adjustments ...................................................................
Foreign currency translation adjustments ......................................
Total comprehensive income ..........................................................................
Issuance of new stocks.................................................................................................
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) ...........................................................................................................................
Changes in the scope of application of the equity method ................
Gains on disposal of treasury stock ......................................................................
Net changes in treasury stock .................................................................................

$598,063$658,856$96,694$8,077,351$244,946($664,405)$9,011,505$1,180,432$10,191,937

Balance, March 31, 2019 .........................................................................................

$598,135 $659,153

—

—

—

147,559(187,045)—(39,486)(3,793)(43,279)———

807,982——

807,982

96,892904,874

—
—
—

—
—
—

—
—
—

—
—
—

2,468
(20,901)(40,171)

—
—
—

72
—
—
—

63
—
—
—

—
—
—
450

—
(314,613)
—
(450)

—
—
—
—

—
—
—
—

2,468
(20,901)(40,171)749,378135(314,613)———(2,216)(4,045)90,631——(56,324)—

2,468(23,117)(44,216)
840,009135(314,613)(56,324)
—

—
—
—
—

234
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
(90)

234
—
—
(90)

(24,297)———(24,063)——(90)703) ($664,495)$9,407,063$97,144 $8,717,829($$1,186,649 $10,593,712

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201963

Consolidated Statements of Cash Flows
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 20192019

Cash flows from operating activities:
Net income .................................................................................................................................................................................................. ¥100,441
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)......................................................................................................................................................
75,300Accrual for pension and severance costs, less payments.........................................................................................
614
Deferred income taxes ................................................................................................................................................................... (12,086)
Gain and loss on sales and disposal of fixed assets, net ............................................................................................
1,444
Impairment loss on long-lived assets (Note 11).............................................................................................................
595
Write-down on real estate inventories (Note 8) .............................................................................................................
580
Gain on private equity investments (Note 22) ................................................................................................................
(4,673)
Impairment loss on goodwill (Note 12) ..............................................................................................................................
—
Gain on sales of securities, net (Notes 7 and 14) ...........................................................................................................
(901)
Loss on other-than-temporary impairment of investment securities (Notes 14 and 22) ....................
8,991
Equity in net income of affiliated companies ..................................................................................................................
(7,002)
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits for armored car services.......................................................................
(6,527)(Increase) decrease in receivables and due from subscribers, net of allowances .............................. (17,404)(Increase) decrease in inventories ....................................................................................................................................
4,285
Increase in deferred charges................................................................................................................................................ (10,716)
Increase (decrease) in notes and accounts payable..............................................................................................
3,388
Increase (decrease) in deposits received......................................................................................................................
8,690
Decrease in deferred revenue .............................................................................................................................................
938
Increase (decrease) in accrued income taxes............................................................................................................
(4,914)
Increase (decrease) in guarantee deposits received .............................................................................................
(164)
Increase in unearned premiums and other insurance liabilities ...................................................................
9,495
Increase (decrease) in accrued consumption tax ...................................................................................................
(831)
Other, net .........................................................................................................................................................................................
8,784
Net cash provided by operating activities ............................................................................................................ 158,327
Cash flows from investing activities:(Increase) decrease in time deposits............................................................................................................................................
(1,251)
Proceeds from sales of property, plant and equipment ..................................................................................................
3,379
Payments for purchases of property, plant and equipment ......................................................................................... (56,401)
Payments for purchases of intangible assets.......................................................................................................................... (11,454)
Proceeds from sales and redemptions of investment securities (Note 7) ............................................................
43,597
Payments for purchases of investment securities ............................................................................................................... (36,686)(Increase) decrease in short-term investments .....................................................................................................................
(4,256)
Acquisitions, net of cash acquired (Note 4) .............................................................................................................................
(3,133)(Increase) decrease in short-term receivables, net..............................................................................................................
62
Payments for long-term receivables ............................................................................................................................................
(1,024)
Proceeds from long-term receivables .........................................................................................................................................
1,685
Other, net ......................................................................................................................................................................................................
1,052
Net cash used in investing activities ........................................................................................................................ (64,430)
Cash flows from financing activities:
Proceeds from long-term debt........................................................................................................................................................
7,161
Repayments of long-term debt ...................................................................................................................................................... (20,184)
Increase (decrease) in bank loans, net ........................................................................................................................................
(1,789)
Increase (decrease) in investment deposits by policyholders .....................................................................................
(1,592)
Dividends paid to SECOM CO., LTD. shareholders ............................................................................................................... (34,922)
Dividends paid to noncontrolling interests.............................................................................................................................
(6,263)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders .......................................................................................................................................................................................
(3,033)
Proceeds from sales of shares of consolidated subsidiaries to noncontrollinginterest holders .......................................................................................................................................................................................
—
Increase in treasury stock, net ..........................................................................................................................................................
(10)
Other, net ......................................................................................................................................................................................................
331
Net cash used in financing activities ........................................................................................................................ (60,301)(595)
Effect of exchange rate changes on cash and cash equivalents............................................................................
33,001
Net increase in cash and cash equivalents .............................................................................................................................
Cash and cash equivalents at beginning of year ............................................................................................................... 316,729
Cash and cash equivalents at end of year ............................................................................................................................... ¥349,730
See accompanying notes to consolidated financial statements.

64

SECOM Annual Report 2019

In millions of yen

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

Years ended March 31

Year ended March 31

2018

2017

2019

¥109,862¥103,389$ 904,874

78,955977(6,118)(1,541)841
865(5,884)11(1,073)
199(7,179)78,183
754
3,563
2,712
2,689
1,164
(13,887)
1,193(1,500)182(5,178)678,378
5,532(108,883)
13,0095,360
5,225(42,099)—(8,117)81,000(63,081)(5,189)(8,292)(18,639)(15,902)
(378)
5,962
(779)
(2,441)
(474)
4,796
1,924
2,754
133,257(2,352)(1,268)187(15,887)
3,435
6,627
(1,560)4,334(1,023)
4,449
(879)
9,296
178,623(58,802)(156,793)
38,604(96,541)
30,52378,2888,450(44,270)(1,477)85,541(7,486)
79,134
1,426,369

172
6,166
(53,751)(7,859)69,365(51,098)(1,150)(23,283)
(457)
(840)
1,224
50
(61,461)

(70)
1,465
(51,222)(7,338)43,290(32,613)(2,283)
(167)
(62)
(760)
1,721
839
(47,200)(11,270)
30,441(508,117)(103,189)
392,766(330,505)(38,342)(28,225)559(9,225)
15,1809,477(580,450)

9,613(20,582)(3,378)(2,483)(32,738)(5,426)

8,407(20,059)(13,528)(2,112)(30,557)(3,556)64,514(181,838)(16,117)(14,342)(314,613)(56,423)

(120)

(489)

(27,324)—(17)
94(55,037)370
17,129299,600¥316,729

618
(13)
1,464
(59,825)(980)
70,618228,982¥299,600

—
(90)
2,982
(543,251)(5,361)
297,3072,853,414$3,150,721

Notes to Consolidated Financial Statements
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2019

1. Nature of Operations
The parent company and its subsidiaries (collectively “the Company”)
are engaged in the businesses of security services, fire protection
services, medical services, insurance services, geospatial information
services, BPO and ICT 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 and systems,
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 anddeposit and sales of security merchandise. The Company has also been
diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishing systems; medical services,
including home and other medical services and the operations of variable interest entities of which the Company is the primary beneficiarythrough managing hospitals and health care-related institutions; non-life
insurance services; geospatial information services using geospatial
information systems (GIS) and surveying and measuring technology; BPO
and ICT services, including data center services, business continuity plan
support, information security services and cloud-based services; as wellas Business Process Outsourcing (“BPO”) related services; real estate andother services, including the development and sale of condominiums
equipped with security and contingency planning features, lease of realestate, 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 accordancewith accounting principles generally accepted in Japan (“Japanese
GAAP”). Certain adjustments and reclassifications have been incorporated in the accompanying financial statements to conform with U.S.
generally accepted accounting principles (“U.S. GAAP”). These
adjustments were not recorded in the statutory books of account.
Significant accounting policies used in the preparation of theaccompanying consolidated financial statements are summarized below:(1) Basis of Consolidation and Investments in Affiliated Companies
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 inconsolidation.
Investments in companies in which the ability to exercise significant
influence exists (generally 20 to 50 percent owned companies), areaccounted for under the equity method. Consolidated income includes
the Company’s current equity in the net income of affiliated companies,
after elimination of intercompany profits.
(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variable interest
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 a variable interest entity (“VIE”) as its
primary beneficiary when it is deemed to have a controlling financial
interest in a VIE, meeting both of the following characteristics:• The power to direct activities of a VIE that most significantly impact
the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentially besignificant to the VIE or the right to receive benefits from the VIE that
could potentially be significant to the VIE.

The Company provides investments, loans and guarantees toorganizations managing hospitals and health care-related institutions, toa company holding real estate, and to a PFI (Private Finance Initiative)
organization which was established to build, maintain and operate correctional facilities. Certain of these organizations are considered VIEs
under ASC 810.
Total assets and liabilities held by VIEs of which the Company is theprimary beneficiary were ¥73,396 million ($661,225 thousand) and¥82,725 million ($745,270 thousand), respectively, at March 31, 2019, and¥74,539 million and ¥84,029 million, respectively, at March 31, 2018. The
creditors of VIEs do not have recourse to the Company’s general credit
with the exception of debts guaranteed by the Company. Total assets
and liabilities held by VIEs of which the Company holds significant variable interests but is not the primary beneficiary were ¥28,531 million($257,036 thousand) and ¥26,610 million ($239,730 thousand), respectively, at March 31, 2019, and ¥29,232 million and ¥27,699 million, respectively, at March 31, 2018. The Company’s assets in the consolidatedbalance sheets and the Company’s maximum exposure to losses related
to VIEs at March 31, 2019 and 2018 were ¥6,851 million ($61,721
thousand) and ¥6,415 million, respectively.
(3) Revenue Recognition
The Company recognizes revenue based on the following five steps inaccordance with ASC 606, “Revenue from Contracts with Customers.”
Step 1: Identify the contracts with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligationsin the contract
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation
The Company generates revenue principally through the sales ofmerchandise and services in the areas of security services, fire protection
services, medical services, insurance services, geospatial information
services, BPO and ICT services, and real estate and other services under
separate contractual arrangements.
Revenue from term service contracts, including security services, isrecognized over the contractual period or, in the case of specific services,
when such services are rendered. Subscribers are generally requested toprepay a portion of service charges, especially for security services, which
are credited to deferred revenue and recognized in income ratably overthe covered service period. Revenue from the installation of security
equipment used to provide on-line centralized security services isdeferred and recognized over the contractual period of security services
after completion of the installation. The related installation costs are alsodeferred and amortized over the contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements, which
may include any combination of security equipment, installation andsecurity services. The Company allocates revenue to each element basedon its relative fair value if such element meets criteria for treatment as aseparate unit of accounting as prescribed in ASC 606, “Revenue fromContracts with Customers.” Otherwise, revenue is deferred until theundelivered elements are fulfilled as a single unit of accounting.
Revenue from sales of merchandise and software is recognized whenthe merchandise and software are received by the customer and, in thecase of installations, when such installations are completed.
Revenue from construction contracts is recognized on the basis of the
progress of the performance obligation, which is mainly measured by
input methods based on costs incurred.

SECOM Annual Report 201965

Revenue from sales of real estate is recognized when the title of thereal estate is transferred to the customer.
Excluding the aforementioned policy, the policies as specificallydescribed hereinafter are applied for each of revenue items.
Property and casualty insurance premiums are earned ratably over theterms of the related insurance contracts. Unearned premiums are earned
ratably over the terms of the unexpired portion of premiums written.
Revenue from sales of equipment under sales-type leases is recognized at the inception of the lease. Unearned income on sales-typeleases and direct-financing leases is recognized over the life of each
respective lease using the interest method. Leases not qualifying as
sales-type leases or direct-financing leases are accounted for as operatingleases and the related revenue is recognized 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 aretranslated into Japanese yen at the rates of exchange in effect at yearend and all income and expense accounts are translated at average rates
of exchange during the year. The resulting translation adjustments areaccumulated and reported as part of other comprehensive income (loss).
Foreign currency receivables and payables of the Company aretranslated into yen at the rate in effect at the balance sheet date and theresulting 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 with initial
maturities of three months or less to be cash equivalents.
(6) Investments in Debt and Equity Securities
The Company classifies investments in debt and equity securities as“available-for-sale” or “held-to-maturity.” The Company has no securities
classified as “trading.” “Held-to-maturity” securities are those securities inwhich the Company has the ability and intent to hold the security until
maturity. All securities not included in “trading” or “held-to-maturity” areclassified as “available-for-sale” securities. Marketable equity securities
classified as “available-for-sale” are measured at fair value with unrealized
gains and losses included in income. Marketable debt securities classified
as “available-for-sale” are measured at fair value, and unrealized holding
gains and losses are reported as part of accumulated other comprehensive income (loss), net of tax. Debt securities classified as “held-tomaturity” are reported at amortized cost.
A decline in the fair value of any marketable debt securities classified
as “available-for-sale” below cost that is deemed to be other-thantemporary results in a reduction in the carrying amount to fair value.
The impairment is charged to income and a new cost basis for the
securities is established. To determine whether an impairment is otherthan-temporary, the Company considers the length of time and extent
to which the market value of the security has been less than its original
cost, the financial condition, other specific factors affecting the market
value, deterioration of the credit condition of the issuers, 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.
Realized gain or losses on the sale of marketable debt securities
classified as “available-for-sale” are based on the moving-average cost
method and are credited or charged to income.

66

SECOM Annual Report 2019

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 of other investments in
non-public companies for possible impairment by taking into consideration the financial and operating conditions of the issuer, the generalmarket conditions in the issuer’s industry and the period of the decline
in the estimated fair value and other relevant factors. If the impairment
is determined to be other-than-temporary, other investments in nonpublic companies are written down to their impaired value through acharge to income.
(7) Private Equity Investments
The Company accounts for private equity investments in accordancewith ASC 946, “Financial Services—Investment Companies,” in whichinvestments are accounted for at fair value based on the Company’s
assessment of each underlying investment. The investments, by theirnature, 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 evidence of achange in fair value. Downward adjustments are also made, in theabsence of third-party transactions, if it is determined that the expected
realizable value of the investment has declined below the carrying value.
The carrying value of private equity investments was ¥13,372 million($120,468 thousand) and ¥29,815 million at March 31, 2019 and 2018,
respectively.
Private equity investments are included in investment securities in the
consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire protectionrelated products, real estate and other related products, are stated at thelower of cost or market. Cost is determined, in the case of real estate,based on the specific identification method and, in the case of otherinventories, primarily using the moving-average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and other receivables 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 is recorded when the Company
becomes aware of a customer’s inability to meet its financial obligations,such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related tocustomers change, estimates of the recoverability of receivables would
be further adjusted.
(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new insurance policies are deferred and amortized principally over the premiumpaying period of the related insurance policies applying a percentage
relationship of cost incurred to premiums from contracts issued toapplicable 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 theestimated useful lives of the assets. Depreciation is computed using thestraight-line method for assets other than security equipment andcontrol stations. Security equipment and control stations are depreciatedusing the declining-balance method. Assets leased to others underoperating leases are depreciated using the straight-line method over theestimated useful lives. Depreciation expense was ¥54,474 million($490,757 thousand), ¥54,127 million and ¥53,677 million for the years
ended March 31, 2019, 2018 and 2017, respectively. Maintenance, repairs
and renewals are charged to income as incurred.

combination and determined to have an indefinite useful life are notamortized, but instead tested for impairment at least annually. Thisaccounting standard also requires that intangible assets with estimableuseful lives be amortized over their respective estimated useful lives totheir estimated residual values, and reviewed for impairment in accordance with ASC 360. The Company conducts its annual impairment test
each fiscal year.

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(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.

The Company recognizes asset retirement obligations if the fair valueof 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 is required forthe building leased by a certain subsidiary when the lease matures andthe Company returns the leased building to its owner. However, theCompany plans not to relocate from the building and to continue to use
it until it will be demolished without restoration. As such, the executionof such obligation is not expected. The Company evaluated all the available evidence as of March 31, 2018 and performed efforts to establish thebest estimate. However, the scope and the amount of execution of theobligation cannot be reasonably estimated. Therefore, an asset
retirement obligation for that building lease is not recognized.
(12) Deferred Charges
Deferred charges primarily consist of costs related to installation services of security equipment used to provide on-line security systems. The
installation costs are deferred and amortized using the straight-line
method over the contractual period of security services after completionof the installation. Amortization expense was ¥10,310 million ($92,882
thousand), ¥15,529 million and ¥15,596 million for the years ended March
31, 2019, 2018 and 2017, respectively.
(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment,” theCompany reviews the carrying amount of its long-lived assets held andused, other than goodwill and intangible assets with indefinite lives, andassets to be disposed of, whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. Long-lived
assets to be held and used are reviewed for impairment by comparing
the carrying amount of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment loss has
occurred, the loss would be recognized 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 thatare 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 amountare recognized in the period in which the long-lived assets are classified
as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of assets ofbusiness acquired. Pursuant to ASC 350, “Intangibles—Goodwill andOther,” goodwill and intangible assets acquired in a purchase business(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 the financial 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 which those temporary differences and carryforwards are expected to be realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Valuation allowances arerecorded to reduce deferred tax assets when it is more likely than notthat 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 merits of theposition, when that position is more likely than not to be sustained upon
examination. The benefit of the tax position is measured at the largest
amount of benefit that has greater than 50 percent likelihood of being
realized upon settlement with the appropriate tax authority.
The Company recognizes interest and penalties accrued related tounrecognized 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 andadministrative expenses for the years ended March 31, 2019, 2018 and2017 were ¥7,345 million ($66,171 thousand), ¥6,383 million and ¥6,491
million, respectively.
(18) Advertising Costs
Advertising costs are charged to income as incurred, except for thecosts related to insurance policies. Advertising costs for acquiring new
insurance policies are deferred and amortized as part of insurance
acquisition costs. Advertising expenses included in selling, general andadministrative expenses for the years ended March 31, 2019, 2018 and2017 were ¥5,374 million ($48,414 thousand), ¥5,011 million and ¥5,072
million, respectively.
(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2019, 2018 and2017 were ¥1,430 million ($12,883 thousand), ¥1,380 million and ¥1,220
million, respectively.

SECOM Annual Report 201967

(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 in the
consolidated financial statements at fair value regardless of the purpose
or intent for holding them. Changes in the fair value of derivative
financial instruments are either recognized periodically in income or inequity 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 the portion of the change in the fair value of thehedged item that relates to the hedged risk. Changes in the fair value ofderivative financial instruments accounted for as a cash flow hedge, tothe extent it is effective as a hedge, are recorded in accumulated othercomprehensive income (loss), net of tax. Changes in the fair value ofderivative financial instruments not qualifying as a hedge are reported
in income.
The Company meets the documentation requirements necessaryfor effective hedges which include the risk management objective andstrategy for undertaking various hedge transactions. In addition, formal
assessment is made at inception of the hedge and periodically 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 ofhedged 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 for the years ended
March 31, 2019, 2018 and 2017 was 218,261 thousand shares, 218,260
thousand shares and 218,261 thousand shares, respectively. There wereno potentially dilutive shares outstanding during the years ended March
31, 2019, 2018 or 2017.
Cash dividends per share shown in the accompanying consolidated
statements of income are computed based on dividends approved andpaid 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 and liabilities,
the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from thoseestimates. Significant items subject to such estimates and assumptions
include the carrying amounts of inventories, deferred insurance acquisition costs, investment securities, other investments, property, plant andequipment, goodwill, other intangible assets, unearned premiums andother insurance liabilities, valuation of receivables, valuation allowances
for deferred income 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 to customers in an
amount that reflects the consideration to which the entity expects to be

68

SECOM Annual Report 2019

entitled in exchange for those goods or services. This accounting standard also requires an entity to disclose sufficient information to enable
users of financial statements to understand the nature, amount, timing,and uncertainty of revenue and cash flows arising from contracts withcustomers. Both qualitative and quantitative information is required. Thisaccounting 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. Therefore, this accounting standard is effective
for fiscal years beginning after December 15, 2017, including interim
periods within that reporting period, and was adopted by the Company
in the fiscal year beginning April 1, 2018, using the cumulative-effectmethod, for only those contracts that are not completed at the date ofinitial adoption. The effect of adopting this accounting standard on the
Company’s consolidated financial statements at the adoption date was adecrease of ¥18,044 million ($162,559 thousand) in assets, a decrease of¥13,408 million ($120,793 thousand) in liabilities, and a decrease of ¥4,353
million ($39,216 thousand) in retained earnings. The difference comparedto the results of applying the previous guidance was a decrease of¥3,333 million ($30,027 thousand) in net sales and operating revenue, adecrease of ¥2,911 million ($26,225 thousand) in costs and expenses, anda decrease of ¥185 million ($1,667 thousand) in net income attributable
to noncontrolling interests on the Company’s consolidated financial
statements for the year ended at March 31, 2019.
In January 2016, the FASB issued ASU No. 2016-01, “Recognition andMeasurement of Financial Assets and Financial Liabilities.” This accounting
standard significantly changes the income statement impact of equity
investments and the recognition of changes in fair value of financial liabilities when the fair value is elected. This accounting standard is effective
for fiscal years beginning after December 15, 2017, including interim periods within that reporting period, and was adopted by the Company inthe fiscal year beginning April 1, 2018. The Company recognized cumulative-effect adjustment from unrealized gains on securities of ¥20,762 million ($187,045 thousand) at March 31, 2018 which had been recognizedas other comprehensive income as a transfer to retained earnings.
In February 2016, the FASB issued ASU No. 2016-02, “Leases.” Thisaccounting standard requires lessees to recognize almost all lease assets
and lease liabilities on the balance sheet that arise from lease contracts
which are classified as operating leases. This accounting standard iseffective for fiscal years beginning after December 15, 2018, includinginterim periods within that reporting period and will be adopted by theCompany in the fiscal year beginning April 1, 2019. The Company iscurrently evaluating the effect of adopting this accounting standard on
its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement ofCredit Losses on Financial Instruments.” This accounting standard
replaces the current incurred loss methodology that delays recognitionof the full amount of credit losses until the loss was probable of occurring with a methodology that reflects expected credit losses and requiresconsideration of a broader range of reasonable 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 theCompany in the fiscal year beginning April 1, 2021. The Company iscurrently evaluating the effect of adopting this accounting standard
on its consolidated financial statements.
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 otherthan inventory which prohibits the recognition of current and deferredincome 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 is effective for fiscal years beginning
after December 15, 2017, including interim periods within that reporting
period, and was adopted by the Company in the fiscal year beginning
April 1, 2018. The adoption did not have a material impact on the
Company’s consolidated results of operations or financial position.
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, the amendments require an
entity to perform its annual, or interim, goodwill impairment test bycomparing the fair value of a reporting unit with its carrying amount andrecognize 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, includinginterim periods within that reporting period, and will be adopted by theCompany in the fiscal year beginning April 1, 2021. The Company is currently evaluating the effect of adopting this accounting standard on its
consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, “Improving
the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost.” This accounting standard requires an entity
to disaggregate the service cost component from the other components
of net benefit cost, and present the service cost component in the sameline item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income
statement separately from the service cost component, such as in otherincome (expenses). This accounting standard allows only the service cost
component to be eligible for capitalization. This accounting standard iseffective for fiscal years beginning after December 15, 2017, includinginterim periods within that reporting period, and was adopted by theCompany in the fiscal year beginning April 1, 2018. The adoption of thisaccounting standard resulted in reclassification of ¥1,522 million fromcost of sales and ¥1,202 million from selling, general and administrative
expenses into other income for the year ended March 31, 2018, and¥1,549 million from cost of sales and ¥1,234 million from selling, generaland administrative expenses into other income for the year ended March
31, 2017. Please refer to note 15 for further information. The adoption of
the capitalization of the service cost component of net benefit cost did
not have a material impact on the Company’s consolidated financial
statements.
In August 2018, the FASB issued ASU No. 2018-12, “Targeted
Improvements to the Accounting for Long-Duration Contracts.” Thisaccounting standard changes the recognition, measurement, presentation and disclosure requirements for long-duration contracts. Thisaccounting standard is effective for fiscal years beginning after December
15, 2020, and will be adopted by the Company in the fiscal year beginning April 1, 2021. The Company is currently evaluating the effect of
adopting this accounting standard on its consolidated financial
statements.
In August 2018, the FASB issued ASU No. 2018-13, “Disclosure
Framework—Changes to the Disclosure Requirements for Fair Value
Measurement.” This accounting standard adds, removes and modifies thedisclosure requirements for fair value measurements. This accounting
standard is effective for fiscal years beginning after December 15, 2019,
and will be adopted by the Company in the fiscal year beginning April 1,
2020. Early adoption is permitted, and the Company is currently evaluating the timing of its adoption. As this accounting standard is a provision
for presentation only, the adoption will not have an impact on the
Company’s consolidated financial statements..
In August 2018, the FASB issued ASU No. 2018-14, “Disclosure
Framework—Changes to the Disclosure Requirements for Defined
Benefit Plans.” This accounting standard adds, removes and clarifies thedisclosure requirements for defined benefit pension or other postretirement plans. This accounting standard is effective for fiscal years beginning after December 15, 2020, and will be adopted by the Company inthe fiscal year beginning April 1, 2021. Early adoption is permitted, andthe Company is currently evaluating the timing of its adoption. As thisaccounting standard is a provision for presentation only, the adoption will
not have an impact on the Company’s consolidated financial statements.
(24) Discontinued Operations
ASC 205-20, “Discontinued Operations,” requires the operating resultsof any component of an entity with its own identifiable operations andcash flows which is disposed of or is classified as held for sale, and withwhich the Company will not have significant continuing involvement tobe reported in discontinued operations.
(25) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2018 and 2017 have been
reclassified to conform to the presentation used for the year ended
March 31, 2019.
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 ¥111=US$1, the approximate rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2019.
These translations should not be construed as representing that the yenamounts actually constitute, or have been or could be converted into
U.S. dollars at that rate.
4. Acquisitions
Acquisition of TMJ, Inc.
On October 2, 2017, the Company acquired 100% of common shares
outstanding of TMJ, Inc. for ¥26,550 million in cash. The purpose of thisacquisition is to increase corporate value through generating various synergies including further improvements in quality of existing business anddevelopment and provision of new BPO (Business Process Outsourcing)
services by taking full advantage of the collective strengths of SECOM
and TMJ.
The following table summarizes the estimated fair values of the assets
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 ..........................................................

¥ 2,654
3,803
290
1,642
1,262
24,919Total assets acquired ..............................................................................................

34,570Current liabilities .......................................................................................................
Long-term liabilities ................................................................................................

5,075
2,945

Total liabilities assumed ........................................................................................

8,020

Net assets acquired .................................................................................................

¥26,550

Intangible assets of ¥7,448 million subject to amortization include
customer relationships of ¥6,796 million with a 15-year useful life. The
goodwill of ¥17,471 million represents expected excess earnings power
based on the future business operations. It is not deductible for tax
purposes and has been assigned to the BPO and ICT services segment.

SECOM Annual Report 2019

69

The Company recorded the acquisition costs of ¥274 million related tothis acquisition in selling, general and administrative expenses for theyear ended March 31, 2018.
The following unaudited pro forma information shows the Company’s
consolidated results of operations for the years ended March 31, 2018and 2017 as if the newly consolidated subsidiaries acquired in the year
ended March 31, 2018, were consolidated on April 1,2016.

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 and costs
pertaining to “available-for-sale” and “held-to-maturity” investments at
March 31, 2019 and 2018 are as follows:
In millions of yen
March 31, 2019

In millions of yen
Gross unrealized

Years ended
March 31
Unaudited2018

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

2017¥1,099,655 ¥1,066,938
97,714

92,070In yenYears ended
March 31

Unaudited

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

2018

2017

¥447.69¥421.83

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually havebeen reported if the transaction in fact had occurred on April 1, 2016,
and is not necessarily representative of the Company’s consolidated
results of operations for any future period.
5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2019 and 2018 comprise thefollowing:

Cash......................................................................
Time deposits.................................................
Call loans ...........................................................
Investment securities ................................

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

¥337,195
12,447—
88¥349,730¥304,415
12,165—149¥316,729$3,037,793
112,135—
793$3,150,721

Investment securities include negotiable certificates of deposit andmoney management funds. These agreements mature within threemonths and their carrying values approximate fair value. The Company
has not experienced any losses through default of the financial 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. Cash deposit
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 through bank overdrafts anddeposits. Bank loans and deposits received, which relate to these operations, were ¥21,211 million ($191,090 thousand) and ¥121,087 million($1,090,874 thousand), respectively, at March 31, 2019, and ¥21,940 million and ¥113,830 million, respectively, at March 31, 2018. As part of its
fee arrangement, the Company is reimbursed for the interest cost of therelated overdrafts.

70

SECOM Annual Report 2019

Cost

Short-term investments:
Available-for-sale:
Debt securities ....................... ¥ 24,460
Held-to-maturity:—
Debt securities .......................
¥ 24,460
Investment securities:
Available-for-sale:
Equity securities* .................. ¥—Debt securities ....................... 111,534
Held-to-maturity:
12,954
Debt securities .......................
¥124,488

Gains

LossesFair value

¥

865 ¥

31

¥ 25,294

¥

—
865 ¥

—
31

—
¥ 25,294

¥

— ¥ —
2,644
320

1,743
—
¥ 4,387 ¥ 320¥—
113,858

14,697¥128,555*After the adoption of ASU No. 2016-01, equity investments are measured at fair value
with changes in the fair value recognized in net income at March 31, 2019.
In millions of yen
March 31, 2018
Gross unrealized
Cost

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

Gains

LossesFair value¥ 16,319

¥

902

¥

10

¥ 17,211—¥ 16,319

¥

—
902

¥

—
10

—
¥ 17,211¥ 35,071
105,423¥31,714
2,799

¥ 175
913

¥ 66,610
107,309

13,006¥153,500

1,546¥36,059—¥1,08814,552¥188,471

In thousands of U.S. dollars
March 31, 2019
Gross unrealized
Cost

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

Gains

LossesFair value$ 220,360$ 7,793 $ 279$ 227,874—$ 220,360——$ 7,793 $ 279—$ 227,874$—
1,004,811$—
23,820

$ —
2,883

$
—
1,025,748

116,703$1,121,514

15,702—$39,522 $2,883

132,405$1,158,153

Gross unrealized losses on, and fair value of, “available-for-sale” and“held-to-maturity” securities, aggregated by investment category andthe length of time that individual securities have been in a continuous
unrealized loss position at March 31, 2019 are as follows:
In millions of yen
March 31, 2019
Less than 12 months

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

12 months or longer

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses¥33,725¥33,725

¥351
¥351

¥—
¥—

¥—
¥—

Gross realized gains......................
Gross realized losses.....................

¥

¥ —

¥—

¥—

The Company maintains long-term investment securities, issued bya 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 of other-thantemporary impairment, was ¥10,890 million ($98,108 thousand) and¥10,515 million at March 31, 2019 and 2018, respectively. The corresponding fair value at that date was not computed as such estimation
was not practicable and no significant events or changes that might
have affected the fair value of the investments were observed.

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

—In thousands of U.S. dollars
March 31, 2019

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

Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses$303,829$303,829$3,162$3,162

$—
$—

$—
$—

$

$

$—

$—

—

—

Based on the Company’s ability and intent to hold the investments
for a reasonable period of time sufficient for a recovery of fair value, thecredit condition of the issuers and other relevant factors, the Company
does not consider these investments to be other-than-temporarily
impaired at March 31, 2019.
At March 31, 2019, debt securities principally consisted of short-term
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-to-maturity”
debt securities by contractual maturity at March 31, 2019 are as follows:
In millions of yen
March 31, 2019
Available-for-saleDue within 1 year ............
Due after 1 year
through 5 years ..............
Due after 5 years
through 10 years ...........
Due after 10 years............

Proceeds from the sale of “available-for-sale” securities for the years
ended March 31, 2019, 2018 and 2017 were ¥11,603 million ($104,532
thousand), ¥26,488 million and ¥15,574 million, respectively. On thosesales, the gross realized gains and gross realized losses, using a movingaverage cost basis, for the years ended March 31, 2019, 2018 and 2017
are as follows:

Held-to-maturity

Cost

Fair value¥ 24,460¥ 25,294

90,477

91,589

1,510

1,540

2,875
18,182¥135,994

3,148
19,121¥139,152—
11,444¥12,954—
13,157¥14,697¥

Cost

Fair value

—

¥

—

In thousands of U.S. dollars
March 31, 2019
Available-for-sale
Cost

Held-to-maturity

Fair value

Due within 1 year ............ $ 220,360 $ 227,874
Due after 1 year
through 5 years ..............
815,108
825,126
Due after 5 years
through 10 years ...........
25,901
28,360Due after 10 years............
163,802172,262$1,225,171 $1,253,622

Cost

$

—

Fair value$—

13,604

13,874—
103,099$116,703—
118,531$132,405

2019

2018

2017

2019

¥1,45753¥1,689268¥1,62372$13,126477

8. Inventories
Inventories at March 31, 2019 and 2018 comprise the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

Security-related products................................. ¥ 8,611
Fire protection-related products.................. 12,160
Real estate .................................................................. 36,607
Other-related products ......................................
8,567¥65,945¥ 7,433
20,47644,455
9,694¥82,058$ 77,577
109,549
329,793
77,180$594,099

Work in process for real estate inventories at March 31, 2019 and 2018,
amounting to ¥30,743 million ($276,964 thousand) and ¥39,689 million,
respectively, are included in real estate.
The amount of write-down on real estate inventories included in costof sales for the years ended March 31, 2019, 2018 and 2017 were ¥580
million ($5,225 thousand), ¥865 million and ¥1,164 million, respectively.
9. Credit Quality of Financing Receivables and Allowancefor Doubtful Accounts
The Company has financing receivables and classifies them into four
categories: “lease receivables,”“loans receivable resulting from medical
services,”“other loans receivable” and “other.” Financing receivables classified
as “lease receivables” are resulting from lease transactions 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, theCompany individually evaluates their collectability in order to 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 thecollectability of each group, using its historical experience of write-offs
and determines the amount of allowance for doubtful accounts.

SECOM Annual Report 201971

Financing receivables and allowance for doubtful accounts at March
31, 2019 and 2018 are as follows:

In thousands of U.S. dollars
Year ended March 31, 2019

In millions of yen

Year ended March 31, 2019

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............................
Financing receivables:
Individually
evaluated............................
Collectively
evaluated............................

¥

¥

¥

Loans
receivable
resulting frommedicalservices

Lease
receivables
Other
loans
receivable

Other

Total

275
(70)
32
—

¥2,373
(6)
—
—

¥ 539
(55)
—
—

237

2,367

484

1,162

4,250

169

2,367

484

1,162

4,182

68

¥

—

¥

0

¥1,216 ¥ 4,403
(54)
(185)
(0)
32
—
—

¥

—

¥

68

277

¥5,142¥ 832¥1,407¥ 7,658

50,374

579

1,277

199

52,429¥50,651¥5,721¥2,109¥1,606¥60,087

In millions of yen
Year ended March 31, 2018

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............................
Financing receivables:
Individually
evaluated............................
Collectively
evaluated............................

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

¥2,390
(17)
—
—

¥ 698
(143)
—
(16)

¥ 850
366
(0)
0

¥ 4,29473
52(16)

Balance at
end of year ...............................
2,135
Individually
evaluated............................
1,522
Collectively
evaluated............................ $613

Other loans
receivable

Other

Total

$21,378 $ 4,856 $10,954 $ 39,666
(54)
(496)
(486)
(1,667)
—
—
(0)
288
—
—
—
—
21,324

4,360

10,46838,287

21,324

4,360

10,46837,674$—$0Financing receivables:
Individually
evaluated............................ $ 2,495
Collectively
evaluated............................ 453,820$46,324$ 7,495

5,217

11,505$456,315$51,541$19,000

$

— $

613

$12,676 $ 68,990
1,792

472,334$14,468 $541,324

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 contractual intereston the basis of being past due and other factors are placed on
nonaccrual status.
The aging analysis of the recorded financing receivables and financing
receivables on nonaccrual status at March 31, 2019 and 2018 are as
follows:

In millions of yen

¥

356
(133)
52
—

Lease
receivables

Other
loans
receivable

Other

Total

¥50,374277¥5,68536¥1,310
799

¥ 957
649

¥58,326
1,761

275

2,373

539

1,216

4,403

119

2,373

539

1,216

4,247

Total:
Financing receivables ..........

¥50,651¥5,721¥2,109¥1,606¥60,087

156

Financing receivables
on nonaccrual status ...........

¥

¥

¥ 833

¥

¥

¥

156

¥

¥

197

¥5,666

—

¥

0

¥ 948

¥

—

¥1,404¥—

3

54,203

548

921

143

55,815¥6,214¥1,869¥1,547¥64,030—

836

In millions of yen¥ 8,215¥54,400

SECOM Annual Report 2019

March 31, 2019
Loans
receivable
resulting frommedicalservices

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

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

72

Allowance for
doubtful accounts:
Balance at
beginning of year................. $ 2,478
Provision (Reversal) .........
(631)
Charge off .............................
288
Other .......................................
—

Loans
receivable
resulting frommedicalservices

March 31, 2018

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

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

¥54,203
197¥6,177
37

¥ 953
916

¥ 843
704

¥62,176
1,854

Total:
Financing receivables ..........

¥54,400¥6,214¥1,869¥1,547¥64,030

Financing receivables
on nonaccrual status ...........

¥

¥

¥ 948

¥

¥

—

4

—

952

In thousands of U.S. dollars
March 31, 2019

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

Current ............................................ $453,820
Overdue..........................................
2,495$51,216 $11,802 $ 8,621 $525,459
325
7,198
5,847
15,865

Total:
Financing receivables .......... $456,315$51,541 $19,000 $14,468 $541,324

Financing receivables
on nonaccrual status ...........

$

$

—

27 $ 7,505 $— $ 7,532

Impaired receivables and the related allowance for doubtful accounts
at March 31, 2019 and 2018 are as follows:
In millions of yen
March 31, 2019

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

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principally consistof Taiwan Secom Co., Ltd., a 28.7 percent owned affiliate, which is listedon the Taiwan Stock Exchange; S1 Corporation, a 28.8 percent owned
affiliate, which is listed on the Korea Exchange; and Toyo Tech Co., Ltd., a27.6 percent owned affiliate, which is listed on the Second Section of theTokyo Securities Exchange.
Combined financial information for the affiliated companies
accounted for under the equity method is as follows:

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

¥277

¥5,142¥832¥1,407¥7,658

169

2,367

484

1,162

4,182

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

Current assets....................................................... ¥133,699
Noncurrent assets ............................................. 188,009¥127,793
196,908$1,204,495
1,693,775

Total assets....................................................... ¥321,708¥324,701$2,898,270

Current liabilities ................................................ ¥ 78,969
Long-term liabilities .........................................
40,801Equity ........................................................................ 201,938¥ 79,246
42,160203,295$ 711,432
367,577
1,819,261

Total liabilities and equity....................... ¥321,708¥324,701$2,898,270

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

In millions of yen
March 31, 2018

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

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

¥197

¥5,666¥948¥1,404¥8,215

119

2,373

539

1,216

4,247

2019

2018

2017

2019

Net sales ...................................... ¥289,172¥283,066¥255,263$2,605,153

Gross profit ................................ ¥ 81,096¥ 83,626¥ 78,246$ 730,595

Net income
attributable toaffiliated companies .......... ¥ 20,435¥ 25,266¥ 17,320$ 184,099

In thousands of U.S. dollars
March 31, 2019

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

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other

Total

$2,495$46,324$7,495 $12,676$68,990

1,522

21,324

4,360

37,674Otherloans
receivable

10,468The average amounts of impaired receivables for the year ended
March 31, 2019 are as follows:

In millions of yen

Average amounts of
impaired receivables ............

Lease
receivables

Loans
receivable
resulting frommedicalservices

Other
loans
receivable

Other

Total

¥214

¥5,499¥818¥1,253¥7,784Lease
receivables

Loans
receivable
resulting frommedicalservices$1,928$49,541

Dividends received from affiliated companies for the years ended
March 31, 2019, 2018 and 2017 were ¥4,390 million ($39,550 thousand),¥4,199 million and ¥3,036 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥54,608 million($491,964 thousand) and ¥51,410 million at March 31, 2019 and 2018,
respectively, had a quoted market value of ¥138,854 million ($1,250,937
thousand) and ¥141,738 million at March 31, 2019 and 2018, respectively.
The amounts of goodwill included in the carrying amount of investments in affiliated companies were ¥4,665 million ($42,027 thousand)and ¥4,836 million at March 31, 2019 and 2018, respectively.

In thousands of U.S. dollars

Average amounts of
impaired receivables ............

Other
loans
receivable

Other

Total

$7,369 $11,288$70,126

SECOM Annual Report 201973

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

2019

2018

2017

2019

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

¥1,422¥1,371¥1,455$12,811Purchases ....................................

¥6,965¥6,293¥4,749$62,748

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

Notes and accounts
receivable, trade...................................................

¥ 490

¥ 475

$ 4,414Loans receivable.....................................................

¥ 331

¥ 492

$ 2,982

Notes and accounts payable..........................

¥3,128¥2,406$28,180

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

¥

¥

$

—

—

—

The Company’s equity in undistributed income of affiliates at
March 31, 2019 and 2018 included in retained earnings was ¥39,466
million ($355,550 thousand) and ¥37,763 million, respectively.
11. Long-Lived Assets
The Company has assessed the potential impairment of its long-lived
assets. As a result of a significant decrease in revenue forecasts, theCompany principally recognized impairment losses on certain businessassets of the geospatial information services segment for the year ended
March 31, 2019, on certain business assets of the BPO and ICT services
segment for the year ended March 31, 2018, and on certain businessassets of the geospatial information services segment for the year ended
March 31, 2017. The fair value was determined based on the estimatedpresent value of future cash flows or appraisal value.
Impairment losses on long-lived assets by business segment for theyears ended March 31, 2019, 2018 and 2017 are as follows:74

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2019

2018

Security services ...................................
Fire protection services....................
Medical services ...................................
Insurance services ...............................
Geospatial information
services ....................................................
BPO and ICT services .........................
Real estate andother services.......................................
Corporate items....................................

¥ 11
23
—
—

¥ 47 ¥ 42
15
62
—
556
—
—

$

545
16

364
415

1,473
485

4,910
144

—
—

—
—

71
—

—
—

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

¥595¥841 ¥2,689$5,360

SECOM Annual Report 2019

2017

2019

99
207
—
—

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill, atMarch 31, 2019 and 2018 are as follows:
In millions of yen
March 31, 2019
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ................................................................ ¥ 63,865
Other ....................................................................... 40,765¥104,630(¥38,759)(12,156)(¥50,915)¥25,106
28,609¥53,715

Unamortized intangible assets ..................... ¥¥¥ 4,177

4,177—

In millions of yen
March 31, 2018

Amortized intangible assets:
Software ................................................................
Other .......................................................................

Unamortized intangible assets .....................

Gross
carrying
amountAccumulated
amortization

Net
carrying
amount¥53,535
40,228¥93,763(¥33,380)(9,307)(¥42,687)¥20,155
30,921¥51,076¥ 5,951¥¥ 5,951—

In thousands of U.S. dollars
March 31, 2019
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ................................................................ $575,360
Other ....................................................................... 367,252$942,612($349,180) $226,180(109,514) 257,738($458,694) $483,918

Unamortized intangible assets ..................... $ 37,632$—$ 37,632

Aggregate amortization expense for the years ended March 31, 2019,2018 and 2017 was ¥10,516 million ($94,739 thousand), ¥9,299 millionand ¥8,910 million, respectively. Amortized intangible assets are amortized using the straight-line method over their estimated useful lives.
The weighted average amortization period for internal use software isapproximately five years.
The estimated aggregate amortization expense for intangible assets
for the next five years is as follows:
Years ending March 312020 .......................................................................................
2021 .......................................................................................
2022 .......................................................................................
2023 .......................................................................................
2024 .......................................................................................

In millions of yen

In thousands of
U.S. dollars¥10,898
9,006
7,296
5,862
4,475

$98,180
81,13565,73052,811
40,315

The changes in the carrying amount of goodwill by business segment
for the years ended March 31, 2019 and 2018 are as follows:
In millions of yen
Security
services

Goodwill .......................... ¥62,741
Accumulated
impairment
losses............................... (2,879)
March 31, 2017 ............ 59,862
Goodwill acquired
during the year .........
38
Disposal ...........................
—
Impairment
losses...............................
—
Translation
adjustment..................
9
Goodwill .......................... 62,788
Accumulated
impairment
losses............................... (2,879)
March 31, 2018 ............ 59,909
Goodwill acquired
during the year ......... 1,623
Disposal ...........................
—
Impairment
losses...............................
—
Translation
adjustment..................
(12)
Goodwill .......................... 64,399
Accumulated
impairment
losses............................... (2,879)
March 31, 2019 ......... ¥61,520

Fire
protection
services

Medicalservices

Geospatial
information
services

BPO and ICT
services

Real estateand otherservices¥1,942¥9,399Total¥4,577¥17,643¥1,962¥ 98,264—
1,942(5,350)
4,049

(775)
3,802

(175)
17,468

(135)
1,827

(9,314)
88,950

57
—

—
—

—
—

17,471———

17,566
—

—

(11)

—

—

—

(11)

—
1,999

—
9,399

(2)
4,575

—
35,114—
1,962

7
115,837—
1,999(5,361)
4,038

(775)
3,800

(175)
34,939

(135)
1,827

(9,325)
106,512

—
—

—
—

—
—

—
—

—
—

1,623
—

—

—

—

—

—

—

—
1,999

—
9,399

(1)
4,574

—
35,114

—
1,962

(13)
117,447— (5,361)¥1,999 ¥4,038(775)(175) (135)(9,325)¥3,799 ¥34,939 ¥1,827 ¥108,122
In thousands of U.S. dollars

Security
services

Fire
protection
services

Medicalservices

Geospatial
information
services

BPO and ICT
services

Real estateand otherservices

Total

Goodwill .......................... $565,658 $18,009 $84,675 $41,216 $316,343 $17,675 $1,043,576
Accumulated
impairment
losses............................... (25,937)— (48,297) (6,982)(1,577) (1,216)(84,009)
March 31, 2018 ............ 539,721 18,009 36,378 34,234 314,766 16,459
959,567
Goodwill acquired
during the year ......... 14,622
—
—
—
—
—
14,622
Disposal ...........................
—
—
—
—
—
—
—
Impairment
losses...............................
—
—
—
—
—
—
—
Translation
adjustment..................
(108)
—
—
(9)
—
—
(117)
Goodwill .......................... 580,172 18,009 84,675 41,207 316,343 17,675 1,058,081
Accumulated
impairment
losses............................... (25,937)— (48,297) (6,982)(1,577) (1,216)(84,009)
March 31, 2019 ......... $554,235 $18,009 $36,378 $34,225 $314,766 $16,459 $ 974,072

13. Bank Loans and Long-Term Debt
Bank loans of ¥38,658 million ($348,270 thousand) and ¥38,969 million
at March 31, 2019 and 2018, respectively, are generally comprised of 30
to 365 day notes. The weighted average interest rate was 0.68 percent
and 0.76 percent at March 31, 2019 and 2018, respectively. Substantiallyall of these loans are borrowed from banks. The Company has enteredinto basic agreements with these banks which state that, with respect toall present or future loans with such banks, collateral (including sums on
deposit with such banks) or guarantors shall be provided immediately
upon request. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebtedness to such banks.
The Company has not been requested to submit such additional security.
At March 31, 2019, Nohmi Bosai Ltd. and Arai & Co., Ltd., subsidiariesof the parent company, had an unused committed line of credit from ashort-term arrangement of ¥6,800 million ($61,261 thousand). The line ofcredit expires in March 2021. Under the agreement, Nohmi Bosai Ltd. isrequired to pay commitment fees, at an annual rate of 0.15 percent, on
the unused portion of the line of credit. The line of credit expires in April
2041. Under the agreement, Arai & Co., Ltd. is required to pay commitment fees, at an annual rate of 0.55 percent and Japanese yen one
month Tokyo Interbank Offered Rate (tibor), on the unused portion of
the line of credit. At March 31, 2019, the Company had overdraft agreements with 44 banks and its unused lines of credit amounted to ¥73,867
million ($665,468 thousand). The Company incurs no fee on the unused
portion of these overdraft agreements. The overdraft agreements expire
in the period from April 2019 to March 2020. The Company has the ability
and intent to extend these overdraft agreements under similar terms
and conditions.
Long-term debt at March 31, 2019 and 2018 comprises the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2018

2019

2019

Loans, principally from banks due
2017–2033 with interest rates
ranging from 0.10% to 10.90%:
Secured ....................................................................... ¥12,270 ¥14,545
Unsecured................................................................. 20,426
25,106
0.38% unsecured bonds due 2021 ..................
493
490
0.26% unsecured bonds due 2021 ..................
50
70
0.25% unsecured bonds due 2021 ..................
50
70
0.31% unsecured bonds due 2023 ..................
33
40
0.40% unsecured bonds due 2024 ..................
22
26
0.29% unsecured bonds due 2022 ..................
30
40
Unsecured bonds due 2017–2027
with floating interest rates basedon 6-month Japanese yen TIBOR ................... 5,946
5,299
Obligations under capital leases,
due 2017–2043 (Note 19) ................................... 24,469
24,246............................................................................. 63,789
69,932
Less: Portion due within one year .................... (18,447) (19,632)............................................................................. ¥45,342 ¥50,300$110,541
184,018
4,441
450
450
297
198
270
53,568220,442574,675(166,189)$408,486

Impairment losses on goodwill recognized in the above table aremainly due to decreases in the estimated fair value of reporting units ineach 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 201975

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2019 and 2018 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

Time deposits................................................................. ¥ 1,349 ¥ 1,437
Short-term and long-term receivables ..........
6,166
6,130
Investment securities ................................................
1,319
1,332
Property, plant and equipment .......................... 43,637 43,510
Other intangible assets ............................................ ¥ 818 ¥ 818$ 12,153
55,55011,883393,126$ 7,369

The aggregate annual maturities on long-term debt at March 31, 2019are as follows:
Years ending March 312020 .....................................................................................
2021 .....................................................................................
2022 .....................................................................................
2023 .....................................................................................
2024 .....................................................................................
Thereafter .........................................................................
...............................................................................................

In millions of yen

In thousands of
U.S. dollars¥18,447
14,529
9,137
7,277
3,716
10,683¥63,789$166,189
130,892
82,31565,55933,477
96,243$574,675

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 inaccordance with Japanese GAAP, which vary in certain respects from U.S.
GAAP. Those differences are principally, (a) that insurance acquisition
costs are charged to expense when incurred under Japanese GAAP
whereas under U.S. GAAP, those costs are deferred and amortized generally over the premium-paying period of the insurance policies, (b) thatliabilities related to incurred but not reported claims are computed basedon related regulations in Japan whereas under U.S. GAAP, those liabilities
are computed based on past experience for unreported losses, and(c) that unearned premiums are calculated based on the documents
authorized by the Supervisory Authorities in Japan whereas under U.S.
GAAP, unearned premiums are reflected based on the lapse andsurrender over the contract period.
In addition, under certain property and casualty insurance contracts
with a refund clause and long-term insurance policies that provide
refunds at maturity, such as personal accident and fire, the policyholder
receives a refund if premiums have been fully paid unless a substantial
settlement (as defined in the policy) has occurred. The Company has provided for such refundable amounts by classifying a portion of the net
premiums written, together with interest 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, 2019 and 2018 was¥72,174 million ($650,216 thousand) and ¥75,968 million, respectively.

76

SECOM Annual Report 2019

Net sales and operating revenue of Secom Insurance include net realized investment gains and losses, including gains and losses on sales of
securities, losses on other-than-temporary impairment of investment
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, 2019, 2018and 2017 were losses of ¥4,016 million ($36,180 thousand), and gainsof ¥694 million and ¥1,004 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2019, 2018 and 2017 were ¥5,032 million ($45,333 thousand),¥142 million and ¥105 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 forlump-sum benefits and/or eligible for pension benefits.
The parent company and certain domestic subsidiaries have adopted
a cash balance pension plan and a defined contribution pension plan.
Benefits under the cash balance pension plan are calculated 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 percentage of employees’ annual income is contributed to thedefined contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries
transferred an additional portion of the cash balance pension plan to thedefined contribution pension plan. Accordingly, the ratio of the accumulated amount in the cash balance pension plan and the 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, 2019, 2018 and 2017 are as follows.
The service cost component of net periodic pension cost and severance cost for the Company’s cash balance pension plan is included incost of sales and selling, general and administrative expenses in the consolidated statements of income. The components other than the service
cost component are included in other income in the consolidated
statements of income.

2019

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2018

2017

Net periodic pension andseverance costs:
Service cost .......................................... ¥7,787 ¥7,996 ¥7,889
Interest cost .........................................
398
404
349
Expected return onplan assets .......................................... (3,254) (3,109) (2,919)
Amortization of priorservice benefit .................................
(4)
(306)
(966)
Recognized actuarial loss ............
176
287
754
Net periodic pension
and severance costs ............... ¥5,103 ¥5,272 ¥5,107

2019$70,1523,586(29,315)(36)
1,586$45,973

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

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2018

2019

¥111,632
7,996
404(1,281)(6,018)591$1,020,937
70,152
3,586(1,387)(59,334)
15,523—(1,261)—(1,847)

113,324

1,046,369

117,2789,425
2,396(4,139)389

1,129,270(1,279)20,324(41,189)
9,153

—
—

(2,342)
685

125,349

1,114,622

2019

Change in benefit obligation:
Benefit obligation
at beginning of year ............................ ¥113,324
Service cost .................................................
7,787
Interest cost ................................................
398
Actuarial (gain) loss ................................
(154)
Benefits paid ...............................................
(6,586)
Acquisition ...................................................
1,723
Transfer to the defined
contribution pension plan ..............
(140)
Transfer of the substitutional
portion of the welfare
pension fund ...........................................
(205)
Benefit obligation
at end of year........................................... 116,147
Change in plan assets:
Fair value of plan assets
at beginning of year ............................ 125,349
Actual return on plan assets .............
(142)
Employer contribution.........................
2,256
Benefits paid ...............................................
(4,572)Acquisition ...................................................
1,016
Transfer of the substitutional
portion of the welfare
pension fund ...........................................
(260)
Other ...............................................................
76
Fair value of plan assets
at end of year........................................... 123,723
Funded status
at the end of year ........................................ ¥ 7,576¥ 12,025$

68,253

Amounts recognized in the consolidated balance sheets at March 31,
2019 and 2018 consist of:Prepaid pension andseverance costs ................................................
Accrued pension andseverance costs ................................................
Net amount recognized..............

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

¥38,489¥41,409$346,748(30,913)¥ 7,576(29,384)¥12,025(278,495)$ 68,253

Other changes in plan assets and benefit obligations recognized inother comprehensive income (loss) for the year ended March 31, 2019are summarized as follows:

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

In millions of yen

In thousands of
U.S. dollars¥3,241(176)
4¥3,069$29,199(1,586)36$27,649

Amounts recognized in accumulated other comprehensive income(loss) at March 31, 2019 and 2018 consist of:Actuarial loss...............................................................
Prior service benefit ...............................................
Net amount recognized....................

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

¥3,816231¥4,047

¥751
227
¥978

$34,378
2,081$36,459

The estimated prior service benefit and actuarial loss for the defined
benefit pension plans that will be amortized from accumulated othercomprehensive income (loss) into net periodic benefit cost over the next
year are ¥–1 million ($–9 thousand) and ¥207 million ($1,865 thousand),
respectively.
The accumulated benefit obligation for the pension plan was ¥115,843
million ($1,043,631 thousand) and ¥113,039 million at March 31, 2019and 2018, respectively.
The projected benefit obligation, accumulated benefit obligation andfair value of plan assets for the pension plans with accumulated benefit
obligation in excess of plan assets were ¥51,666 million ($465,459
thousand), ¥51,362 million ($462,721 thousand) and ¥18,580 million($167,387 thousand), respectively, at March 31, 2019, and ¥49,470 million,¥49,186 million and ¥29,006 million, respectively, at March 31, 2018.
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, 2019 and 2018 are as follows:
March 31

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

2019

2018

0.3%
2.2%

0.4%
2.6%

Weighted-average assumptions used to determine net pension andseverance costs for the years ended March 31, 2019, 2018 and 2017 are
as follows:
Years ended March 31

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

2019

2018

2017

0.4%
3.0%
2.6%

0.4%
3.0%
2.7%

0.3%
3.0%
2.6%

The Company determines the expected long-term rate of return basedon the expected long-term return of the various asset categories inwhich it invests. The Company considers the current expectations for
future returns and the actual historical returns of each plan asset
category.
The Company’s investment policy is designed to ensure that sufficientplan assets are available to provide future payments of pension benefits
to the eligible plan participants. The policy uses target allocations for theindividual asset categories. Plan assets are invested primarily in equity
and debt securities, and pooled funds with the objective to minimize risk
and achieve the expected rate of return. The investment results are
periodically checked and asset allocation is adjusted as necessary.

SECOM Annual Report 201977

The following table represents the fair value of the Company’s pension
plan assets at March 31, 2019 and 2018. The three levels of inputs used tomeasure fair value are more fully described in Note 22.
In millions of yen
March 31, 2019
Level 1

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

¥ 6,618

Level 2¥—

Level 3

¥

—

Total

¥

6,618

22,944—424

23,368

5,240

—

—

5,240

2,485

414

—

2,899

—
411
—
—
2
¥37,700—
47,3453,770
13,493448¥65,470—
19,545——584¥20,553—
67,301
3,770
13,493
1,034¥123,723* The plan’s government bonds include approximately 10% Japanese bonds and 90%
foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified as
Level 2, and invests approximately 50% in equity securities, 40% in debt securities and
10% in other investments. The unquoted beneficial certificate of security investment
trust included in the plan’s pooled funds is classified as Level 3.
In millions of yen
March 31, 2018
Level 1

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

¥ 8,142

Level 2¥—¥

Level 3

Total—

¥ 8,142

23,703434—

24,137

3,837

—

—

3,837

2,515

494

—

3,009

—
595
—
—
—
¥38,792

2,032
39,134
5,314
13,127355¥60,890—
24,433——
1,234¥25,667

2,032
64,162
5,314
13,127
1,589¥125,349* 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 50% in equity securities, 40% in debt securities and
10% in other investments. The unquoted beneficial certificate of security investment
trust included in the plan’s pooled funds is classified as Level 3.

78

SECOM Annual Report 2019

In thousands of U.S. dollars
March 31, 2019
Level 1

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

$ 59,622

Level 2$

Level 3

— $

Total

—

$

59,622

206,703—

3,820

210,523

47,207——

47,20722,387

3,730—

26,117——426,531 176,081
33,964—
121,559
—
4,036
5,261
$589,820 $185,162—
606,315
33,964
121,559
9,315$1,114,622

—
3,703
—
—
18
$339,640* The plan’s government bonds include approximately 10% Japanese bonds and 90%
foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified as
Level 2, and invests approximately 50% in equity securities, 40% in debt securities and
10% in other investments. The unquoted beneficial certificate of security investment
trust included in the plan’s pooled funds is classified as Level 3.

The following table represents the changes in Level 3 investments forthe years ended March 31, 2019 and 2018.
Level 3 investments, mainly in unquoted certificates of beneficial interests in securities investment trust included in the plan’s pooled funds, areat the discretion of the administrator of the fund. Their fair values are estimated based on unobservable inputs provided by the administrator of
the fund.

In millions of yen

Year ended March 31, 2019
Equitysecurities

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 (from) Level 3, net ......
Balance at end of year ......................

Japanesecompanies

Pooled
funds

Other

Total

¥ —

¥24,433¥1,234¥25,667

—

552

79

631

—

141

(1)

140

—
424
¥424

(1,533)(4,048)¥19,545

(728)
—
¥ 584

(2,261)(3,624)¥20,553

In millions of yen
Year ended March 31, 2018
Equitysecurities

In millions of yen

In thousands of
U.S. dollars¥27,051

Years ended
March 31

Year ended
March 31

2017

2019

68

(979)

615

(78)

537

(1,408)—¥24,433

466—¥1,234(942)—¥25,667

Consolidated income taxes
from continuing
operations ............................................. ¥35,124 ¥48,107 ¥47,012
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities ...................................
139
155
1,244
Pension liability
adjustments....................................
(986)
2,332
1,876
Foreign currencytranslation
adjustments....................................
(662)
662
(358)
............................................................ ¥33,615 ¥51,256 ¥49,774

Japanesecompanies

Pooled
funds

Other

Total

¥—

¥26,273¥ 778—(1,047)———¥—

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 (from) Level 3, net ......
Balance at end of year.......................

2019

In thousands of U.S. dollars
Year ended March 31, 2019
Equitysecurities
Japanesecompanies

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 (from) Level 3, net ......
Balance at end of year ......................

17. Income Taxes
Total income taxes for the years ended March 31, 2019, 2018 and 2017
are allocated as follows:$

Pooled
funds

Other

Total

— $220,117 $11,117 $231,234
—

4,973

712

5,685

—

1,270

(9)

1,261

—
(13,811) (6,559) (20,370)
3,820(36,468)—(32,648)$3,820 $176,081 $ 5,261 $185,162

The Company expects to contribute ¥2,669 million ($24,045 thousand)to its domestic defined benefit plans in the year ending March 31, 2020.
The following benefit payments, which reflect future service, as
appropriate, are expected to be paid.
Years ending March 312020 .....................................................................................
2021 .....................................................................................
2022 .....................................................................................
2023 .....................................................................................
2024 .....................................................................................
2025–2029 .......................................................................

In millions of yen

In thousands of
U.S. dollars¥ 5,451
5,615
5,806
6,009
6,177
31,347$ 49,108
50,58652,30654,13555,649282,405

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, 2019, 2018 and 2017 were
¥1,963 million ($17,685 thousand), ¥1,851 million and ¥2,192 million,
respectively.
16. Exchange Gains and Losses
Other expenses for the years ended March 31, 2019, 2018 and 2017
includes net exchange losses of ¥169 million ($1,523 thousand), ¥213
million and ¥454 million, respectively.

2018$316,432

1,253(8,884)(5,964)$302,837

The parent company and its domestic subsidiaries are subject to anumber of income taxes. As a result of revisions to domestic laws during
the third quarter ended December 31, 2015, and the fourth quarter
ended March 31, 2016, the statutory income tax rate in Japan, which
was approximately 30.7 percent for the years ended March 31, 2017 and2018, decreased to approximately 30.5 percent for the year ended March
31, 2019.
Reconciliations of the differences between income taxes computed atstatutory tax rates and consolidated income taxes from continuing
operations are as follows:2019

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2017

2019

2018

Income taxes computed
at statutory tax rate.......................... ¥39,212 ¥46,293 ¥44,584
Increase (decrease)resulting from:
Provision of valuation
allowance.........................................
215
2,116
714
Per capita tax ....................................
882
882
867
Reversal of valuation
allowance......................................... (3,959)(835) (1,048)
Net effect of changes incorporate tax rates .....................
139
660
512
Other, net............................................ (1,365) (1,009)
1,383
Consolidated income
taxes from continuing
operations ................................. ¥35,124 ¥48,107 ¥47,012$353,261

1,935
7,946
(35,665)
1,252(12,297)$316,432

SECOM Annual Report 201979

The significant components of deferred tax assets and liabilities at
March 31, 2019 and 2018 are as follows:

Deferred tax assets:
Accrued pension andseverance costs ............................................
Property, plant and equipment ............
Loss carryforwards ........................................
Adjustment of book value atthe date of acquisition
Land and buildings ................................
Other assets ................................................
Accrued bonus................................................
Deferred revenue ..........................................
Vacation accrual .............................................
Investment securities ..................................
Unrealized intra-entity profit
on assets ...........................................................
Allowance for doubtful accounts........
Intangible assets ............................................
Write-down on real estate
inventories.......................................................
Other .....................................................................
Gross deferred tax assets ....................
Less: Valuation allowance ...................
Total deferred tax assets ......................
Deferred tax liabilities:
Adjustment of book value atthe date of acquisition
Intangible assets ......................................
Land and buildings ................................
Other assets ................................................
Prepaid pension andseverance costs ............................................
Unrealized gains on securities...............
Investments in affiliatedcompanies.......................................................
Deferred installation costs .......................
Other .....................................................................
Gross deferred tax liabilities ..............
Net deferred tax assets(liabilities) .............................................

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

¥ 8,354
6,749
6,527

¥ 8,637
7,448
9,138

$ 75,261
60,80258,802

6,073
399
6,181
5,382
4,441
4,307

6,153
399
5,813
7,176
4,289
2,139

54,712
3,595
55,68548,48640,00938,802

3,521
1,714
1,549

—
1,774
1,798

31,721
15,441
13,955595
14,25570,047(20,649)
49,398631
12,00367,398(27,509)39,8895,360
128,423
631,054(186,027)
445,027(8,826)(3,904)(920)(9,690)(4,117)(951)(79,514)(35,171)(8,288)(11,014)(7,494)(12,646)(9,570)(99,225)(67,514)(6,021)(888)(4,312)(43,379)(6,458)(5,204)(4,544)(53,180)(54,243)(8,000)(38,847)(390,802)¥ 6,019(¥13,291)$ 54,225

The valuation allowance principally relates to deferred tax assets ofsubsidiaries 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, 2019, 2018 and 2017 was a decreaseof ¥6,860 million ($61,802 thousand), and an increase of ¥1,862 millionand ¥599 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 futuretaxable 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 in making this assessment. Based upon thelevel 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 the80

SECOM Annual Report 2019

Company will realize the benefits of these deductible differences, net ofthe existing valuation allowance at March 31, 2019 and 2018.
Net deferred tax assets (liabilities) at March 31, 2019 and 2018 arereflected in the accompanying consolidated balance sheets under thefollowing captions:Deferred income taxes(Other assets) .................................................
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

2019

2018

2019

¥22,060¥13,239$198,739(16,041)(26,530)(144,514)¥ 6,019(¥13,291)$ 54,225

The Company has not recognized deferred tax liabilities for a portionof undistributed earnings of foreign subsidiaries of ¥36,749 million($331,072 thousand) totaling ¥646 million ($5,820 thousand) at March 31,
2019 as they are not expected to be remitted in the foreseeable future.
At March 31, 2019, the operating loss carryforwards of domestic
subsidiaries amounted to ¥13,442 million ($121,099 thousand) and areavailable for offsetting against future taxable earnings of such
subsidiaries for up to ten years, as follows:
Expires in the years ending March 312020 .......................................................................................
2021 .......................................................................................
2022 .......................................................................................
2023 .......................................................................................
2024 .......................................................................................
2025 .......................................................................................
2026 .......................................................................................
2027 .......................................................................................
2028 .......................................................................................
2029 .......................................................................................
...................................................................................................

In millions of yen

¥

249
116
2,209
1,419
2,396
3,473
1,813
1,615
—
152
¥13,442In thousands of
U.S. dollars$ 2,243
1,045
19,901
12,784
21,586
31,28816,333
14,550—1,369$121,099

The operating loss carryforwards of overseas subsidiaries at March 31,
2019 amounted to ¥8,736 million ($78,703 thousand), a part of which will
begin to expire in the year ending March 31, 2020.
The total amount of unrecognized tax benefits for the years ended
March 31, 2019, 2018 and 2017 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 theunrecognized tax benefits during the years ended March 31, 2019, 2018and 2017.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determinationof income tax audit settlements and any related litigation could affectthe total amount of unrecognized tax benefits in future periods. Basedon the information available as of March 31, 2019, the Company does notexpect significant changes to the unrecognized tax benefits within thenext twelve months.
The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regular income tax
examinations by the tax authorities for years before 2012. In other foreign
tax jurisdictions, major subsidiaries are no longer subject to income tax
examinations by tax authorities for years before 2018, with some
exceptions.

18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect of changes
in the Company’s ownership interest in its consolidated subsidiaries.
The net income attributable to SECOM CO., LTD. and transfers from (to)noncontrolling interests for the years ended March 31, 2019, 2018 and2017 are as follows:2019

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2017

2019

2018

Net income attributable
to SECOM CO., LTD. ............................ ¥89,686 ¥96,623 ¥91,387
Net transfers from (to)noncontrolling interests .............
26
24
(16)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests ................. ¥89,712 ¥96,647 ¥91,371$807,982
234$808,216(2) Retained Earnings
The Japanese Companies Act provides that an amount equal to 10
percent of surplus distributed by the parent company and its Japanesesubsidiaries be appropriated as a legal reserve until the aggregate
amount of additional paid-in capital and legal reserve equals 25 percentof the common stock account.
The amount available for dividends under the Japanese Companies
Act is based on the amount recorded in the parent company’s nonconsolidated statutory financial statements in accordance with Japanese
GAAP. Such amount was ¥622,185 million ($5,605,270 thousand) at
March 31, 2019.
Subsequent to March 31, 2019, the parent company’s Board of
Directors declared a year-end cash dividend of ¥85 ($0.77) per share,
totaling ¥18,552 million ($167,135 thousand), to shareholders of record
on March 31, 2019. The dividend declared was approved at the generalshareholders’ meeting held on June 26, 2019. Dividends are recorded in
the year they are declared.
The Company has made it a basic policy to distribute dividends twicea 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 isdetermined by the General Meeting of Shareholders.
Cash dividends per share are computed based on dividends paid forthe year.

(4) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the years
ended March 31, 2019, 2018 and 2017 are as follows:
In millions of yen

For the year ended March 31, 2019:
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............................................
Pension liability adjustments—
Unrealized gains or losses
arising during the period .........................
Less: Reclassification
Less: adjustment for gains
Less: or losses realized
Less: in net income ......................................
Foreign currencytranslation adjustments ..................................
Other comprehensive
income (loss) .............................................
For the year ended March 31, 2018:
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............................................
Pension liability adjustments—
Unrealized gains or losses
arising during the period .........................
Less: Reclassification
Less: adjustment for gains
Less: or losses realized
Less: in net income ......................................
Foreign currencytranslation adjustments ..................................
Other comprehensive
income (loss) .............................................

Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount¥1,236(¥ 359)

¥ 877

(823)

220

(603)

(3,756)

1,030(2,726)

204

(44)

160

(5,570)662(4,908)(¥8,709)¥1,509(¥7,200)¥ 1,319(¥ 413)

¥ 906

(908)

258

(650)

7,695

(2,315)

5,380

13

(17)

(4)

2,614

(662)

1,952

¥10,733(¥3,149)¥7,584(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.

SECOM Annual Report 201981

In millions of yen
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............................................
Pension liability adjustments—
Unrealized gains or losses
arising during the period .........................
Less: Reclassification
Less: adjustment for gains
Less: or losses realized
Less: in net income ......................................
Foreign currencytranslation adjustments ..................................
Other comprehensive
income (loss) .............................................

¥7,048Tax(expense)or benefit(¥1,586)

Net-of-tax
amount¥5,462(1,204)

342

(862)

6,656

(1,869)

4,787

(105)

(7)

(112)

(6,084)358(5,726)¥6,311(¥2,762)¥3,549In thousands of U.S. dollars
Tax(expense)or benefit

Net-of-tax
amount$11,135 ($ 3,235)$ 7,900

Pre-tax
amount

For the year ended March 31, 2019:
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.........................................
Pension liability adjustments—
Unrealized gains or losses
arising during the period ......................
Less: Reclassification
Less: adjustment for gains
Less: or losses realized
Less: in net income ...................................
Foreign currencytranslation adjustments ...............................
Other comprehensive
income (loss) ..........................................

Reclassification adjustments for gains or losses realized in net income(pre-tax amount) included in the consolidated statements of income forthe years ended March 31, 2019, 2018 and 2017 are as follows:(7,414)

1,982(5,432)(33,838)

9,280(24,558)

1,837

(396)

1,441

(50,180)

5,964(44,216)($78,460) $13,595($64,865)

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

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2019

2018

2017

2019

(¥825)(¥694) (¥1,007)($7,432)

(2)

(269)

(268)

(18)

4

55

71

36

172

(19)

(212)

1,550

¥ 32

¥ 32

¥ 107

$ 287

19. Lessee
The Company leases certain office space, employee residential facilities, equipment for armored car services and transportation equipment.
Some leased buildings, and equipment for armored car services andtransportation equipment are held under capital leases. Other leases areclassified as operating leases.
On April 23, 1996, the Company entered into a long-term lease agreement 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 intoa 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 these lease arrangements relating to the building has been classified as a capital lease; accordingly, an asset of approximately ¥7,209 million ($64,946 thousand) has been recorded in thebuildings and improvements account. The portion of the lease relating to
the land has been classified as an operating lease. The future minimum
lease payment for the site at March 31, 2019 was ¥3,854 million ($34,721
thousand).
A summary of leased assets under capital leases at March 31, 2019and 2018 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

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

2018

2019

¥ 8,504 ¥ 8,452$ 76,613

36,008173

32,664298

324,396
1,559(23,107) (21,723)¥21,578 ¥19,691(208,171)$194,397

Depreciation and amortization expenses for assets under capital leases
for the years ended March 31, 2019, 2018 and 2017 were ¥6,856 million($61,766 thousand), ¥6,313 million and ¥6,785 million, respectively.

82

SECOM Annual Report 2019

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, 2019:Years ending March 312020 ...........................................................................................
2021 ...........................................................................................
2022 ...........................................................................................
2023 ...........................................................................................
2024 ...........................................................................................
Thereafter ...............................................................................
Total minimum lease payments ...............................
Less: Amount representing interest .......................
Present value of net minimum
lease payments (Note 13) ..........................................
Less: Current portion .......................................................
Long-term capital leaseobligations ....................................................................

In millions of yen

In thousands of
U.S. dollars¥ 7,041
5,418
4,093
2,948
1,795
10,32931,624(7,155)$ 63,432
48,81136,87426,55916,171
93,054284,901(64,459)

24,469(6,414)

220,442(57,784)¥18,055$162,658

Rental expenses under operating leases for the years ended March 31,
2019, 2018 and 2017 were ¥27,924 million ($251,568 thousand), ¥25,513
million and ¥25,359 million, respectively. A significant portion of suchrentals relates to cancelable short-term leases for office space andemployee residential facilities, many of which are renewed upon
expiration.
On December 8, 2000, the Company entered into a lease agreement
for a building and land in Shibuya, Tokyo. The lease term is 20 years
beginning December 8, 2000. For financial reporting purposes, the leasehas been classified as an operating lease. Based on the agreement, theannual lease payment for the site is approximately ¥1,312 million($11,820 thousand) over a 20-year period.
The future minimum lease payments required under operating leases
that have initial or remaining noncancelable lease terms in excess of one
year at March 31, 2019 are as follows:
Years ending March 312020 ..........................................................................................
2021 ..........................................................................................
2022 ..........................................................................................
2023 ..........................................................................................
2024 ..........................................................................................
Thereafter ..............................................................................
Total future minimum lease
payments ......................................................................

In millions of yen

In thousands of
U.S. dollars¥11,707
8,609
7,326
7,017
2,872
21,975$105,468
77,55966,00063,21625,874
197,973¥59,506$536,090

20. Lessor
The Company’s leasing operations consist principally of leasing of
security merchandise, security systems and real estate for offices andmedical institutions. Most of the security merchandise and security
systems on lease are classified as sales-type leases or direct-financing
leases. Other leases are classified as operating leases.

A summary of lease receivables under sales-type and direct-financing
leases at March 31, 2019 and 2018 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2018

2019

¥59,332 ¥63,766(5,004) (5,839)(3,678) (3,527)
50,650 54,400(17,257) (17,899)¥33,393 ¥36,501$534,523(45,081)(33,136)456,306(155,468)$300,838

2019

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 direct-financing leases at
March 31, 2019:Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥19,446
14,829
11,638
8,044
4,004
1,371

$175,189
133,595
104,847
72,46836,072
12,352¥59,332$534,523

2020 ..........................................................................................
2021 ..........................................................................................
2022 ..........................................................................................
2023 ..........................................................................................
2024 ..........................................................................................
Thereafter ..............................................................................
Total future minimum lease
payments to be received ....................................

A summary of investment in property under operating leases andproperty held for lease at March 31, 2019 and 2018 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 312019Land ...............................................................................
Buildings and improvements.........................
Other intangible assets ......................................
Accumulated depreciation
and amortization.................................................
..............................................................................

2018

2019

¥34,353 ¥31,499
30,258 30,578
662
662$309,486
272,595
5,964(13,398) (12,725)¥51,875 ¥50,014(120,703)$467,342

The future minimum rentals under noncancelable operating leases at
March 31, 2019 are as follows:
Years ending March 312020 ..........................................................................................
2021 ..........................................................................................
2022 ..........................................................................................
2023 ..........................................................................................
2024 ..........................................................................................
Thereafter ..............................................................................
Total future minimum rentals .............................

In millions of yen

In thousands of
U.S. dollars¥2,062
253
162
162
162
2,586
¥5,387$18,577
2,279
1,459
1,459
1,459
23,299$48,532

SECOM Annual Report 201983

21. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate thefair value of financial instruments in cases for which it is practicable. The
three levels of inputs used to measure fair value are more fully describedin Note 22.

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, 2019 and 2018 are as follows:
In millions of yen
March 31

(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits for armoredcar 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 the shortterm 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, are classified as
Level 2 and fair value is estimated based on the present value of future
cash flows through estimated maturity, discounted using estimatedmarket 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 value of future cash
flows of each instrument discounted using the Company’s current
incremental borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are classified
as Level 3 and estimated based on the present value of future cash flows,
discounted using the interest rates currently being offered for similar
contracts.
(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from financial institutions.

2019
Carrying
amountNon-derivatives:
Assets—Long-term receivables
including current
portion (Less allowancefor doubtful accounts) .......... ¥54,995
Liabilities—
Long-term debt
including current
portion............................................ 63,789
Investment deposits
by policyholders ....................... 23,615
Derivatives:
Assets—Forward exchange
contract(Other current assets) ............
—
Liabilities—
Interest rate swaps(Other long-term
liabilities)........................................
15

2018

Estimated
fair value

Carrying
amountEstimated
fair value¥55,414¥58,996¥59,356

63,786

69,931

69,937

24,42725,20826,212

—

—

—

15

33

33

In thousands of U.S. dollars
March 31, 2019
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$495,450 $499,225
574,676574,649

212,748

220,063

—

—

135

135

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 andmatters of significant judgment and therefore cannot be determinedwith precision. Changes in assumptions could significantly affectthe estimates.

84

SECOM Annual Report 2019

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as
the price that would be received to sell an asset or paid to transfer 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 thanquoted prices that are observable, and inputs that arederived principally from or corroborated by observable
market data by correlation or other means.
Level 3— Inputs are derived from valuation techniques in which one
or more significant inputs or value drivers are unobservable, 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 and liabilities thatare measured at fair value on a recurring basis at March 31, 2019and 2018. Transfers between levels are recognized at the end of therespective reporting periods.
In millions of yen
March 31, 2019
Level 1

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

¥

88

Level 2¥—

Level 3

¥

—

Total

¥

88

147,516

52,84013,372

213,728—¥147,604—¥52,840—¥13,372—¥213,816

¥
¥

¥
¥

¥
¥

¥
¥

—
—

15
15

—
—

15
15

In millions of yen
March 31, 2018
Level 1

Level 2

Level 3

Total

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

149,365

41,43329,815

220,613—¥149,514—¥41,433—¥29,815—¥220,762

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

¥
¥

¥
¥

¥
¥

¥
¥

¥

149

¥

—
—

—

¥

33
33

—

¥

—
—

149

33
33

In thousands of U.S. dollars
March 31, 2019
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents ........... $793
Short-term
investments andinvestment
securities.......................... 1,328,972
Derivatives(Other current
assets) ................................
—
Total assets .............................. $1,329,765

120,468

1,925,476——$476,036 $120,468—$1,926,269

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

$
$

$
$

—
—

$

— $

476,036

135 $
135 $

—

—
—

$

793

135
135

Cash Equivalents
All highly liquid investments with initial maturities of three months or lessare 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 are valued
using unadjusted quoted market prices in active markets with sufficientvolume and frequency of transactions.
Level 2 assets comprise principally debt securities, which are valued
using quoted prices for similar assets in active markets, or quoted prices
for identical or similar assets in markets that are not active.
Non-marketable securities classified as Level 3 assets are valued basedon unobservable inputs as the market for the assets was not active at themeasurement date. The fair value is determined by using a valuation
technique, such as the discounted cash flow model, which best reflects
the nature, characteristics and risks of each asset. These significant
unobservable inputs contain discount rates, exit timing and an EBITDA
multiple. An increase (decrease) in the discount rates, the later (earlier)exit and a decrease (increase) in the EBITDA multiple would result in adecrease (increase) in the fair value of non-marketable securities.

SECOM Annual Report 201985

The Company’s Level 3 investment securities that are measured at fairvalue on a recurring basis at March 31, 2019 and 2018, amounting to¥13,372 million ($120,468 thousand) and ¥29,815 million, respectively,
are primarily private equity investments. The valuation technique andsignificant unobservable inputs are as follows:
March 31, 2019
Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

15%–30%2019–2023
3.4x–26.6x

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2018–2022
3.2x–8xMarch 31, 2018

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, 2019 and 2018.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2018

2019

Balance at beginning of year............................. ¥29,815 ¥49,738
Total gains or losses(realized and unrealized):
Included in earnings...................................
5,285
5,964
Included in othercomprehensive income.........................
——
Purchases.................................................................
6,048
5,270
Sales ............................................................................ (27,243) (29,479)
Redemptions.........................................................
——
Cancellation of contract.................................
——
Foreign currency translation
adjustments.........................................................
(533) (1,678)
Balance at end of year............................................ ¥13,372 ¥29,815

2019$268,604

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
Included in earnings................................... (¥776) ¥

399

47,612—54,486(245,432)——(4,802)$120,468($

6,991)

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.

86

SECOM Annual Report 2019

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Non-marketable equity securities with a carrying amount of ¥10,891 million ($98,117 thousand) were written down to their fair value of ¥10,890
million ($98,108 thousand), resulting in an other-than-temporary impairment charge of ¥1 million ($9 thousand), which was included in earnings
for the year ended March 31, 2019. For the year ended March 31, 2018,non-marketable equity securities with a carrying amount of ¥10,517 million were written down to their fair value of ¥10,515 million, resulting inan other-than-temporary impairment charge of ¥2 million, which was
included in earnings. All impaired non-marketable equity securities wereclassified 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 also measured
at fair value on a nonrecurring basis. All impaired long-lived assets
and goodwill were classified as Level 3 assets as the Company uses
unobservable inputs to value these assets. These Level 3 assets are notsignificant.
23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in the normal
course of business to reduce exposure to fluctuations in interest rates.
The Company assesses interest rate risk by continually monitoringchanges 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 inthe event of non-perfomance by counterparties to derivative financial
instruments, but it is not expected that any counterparties will fail tomeet their obligations, because most of the counterparties are internationally recognized financial institutions and contracts are diversified
amongst a number of major financial institutions.
(2) Risk Management
The Company has exposure to the market risk of changes in interest
rates which relates primarily to its debt obligations. The Company
principally enters into interest rate swap agreements to manage fluctuations in cash flows resulting from changes in interest rates. Interest rate
swaps are used to change floating rates on debt obligations to fixed rates
by entering into receive-floating, pay-fixed interest rate swaps underwhich the Company receives floating interest 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 effective portion of changes in fair values of derivative instruments designated as cash flow hedges of these debt obligations arereported in other comprehensive income (loss). These amounts arereclassified into current income in the same period that hedged items
affect current income. The ineffective portion of changes in fair values arereported in income immediately.

(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 these derivative financial instruments, which are not designated as hedges, arereported in current income.

25. Revenue(1) Disaggregation of revenue
Revenue from contracts with customers and other sources for the year
ended March 31, 2019 is as follows:

Fair values of derivative instruments reflected in the consolidatedbalance sheets as of March 31, 2019 and 2018 are as follows:

In millions of yen

In thousands of
U.S. dollars

Revenue recognized from contracts
with customers......................................................................
Revenue recognized from other sources ................

March 31

March 31

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

Derivatives not designated as hedging instruments

Assets:Forward exchange
contract
Liabilities:
Interest rate swaps

Location

2019

2018

2019

Other current
assets

¥—

¥ 0

$ —

Other long-term
liabilities

15

33

135

Effects of derivative instruments on the consolidated statements
of income for the years ended March 31, 2019, 2018 and 2017 are
as follows:
Derivatives not designated as hedging instruments

Forward exchange
contract
Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Location

2019

2018

2017

2019

Other income
Other income

¥—
17

¥—
27

¥ 2
38

$ —
153

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2019 forthe purchase of property, plant and equipment of approximately ¥8,316
million ($74,919 thousand).
The Company provides guarantees to third parties mainly with respect
to bank loans extended to its affiliated companies and other entities.
Such guarantees are provided to enhance the credit standing of the affiliated companies and other entities. For each guarantee provided, theCompany would have to per form under the guarantee if the affiliatedcompanies and other entities default on a 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 ¥969 million ($8,730 thousand) at March 31, 2019. The carrying amounts of the liabilities recognized as the Company’s obligations
under these guarantees at March 31, 2019 and 2018 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.

In millions of yen

In thousands of
U.S. dollars

Year ended
March 31

Year ended
March 31

2019

2019

¥1,045,995
65,605$ 9,423,378
591,036¥1,111,600$10,014,414

The disaggregation of revenue by operating segments is describedin Note 27.
Revenue recognized from other sources primarily comprises revenue
recognized from lease contracts and insurance contracts.
(2) Contract balances
Contract balances arising from contracts with customers at March 31,
2019 and at April 1, 2018 are as follows:

Receivables*1 ............................................
Contract assets*2 ....................................
Contract liabilities*3 ..............................

In millions of yen

In thousands of
U.S. dollars

March 31

April 1March 31

2019

2018

2019

¥188,182
31,69950,116¥173,603
28,39048,307$1,695,333
285,577
451,495*1 Receivables are included in notes and accounts receivable, trade, due from subscribers in the accompanying consolidated balance sheets. These amounts are before
deducting allowance for doubtful accounts.
2* Contract assets are included in notes and accounts receivable, trade, in the accompanying consolidated balance sheets. These amounts are before deducting allowancefor doubtful accounts.
3* Contract liabilities are included in deferred revenue, other current liabilities andlong-term deferred revenue in the accompanying consolidated balance sheets.

Revenue recognized for the fiscal year ended March 31, 2019 thatwas included in the contract liability balance as of April 1, 2018 was¥37,129 million.
(3) Transaction price allocated to the remaining performance obligations
The aggregate amounts of transaction price allocated to unsatisfied
performance obligations related to contracts that have original expected
durations in excess of one year at March 31, 2019 are as follows:

Due within 1 year ...................................................................
Due after 1 year .......................................................................

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2019

¥156,933
221,605$1,413,811
1,996,441¥378,538$3,410,252

SECOM Annual Report 201987

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

Cash paid during theyear for:
Interest ..............................................
Income taxes .................................
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases ................
Increase in land, buildings
and improvements byoffsetting long-term
receivables ...................................
Significant acquisitions(Note 4)—
Assets acquired ........................
Liabilities assumed.................
Considerations forequity ..........................................
Cash and cash
equivalents on hand ..........
Total considerations..............

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2019

2018

2017

2019

¥ 1,11452,021¥ 1,278
55,970¥ 1,379
40,165$ 10,036
468,658

7,225

6,355

6,035

65,090

—

—

—

—

—
—

34,570(8,020)

—
—

—
—

—

26,550————(2,654)¥23,896

¥

¥

—
—

$

—
—

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 for which separate
financial information is available and for which operating profit/loss
amounts are evaluated regularly by management in deciding how toallocate resources and assess performance.
The Company has seven reportable business segments: security services, fire protection services, medical services, insurance services, geospatial information services, BPO and ICT services, and real estate andother services.
Pasco Corporation, the principal company in the geographic information services, released “Pasco Group’s Medium-Term Management Plan
2018–2022” on May 9, 2018, expressing its aim to become a comprehensive company in geospatial information industry pursuing the businessmodel that capitalizes positional information including various related
events. Accordingly, the segment name was changed from geographic

88

SECOM Annual Report 2019

information services to geospatial information services from the year
ended March 31, 2019. Reportable segments are not reclassified bythis change.
The Company changed the designation of information and communication related services, which focused primarily on ICT related services
and data center services, to BPO and ICT services with the acquisitionof TMJ, Inc., a subsidiary newly consolidated from October 2017. The
Company acquired all shares in TMJ, Inc. which provides various BPO
related services including operation of call center services with the aimof expanding its business capabilities through integrating BPO related
services with existing information and communication related services.
Reportable segments are not reclassified by this change.
The security services segment provides various types of security services by utilizing the Company’s unique security systems and manufacturing 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 other fire protection systems for office buildings, plants, tunnels, ships, residences and culturalmonuments. The medical services segment provides 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 healthcare-related institutions. The insurance services segment includes the
non-life insurance-related underwriting business in the Japanese market.
The geospatial information services segment includes surveying andmeasuring services and GIS services. The BPO and ICT services segment
includes various BPO related services, data center services, business continuity plan support, information security services and cloud services.
The real estate and other services segment includes development andsales 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 ofthe parent company and administrative departments of the 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 ofeach segment or which are allocated when used jointly. Corporate assets,
which are held by the parent company and the foreign holding company
for general and administrative facilities, consist principally of cash andcash 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, 2019, 2018 and 2017 is as follows:(1) Business Segment Information

2019

Net sales andoperating revenue:
Security services—
Customers ............................... ¥ 563,739
Intersegment.........................
3,428...................................................
567,167
Fire protection services—
Customers ...............................
140,139
Intersegment.........................
3,942...................................................
144,081
Medical services—
181,705
Customers ...............................
Intersegment.........................
168...................................................
181,873
Insurance services—
41,637
Customers ...............................
Intersegment.........................
3,120...................................................
44,757
Geospatial information
services—
Customers ...............................
51,510Intersegment.........................
386...................................................
51,896
BPO and ICT services—
Customers ...............................
88,065Intersegment.........................
13,209...................................................
101,274
Real estate andother services—
Customers ...............................
44,805Intersegment.........................
1,787...................................................
46,592
Total ................................................. 1,137,640
Eliminations ................................
(26,040)
Total net sales andoperating revenue........... ¥1,111,600

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2017

2019

¥ 562,272 ¥ 543,524
3,144
2,968
565,416
546,492$ 5,078,730
30,883
5,109,613

2018

136,559
4,170
140,729

126,232
3,459
129,691

1,262,514
35,514
1,298,028

175,318
185
175,503

168,819182
169,001

1,636,981
1,514
1,638,495

44,683
3,034
47,71743,7803,094
46,874375,108
28,108403,216

50,906
176
51,08251,609231
51,840464,0543,477
467,531

69,5697,275
76,844

49,681
7,126
56,807

793,378
119,000
912,378

43,48547,6162,004
1,923
45,48949,5391,102,780 1,050,244(19,988) (18,983)

403,649
16,099419,748
10,249,009(234,595)¥1,082,792 ¥1,031,261$10,014,414

Operating income (loss):
Security services......................
Fire protection
services.......................................
Medical services......................
Insurance services..................
Geospatial information
services.......................................
BPO and ICT services............
Real estate andother services .........................
Total ................................................
Corporate expenses
and eliminations...................
Operating income .................
Other income ...........................
Other expenses .......................
Income fromcontinuing operations
before income taxes......

Assets:Security services......................
Fire protection
services.......................................
Medical services......................
Insurance services..................
Geospatial information
services ......................................
BPO and ICT services............
Real estate andother services .........................
Total ................................................
Corporate items ......................
Investments inaffiliated companies...........
Total assets .................................

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2019

2018

2017

2019

¥110,146¥114,469¥110,370$ 992,306

14,188
5,782(4,856)

15,7304,034
6,221

13,146
1,680
7,268

127,820
52,090(43,748)

1,878
9,390

1,676
8,133

(1,119)
7,175

16,91984,595

5,084
141,612

6,910
157,173

5,241
143,761

45,802
1,275,784(17,901)¥123,711
11,246(6,394)(17,062)¥140,111
13,454(2,775)(16,366)¥127,395
20,918(3,090)(161,270)$1,114,514
101,314(57,603)¥128,563¥150,790¥145,223$1,158,225

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2019

2018

2019

¥ 768,128¥ 727,449$ 6,920,072

162,549
178,755
235,773

159,114
180,594
233,618

1,464,405
1,610,405
2,124,081

67,768
152,777

69,306
149,553

610,523
1,376,369

142,750
1,708,500
107,513145,289
1,664,923
109,402

1,286,036
15,391,891
968,586

63,697¥1,879,710

64,620¥1,838,945

573,847$16,934,324

SECOM Annual Report 201989

Depreciation andamortization:
Security services .....................
Fire protection
services ......................................
Medical services......................
Insurance services .................
Geospatial information
services ......................................
BPO and ICT services ...........
Real estate andother services .........................
Total ................................................
Corporate items ......................
Total depreciation
and amortization.............
Capital expenditure:
Security services......................
Fire protection
services.......................................
Medical services......................
Insurance services .................
Geospatial information
services.......................................
BPO and ICT 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

2019

2018

2017

2019

¥49,409¥54,091¥54,770$445,126

2,375
8,684
1,792

2,128
8,675
1,808

1,837
8,433
1,521

21,39678,234
16,144

2,249
9,075

2,540
7,813

3,011
6,824

20,26181,757953
74,537763

1,066
78,121
834

868
77,264
919

8,586
671,504
6,874¥75,300¥78,955¥78,183$678,378¥48,451¥44,404¥39,956$436,495

2,269
4,750
2,972

3,910
5,276
1,900

4,678
9,646
2,087

20,44142,793
26,775

2,420
9,085

1,701
31,987

1,904
7,686

21,802
81,8474,550
74,4971,291

1,690
90,868349

233
66,190856

40,991
671,144
11,631¥75,788¥91,217¥67,046$682,775

The capital expenditures in the above table represent the additions toproperty, plant and equipment and intangible assets of each segment.
The Company has no single customer that accounts for more than 10
percent of total revenues.
The following table is a breakdown of security services revenue toexternal customers by service category. The security services businessis managed as a single operating segment by the Company’s
management.

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

90

SECOM Annual Report 2019

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2019

2018

2017

2019

¥344,297¥341,157¥338,744$3,101,775

66,26559,03056,417596,982

62,41761,08957,873562,315

90,760100,996

90,490817,658¥563,739¥562,272¥543,524$5,078,730(2) Geographic Segment Information
Net sales and operating revenue attributed to countries based on
the geographical location of customers for the years ended 2019, 2018and 2017 and long-lived assets as of March 31, 2019 and 2018 wereas follows:2019

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2017

2019

Net sales andoperating revenue:
Japan ................................... ¥1,063,223 ¥1,034,228 ¥ 985,366
Other ...................................
48,37748,56445,895
Total ............................... ¥1,111,600 ¥1,082,792 ¥1,031,261$ 9,578,585
435,829$10,014,414

In millions of yen

In thousands of
U.S. dollars

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

2018

March 31

March 31

2019

2018

2019

¥618,061
11,699¥629,760¥629,069
11,239¥640,308$5,568,117
105,396$5,673,513

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
28. Subsequent Events
The Company has evaluated subsequent events through July 30, 2019,
the date at which the financial statements were available to be issued,
and determined there is no item to disclose.

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 the consolidatedbalance sheets as of March 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, changes in equity, andcash flows for each of the years in the three-year period ended March 31, 2019, and the related notes to the consolidated 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 fairpresentation 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 in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit toobtain 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 misstatement of 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 presentation of 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, 2019 and 2018 and the results of their operations and their cash flows for each of the years in the three-year
period ended March 31, 2019, 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, 2019 are presented
solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has
been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
July 30, 2019

SECOM Annual Report 2019

91

OTHER FINANCIAL DATA

Contents
Summary of Selected Financial Data .......................................................................... 93
Common Stock Data ............................................................................................................. 95

92

SECOM Annual Report 2019

Summary of Selected Financial Data
SECOM CO., LTD. and Subsidiaries
Years ended/as of March 31
In millions of yen
2019

2018

2017

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue ....................................................................................... ¥1,111,600 ¥1,082,792 ¥1,031,261
563,739562,272
543,524
Security services: .....................................................................................................................
As a percentage of net sales and operating revenue ...........................
50.8%
51.9%
52.7%
Electronic security services.........................................................................................
344,297
341,157
338,744
As a percentage of net sales and operating revenue ...........................
31.0
31.5
32.8
Other security services—
Static guard services .................................................................................................
66,26559,03056,417
As a percentage of net sales and operating revenue ...........................
6.0
5.5
5.5
Armored car services ................................................................................................
62,41761,08957,873As a percentage of net sales and operating revenue ...........................
5.6
5.6
5.6
Subtotal .................................................................................................................
128,682
120,119
114,290
Merchandise and other.................................................................................................
90,760100,996
90,490As a percentage of net sales and operating revenue ...........................
8.2
9.3
8.8
Fire protection services .......................................................................................................
140,139
136,559
126,232
As a percentage of net sales and operating revenue ...........................
12.6
12.6
12.2
Medical services.......................................................................................................................
181,705
175,318
168,819
As a percentage of net sales and operating revenue ...........................
16.3
16.2
16.4
Insurance services ..................................................................................................................
41,63744,683
43,780As a percentage of net sales and operating revenue ...........................
3.8
4.2
4.3
Geospatial information services....................................................................................
51,51050,906
51,609As a percentage of net sales and operating revenue ...........................
4.6
4.7
5.0
BPO and ICT services ............................................................................................................
88,06569,56949,681
As a percentage of net sales and operating revenue ...........................
7.9
6.4
4.8
Real estate and other services ........................................................................................
44,80543,48547,616
As a percentage of net sales and operating revenue ...........................
4.0
4.0
4.6
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD. ............................................................ ¥ 89,686
Cash dividends paid (2)................................................................................................................
34,922
SECOM CO., LTD. shareholders’ equity ............................................................................. 1,044,184
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans ..............................................................................................................................
Current portion of long-term debt .......................................................................
Straight bonds.....................................................................................................................
Other long-term debt ....................................................................................................
Total debt .........................................................................................................................
SECOM CO., LTD. shareholders’ equity .......................................................................
Total capitalization......................................................................................................
Return on total assets (percentage) (a) .............................................................................
Return on equity (percentage) (b) ........................................................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization .....................................................................................
Rental expense under operating leases...................................................................
Ratio of accumulated depreciation to depreciable
assets (percentage) ...................................................................................................................
Net property turnover (times) (c) ..........................................................................................
Before-tax interest coverage (times) (c) (d) ........................................................................

¥

96,62332,7381,000,277

¥

2016

2015

2014

¥983,428
505,058
51.4%
330,84333.6¥945,238
487,06351.5%
326,300
34.5¥921,146
472,44951.3%
318,11634.5

55,9075.7
32,9903.4
88,89785,3188.7
131,743
13.4
163,538
16.6
40,654
4.1
52,553
5.4
48,294
4.9
41,588
4.2

53,788
5.7
21,0102.2
74,79885,965
9.1
121,18912.8
155,884
16.5
38,2594.1
52,7605.6
47,412
5.0
42,671
4.5

51,681
5.6
20,7672.3
72,44881,8858.9
122,04613.3
150,535
16.3
37,011
4.0
54,697
5.9
46,992
5.1
37,416
4.1

91,38730,557929,242¥ 84,072
28,373865,278¥ 80,184
38,197
825,969¥ 73,979
22,918753,099

3.4
1.6
0.4
3.6
8.9
91.1
100.0

3.5
1.7
0.5
4.1
9.8
90.2
100.0

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

4.8
8.6

5.3
9.7

5.2
9.8

5.0
9.7

5.3
9.7

5.1
9.8

6.8
2.5

7.3
2.3

7.6
2.5

7.4
2.5

7.3
2.4

7.2
2.4

65.4
2.67
109.6

64.6
2.63
123.0

63.2
2.49
107.1

62.8
2.38
89.2

61.6
2.38
93.8

60.8
2.34
90.4

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

SECOM Annual Report 2019

93

2019

2018

2017

2016

2015

2014

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

233,292,219
15,031,867

233,290,441
15,030,573

233,288,717
15,028,470

233,288,717
15,026,824

233,288,717
15,024,812

233,288,717
15,022,012

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

218,260,352

218,259,868

218,260,247

218,261,893

218,263,905

218,266,705¥ 410.91
160.00¥ 442.70
150.00¥ 418.71
140.00¥ 385.19
130.00¥ 367.37
175.00¥ 338.94
105.004,784.12
590.91
1.98
23.08
16.05
9,482

4,582.96
649.44
1.73
17.89
12.20
7,920

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

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

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

94

SECOM Annual Report 2019(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2019, cash dividends of ¥18,552 million (¥85 per share)
were approved at the general shareholders’ meeting on June 26, 2019 (see Note
18 of the accompanying notes to consolidated financial statements).
(3) Per share amounts are based on the number of shares outstanding at the end ofeach 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 .......................................................................................................

2019

2018

2017

2016

2015

2014

24,02326,80925,20024,97524,852

27,05437.14%
3.30
2.46
42.74
7.92
6.44
100.00%35.94%
1.63
2.53
44.85
8.61
6.44
100.00%35.05%
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%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2017
2018

2019

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

Price per share (in yen)
High
Low

¥8,686
8,687
9,118
8,833
8,550
9,368
9,827
9,684

¥7,814
7,921
8,170
7,435
7,751
8,130
8,765
8,781

Nikkei Stock Average (in yen)
High
Low

¥20,230.41
20,397.58
22,939.18
24,124.15
23,002.37
24,120.04
24,270.62
21,822.04¥18,335.63
19,274.82
20,400.78
20,617.86
21,292.29
21,546.99
19,155.74
19,561.96

SECOM Annual Report 201995

COMMON STOCK ISSUES

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

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

15, 1974
21, 1974
21, 1975
21, 1975
1, 1975
31, 1976
1, 1976
1, 197630, 1977
1, 1977
1, 1978
1, 1981
1, 198120, 1983
30, 1983
30, 1984
30, 1985
20, 1986
30, 1986
30, 1987
20, 1988
30, 1988
30, 1989
19, 1990
31, 1990
31, 1991
31, 1992
31, 1993
31, 1994
31, 1995
31, 1996
31, 1997
31, 1998
31, 1999
19, 1999
31, 2000
31, 2001
31, 2002
31, 2003
31, 2005
27, 2017
26, 2018
26, 2019

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
2
2

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
233,292
233,294¥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
66,392,692
66,401,083—
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
Issue of new shares as restricted stock compensation
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.

96

SECOM Annual Report 2019

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

Contents
Condensed Consolidated Balance Sheets(Based on Japanese GAAP)............................................................................................. 98
Condensed Consolidated Statements of Income(Based on Japanese GAAP)............................................................................................. 100
Consolidated Statements of Comprehensive Income(Based on Japanese GAAP)............................................................................................. 100

SECOM Annual Report 201997

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

ASSETS

98

2019

2018

2017

2016

2015

2014

Current assets:
Cash on hand and in banks ................................................................................ ¥Cash deposits for armored car services ......................................................
Call loans ........................................................................................................................
Notes and accounts receivable, trade..........................................................
Due from subscribers .............................................................................................
Short-term investments........................................................................................
Lease receivables and investments in leased assets...........................
Merchandise and products ................................................................................
Real estate inventories...........................................................................................
Work in process..........................................................................................................
Costs on uncompleted construction contracts.....................................
Work in process for real estate inventories ...............................................
Raw materials and supplies ................................................................................
Deferred income taxes ..........................................................................................
Short-term loans receivable ...............................................................................
Other.................................................................................................................................
Allowance for doubtful accounts ...................................................................
Total current assets .................................................................................

350,319
142,335—
133,659
41,61625,382
41,82614,146
5,864
5,872
10,97130,743
10,398—4,398
31,000(1,775)
846,759¥ 317,267
135,808—
129,984
35,272
17,36045,544
12,321
4,766
5,057
10,441
39,688
8,849
—
5,196
26,352(1,818)792,094¥ 302,364
130,619—
119,801
33,09029,38743,974
11,915
5,223
4,913
8,979
22,2838,385
14,003
4,942
23,684(1,766)
761,804¥ 228,458
128,267—
122,048
31,812
34,44839,542
13,099
3,527
5,557
9,070
23,024
8,579
12,728
4,086
27,375(1,883)689,744¥ 232,221
50,395
15,500114,071
26,31628,517
39,242
14,163
3,063
4,031
9,460
21,058
7,913
12,8082,268
21,111(1,997)600,146¥ 210,514
58,597
20,500115,318
25,174
12,95533,18814,186
33
4,602
8,983
15,396
7,573
13,254
2,699
17,623(2,026)558,574

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

148,693
71,715
116,876
41,115
378,401

148,62270,872
114,287
39,907
373,689

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

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

128,215

131,028

112,131

119,505

49,41153,596

Investments and others:
Investment securities .......................................................................................
269,575
35,284Long-term loans receivable..........................................................................
Net defined benefit asset...............................................................................
38,48827,469Deferred income taxes.....................................................................................
53,952Other ...........................................................................................................................
Allowance for doubtful accounts..............................................................
(13,042)
411,728
Total investments and others...........................................................
918,346
Total fixed assets.......................................................................................
Deferred assets .............................................................................................................
—
Total assets ................................................................................................... ¥1,765,105

280,659
35,284
41,40921,65852,332(13,033)
418,311923,029—¥1,715,123

280,974
38,40335,282
9,592
51,436(15,990)399,698
888,367
4¥1,650,176

264,400
39,40130,796
8,602
54,978(15,698)
382,482
878,29314¥1,568,052

284,32242,90435,0104,874
49,382(17,525)
398,969
810,541
26¥1,410,715

246,233
45,701
17,612
13,521
48,486(16,352)
355,203769,633
17¥1,328,226

SECOM Annual Report 2019

In millions of yen

LIABILITIES2019

Current liabilities:
Notes and accounts payable, trade.............................................................. ¥ 45,826
39,126
Bank loans.....................................................................................................................
Current portion of straight bonds .................................................................
2,009
4,875
Lease obligations .....................................................................................................
42,645
Payables—other .......................................................................................................
Accrued income taxes ..........................................................................................
22,767
Accrued consumption taxes.............................................................................
7,209
7,329
Accrued expenses ...................................................................................................
Deposits received for armored car services.............................................
121,086
30,438Deferred revenue .....................................................................................................
17,255
Accrued bonuses .....................................................................................................
Provision for loss on construction contracts...........................................
2,913
25,975
Other................................................................................................................................
369,458
Total current liabilities..........................................................................
Long-term liabilities:
Straight bonds............................................................................................................
Long-term loans .......................................................................................................
Lease obligations .....................................................................................................
Guarantee deposits received............................................................................
Deferred income taxes..........................................................................................
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............................................................................................

2018

¥

43,92941,558795
4,932
40,10225,896
7,959
7,084
113,830
30,30916,2092,436
22,499357,5442017¥

44,63544,9691,460
4,752
37,46927,557
5,765
5,315
107,878
30,552
15,447
2,532
25,596353,933

2016¥

41,79455,283
2,582
4,724
38,37622,341
6,611
5,562
101,306
31,38915,524
1,397
20,738347,633

2015¥

43,16044,9651,414
503
33,84921,063
12,878
4,653
16,94531,34814,652
1,612
20,707
247,755

2014¥

49,40952,1204,640
579
31,316
27,744
4,151
4,625
17,76531,027
14,437
1,981
16,883
256,684

4,702
10,063
11,96032,9558,735

5,322
12,721
11,902
33,181
14,217

7,003
14,123
11,77733,907
21,9438,251
20,033
11,95435,002
14,026

8,413
20,602
3,712
36,00013,554

7,796
17,256
4,183
36,542
11,1691,046
22,953

1,421
21,8491,306
22,4281,387
22,816

1,415
18,504

1,635
18,569172,866
4,406
269,691
639,150

172,345
3,403
276,366
633,910

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

NET ASSETS
Shareholders’ equity:
Common stock .......................................................................................................... ¥ 66,392
80,360Capital surplus ...........................................................................................................
908,852
Retained earnings....................................................................................................
Common stock in treasury, at cost ...............................................................
(73,759)
981,846
Total shareholders’ equity ..................................................................

¥

66,38580,328
851,764(73,748)924,729¥

66,37780,297
797,493(73,731)
870,437¥

66,37780,326743,353(73,717)816,340¥

66,37780,265
694,688(73,701)
767,630¥

66,377
83,054656,286(73,682)732,036

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

18,157(21)(10,683)
6,421
13,87323,759(24)(5,774)
9,933
27,89425,125(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)

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

130,234

128,589

121,253

109,859

106,895

100,253

Total net assets ......................................................................................... 1,125,954
Total liabilities and net assets .......................................................... ¥1,765,105

1,081,213¥1,715,123

1,013,253¥1,650,176

943,144¥1,568,052

907,341¥1,410,715

830,369¥1,328,226

SECOM Annual Report 201999

Condensed Consolidated Statements of Income (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2019

2018

2017

2016

2015

2014

Revenue¥1,013,823
Percentage change from prior year ...................................................
4.5%¥970,624
4.6%¥928,098
5.3%¥881,028
4.8%¥840,722
2.2%¥822,228
7.4%

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

692,21168.3

652,67367.2

621,412
67.0

586,53966.6

557,884
66.4

542,949
66.0

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

321,61131.7

317,95032.8

306,686
33.0

294,48833.4

282,83733.6

279,278
34.0

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

191,39718.9

182,50218.8

175,63618.9

165,906
18.8

159,22218.9

159,259
19.4

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

130,21312.8

135,44814.0

131,050
14.1

128,582
14.6

123,61514.7

120,018
14.6

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

19,646
4,970

13,152
4,281

22,371
6,388

11,3805,136

18,366
5,293

13,1006,441

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

144,889
14.3

144,31814.9

147,033
15.8

134,826
15.3

136,68816.3

126,677
15.4

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

1,909
2,838

2,471
2,545

516
5,697

1,584
15,003

1,962
11,384

2,025
3,876

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

143,960
14.2

144,24514.9

141,852
15.3

121,40813.8

127,265
15.1

124,826
15.2

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

47,001(7,808)54,811(9,314)43,3262,369

39,150(526)

43,156(37)

48,485(2,110)Net income...............................................................................................................

104,766

98,74896,15682,784

84,14678,451

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

12,757

11,755

11,986

5,745

8,754

8,574

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

92,0099.1
5.8

86,9939.0
3.4

84,170
9.1
9.3

77,0398.7
2.2

75,3929.0
7.9

69,8768.5
9.8

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

100

In millions of yen
2019

2018

2017

2016

2015

2014

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 ...........

¥104,766¥ 98,748¥ 96,156¥ 82,784¥ 84,146¥78,451(5,740)(0)(2,616)(3,056)(1,649)0(1,003)
5,595

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

15,058
—
9,527
8,581

543
—
11,787—(3,439)3,876(1,327)(2,743)

3,676

6,649

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

(14,853)

6,819

5,155

(17,626)

36,843

18,980Comprehensive income...................................................................................

89,913

105,568

101,31265,157

120,990

97,431

Comprehensive income attributable to:
Owners of the parent company ............................................................
Noncontrolling interests ............................................................................

77,988
11,924

93,323
12,24488,78912,522

61,1683,989

110,128
10,861

87,4809,950

SECOM Annual Report 2019

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

Contents
Condensed Nonconsolidated Balance Sheets(Based on Japanese GAAP)............................................................................................. 102
Condensed Nonconsolidated Statements of Income(Based on Japanese GAAP)............................................................................................. 104

SECOM Annual Report 2019101

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

ASSETS

2019

2018

2017

2016

2015

2014

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

¥120,815
39,504723
17,931
11,516
4,714
—
7,047
1,686
2,599
—
35,2504,530(101)
246,218¥ 85,009
38,347523
17,286
10,995
4,387
—
5,628
1,767
2,556
—
28,0171,712(105)
196,128¥ 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

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

16,263
501
69,049143
3,566
21,952
4,721
1,827
118,025

16,160611
67,746
162
2,861
22,077
4,812
72
114,504

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

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

—
8,560
920
9,480

—
5,903
741
6,644

—
6,125
400
6,526

—
5,794
574
6,369

—
4,644
730
5,375

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

21,982

24,58323,083

20,58829,72523,789353,375

350,551

323,993

325,104

239,120

239,008

2,149
113,221
7,578
20,461
21,410
5,442
4,109
2,458
(4,442)547,748675,254¥921,472

2,098
138,277
7,650
20,622
20,763
—
4,046
2,613
(4,440)566,767
687,917¥884,045

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

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....................................
Deffered income taxes.....................................................................
Insurance funds....................................................................................
Other ...........................................................................................................
Allowance for doubtful accounts .............................................
Total investments and others...........................................
Total fixed assets.......................................................................
Total assets ...................................................................................

102

SECOM Annual Report 2019

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

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

2019

2018

2017

2016

2015

2014

¥

3,820
21,211309
19,7695,437
11,2103,221
747
18,34819,9496,488
2,590
113,104¥ 4,108
21,940229
16,708
3,897
13,162
3,817
691
16,446
20,3006,300
2,623
110,226¥ 3,604
22,703215
14,476
4,018
14,3452,883
697
15,187
20,6296,278
4,014
109,053¥ 3,641
36,923
198
15,698
3,980
9,479
2,718
737
13,97520,923
6,246
4,177
118,699¥ 3,172
29,416
185
15,675
4,480
10,826
7,088
800
15,124
21,2696,296
4,311
118,647¥ 3,429
36,703
176
14,546
4,218
12,3661,478
802
16,17521,301
6,246
3,530
120,976

3,971
16,462—
1,788
343
22,566135,670

2,358
16,640
3,575
2,164
91
24,830135,057

2,477
16,804
6,642
2,506
103
28,533
137,5872,601
17,038
6,213
2,835
378
29,068
147,768

2,661
17,286
3,400
3,241
408
26,998145,646

2,747
17,622
307
3,555
459
24,692
145,668¥ 66,392¥ 66,385¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,0690
83,06983,061
0
83,062

83,0540
83,054

83,0540
83,054

83,0540
83,054

83,0540
83,054

9,028

9,028

9,028

9,028

9,028

9,028

800
2,212
692,935
704,976(73,759)
780,679800
2,212
653,840
665,881(73,748)
741,579

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)
624,768

5,122

7,408

6,634

4,518

6,347

2,473

5,122
785,801¥921,472

7,408
748,988¥884,045

6,634
713,263¥850,851

4,518
678,355¥826,124

6,347
650,132¥795,778

2,473
627,242¥772,910

SECOM Annual Report 2019103

Condensed Nonconsolidated Statements of Income (Based on Japanese GAAP)SECOM CO., LTD.
Years ended March 31
In millions of yen
2019

104

2018

2017

2016

2015

2014

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

¥394,181
1.6%
332,995
1.7
61,185
1.3¥387,881
1.4%
327,470
1.6
60,411
0.5¥382,476
1.7%
322,338
1.4
60,1373.2¥376,044
1.5%
317,764
1.2
58,2803.0¥370,663
1.8%
314,068
1.5
56,5943.3¥364,280
2.5%
309,499
1.4
54,781
9.4

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

234,046
59.4
190,62857.2
43,41871.0

229,33259.1
186,63957.0
42,693
70.7

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

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

160,13440.6
142,367
42.8
17,76729.0

158,54940.9
140,83143.0
17,71829.3

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

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

83,30121.1

80,38020.7

78,988
20.7

77,191
20.5

76,04620.5

75,521
20.7

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

76,833
19.5

78,16820.2

76,28319.9

75,66420.1

73,17419.8

72,90920.0

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

15,006
2,866

14,9782,064

13,3893,130

13,6392,691

11,714
3,316

10,2694,295

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

88,972
22.6

91,083
23.5

86,54322.6

86,61223.0

81,57222.0

78,884
21.7

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

87
203

1,896
324

651
100

3,064
6,733

1,670
2,805

491
1,604

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

88,85522.5

92,65523.9

87,09422.8

82,94322.1

80,43721.7

77,771
21.3

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

14,838
16.7

24,962
26.9

23,83327.4

24,50029.5

22,94528.526,27333.8

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

74,01618.8
9.3

67,69217.5
7.0

63,26016.5
8.2

58,44215.5
1.7

57,492
15.5
11.6

51,497
14.1
4.8

SECOM Annual Report 2019

Corporate Information(As of June 30, 2019)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:

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

MAJOR CONSOLIDATED SUBSIDIARIES

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

Issued capital(In millions of yen)

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
100
30

(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)(100.0)(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
100.0
80.1

Lines of business(As of June 30, 2019)

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
Security services
Security services

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

(Continued )SECOM Annual Report 2019

105

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights¥13,302(50.4)%

28
30
20
80
20
30
32
20
50
10
20
40
20
20
20
20
20
80
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)(82.0)(100.0)100.0

Nittan Electronic Co., Ltd.
Nittan Denko Co., Ltd.
Nittan Hokkaido Service Center Co., Ltd.
Nittan Tohoku Service Center Co., Ltd.
Sogo Denki Trading Co., Ltd.
Shell beach Co., Ltd.
Consilium Nittan Marine Ltd.

60
10
10
10
10
10
42

(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(50.0)

Manufacturing and sales of fire protection equipment
and facilities
Installation of fire protection equipment
Installation and maintenance of fire protection equipment
Building management
Installation of fire protection equipment
Maintenance of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of environmental monitoring systems
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation and maintenance of fire protection equipment
Installation, sales 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
Sales of fire protection equipment<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<Fire protection services>
Nohmi Bosai Ltd.
Ichibou Co., Ltd.
Kyushu Nohmi Co., Ltd.
Chiyoda Service Co., Ltd.
Nohmi Engineering Corp.
Nohmi System Co., Ltd.
Iwate Nohmi Co., Ltd.
Tohoku Nohmi Co., Ltd.
Aomori Nohmi Co., Ltd.
Nissin Bohsai Co., Ltd.
Chiba Nohmi Co., Ltd.
Shikoku Nohmi Co., Ltd.
Nohmi Techno Engineering Co., Ltd.
Akita Nohmi Co., Ltd.
Fukushima Nohmi Co., Ltd.
Niigata Nohmi Co., Ltd.
Hokkaido Nohmi Co., Ltd.
Yashima Bosai Setsubi Co., Ltd.
System Service Co., Ltd.
Nittan Co., Ltd.

Lines of businessNotes: 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.

106

SECOM Annual Report 2019

(As of June 30, 2019)(Continued )MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights<Insurance services>
Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

¥ 100
16,809(100.0)%97.1

Non-life insurance agency
Non-life insurance<Geospatial information services>
Pasco Corp.
GIS Hokkaido Co., Ltd.
GIS Kanto Co., Ltd.
Mid Map Tokyo Corp.
RIIC Corp.
Higashi-Nihon Sogo Keikaku Co., Ltd.
Satellite Image Marketing Corp.

8,758
190
40
15
20
200
60

69.8
(100.0)(52.6)(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<BPO and ICT services>
Secom Trust Systems Co., Ltd.

1,469

100.0

At Tokyo Corp.
TMJ, Inc.
BiOS, Inc.
Mobile Select, Inc.

13,379
100
39
10

50.9
100.0
(90.0)(100.0)Information, communication, information security
services and software development
Data center business
BPO services
Bilingual IT services
Contact center support services<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 Business Plus Co., Ltd.
Secom Home Service Co., Ltd.
Kurashi-TEL Co., Ltd.
Secom Engineering Co., Ltd.
Toko Create Co., Ltd.

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

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

Development of residential buildings
Real estate leasing
Management of real estate
Credit services
Clerical services
Car maintenance
Employee welfare for SECOM Group
General office services
Lifestyle support services
Comprehensive lifestyle support services
Design, construction and maintenance of facilities
Electrical engineeringLines of businessNotes: 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.

(As of June 30, 2019)(Continued )SECOM Annual Report 2019107

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital

Percentageof equity/
voting rights

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 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.
Secom Jindun (Tianjin) Security Co., Ltd.
Jiangsu Secom Security Co., Ltd.
PT. Secom Indonesia
PT. Secom Bhayangkara
PT. Secom Realty 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.
Secom Aktif Guvenlik Yatirim A.S.
Kent Guvenlik Sistemleri Elektronik Insaat Sanayi ve Ticaret A.S.

£44,126 thousand£20 thousand£50 thousand¥5,550 million
US$2,000 thousand
Rmb80,000 thousand
US$2,500 thousand
US$1,000 thousand
US$4,500 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb10,000 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb5,000 thousand
Rmb15,000 thousand
US$4,111 thousand
I.RPA3,200 million
I.RPA97,972 million
THB378,934 thousand
AUD18,126 thousand
AUD5,951 thousand
NZD1,604 thousand¥120 million
VND95,177 million
S$5,000 thousand
S$100 thousand
TRY26,584 thousand
TRY19,302 thousand

100.0%(100.0)(100.0)100.0(95.0)(85.0)(80.0)(80.0)(100.0)(95.0)(100.0)(100.0)(97.0)(60.0)(69.4)(100.0)49.0(40.0)(99.9)
49.0
100.0(70.0)(100.0)100.0(80.0)
46.6(100.0)50.0(100.0)

Security services
Holding company
Security services
Holding company
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
Real estate leasing
Security services
Security services
Security services
Security services
Sales of security equipment
Security services
Security services
Security services
Security services
Security services<Other services>
Shanghai Nohmi Secom Fire Protection Equipment Co., Ltd.

US$14,300 thousand(100.0)Nohmi Taiwan Ltd.

NT$15,000 thousand(96.3)

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.
Pasco (Thailand) Co., Ltd.
PT. Nusantara Secom InfoTech£1,194 thousand
US$1,400 thousand
US$3,236 thousand
S$51,330 thousand
INR3,029 million
INR15 million
PHP50,400 thousand
Rmb22,320 thousand
THB129,000 thousand
US$3,304 thousand(100.0)(100.0)(100.0)(100.0)(49.7)(99.3)(100.0)(99.0)(100.0)(100.0)Aerodata International Surveys BVBA
Pasco Europe B.V.
Pasco North America Inc.
Keystone Aerial Surveys Inc.
Value Communication Services (Shanghai), Inc.
Jie Sheng Communication Services (Shanghai), Inc.
TMJP BPO Services, Inc.
The Westec Security Group, Inc.
ClearLight Partners, LLC
ClearLight Partners II, LLC
ClearLight Partners III, LLC

EUR14,302 thousand
EUR4,000 thousand
US$5,621 thousand
US$0.6 thousand
Rmb35,749 thousand
Rmb5,000 thousand
PHP35,900 thousand
US$0.3 thousand———(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)(99.9)
100.0(99.7)(99.0)(98.0)

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

Lines of businessNotes: 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.

108

SECOM Annual Report 2019

(As of June 30, 2019)

SECOM’s Basic Business Areas

109

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

Armored Car Services

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

Security Services
On-Line Security Systems for Commercial Use andSecurity Services for Large-Scale Events

SECOM AXSECOM AX is an on-line security system with advanced on-site image sensors thatincorporate microphones to enable SECOM control center staff to check thesubscriber’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 monitors andmanages 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 with facility
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 then sent 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 AIRSHIP/SECOM AEROSTAT
These dirigibles are used for overhead surveillance at large-scale events to ensure
the prompt detection of problems and in disaster situations to provide support for
efforts to swiftly gauge the extent of damage to evacuation guidance, among others.

Static Guard Services

On-Line Security Systems

SECOM offers a wide range of services and products with theaim of realizing its Social System Industry vision.

SECOM AED Package Service

Subscriber

PoliceDept.

1 Alert using

3 Dispatch SECOM

telecommunications
circuits

emergency response
personnel

SECOM
Emergency
Depot

2 Alert SECOM emergency

SECOM
Control Center

response personnel

On-Line Security Systems for Residential Use

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining aroundthe-clock intrusion- and fire-prevention services, emergency call services, gas leakmonitoring and medical emergency call services. The new SECOM Home Security NEO
is an advanced version that features a desktop controller and can be operated from asmartphone. This service can also be linked with devices on the IoT, facilitating accessto a variety of new services.
SECURITY SYSTEMS FOR CONDOMINIUMS AND APARTMENTS
SECOM provides comprehensive building management functions for condominiums
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 alert andhealth management service. This service is offered as an option to SECOM Home
Security subscribers.
SECOM SENIOR CARE PHONE SERVICE
When the user presses the device’s safety confirmation button in response to aprompt, an email verifying the user’s safety is automatically sent to registered

Fire
Dept.
Gas
Company

Alert emergency
services as necessary

individuals. Whether indoors or out, the device, when activated, sends anemergency signal to SECOM. If requested, SECOM can also dispatch emergency
response personnel. If deemed necessary, SECOM staff also contacts emergency
services, in which case preregistered emergency information is displayed on thesubscriber’s device, thereby ensuring it is immediately available to ambulanceattendants and hospital staff.

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 to locate moving
objects, such as people, vehicles and property. As an option, customers can also
request to have emergency response personnel dispatched to the location of theobject or an emergency alert relayed to a predetermined telephone number.

The SECOM AED Package Service is a full-service package encompassing leasing
and maintenance of emergency lifesaving kits featuring automated external
defibrillators (AEDs) to non-medical professionals. SECOM MyAED, a version forhome-use AEDs, is also offered.

Merchandise

SECURITY CAMERA SYSTEM
This multifunctional, cost-effective security camera system provides stable
monitoring even in places where insufficient light makes clear images difficult andallows the combined use of digital and analog cameras. It is also capable ofdetecting 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 vein authentication.
TOMAHAWK SERIESThe TOMAHAWK series is an extensive lineup of innovative extinguishing systems,
including TOMAHAWK MACH II residential-use fire extinguisher and TOMAHAWK III
high-speed automated fire extinguishing system with gas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat resistanceand 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 to facilitate
effective detection of intrusions over a broad area. The sensor is flexible and can be
programmed to accommodate various monitoring areas.

Fire Protection Services

Medical Services

Insurance Services

BPO and ICT Services

FIRE ALARM SYSTEMSThis business encompasses the assembly, installation and sale of a broad range ofequipment and systems, including automatic fire alarm systems, environmental monitoring systems, and fire and smoke control systems, suited to buildings of varying
sizes and uses, from homes to large-scale commercial and industrial facilities.
FIRE EXTINGUISHING SYSTEMSSECOM offers an extensive lineup, including fire sprinklers and other water fire
extinguishing systems, foam fire extinguishing systems, dry chemical fire extinguishingsystems and inert gas fire extinguishing systems, for applications ranging from officebuildings to chemical plants and tunnels.
MAINTENANCE SERVICES
This business centers on inspection, maintenance and repair services, as well asaround-the-clock on-line monitoring and other services provided through a customer
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 in otherindustries, including medical and electronics equipment.

HOME MEDICAL SERVICESSECOM’s medical services for patients at home include pharmaceutical services,encompassing the preparation and delivery of prescription pharmaceuticals, andhome nursing services provided through visiting nurse stations. SECOM also provides
consulting and support services for physicians opening home medical care clinics.
HOME-BASED PERSONAL CARE SERVICESSECOM provides patients recovering at home with caregivers to assist with personal
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 atclinics and small and medium-sized hospitals. The system enables the sharing of 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 resonanceimaging (MRI), computerized tomography (CT) and other images to SECOM’s Hospinet center, where diagnostic experts examine them and provide consultation to theprimary 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 ofnursing homes.
SECOM HEALTH CARE CLUB KENKO
SECOM Health Care Club KENKO is a membership-based club that provides access to avariety 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 clinicin Tokyo.

SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that features
reduced premiums for subscribers to commercial security systems.
SECOM ANSHIN MY HOME
SECOM Anshin My Home is a comprehensive fire insurance policy that features
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 thepatient’s portion of the cost of medical care covered by the national health insurance scheme. MEDCOM also provides hospital referrals and treatment-related
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 equipped withantitheft 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 whendisaster strikes and during post-disaster reconstruction. These include SECOM Safety
Confirmation Service, which helps companies confirm the safety of employees inthe 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 is detected.
CLOUD-BASED SERVICESSECOM extends cloud-based services that help increase customers competitiveness,
productivity and ability to create value by digitizing their business processes.
BPO SERVICESSECOM offers contact center, back office support and a broad range of otherBPO services.

SECOM SECOM
Annual Report
Annual2019
Report 2019109

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

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

SECOM
SECOM
AnnualAnnual
ReportReport2019 2019 110 110

Directors, Audit and Supervisory Board Members
and Executive Officers
Directors

Makoto Iida

Yasuo Nakayama

Ichiro Ozeki

Founder

Chairman and
Representative Director

President andRepresentative Director

Yasuyuki Yoshida

Tatsuro Fuse

Tatsuya Izumida

Tatsushi Kurihara

Senior Executive Director

Executive Director

Director

Director

Takaharu Hirose

Hirobumi Kawano

Hajime Watanabe

Outside Director

Outside Director

Outside Director

Audit andSupervisory
Board Members

Executive Team
Directors

Takayuki Ito

Yasuo Nakayama

Kenichi Furukawa

Yoichi Sugimoto

Sadahiro Sato

Kazuhiro Mitomo

Koji Kato

Chairman and
Representative Director

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Hideki Kato*

Ichiro Ozeki

Masahiro Takeda

Sumiyuki Fukumitsu

Yoshinori Yamanaka

Takehiko Senda

Executive Officer

Executive Officer

Executive Officer

Makoto Yasuda*

President andRepresentative Director

Managing Executive Officer

Toshiaki Mizuno

Kensuke Shindo

Seiya Nagao

Takashi Nakada

Setsuo Tanaka*

Yasuyuki Yoshida

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Shokichi Ishimura

Yasufumi Kuwahara

Noriyuki Uematsu

Michiyoshi Morita

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Keitaro Arai

Noriyuki Fukuoka

Osamu Nagai

Makoto Inaba

Managing Executive Officer

Executive Officer

Executive Officer

Executive Officer

Osamu Ueda

Takeshi Akagi

Atsushi KomatsuManaging Executive Officer

Executive Officer

Executive Officer

Senior Executive Director*Outside

Tatsuro Fuse
Executive Director

Tatsuya Izumida
Director

Tatsushi Kurihara

Executive Officers

Director(As of July 31, 2019)111

SECOM Annual Report 2019

SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo 150-0001, Japanwww.secom.co.jp

Printed in Japan