DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS
Directors

Corporate Auditors
Teruo Ogino
Ken Tsunematsu
Hiroshi Yasuda
Kohei Yamashita

Makoto Iida

Juichi Toda

Founder

Co-Founder

Shuji Maeda

Minoru Takaoka

President andRepresentative Director

Executive Officer

Koichi Sato

SECOM CO., LTD.

Executive Officers

Hideo Morishita
Executive Officer

Executive Vice President

Katsuo Akiyama
SeniorManaging Executive Officer

Fumio Obata
Senior Executive Director

Katsuhisa Kuwahara
Kanemasa Haraguchi

Shuji Maeda

Chairman

Executive Vice Chairman

President andRepresentative Director

Executive Director

Yasuo Nakayama
Executive Director

Seiichi MoriManaging Executive Officer

Hiroshi Ito
Executive Director

Shunji Ogahara
Managing Executive Officer

Executive Officer

Takayuki Ito
Director

Ryohei Komatsu
Executive Officer

Teruo Kano
Executive Officer

SECOM CO., LTD.

Yukio Tsunoda

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

Executive Officer

Naohide Nakamura
Executive Officer

ANNUAL REPORT 2010

Shohei Kimura

Tsuneo Komatsuzaki

Tokyo 150-0001, Japan
http://www.secom.co.jp/

Masahiro Takeda
Executive Officer

Teruhisa Yoshimura
Executive Officer

Koichi Sato

Fumio Obata

Executive Vice President

Senior Executive
Director

Keitaro Arai
Executive Officer

Yasuyuki Yoshida
Executive Officer

Tatsuro Fuse
Executive Officer

ANNUAL REPORT 2010
Year ended March 31, 2010

Katsuhisa Kuwahara

Yasuo Nakayama

Hiroshi Ito

Executive Director

Executive Director

Executive Director(As of July 31, 2010)

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

Takayuki Ito
Director

Printed in Japan79

Secom Co., Ltd.

Annual Report 2010

PROFILE

SECOM GROUP’S BASIC BUSINESS AREAS

SECOM AED Package Service

Centralized Security Systems

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

SECOM offers a wide range of services and ­productswith the aim of realizing the Social System Industry.
Security Services

S

ince its establishment in 1962, SECOM CO., LTD., a pioneer in Japan’s security services market,
has endeavored to contribute to society through its business activities, an approach that hasenabled it to respond swiftly to society’s evolving needs for security and peace of mind, as well as toachieve solid growth. Beginning with the development in 1966 of Japan’s first on-line security service,
SECOM has sought consistently to create security services that meet changing security needs—
including an on-line home security system in 1981 and COCO-SECOM, a mobile security system foroutdoor use, in 2001—and at the same time to secure broad acceptance of the concept of security
services in Japan.
In light of growing social unease and increasingly diverse and sophisticated security needs, SECOM
is leveraging its accumulated know-how in the security field, as well as its distinctive technology
development abilities and dependability as a security professional, to develop and promptly launch avariety of innovative products and services. Such efforts have enabled SECOM to achieve steady
growth.
SECOM’s overarching mission is encapsulated in its corporate message, “Providing reliable peaceof mind.” To this end, SECOM—comprising the parent company and the companies of the SECOM
Group—continues working to realize its vision for the future, the Social System Industry, which
describes a framework of distinctive, integrated products and services that make life more secure,convenient and comfortable. In addition to its core security services, SECOM’s business portfolio
today includes fire protection services, medical services, insurance services, geographic information
services, real estate development and sales, and information and communication related and otherservices, which SECOM combines into exclusive, tailored packages that enable it to provide safety
and security for people whenever and wherever necessary.
SECOM has also expanded into overseas markets, establishing a network of subsidiaries and affiliates in 11 countries and territories, where it provides services of the same high quality as it does inJapan. In particular, SECOM is focusing on the People’s Republic of China (PRC), where it is working
to expand its business area, thereby reinforcing its presence, in response to robust demand for security services fueled by sustained economic growth.

Fire
Dept.

Centralized Security Systems
Commercial Use:

SECOM AXSECOM AX is an on-line security s­ ystem with advanced on-site image sensors
that incorporate microphones to enable the SECOM control center staff to checkthe subscriber’s premises by listening and viewing.
SECOM IXSECOM IX is a remote imaging security system for c­ ommercial facilities offeringround-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 b­ uildings with morethan one tenant.
HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.

Residential Use:

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
basic ­intrusion- and fire-prevention services and emergency call services, as well
as gas leak monitoring and medical emergency call ­service options. The system
is linked around the clock with a SECOM control center, where personnel
respond immediately in the event of a problem by dispatching emergency
response personnel and, if necessary, contacting the appropriate authorities.
Subscribers are also eligible for telephone health counseling and other services

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

77

Secom Co., Ltd.

Merchandise

Subscriber

PoliceDept.

Annual Report 2010

Gas
Company• Alert emergency
services asnecessary

Alert using
1 telephone

3 Dispatch SECOM emergency

circuits

response personnel

SECOM
Emergency
Depot

SECOM
Control Center

2 Alert SECOM

emergency
response personnel

offered through SECOM Medical Club and have access to SECOM Home
Service, a suite of lifestyle support services.
SECOM CONDOMINIUM SECURITY SYSTEMSSECOM condominium security systems provide comprehensive building­management functions for condominiums and total safety with a centralized­security sys­tem for each unit in the building. SECOM MS-3, the top-of-the-line
system, can be used for buildings of any size, either as a retrofit or a new
installation.

Large-Scale Proprietary Security Systems

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

COCO-SECOM

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

Static Guard Services

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.

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

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

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

SECOM CCTV SYSTEMThe SECOM CCTV system is a multifunctional, cost-effective closed-circuit­surveillance camera system. The system provides stable monitoring evenin places where insufficient light makes clear images difficult and allows the
combined use of digital and analog cameras. It is also capable of detecting
attempts to disable or destroy the camera.
SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
SESAMO SERIESThe SESAMO series comprises access-control systems for use in ­corporate
offices, factories, parking facilities and any other security-sensitive areas.
These systems employ such technologies as contactless IC pass cards,
magnetic cards, personal identification numbers, f­ingerprint identification andpalm vein identification.
TOMAHAWK SERIESThe Tomahawk series is an extensive lineup of innovative ­extinguishingsystems, including Tomahawk Mach II residential-use fire extinguisher andTomahawk III high-speed automated fire extinguishing system withgas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat­resistance and performance.
SENSOR LIGHTSENSOR LIGHT is a sensor-equipped light activated automatically when thesensor detects human body temperature.
SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
PHYSICAL SECURITY PRODUCTS FOR HOMESSECOM offers a broad range of physical security products for homes. These
include SECOM Anshin Glass, a high-impact breakage-resistant window
glass designed to prevent intruders from entering through broken windows;
SECOM Window Frame, a window frame with reinforced stainless bars; andStrong Door, a door that cannot be forced open for an extended period oftime after it has been engaged.

Real Estate Development and Sales
REAL ESTATE DEVELOPMENT AND SALESSECOM offers Glorio condominiums.

Information and Communication Related and Other Services
SECURE DATA CENTERThe Secure Data Center provides a comprehensive service for e-business thatcombines SECOM’s expertise in both physical and information security.
DIGITAL AUTHENTICATION SERVICESSECOM offers public key infrastructure (PKI) services that provide an effectivemeans of establishing credibility among Internet users, including issuance ofdigital certificates and a set-up and operating service for organizations thatwish to establish their own digital certificate authority.
NETWORK SECURITY MONITORING SERVICESSECOM provides security and stability for clients’ IT systems around theclock. SECOM ­monitors and reports on threats to security, and on network
operating s­ tatus and network traffic.
Disaster Response Services
SECOM offers a variety of services, including SECOM Safety Confirmation
Service, which helps commercial subscribers ascertain the safety of employees
and collect and share information in the event of a major disaster, thereby
assisting them to reopen for business as soon as possible.

Annual Report 2010

Secom Co., Ltd.

78

CONTENTS

A Message to Shareholders . ............................................................................

2

At the general shareholders’ meeting, shareholders approved the payment of annual cash
dividends of ¥85.00 per share.

SECOM’s Vision . ...............................................................................................

6

The Social System Industry: Combining SECOM products and services into distinctive packages to achieve our overarching goal of providing safety and security for people whenever andwherever necessary.

Business Index ..................................................................................................

8

SECOM Today ...................................................................................................

9

We maintain control over every aspect of our security services, from R&D to manufacturing,sales, security planning, installation, around-the-clock monitoring, emergency response­services and equipment maintenance. This approach enables us to provide products andservices that respond effectively to the diverse needs of subscribers at appropriate prices.

Financial Review ..................................................................................................................... 24
Audited Financial Statements ................................................................................................. 29
Other Financial Data . .............................................................................................................. 60
Consolidated Financial Data (Based on Japanese GAAP) [Reference] . ................................. 65
Nonconsolidated Financial Data (Based on Japanese GAAP) [Reference] . ........................... 69
Corporate Information ............................................................................................................. 73
SECOM Group’s Basic Business Areas................................................................................... 77
Directors, Corporate Auditors and Executive Officers ............................................................ 79
Note: Unless specified otherwise, all figures contained in this annual report are based on the financial statements,
which have been calculated and are presented in accordance with accounting principles generally accepted in
the United States (U.S. GAAP).

Annual Report 2010

Secom Co., Ltd.

1

HIGHLIGHTS

Pursuant to the applicable Japanese law, SECOM is required to publish results in line with accounting principles­generally accepted in Japan (Japanese GAAP). Key financial highlights calculated using Japanese GAAP are
shown below for reference.
			
U.S. GAAP		In millions of yen
SECOM CO., LTD. and Subsidiaries			
Three years ended March 31, 2010		Years ended March 31

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

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

In thousandsof U.S. dollars
Year ended
March 31

2010

2009

2008

2010

¥ 670,644
97,178¥ 684,016
76,259¥ 701,836
105,278$ 7,211,226
1,044,925

46,9891,138,147

30,5601,143,141

61,7561,265,525

505,258
12,238,139

569,799

528,721574,554

6,126,870

In yenIn U.S. dollars¥ 215.51
85.00¥ 137.42
85.00¥ 274.51
80.00$ 2.320.91

2,613.34

2,424.91

2,553.97

28.10

			
Japanese GAAP		In millions of yen
SECOM CO., LTD. and Subsidiaries			
Three years ended March 31, 2010		Years ended March 31

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

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

(In billions of yen)

2009

2008

2010

¥ 654,678
98,53998,32747,611
1,081,679
625,153¥ 678,400
87,63490,92421,502
1,090,483
582,608¥ 682,619
104,706
114,278
61,506
1,202,840
630,274$ 7,039,548
1,059,559
1,057,280
511,946
11,630,957
6,722,075

In yenIn U.S. dollars¥ 273.40
80.00
2,521.45$ 2.350.91
27.55¥ 218.37
85.00
2,561.94

¥

96.69
85.00
2,380.12

Note: Cash dividends per share of common stock shown are based on dividends approved and paid in each period.
Subsequent to March 31, 2010, cash dividends of ¥85.00 per share were approved at the general shareholders’meeting held on June 25, 2010.

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

80

80

60

60

40

40

20

20

0
05

06

07

08

09

10

Note: Net income attributable to SECOM CO., LTD. in the year ended March 31, 2010, increased ¥16.4 billion, to¥47.0 billion. Principal factors behind this result were decreases in loss on other-than-temporary impairmentof investment securities and operating loss in the real estate development and sales segment.
		 Net income attributable to SECOM CO., LTD. in the year ended March 31, 2009, declined ¥31.2 billion,to ¥30.6 billion. This result was due mainly to an increase in loss on other-than-temporary impairment ofinvestment securities, reflecting a ­stagnant stock market, and an operating loss in the real estate­development and sales segment, owing to flagging conditions in the condominium market.
		 Net income attributable to SECOM CO., LTD. in the year ended March 31, 2008, rose ¥5.9 billion, to¥61.8 billion. This result was due to higher operating income, which reflected increases in the security services segment and a full year of contributions from the fire protection services segment, newly added forthe operations of Nohmi Bosai Ltd., which became a consolidated subsidiary in December 2006.

Year ended
March 312010

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of¥93=US$1, the rate prevailing on the Tokyo F­ oreign Exchange Market on March 31, 2010.
2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number ofshares ­outstanding during each period, less treasury stock.
3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares­outstanding at the end of each period, less treasury stock.
4. Cash dividends per share of common stock shown are based on dividends approved and paid in each period.
Subsequent to March 31, 2010, cash dividends of ¥85.00 per share were approved at the general shareholders’­meeting held on June 25, 2010 (see Note 17 of the accompanying Notes to Consolidated Financial Statements).

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

0
05

06

07

08

09

10

A MESSAGE TO SHAREHOLDERS

Consolidated Operating Results
In the fiscal year ended March 31, 2010, improved economic conditions overseas andemergency economic stimulus measures in Japan prompted a recovery in corporate earnings and stemmed the decline in capital investment. Nevertheless, the Japanese economy
fell short of a full recovery, owing to a persistently harsh employment situation, coupled withfears of another economic downturn overseas and deflation at home.
In this environment, SECOM continued to respond to needs of customers by providing
high-grade products and services in our mainstay security services business, as wellas in our other businesses: fire protection services, medical services, insurance services,
geographic information services, real estate development and sales, and information andcommunication related and other services. Through such efforts, we pressed forward to
realize our Social System Industry vision.
Despite increases in our medical services, insurance services and geographic information
services segments, consolidated net sales and operating revenue were down 2.0%, or¥13.4 billion, to ¥670.6 billion. This result was largely attributable to a decrease in net sales
and operating revenue in our mainstay security services segment, which reflected a decline
in sales of merchandise and the negative impact of foreign exchange rate fluctuations on
the net sales and operating revenues of overseas subsidiaries, which increased on a local
currency basis. Other factors included flagging conditions in the condominium market,
which prompted us to restrict our selection of properties for development while paying heed
to profitability. In contrast, operating income rose 27.4%, or ¥20.9 billion, to ¥97.2 billion,
owing to decreases in loss on other-than-­temporary impairment of investment securities in
the insurance services segment and write-down of real estate ­inventories in the real estatedevelopment and sales segment. Net income attributable to SECOM CO., LTD., advanced
53.8%, or ¥16.4 billion, to ¥47.0 billion, reflecting the increase in operating income anddecrease in the loss on o
­ ther-than-temporary impairment of investment securities.
Distribution of Dividends
Recognizing the provision of a fair return to shareholders as an important task, we determine consolidated dividend payout levels based on an overall assessment of trends in ouroperating performance, in line with our policy of ensuring a consistent, stable distribution of
profits. At the general shareholders’ meeting held on June 25, 2010, shareholders approved
the payment of annual cash dividends of ¥85.00 per share, the same as in the previous­fiscal year.
New Management TeamAt a meeting of SECOM’s Board of Directors on November 16, 2009, directors voted toappoint new senior executives. Accordingly, effective January 1, 2010, Kanemasa
Haraguchi was appointed executive vice chairman and Shuji Maeda took the reins as­president and representative director.

2

Secom Co., Ltd.

Annual Report 2010

Creating New Business Opportunities
The nature of security services is changing with the times. Evolving social imperatives,changing patterns of criminal behavior, technological advances and improvements in thesocial infrastructure are among the many factors that influence the constantly evolving
needs of customers for security and peace of mind. The security services market must
keep pace with these changes.
One result of such changes has been a broadening of our customer base for on-line
home security systems. Another has been more diversity in interpretations of “security andpeace of mind” among existing customers, particularly for SECOM Home Security. In
response, we have introduced a wider range of peripheral products and services that help
make life more secure. These range from remote monitoring services that use surveillancecameras placed outside the subscriber’s home to high-impact, breakage-resistant window
glass. Looking ahead, needs and family structures will continue to evolve as the aging ofsociety spurs an increase in the number of elderly couples and seniors living alone. We
believe that SECOM has the flexibility necessary to respond accurately to the evolving
needs of such a diverse range of customers. Our confidence derives from our proven­service capabilities, substantial management resources and distinctive c­ orporate culture.
In our core on-line security services business, we maintain control over every aspect ofour security services, from R&D to manufacturing, sales, security planning, installation,around-the-clock monitoring, emergency response services and equipment maintenance.
This approach enables us to swiftly incorporate feedback from subscribers and potential
customers—obtained through day-to-day sales and service activities—into the development process. Our R&D departments use such information in the development of new
security systems as well as in ongoing efforts to improve existing systems, further enhancing our ability to respond to customer needs. We have also established a department dedicated to comprehensively investigating and analyzing social trends. This department serves
as our very own radar, picking up on social changes and predicting how such changes willtransform the market, and constantly verifying and widening its research to back up findings. The results of these activities are also fed back to our R&D groups, bolstering our ability to develop proprietary technologies and new products and systems, and to determine
new R&D themes. Such close cooperation among sales, operations and R&D teams is adirect result of our uniquely ­integrated business approach.
This approach helps us deliver uninterrupted high-grade services around the clock,a prerequisite to security and peace of mind. To ensure that our security systems operate
dependably, regardless of weather conditions and where they are installed, we have­established our own stringent quality standards that all products and services must meet.
Information gathered by our various departments is collected, analyzed and used to
improve our day-to-day operations. These and other efforts to continuously improve andenhance are the secret to SECOM quality and reliability.
Building on our mainstay security services, we have developed our business portfolio toinclude fire protection services, medical services, insurance services, geographic information services, real estate development and sales, and information and communication
related and other services. By leveraging the capabilities of our Group companies, weAnnual Report 2010

Secom Co., Ltd.

3

A MESSAGE TO SHAREHOLDERS­ ontinue to deliver unrivaled products and services that provide safety and security forc­people everywhere.
What really makes this integrated approach to the provision of products and services
work—enabling us to capitalize on comprehensive Group capabilities to provide advanced
and highly reliable products and services—is the efforts of our employees. In all of ourefforts, we adhere to our original corporate philosophy, which emphasizes not being content with the status quo and striving to do what is appropriate. The former means continually seeking to provide more innovative and appropriate solutions; the latter means judging
the legitimacy of our actions based on whether they are just and fair and beneficial to society. This philosophy also guides the actions of each and every SECOM employee, inspiringthem to work with pride and dedication.
By continuing to place a high priority on advanced technologies and product dependability, we pledge to continue combining our products and services into distinctive packages,
to achieve our overarching goal of providing safety and security for people whenever andwherever necessary. We have always sought to keep abreast of social trends and changing
patterns of criminal activity, among others, to leverage our diverse basic technologies andaccumulated know-how and create products and services that make life more secure, convenient and comfortable. We will push forward with the expansion of our businesses bydeveloping forward-looking products and services that respond accurately to customer
needs and by infusing new energy into our sales activities.
Strengthening Operations in Growing Markets Overseas
In key Asian markets, economic growth has spurred an increase in security needs in recent
years. The defining feature of our overseas security services business is that we provide“SECOM-style” on-line security services, that is, services of the same high quality as inJapan, customized to reflect local needs and cultural sensibilities. The standard businessmodel of security services companies in Europe and the United States is to sell security
equipment outright. While such equipment is linked to an on-line monitoring center, thestandard response in the event of an emergency is simply to notify the police and/or otherpertinent authorities. In contrast, “SECOM-style” on-line security services encompass theinstallation of security equipment at the subscriber’s premises, around-the-clock monitoringfrom a SECOM control center and prompt dispatch of emergency response personnel
should an abnormality be detected. Going forward, we will continue working to increase thetrust of subscribers in overseas markets, while at the same time promoting greater market
penetration for “SECOM-style” services.
In the People’s Republic of China (PRC), which continues to see exceptional economic
growth, we are actively promoting “SECOM-style” security services. We have establisheda network of bases, particularly in key cities in the country’s important coastal regions. In
the coming years, we intend to expand this network to major inland cities, enabling us toprovide the same reliable services to an increasing number of subscribers. We have alsoestablished an R&D facility in Shanghai, which is gathering information in relation to theamendment of standards for security equipment in the PRC—a change that is expected tohave far-reaching ramifications for security services companies in the country. Additionally,

4

Secom Co., Ltd.

Annual Report 2010

we are preparing for the launch of on-line home security services, which will open up a
brand new market to us.
Repositioning SECOM Firmly on a New Growth Trajectory
We continue to pursue a variety of initiatives aimed at realizing our Social System Industry
vision, which depicts a framework of distinctive, integrated products and services that makelife more secure, convenient and comfortable. To this end, we not only provide individual
products and services, but also combine them into tailored, integrated packages, thereby
creating an essential social infrastructure for our customers, one that will support our
growth and expansion in the years ahead. To further consummate our vision, we also needto respond swiftly and accurately to evolving social imperatives and to customer feedback,well informed by a solid grasp of people’s needs for safety and security—tasks that rely
greatly on our technological capabilities.
In April 2010, we held the first SECOM Technical Fair at our head office in Tokyo. We­welcomed approximately 4,000 visitors over the three days of this event, which highlighted
our technological and product development capabilities, presenting groundbreaking prototype security systems that augur the future of the security services industry in line with our
vision. Looking ahead, we will hone the astuteness necessary to stay abreast of evolvingsocial imperatives, rally our t­echnological strengths to develop and launch advanced­products and services in a timely manner and promote further market acceptance.
Overseas, we will leverage expertise accumulated in Japan to provide security services tocustomers in key growth markets, particularly in the PRC. Through such efforts, we will
work to expand and accelerate growth in our overseas security services business.
As always, our most important task is to earn the trust of our customers. In line with our
corporate message—“Providing reliable peace of mind”—we pledge to work as one to contribute to society through our business activities and to prove SECOM worthy of the trust ofcustomers and achieve new growth. In these and all of our endeavors, we look forward to
the continued support of shareholders.

Makoto Iida
Founder

Shohei Kimura
ChairmanJune 25, 2010
Kanemasa Haraguchi
Executive Vice Chairman

Makoto Iida

Shohei KimuraFounder

ChairmanKanemasa Haraguchi

Shuji Maeda

Shuji Maeda

Executive Vice Chairman

President and Representative Director

President and Representative Director

Annual Report 2010

Secom Co., Ltd.

5

SECOM’s VISION

Realizing the Social System Industry Vision
Since first declaring the Social System Industry vision in 1989,
we have sought to make this vision a reality by advancing ourcore security services business and broadening our focus toinclude other businesses—fire protection services, medical­services, insurance services, geographic information services,
real estate development and sales, and information and communication related and other services—to create a frameworkof distinctive products and services. We not only provide products and services independently, but also combine them into
integrated packages, in line with our overarching mission,
which is to provide safety and security for people whenever
and wherever necessary.
The cornerstone of the Social System Industry, security­services, encompasses services for commercial customers,
homes and individuals. To provide ­services that deliver security
and peace of mind to a diverse range of customers in a variety
of settings, we work tirelessly to provide reliable security systems supported by robust backup capabilities, as well as todevelop products and services that reflect changing social
imperatives. In addition, we have established a nationwide

network of emergency response depots that enables us toswiftly dispatch highly trained emergency response personnel.
These capabilities have earned us both a solid reputation as
security professionals and the trust of our customers. Buildingon this trust, we continue to expand the scope of our businesses, positioning ourselves to provide ever-more effective
solutions to people’s evolving safety and security needs.
In all our efforts, we are guided by our original c­ orporate­philosophy, which also governs the conduct of every SECOM
employee and has served as a powerful driver of growth andexpansion to date. This p­ hilosophy emphasizes not being content with the ­status quo and striving to do what is appropriate.
The former means seeking constantly to provide innovative andmore suitable products, services and systems by challenging
accepted norms, while the latter means judging the legitimacyof our actions by whether they are just and fair and beneficial tosociety. Looking ahead, we will continue pressing forward withefforts to realize our Social System Industry vision with the aimof being a corporate group that makes a positive contribution
to society.

Geographic iceserv
information s

Insurances
servicelMedica es
servic6

Secom Co., Ltd.

Annual Report 2010

Targeting New Growth
We recognize technological capabilities as a crucial management resource and vital to maintaining a ­competitive edge inthe security services market. Accordingly, we are capitalizing
on changing customer needs and actively promoting the­development of p
­ ioneering technologies and the launch of
attractive products and services, thereby injecting new life into
our sales activities.
Since our establishment, we have sought to keep abreastof social trends, patterns of criminal activity and technologicaladvances and to develop proprietary technologies in-house,
thereby enabling us to provide innovative systems, products
and services. Our R&D department comprises the SecomIntelligent Systems Laboratory, which conducts research in
the area of basic technology, and the Development Center,
which is responsible for the timely development of security­systems that augur market directions. Having our own R&D
capability gives us a key advantage, making it possible for us
to promptly incorporate feedback and information pertaining
to customer needs obtained through day-to-day sales and­service activities into R&D.

In April 2010, we held the SECOM Technical Fair at ourhead office in Tokyo. This event introduced existing proprietarysensing, authentication and image recognition technologies—
all of which play an essential role in our security systems—andnear-future image recognition technologies currently underdevelopment. Visitors were given the opportunity to physically­experience these forward-looking systems, which exemplify
our technological strategies. As Japan’s foremost provider ofon-line security ­services, we recognize the need to continue
combining our accumulated operational know-how with newofferings such as these. Accordingly, we will work to expedite
the launch and promote the broad ­acceptance of high-grade,value-added security services.
Moving forward, we will continue to provide uniquely
SECOM products and services, thereby earning theconfidence and satisfaction of customers and encouraging
an ever-increasing number of people to turn to SECOM withthe confidence that doing so will help resolve their security
problems and enhance security and peace of mind.

ate
Real est ment
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p
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Fir
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serviceAnnual Report 2010

Secom Co., Ltd.

7

BUSINESS INDEX
Percentage of consolidated
net sales andoperating revenue*n Security Services

P 9

n Commercial Security Services

P10

63.3%

n Home Security Services

P13

Security Services

n Other Security Services

P15

n Security Services in Overseas Markets

P16

n Fire Protection Services

P18

n Medical Services

P19

n Insurance Services

P20

n Geographic Information Services

P21

n Real Estate Development and Sales

P22

n Information and Communication Related
and Other Services

P22

11.9%
Fire Protection Services

8.4%
Medical Services

4.3%
Insurance Services

6.3%
Geographic Information Services

2.0%
Real Estate Development
and Sales

3.8%
Information and Communication
Related and Other Services* Pie charts show percentage of consolidated net sales and operating revenue(Excluding intersegment transactions)8

Secom Co., Ltd.

Annual Report 2010

SECOM TODAY

Security Services
Our competitive advantage derives from our distinctive
approach to the provision of security services.

We began offering on-line security services
in 1966. Rather than simply selling security
equipment outright, we sought to provide
comprehensive services. To this end, we
combined the speed and accuracy ofmachines in detecting irregularities andtransmitting information with the judgment,
mobility and quick action of humans,
thereby realizing both operational efficiency and high quality. This model yielded
our on-line security system, which encompasses the placement of sensors at its
subscribers’ premises and around-theclock monitoring from a SECOM control
center via telecommunications circuits, aswell as the dispatch of emergency
response personnel from the closest
emergency depot should sensors signal
an irregularity and, when necessary, alerting of the police and/or fire department.
Our insistence on providing not only
equipment installation and monitoring, butalso emergency response services,reflects our deep-seated belief that only byguaranteeing subscribers’ safety can wehonestly claim to be providing security.
Today, SECOM on-line security systems
are the most widely used security systems
in Japan, with subscribers spanning abroad range of industries. Recognizing theneed to respond promptly and accurately
to varied customer needs, determined bysuch factors as regional variations andbusiness differences, we have developed
a distinctive approach that makes thispossible. This approach involves thefollowing:• Swift response in the event of an
emergency: Capitalizing on our many
years of experience, which is reflected in
the prompt decision-making capabilitiesof our control center staff and the quick
reactions of our highly trained emergency response personnel, we are well
positioned to respond swiftly and effectively in the event of an emergency.
Another key factor underscoring our
responsiveness is our nationwide network of approximately 2,750 emergency
depots, each of which covers only a­limited geographic area. Additionally,

emergency response personnel are­outfitted with COCO-SECOM mobile
security system transmitters, meaning
control center staff are always aware of
their locations and thus able to dispatch
the closest individuals.
• Systems that are a cut above: Knowhow gained through extensive experience in the provision of security systems
has enabled us to double and treble our
backup capabilities, thereby ensuring
our systems are a cut above. For example, to link sensors placed at a subscriber’s premises with a SECOM
control center we use both the subscriber’s telephone circuits and the­cellular phone network, thus providing
reliable backup in the event of an­interruption in regular telephone service.
• In-house R&D capabilities: We receive
constant feedback from customers on
their needs and opinions—including
requests for equipment with certain
functions and reports of frightening
experiences—through our daily sales
activities. In addition, emergency
response personnel provide detailed
information on actual crimes, whiledevelopment personnel visit customers
directly to obtain first-hand information.
We maintain control over every aspectof our security services, from R&D to
manufacturing, sales, security planning,
installation, around-the-clock monitoring, emergency response services andequipment maintenance. Pertinent
departments cooperate to analyze existing systems in light of customer feedback obtained in the course of providing
security services, facilitating the prompt
development and improvement of services and products in response to­customer needs.
• Effective training and management of
human resources: Our four training
centers in Japan provide training for
emergency response personnel
designed to impart knowledge andtechniques. At the same time, thesefacilities strive constantly to impart the
SECOM corporate philosophy and standards of conduct that employees—assecurity professionals—are expected toobserve. The effective training and management of human resources is essential to our ability to provide high-grade
services.
• A comprehensive, integrated
approach to peace of mind: In addition to security services, we provide fire
protection, medical services, insurance
services, geographic information services, real estate development andsales, and information and communication and related and other services,which we also combine into unique,tailored packages that enable us to go
beyond simply installing security systems, ensuring customers feel they canturn to us anytime for solutions that willremove sources of unease and deliver
security and peace of mind.
Within our security services business,
we work to offer services that respond tovaried customer needs and are appropriately priced. To this end, we retain ownership of security equipment, which we rent
rather than sell to subscribers. Rental contracts mean initial costs for subscribers
are significantly lower than would be thecase if they were required to purchaseequipment outright. The rental format also
allows us to take responsibility for replacing equipment promptly in the event of amalfunction or an upgrade, ensuring stable, high service quality. This distinctive
approach yields considerable synergies
that support the broad competitive advantage our security services enjoy in theJapanese market.

Annual Report 2010

Secom Co., Ltd.

9

SECOM TODAY

Commercial Security Services
We continue to promote greater market acceptance of security services by drawing on our
expertise in image recognition and developing systems adapted to the telecommunications
infrastructure.
Utilizing image recognition­technologies to develop diverse
systems
In view of the increasingly cunning andmalicious nature of criminal acts, plus
the fact that they are often committed ina matter of minutes, in 1998 we developed and launched SECOM AX, an
on-line security system employing
image recognition technology. SECOM
AX records and transmits images
should an abnormality be detected at a
subscriber’s premises, thus facilitating
prompt assessment by the control
center and a swift and accurate
response in the event of an intrusion.
Control center staff can also broadcast
a warning to intruders using on-premises speakers, thereby helping to prevent crimes from occurring. The mostimportant feature of SECOM AX is its
image sensors, which employ proprietary image recognition technology thatare able to distinguish between humanand nonhuman intruders and to detect
the presence of an intruder even when
the premises are in darkness.

SECOM AX on-line security system

10

Secom Co., Ltd.

Annual Report 2010

Our extensive experience in theprovision of security systems withbuilt-in image sensors has enhanced
both the technological capabilities andthe know-how of our R&D personnel in
the area of image recognition technologies. One outcome of this has been theevolution of technology used in
SECOM AX for application in other
SECOM security systems. For example,
we have developed a remittance fraud
protection system whereby sensors
attached to automated teller machines(ATMs) capture images and sounds
from the ATM booth and alert a SECOM
control center should they detect any
suspicious human movement.
Looking ahead, we will continue toleverage our accumulated technologicalcapabilities and know-how in the areaof image recognition to develop highgrade security systems that reflect
evolving social imperatives andcustomer needs.
Developing systems that facilitate
integrated management of image
data from multiple surveillancecamerasWith crimes in Japan growing ever morebrutal, public perceptions of security
appear to be deteriorating. In thisenvironment, surveillance camera
systems are playing an increasingly
important role in providing evidence
necessary to ensure the arrest of criminals and in averting crimes. As a consequence, the number of such cameras inuse is expanding rapidly.
Companies with several shops or
offices must install independent cameras at each location to record andarchive all the image data they need—a proposition that requires space for
installation and involves high operating
costs, as well as presents challenges
in terms of image data management,
among others. Drawing on our extensive IT technologies and accumulated
know-how, we have developed theSECOM Image Archive System, whichmakes effective use of intranets andother existing in-house networks tocentralize the recording and archiving ofimage data from multiple surveillancecameras installed at different locations.
Such a system was made possible byimprovements made to Japan’s telecommunications infrastructure in recent
years that facilitate the transmission oflarge volumes of data. With this system,a subscriber with a network of shops,
for example, can use the intranet totransmit image data from cameras
installed in each of the shops, thereby
facilitating the integration of recording
and archiving such data at the head
office administrative department orother central location. In addition toresolving installation space, operating
cost and data management issues, thesystem thus also ensures the effective

management of personal information.
We will continue to promote greater useof the SECOM Image Archive Systemas part of our drive to help enhance thesafety and security of modern society.
A cellular phone-based system toconfirm security for shops, public
facilities and families
Capitalizing on our accumulated technological know-how, we recently developed the Cellular Video Surveillance
System. Unlike webcams, this system
requires neither the Internet nor PCs,
using instead the videophone capabilities of cellular phones to provide visualand aural confirmation of security.
The owner of a company operating
multiple laundromats or parking lots,
for example, can use the Cellular Video
Surveillance System to check on thestatus of the shops or the lots at any

time using his or her own cellular phone.
If an abnormality is suspected and/or an emergency situation has arisen,
employees need simply to press abutton to automatically send an email
to the owner advising of trouble totrigger a rapid emergency response.
Surveillance cameras can also be
mounted on vehicles, making it possible
to assess what is happening inside.
In recent years, many companies areequipping corporate vehicles with drive
recorders, which provide a visual recordof what happens in the event of a traffic
accident. However, drive recorders are
only useful after the fact. In addition
to functioning as a drive recorder, thissystem facilitates real-time monitoring ofwhat is happening to the vehicle when it
is involved in an accident.

Centralized (On-Line) Security Systems
Flashing lights

SECOM sticker

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

Subscriber

Lights flash if the system detects
an abnormality to warn people
in the vicinity and to guide
SECOM emergency
response personnel
dispatched to thecustomer’s premises.

Police
Dept.
Fire
Dept.

Alert using
1 telephone
circuits

Dispatch SECOM emergency
3 response
personnel

Gas
Company• Alert emergency
services asnecessary

SECOM
Control Center

SECOM
Emergency
Depot
Alert SECOM emergency
2 response
personnel

SECOM Control Center

Annual Report 2010

Secom Co., Ltd.

11

SECOM TODAYThe Cellular Video Surveillance
System is also attracting attention as away to help people monitor the safety ofelderly parents living alone and awayfrom their children. In Japan, the rapid
aging of the population and the increasing prevalence of nuclear families, as
opposed to the traditional extended
family group, have increased the number of elderly people living alone, acause of concern for family members.
With the Cellular Video Surveillance
System, surveillance cameras are
installed in the homes of elderly parents
living alone, for example, transmitting
image and sound data to the cellular
phones of their children and enablingthem to notify their children if they are ill
simply by pushing the “Notify” button,
which prompts the system to send an

email to the appropriate cellular phone.
The Cellular Video Surveillance System
is also popular with people who want tocheck up on their pets while they areaway from home. Looking ahead, we
will continue actively to promote thissystem for a wide range of applications
in response to the increasingly varied
needs of customers.

Contracts forCentralized Security Systems(As of March 31, 2010)

Home

Commercial

Service industries
Retailing/wholesaling
Financial services
Manufacturing
Government agencies
Other
Home

11.5%
7.1%
6.7%
6.1%
5.1%
23.1%
40.4%

Cellular Video Surveillance System

12

Secom Co., Ltd.

Annual Report 2010

Home Security Services
By capitalizing on our extensive range of high-grade home security products and services,which center on the SECOM Home Security system, we are responding to the needs of­homeowners for greater safety, peace of mind, convenience and comfort.
SECOM Home Security:
Comprehensive services forpeace of mind
SECOM Home Security, our core on-line
security system for residential applications, comprises sensors and othersecurity equipment, which are placed inand around the subscribers home, providing around-the-clock monitoring for
intruders and fires, sending emergency
messages, warning of gas leaks andsummoning emergency medical services. Should an abnormality be
detected, the system alerts a SECOM
control center. Control center staff
respond by assessing the situation, dispatching emergency response personnel and, if necessary, contacting thepolice and/or fire department.
In 1981, we launched Japan’s firstever on-line home security system.
Since then, we have incorporated feedback from customers and sought torespond adequately to changing social
imperatives, improving security capabilities and introducing more convenientfeatures. Today, SECOM Home Security
provides security not only when occupants are out, but also when they areat home, whether they are asleep orawake. For example, if all the occupants
are on the second floor the system canbe armed exclusively on the vacant firstfloor. We have also added features that
capitalize on the prevalence of cellular
phones. Subscribers can take advantage of optional cellular phone-based
services that make it possible to checkon the security of their homes from
wherever they may be using a cellular
phone, and to arm the system if they
have neglected to do so.

Having our own in-house R&D­ apabilities has enabled us to developca number of attractive products andsystems that can be integrated into
SECOM Home Security to respond toincreased security needs even after
the original system has been installed.
Combining SECOM Home Security with
External Image Monitoring Service
allows for images captured by surveillance cameras placed outside the subscriber’s home to be transmitted to a
SECOM control center, thus ensuring
quick, effective action in the event of
a security breach. Security products
include SECOM Anshin Glass, a highimpact, breakage-resistant window
glass with built-in sensors. Combinedwith SECOM Home Security, SECOM
Anshin Glass not only deters break-ins
through windows, but also instantaneously alerts a SECOM control center,
facilitating early detection in the eventof a break-in and a swift, accurate
response.
Owing to the rapid aging of Japan’s
population, we are seeing an increase
in seniors subscribing to SECOM Home
Security to protect themselves against
crimes. In addition to helping to prevent
crimes from occurring, SECOM Home
Security offers a host of attractive
optional support services that assist
in resolving other issues of concern toseniors. These include My Doctor, apendant-style emergency medical alert

SECOM Home Security

Annual Report 2010

Secom Co., Ltd.

13

SECOM TODAY

system that can be activated in theevent the wearer becomes ill or isinjured, causing it to send an emergency signal to a SECOM control center, which promptly alerts a physician
specified in advance by the subscriberand summons an ambulance. The Daily
Life Monitoring function sends out analert if no movement is detected in theresidence for a specified interval, thus
providing peace of mind for the familiesof seniors living alone.
SECOM Home Security continues tofind wide applications for a range ofhomes, from condominiums todetached houses to residences
designed for two generations living
under the same roof, with a broad subscriber base that ranges from young
singles to middle-aged people with families and seniors. Looking ahead, we willcontinue to develop and provide security for residential applications, centering
on SECOM Home Security, that help
resolve causes of unease and further
increase convenience for all of ourcustomers.

SECOM Home Service (Family Support Service)

14

Secom Co., Ltd.

Annual Report 2010

Increasingly popular SECOM
Home Service
Responding to feedback from customers, in 2005 we launched SECOM
Home Service, which encompasses avariety of lifestyle support services for
SECOM Home Security subscribers.
With demand for these services increasing, we have since made some of these
services available to nonsubscribers.
We have also expanded both our service menu and our geographic coverage. At the same time, we are working
to enhance the quality of services,which are provided by professionals
who have completed our stringent
in-house training program.
At present, SECOM Home Service
encompasses Anshin Support Service,whereby SECOM staff assist in resolving
concerns that arise in everyday life by,for example, patrolling around the subscriber’s home when the occupants areaway. Troubleshooting Support Service
includes assistance in resolving unforeseen problems, such as lost keys.
Housework Support Service provides

help with housekeeping and aroundthe-house jobs. The SECOM Home
Service Pack is a special plan thatallows subscribers to sign up for ­popular
services on an annual basis. Housework
Support Service is appreciated by subscribers who value the capabilities ofour highly skilled cleaning staff, while
Family Support Service, a key component of Housework Support Service, iswelcomed by subscribers who seek
short-term assistance with such tasks
as tidying the house, cooking meals,
washing laundry and airing bedding.
Given the rapid aging of society andthe increasing trend toward nuclear
families in Japan, we will continue toexpand the scope of SECOM Home
Service to respond to evolving needs
nationwide.

SECOM Home Service (kitchen cleaning service)Other Security Services
We are capitalizing on the advantages of COCO-SECOM to promotewider acceptance of ­personal security.

business to send emergency signals,
preventing the loss or theft of handbags, the destruction and/or theft ofsafes and ATMs, the theft of bulldozers
and power shovels, and managing
corporate car fleets.

Expanded applications for
COCO-SECOM continue tosupport increased sales
With the launch of the COCO-SECOM
mobile security system for outdoor use
in April 2001, we expanded our capabilities into the area of locating systems
for individual subscribers. COCOSECOM uses signals from Global
Positioning System (GPS) satellites andcellular phone base stations to pinpoint
the location of exclusive transmitter
devices with outstanding precision.
Simply by pushing the alert button on
the device, an individual can notify the
COCO-SECOM operations center if heor she feels in danger. The operations
center will dispatch emergency
response personnel at any time of the
day or night if needed, thereby helping
subscribers feel a greater sense of
security.
Initially developed with the aim ofpreventing child abductions, locatingelderly people who have wandered off
and averting the theft of cars andmotorcycles, COCO-SECOM is today
attracting attention for a wider range ofapplications, reflecting the increasing
diversity of customer needs. Examples
include thwarting crimes against
women, enabling people who are frequently out of the office or away on

Newly developed cellular phone forchildren with COCO-SECOM as astandard feature
Since spring 2009, there has been adrive to impose restrictions on the possession of cellular phones by children inelementary and junior high schools inJapan. Underscoring this is an increasein bullying incidents and crimes involving
children that many attribute to the useof cellular phone e-mail and Internetfunctions. However, parents recognize
the benefits of having their children carrycellular phones because it enables themto ascertain their children’s whereabouts
between home and school. Many parents have also said how much moresecure they would feel if their children’s
cellular phones were equipped withemergency buzzers.

Working with a major telecommunications company, we sought to respondto these various needs by developing
mamorino, a new cellular phone model
for children. In addition to being safe
and secure, mamorino is equipped with
an emergency buzzer and COCOSECOM as standard features. If thechild feels threatened, all he or she has
to do is sound the buzzer to alert theCOCO-SECOM operations center,
which then determines the child’s­location. The operations center thenmakes contact with the child and a­parent or guardian and, if necessary,
dispatches emergency response personnel. Because it does not have a
web browser function and limits children
to a maximum of four telephone/email
contacts, which must be specified inadvance, mamorino also protects­children from potential trouble arisingfrom e-mail and Internet use.

COCO-SECOM Mobile Security System (Location and Emergency Response)
GPS satellite
Positioning
information

COCO-SECOM
Operations
CenterNotification of police (if warranted)

Cellular phonebase station

SECOM
Emergency
Depot

Request forsearchPolicedepartment,
emergency
services(telephone/Internet)

COCO-SECOM Transmitter
Device (Vehicle-Mounted)

Subscriber
COCO-SECOM
Transmitter
Device (Portable)

Dispatchemergency
response
personnel(if requested)

Annual Report 2010

Secom Co., Ltd.

15

SECOM TODAY

Security Services in Overseas Markets
By offering “SECOM-style” security services customized to reflect local needs and sensibilities,
we continue to expand our subscriber base in key overseas markets.

The evolution of our overseas
security services business
Since launching operations in Taiwan
in 1978, we have substantially
increased our geographic coverage.
From that time, we have accumulated
experience in the provision of
security services in 11 countries
and territories: Taiwan, the Republicof Korea (ROK), the PRC, Thailand,
Malaysia, Singapore, Indonesia,
Vietnam, the United Kingdom,
Australia and the United States.
In overseas markets, our approachis to offer “SECOM-style” services
customized to reflect local needs andsensibilities. By this, we mean not only
monitoring customers’ premises from acontrol center—in the event an abnormality is detected—but also dispatching
highly trained emergency response
personnel and, if necessary, contacting
the police and/or fire department. Thisapproach, which is the same as we
use in Japan, differs significantly fromthe on-line security systems sold byEuropean and U.S. security service­providers, which as a rule do not offer
emergency response services in suchsituations, but rather simply notify thepolice. Accordingly, this approach­delivers greater security and peaceof mind to customers.
Our equity-method joint venture in
Taiwan, Taiwan Secom Co., Ltd., has a
network of bases that covers the entire
territory and enjoys the leading share of
the Taiwanese security services market.
Taiwan Secom is also publicly listed on
the Taiwan Stock Exchange. Maintaining
the SECOM business model, Taiwan
Secom rents security equipment andenters into long-term contracts with
subscribers. The company also offers
a proprietary mobile emergency information system developed in-house thatis similar to COCO-SECOM and sells
automated external defibrillators (AEDs).
In 2009 Taiwan Secom began selling

16

Secom Co., Ltd.

Annual Report 2010

new on-line home security systems withimaging and automated functions.
In the ROK, equity-method joint­venture S1 Corporation provides anextensive selection of security services
to a subscriber base that ranges from
homeowners and large-scale commercial facilities. S1 is currently the top
security services company in the ROK
and is listed on the Korea Exchange.
We are also expanding “SECOMstyle” security services in Southeast
Asia. In Thailand and Malaysia, we areextending our efforts beyond the capitalcities to include other urban centers. In
Singapore, “SECOM-style” services
continue to gain considerable praise.
Our subsidiary in Indonesia, a leading
name in the local security services market, is expanding its operations with afocus on the capital city of Jakarta. In
Vietnam, our emphasis is currently on
security service-related consulting andthe provision of solutions, due to restrictions on foreign investment in the country. However, we do expect to begin
offering on-line security systems atsome time in the future.
Our presence in the United Kingdom
began in 1991, when we acquired a
local security services firm and beganoffering our own brand of services.
Many competitors in the U.K. security
services provide only the installation of
security equipment. As a consequence,
our integrated approach, encompassing
the sale and installation of equipment,
around-the-clock monitoring, emergency response services and maintenance, did not immediately resonate
with local customers. However, as subscribers to “SECOM-style” services
increased in number, so did recognitionof our services’ superb quality. Today,
our menu of services in the United
Kingdom encompasses security services for homes, companies and public
facilities, and our subscriber basecontinues to expand steadily.

SECOM in the PRC:
Expanding into inland markets
Recognizing the tremendous potentialof the local market, we began offering
services in the PRC in 1992. Initially, ourfocus was on offering “SECOM-style”
security services in cities in the country’s
high-growth coastal areas—namely,
Dalian, Beijing, Qingdao, Shanghai,
Shenzhen and Fuzhou. Since then, we
have expanded our service network to
include surrounding cities, including
Shenyang, Wuxi, Kunshan, Hangzhou,
Tianjin and Guangzhou. The next stepfor us will be to set up operations
in key inland cities, thereby enabling
us gradually to expand our service
area. Eventually, we hope to offer security services to customers throughout
the PRC.
Heightened awareness of the needfor effective security in the PRC has
spurred demand for high-grade
security services. In this environment,
recognition of the intrinsic value of“SECOM-style” on-line security services
is growing and our subscriber baseis expanding steadily. We are alsoseeing increased demand from local

commercial customers, which currently
outnumber Japanese and other foreigncompanies on our books—indicative of
the broad acceptance “SECOM-style”
services have found in the local
community.
Reflecting growth in the local security
services market, the number of newmarket entrants is on the rise. Believing
firmly that service excellence is the key
to being the first choice of customers in
the PRC, in 2008 we established an
R&D center in Shanghai, enabling us todraw on our accumulated experience inthe provision of “SECOM-style” security
services and our extensive know-how,contributing to enhanced service quality
and wider market acceptance. Thisfacility is also working to respondquickly to the amendment of standards
for security equipment in the PRC, aswell as preparing for the launch of home
security services.
Our efforts in the PRC have not been
limited to security services but also
include the manufacture of fire pre­vention and security equipment. Our
joint venture with Nohmi Bosai Ltd.,
manufactures and sells fire protection

equipment for the local market, as wellas supplies security equipment to customers in Japan, the PRC and thecountries of Southeast Asia.

Control Center (Beijing Jingdun Secom Electronic
Security Co., Ltd.)An increasingly popular choice in Taiwan

Control Center (S1 Corporation, ROK)

Annual Report 2010

Secom Co., Ltd.

17

SECOM TODAY

Fire Protection Services
Drawing on its solid record in fire protection services, SECOM is expanding its fire protection
services business by focusing on the renovations market and developing new products.

Growing demand for fire alarm­systems in the ­renovations market
A pioneer in the fire protection market,
subsidiary Nohmi Bosai Ltd. provides
fire alarms and other fire protection systems, with an extensive lineup that
includes products for office buildings,
production facilities, tunnels, culturalproperties, ships and homes.
In recent years, the deterioration ofolder office buildings has stimulated
demand for automatic fire alarms andother equipment as building owners
take advantage of the opportunity provided by renovations to update fire protection systems. Nohmi Bosai isdrawing on its solid record in this field
and the strong trust of its customers tosecure demand from customers undertaking renovations. For example, tosecure demand for the replacement offire protection systems for older skyscrapers, many of which are due to berenovated in the near future, Nohmi
Bosai has established a dedicateddepartment and will take steps toenhance its ability to offer effective­solutions for such customers.
Newly developed PROTECVIEW fire
detection and alarm system
Nohmi Bosai’s new PROTECVIEW fire
detection and alarm system was developed for use in locations where it is particularly necessary to prevent firedamage, including rooms housing computers, servers and telecommunicationequipment, clean rooms and areas in
the vicinity of circuit boards.
An ultrasensitive smoke detection
system, PROTECVIEW provides
around-the-clock monitoring for earlysigns of fire, thereby facilitating a quick
response in the event one is detected,
minimizing resulting damage and allowing a swift return to normal operations.
For example, computer and serverrooms have air conditioning systems
running at all times to keep equipment
cool. Air conditioning has a tendency

Foam fire extinguishing system

Water curtain system installed in tank yard

18

Secom Co., Ltd.

Annual Report 2010

to dilute and diffuse smoke and fumes,
making the prompt detection of fire­difficult. As a consequence, protecting
valuable information demands being
able to recognize the early signs of fire.
With PROTECVIEW, customers getaround-the-clock monitoring and­ultrasensitive smoke detection, thereby
preventing escalation into a full-fledged
conflagration.
Advances in home fire alarm systems
Owing to the partial revision of Japan’s
Fire Services Act in 2006, fire alarmsystems will be mandatory in all homesby 2011. Accordingly, we continue toexpand our lineup of home fire alarmsystems, which are manufactured by
Nohmi Bosai and also sold under the
SECOM name. A new addition to thislineup is a recently launched wireless
integrated system designed to accelerate the detection of fires. In addition toan estimated life of 10 years, and noneed for wiring—a characteristic itshares with our existing battery-­operated fire detection systems—
our new system features a voice alert,
in which the unit that has detected thefire broadcasts the discovery while atthe same time wirelessly instructing all
the other units to sound. This ensures
the instant awareness of the fire, even
if residents are not present, expediting
efforts to extinguish and/or evacuate thepremises. Looking ahead, we will continue to promote greater awareness ofthe benefits of residential fire alarm systems in protecting lives and property
from house fires.

Wireless integrated residential fire alarmMedical Services
SECOM is expanding the scope of its services in the medical, health care and personal carefields in an effort to give new form to its ideal of providing peace of mind.

Steadily expanding home medical
services
Our diversification into the medical services business is a reflection of ourbelief that protecting the health and livesof people is a natural extension of ourcommitment to provide security andpeace of mind. What began as Japan’s
first home nursing services business has
since expanded to encompass a wide
range of services in the medical, healthcare and personal care fields.

Home medical services—a mainstay
of our medical services business—­
centers on home nursing, which involves
regular visits by nurses to patients intheir homes to provide expert nursing
services and treatment in accordancewith the instructions of the patients’ physicians, and pharmaceutical dispensing
and home delivery services. Our homenursing services are rated favorably byboth patients and their families. One reason for this is our rigorous proprietarytraining program, which continues toenhance the capabilities of our visiting
nurses and further hones their skills.
This enables visiting nurses to provide
highly professional services that take
into account the condition of the patient.
We have established a network of­visiting nurse stations in major cities
nationwide, which dispatch visiting
nurses to patients’ homes and are on
call around the clock.
Our pharmaceutical dispensing andhome delivery services range from thedispensing and delivery of common oral
medications to the provision of specialized services for home health carepatients. The latter includes parenteralnutrition, that is, the intravenous feeding

Home Medical Services

Medical Care
Institution

Prescription

Physician’s guidelines
Nurse’s report

Coordination

Pharmaceutical
Dispensing andHome Delivery
Service(SECOM Pharmacy)

Home Nursing
Services(SECOM Visiting
Nurse Station)

Consultationof nutrient solutions through a catheter,
and home visits by pharmacists to provide guidance on the use of prescribed
medications and support for, among
others, the intravenous administration of
Flolan®, a drug used in the treatment ofprimary pulmonary hypertension, an
intractable disease. Backed by aroundthe-clock emergency response services,
our pharmaceutical and dispensing services help provide peace of mind topatients undergoing home medical care,earning solid marks and steadily growing
demand.
Residences for seniors:
A uniquely SECOM approach tosecurity, peace of mind and comfort
We have developed and manage innovative residences for seniors in Japan toaccommodate a variety of needs. These
range from residences designed for
healthy individuals who do not yet need
personal care, with services comparable
to those at the finest hotels, to residences for individuals requiring personalcare from the outset. The SECOMFORT
series, which brings together our expertise in security and medical services help
in the realization of a society in whichpeople can age with grace and serenity.
Comfort Garden Azamino, the first
facility in the SECOMFORT series, whichcaters to seniors requiring personalcare, opened in Yokohama in 2006. Thiswas followed in June 2009 by Comfort
Hills Rokko, which opened in Kobe.
Both residences continue to attract considerable acclaim. Comfort Hills Rokko
boasts two uniquely SECOM features.
First, it is adjacent to Kobe Kaisei
Hospital, a SECOM-affiliated facility.
Second, it is organized to accommodate the changing needs of residents asthey age and provides a variety of programs designed to ensure fulfilling,
comfortable and enjoyable lifestyles.

Prescription
Pharmaceutical delivery

Patient

Nurse visit
Outpatient care

Annual Report 2010

Secom Co., Ltd.

19

SECOM TODAY

Insurance Services
Public appreciation for SECOM’s distinctive insurance policies continues to grow.

Increasing contract volume
by providing uniquely SECOM
non-life insurance policies
Our decision to expand into thenon-life insurance business reflected
our conviction that augmenting our
security services, which provide priorprotection, with insurance, which looks
after customers in the event of misfortunes, would reinforce security andpeace of mind.
The distinctive policies in our lineup
are aimed primarily at security services
customers and include such offerings
as the Security Discount Fire Policy, for

SECOM Anshin My Car on-site emergency service

20

Secom Co., Ltd.

Annual Report 2010

commercial customers; SECOM Anshin
My Home, for homes; and SECOM
Anshin My Car. Security Discount Fire
Policy and SECOM Anshin My Home
take into account the risk-mitigating factor of on-line security systems, offeringa discount on regular premium rates tosuch customers.
With SECOM Anshin My Home, customers are free to configure the policy
to suit their particular needs. For homes
where the risk of water damage is minimal, for example, the customer candrop water damage coverage, while
owners of homes with superior fire
­protection capabilities or exclusively
electrical appliances (i.e., no gas appliances) can opt out of fire damage protection, thereby reducing premiums.
Here, we benefit from considerable­synergies with other businesses. In
some cases, the drawing up of a security system contract prompts subscribers to purchase insurance, while inothers, the decision to purchase insurance prompts a customer to sign up
for security services.
SECOM Anshin My Car is a comprehensive automobile insurance policythat includes on-site support services
by emergency response personnel, if
requested.

Going forward, we will continue to
add to our lineup of distinctive non-life
insurance policies that stand out against
the competition.
Expanding sales of our MEDCOM
unrestricted cancer treatment policy
We also offer MEDCOM, an unrestricted
cancer treatment policy that provides
coverage for all hospitalization and medical treatment costs, both those that arecovered under Japan’s National Health
Insurance (NHI) scheme or other healthinsurance and those that are not, andfor which the patient normally bears thefull cost. This highly rated policy therefore enables subscribers to take advantage of advanced treatment options.
In April 2009, we enhanced the content of MEDCOM to include outpatient
treatment, becoming the first such policy in Japan that places no restriction on
the number of days of outpatient treatment covered, and added coverage foroutpatient treatment of up to ¥10 million
for each five-year period. As a consequence, MEDCOM subscribers are evenbetter positioned to benefit from themost appropriate treatment options
available. This has garnered acclaim
and prompted an increase in the number of policies underwritten. These
upgrades were also introduced to
MEDCOM Plus, which we offer througha major Japanese life insurer, bolstering
sales of this policy.

MEDCOM provides coverage for advanced
treatment options

Geographic Information Services
Subsidiary Pasco Corporation is making use of geospatial information to expand its
services in such areas as environmental protection and disaster prevention, as well as
its overseas operations.

©DLR

Building on technological capabilities
and accumulated expertise to capitalize
on new business opportunities
For more than 50 years, Pasco has leveraged its surveying and geographic
data collection capabilities, which are
based primarily on aerial photography,
and expanded its focus to encompass
the integration and analysis of data thus
collected, to develop a wide range of
geospatial information services. This has
enabled Pasco to provide basic data forthe development of social infrastructure
crucial to both public-sector planningand administration and private-sector
corporate management.
In addition to accumulating knowhow in geospatial information collection
and processing, Pasco continuallyseeks to acquire cutting-edge technologies. Pasco sells image data offered by
the operator of TerraSAR-X, a German
satellite that delivers a higher resolution
than other commercial satellites. Pasco
is building on the technological capabilities and expertise it has acquired
through this arrangement, positioning it
to capitalize on expanding business
opportunities. For example, in responseto the 2008 creation of Japan’s J-VER
scheme, which strives to ensure thetrustworthiness of carbon offset transactions, Pasco introduced geospatial

information services to local governments aimed at facilitating sustainable
forest management.
In response to the aging of existingsocial infrastructures and the need to
optimize related costs over the entire
infrastructure lifecycle, Pasco capitalized
on its experience in mapping used formore effective road maintenance todevelop the Mobile Mapping System(MMS), a measuring system mounted
on a vehicle which facilitates the extraction of precise data for 3D mapping.
In the area of disaster prevention,
Pasco worked with the Saga prefectural
government to develop a geospatial
information-based system for monitoring the patterns of infection for the new
H1N1 strain of influenza to prevent or
limit its further spread. Pasco markets
this system to prefectural authorities,
as well as to cities designated by­government ordinance (cities withlarge populations that have assumed
functions—such as social welfare andurban planning—otherwise performedby ­prefectural governments).
Since 2008, Pasco has participated in
ASNARO (Advanced Satellite with New
system ARchitecture for Observation)
project, an initiative for developing an
advanced, small, low-cost satellite thatcan be built and launched for shortperiods. Pasco has been charged with
developing the satellite’s ground segment, a comprehensive, small, movableground system for the satellite. Thiss­ystem, together with two receiving
stations—an existing facility in Okinawa
and a near-complete new facility in
Hokkaido—will ensure a highly effective
reception framework and at the sametime giving full play to Pasco’s image processing technologies for environmental
monitoring and disaster prevention.
For private-sector customers, Pasco
has leveraged business area analysis
capabilities and operations-level expertise accumulated through the provisionof marketing support services, todevelop and launch Shoken Taisho,a membership-based service for retailers that focuses on business area analysis, shop development and retail spacedesign, and product mix strategies.
Pasco will continue to broaden its
experience in the provision of geospatial
information services, positioning it tocultivate new business opportunities inthe years ahead.
Expanding global operations
Pasco has obtained exclusive rights inJapan and nonexclusive rights worldwide to sell image data from Germancommercial satellite TerraSAR-X, which
complements laser-based biomass
estimation and carbon mapping services, thereby contributing to the reduction of greenhouse gas emissions, amajor cause of forest loss. TerraSAR-X
is unique in that it can capture highfrequency high-resolution images
regardless of the time of day. Pasco
will continue to take advantage of thiscapability to gather and analyze datathat will support efforts to measure theimpact of global environmental issues
and assist national governments andother organizations worldwide in thedevelopment and implementation ofeffective solutions.
Pasco will also continue to expand its
overseas operations, assisting in the creation and revision of national land maps
in countries where mapping data is notreadily available. Additionally, Pasco isproviding satellite and aerial data, as well
as applications to assist in the effective
use of such data, and offering consulting services, assisting in the fostering of
human resources and providing technological support. Through such efforts,
Pasco is securing major orders to create geospatial information databasesthat help prevent disasters, protect theenvironment, promote urban development and develop infrastructure—all ofwhich are crucial to the advancement of­developing countries.

Annual Report 2010

Secom Co., Ltd.

21

SECOM TODAYReal Estate Development and Sales
This business encompasses the development and sale of condominiums with advanced
security features.

Sales of Glorio Roka-koen
In line with our emphasis on peace ofmind and comfortable living, we develop
and sell condominiums in the Glorio
series, which are equipped withadvanced SECOM security systems. In
January 2010, homeowners took possession of units in our newest location,
Glorio Roka-koen in Tokyo’s Setagaya
Ward. In addition to access-control­systems, Glorio Roka-koen features the
SECOM MS-3 condominium security
system, the SECOM IX remote imaging
system, ­outdoor surveillance cameras

and sensor-equipped perimeter fences,bringing together SECOM’s expertiseand advanced security service capabilities to provide quality homes that aresafe and secure. Glorio Roka-koen’s
multifaceted approach to security andpeace of mind also includes the provision of healthcare support throughcooperation with nearby Kugayama
Hospital, a SECOM-affiliated facility,
and the establishment of a community
house that is designed to also serveas an evacuation facility in the eventof a disaster.

Information and Communication Related and Other Services
SECOM is expanding this business by focusing on comprehensive information andcommunication related services, which center on information security and disaster
response services.

Capitalizing on a solid foundationin “safety confirmation” to expand
services
SECOM has acquired a significant
reputation as a provider of comprehensive services designed to ensure thesecurity of information and communications in the event of a major disaster.
Of particular note is SECOM Safety
Confirmation Service, which we haveoffered since 2004 and which continues
to attract considerable acclaim.

SECOM Safety Confirmation Service
helps subscribers promptly restore
water, electricity and other essential
services, and to confirm the whereabouts and safety of employees in theaftermath of an earthquake or othermajor disaster, thus relieving concern
and assisting companies in restarting
operations as soon as possible. We
continue to add new functions to
SECOM Safety Confirmation Service,including one that helps companies tomanage exposure to the new H1N1
strain of influenza, in response to theneeds of subscribers for greater convenience, as well as to bolster the service
menu. Since 2007, we have also offered
SECOM Safety Confirmation Service
SCM, which enables subscribers to
confirm the safety of key suppliers andthe extent of damage to essential
services. From the perspective ofassisting customers to formulate effective business continuity plans (BCPs),ensuring they are not only able to gettheir own companies swiftly back up

and running in the aftermath of a disaster, but also to promptly confirm thesafety of major suppliers andcustomers.
We are applying know-how gained
through the provision of SECOM Safety
Confirmation Service to the development of a wide range of new services.
The solid foundation we have established with this service, combined withthe expertise of a pharmaceuticals
manufacturer, facilitated the launch of
YuchuReco, a documentation service
for hemophiliacs, who must administer
their own daily medications andDisaster monitoring center

22

Secom Co., Ltd.

Annual Report 2010

transfusions of blood products andmaintain a careful record to enablephysicians to provide proper treatment.
YuchuReco allows individuals to makeentries easily and quickly from a computer or mobile phone, thus helping toprevent errors and omissions.
We are also capitalizing on our know­
how in the security services businessand the foundation we have establishedwith SECOM Safety Confirmation­Service, and have begun offering risk
management services. Our expertise in
security services and our emergency
response capabilities are given full playin Initial Response Operations Service.
In the aftermath of a major accident or
information leak, for example, we provide around-the-clock services that
include handling queries from employees and other related parties and swiftly
notifying individuals in charge on thecustomer side. By promptly establishinga strict chain of communication following such an incident, this service helps
ensure an effective initial response.

Another such offering is SECOM­Emergency Contact Network Service,
which draws on SECOM Safety
Confirmation Service to facilitate
efficient contact via email or mobile
phone for everyday emergencies, rather
than in the aftermath of a major disaster,and collates responses, enabling theswift communication of information.
­Combining Initial Response Operations
Service and SECOM Emergency­Contact Network Service creates acomprehensive risk management tool.
Going forward, we will continue toenhance the functions of SECOM
Safety Confirmation Service, as wellas to create new services that capitalizeon the foundation we have establishedin this area. We will also step up efforts
to market such services to an everbroader market.
New Secure Data Center to open
In response to the call for greater­security and peace of mind in today’s
networked society, we operate the

Secure Data Center, a secure environment protected by stringent physicalsecurity and monitoring by experts. The
Secure Data Center houses servers, aswell as important data and other key
information assets, entrusted to us by
subscribers, who include prominent
financial institutions. In response torising demand for these services, inJuly 2010 we will open a second facility.
Equipped with distinctive SECOM
security features and incorporating our
extensive expertise in this area, the new
Secure Data Center also features anadvanced seismically sound design,
enabling it to function as a BCP centerin the event of a disaster. The newfacility is thus particularly well positioned
to provide a wide range of services that
contribute to greater operating efficiency
for subscribers. Looking ahead, the
new Secure Data Center will serve asa base from which we provide a wide
range of proprietary information andcommunication related services.

SECOM’s Environmental Initiatives
In accordance with our mission, which is to contribute tosociety through our business activities, and with the belief
that protecting the environment is essential to our ability toprovide security and peace of mind, we continue to ­promote
environmental initiatives in all areas of our operations.
l A business model that facilitates the ­recycling andreuse of resources
In our mainstay on-line security services business, which
we launched in 1966, we provide equipment on a rental
basis, rather than selling it, and take responsibility for­equipment management, which includes maintenance andthe collection of used equipment. This has enabled us to­minimize waste, as well as to enhance efforts to reuse andrecycle. We also promote green purchasing, environmentfriendly design and other efforts aimed at contributing toenvironmental protection.
l Reducing CO2 emissions
We are currently implementing a program aimed at replacing approximately 5,000 cars in our fleet with environment-

friendly vehicles. We are also adopting low-power lighting
and air conditioning systems at our various sites, introducing multifunctional OA equipment and implementing othermeasures aimed at shifting to high-efficiency, low-energy
equipment.
On another front, we are promoting “Eco-Anzen Drive,”
an initiative that aims to reduce the amount of fuel used
when driving, as well as to prevent traffic accidents. Additionally, we have established an Environmental Promotion
Committee, which promotes voluntary initiatives aimed
at making our offices more environment friendly, andSECOM Eco Team, which strives to raise the environmental­awareness of each and every SECOM employee at home.
l Furthering our environmental protection initiatives
With the aim of taking our efforts to protect the environment
to the next level, we have introduced lifecycle assessments(LCAs) and are working to reduce the environmental footprint of our various products and services over their entire
lifecycle, as well as to cultivate new businesses that allow
us to contribute further to environmental protection.

Annual Report 2010

Secom Co., Ltd.

23

FINANCIAL REVIEW
Operating Results

Overview

Operating Income

In the year ended March 31, 2010, SECOM CO., LTD. and its

Operating income rose 27.4%, or ¥20.9 billion, to ¥97.2 billion,­subsidiaries (collectively “the Company”) sought to provide high-equivalent to 14.5% of net sales and operating revenue, up from

quality products and services that respond to the needs of cus-

11.1% in the previous period. This was due largely to an increase

tomers in its core security services segment, as well as in its firein net sales and operating revenue in the insurance services seg-

protection services, medical services, insurance services, geo-ment, owing to the decrease in loss on other-than-temporary

graphic information services, real estate development and sales,

impairment of investment securities, and to declines in cost of sales

and information and communication related and other services

and SG&A expense. Segments contributing to operating income

segments. Nonetheless, consolidated net sales and operating rev-

were—in order of size of contribution—security services, fire pro-enue for the period slipped 2.0%, or ¥13.4 billion, to ¥670.6 billion,

tection services, information and communication related and otherowing to decreased sales of security merchandise in its core secu-

services, medical services and geographic ­information services.

rity services segment, combined with declines in net sales and(For more details, please see Segment Information below.)

operating revenue at its overseas subsidiaries due to foreign currency rate fluctuations, and efforts to restrict its selection of prop-

Other Income and Expenses

erties for development and sales in the real estate development

Other income slipped ¥407 million, to ¥5.4 billion, and otherand sales segment.

expenses fell ¥11.0 billion, to ¥7.9 billion, resulting in net otherIn contrast, operating income rose 27.4%, or ¥20.9 billion, to

expenses of ¥2.5 billion, down substantially from ¥13.1 billion in¥97.2 billion, reflecting decreases in loss on other-than-temporary

the previous period. Factors behind this result included a ¥7.1

impairment of investment securities in the insurance services­billion decrease in loss on other-than-temporary impairment of­segment and write-down on real estate inventories in the real

investment securities, to ¥1.8 billion, the reversal of reserve for

estate development and sales segment. Net income attributable­litigation loss, and a net exchange gain compared with a net

to SECOM CO., LTD., advanced 53.8%, or ¥16.4 billion, toexchange loss in the previous period. These were partially offset by¥47.0 billion.

a ¥1.4 billion loss on private equity investments, compared with a¥1.4 billion gain in the previous period. The Company also incurred

Net Sales and Operating Revenuea ¥1.3 billion loss related to spectrum reallocation, for disposal and

Despite increases in the medical services, insurance services andreplacement of equipments, since the allotted spectrum currently

geographic information services segments, net sales and operat-

used for COCO-SECOM will no longer be available after July 2012

ing revenue slipped 2.0%, or ¥13.4 billion, to ¥670.6 billion, owing

as a result of spectrum reallocation by the Japanese government.

to decreases in the security services, real estate development andsales, fire protection services, and information and communication

Income from Continuing Operations before Income Taxes andrelated and other services segments. (For more details, please see

Equity in Net Income of Affiliated Companies

Segment Information below.)

Income from continuing operations before income taxes andequity in net income of affiliated companies climbed 49.9%, or

Costs and Expenses¥31.5 billion, to ¥94.7 billion, bolstered by the increase in

Total costs and expenses, at ¥573.5 billion, were down 5.6%,­operating income and decline in net other expenses.

or ¥34.3 billion. Cost of sales declined 6.3%, or ¥29.0 billion, to¥433.1 billion, equivalent to 64.6% of net sales and operating

Income Taxes­revenue, an improvement from 67.6% in the previous period. This

Reflecting the increase in income from continuing operations

result primarily reflected a decrease in write-down on real estate

before income taxes and equity in net income of affiliated compa-

inventories in the real estate development and sales segment.

nies, income taxes increased ¥9.4 billion, to ¥45.6 billion. Income

Selling, general and administrative (SG&A) expense dipped

taxes were equivalent to 48.2% of income from continuing opera-

3.0%, or ¥4.2 billion, to ¥137.7 billion. SG&A expense was equiva-

tions before income taxes and equity in net income of affiliatedlent to 20.5% of net sales and operating revenue, a slight improve-companies, down from 57.4% in the previous period, due mainly

ment from 20.8% in the previous period, attributable primarily toto the fact that unrecognized tax benefits from subsidiaries in loss

the reduction of costs, particularly personnel expenses and adver-

positions increased in the previous period.

tising costs. In addition, impairment loss on goodwill amounted to¥245 million, a decrease of ¥1.3 billion.

24

Secom Co., Ltd.

Annual Report 2010

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

Equity in Net Income of Affiliated Companies

Security Services

Equity in net income of affiliated companies was down ¥6.1 billion,

The security services segment encompasses electronic security

to ¥2.6 billion. This reflected declines in equity in net income ofservices, other security services, and merchandise and other. Net

overseas affiliated companies attributable to currency exchange

sales and operating revenue in the segment decreased 2.8%, orrate fluctuations. Another factor was a reversal of long-term¥12.1 billion, to ¥426.4 billion. Excluding intersegment transac-

deferred tax liabilities related to undistributed earnings of overseas

tions, the segment’s net sales and operating revenue amounted

affiliated companies arising from the revision of Japanese tax

to ¥424.4 billon, equivalent to 63.3% of overall net sales and­regulations in the previous period.

­operating revenue, down from 63.9% in the previous period.
Electronic security services include on-line commercial andIncome (Loss) from Discontinued Operations

home security systems (centralized systems) and large-scale pro-

The Company sold Japan Image Communications Co., Ltd., andprietary security systems, which center on surveillance services at

Asia Pacific Business Link Ltd. in August and December 2009,

the subscriber’s premises. On-line commercial and home security

respectively. Income from these companies is included insystems, the core of our electronic security services, use sensors­discontinued operations. Prior period figures have been restated.

installed at the subscriber’s premises to detect events, such as

Income from discontinued operations amounted to ¥1.4 billion,

intrusions, fires and equipment malfunctions. Sensors are linked tocompared with a loss from discontinued operations of ¥149 million

a SECOM control center via telecommunications circuits to enable

in the previous period. This was due primarily to the gain on sales

remote monitoring around-the-clock. Should an event be detectedof discontinued operations. (For more details, please seeat the subscriber’s premises, the relevant information is relayed toNote 25 of the accompanying Notes to the Consolidated

the control center, where staff dispatch emergency response per-Financial Statements.)

sonnel. Control center staff also notify the police or fire department
if required while the emergency response personnel take other

Net Income Attributable to Noncontrolling Interests

appropriate measures. We have established an integrated

Net income attributable to noncontrolling interests rose ¥1.1 billion,

approach, whereby we take full responsibility for maintaining

to ¥6.0 billion.

­control over every aspect of our electronic security services, from
R&D to manufacturing, sales, security planning, installation, moni-

Net Income Attributable to SECOM CO., LTD.

toring, emergency response services and equipment maintenance.

As a consequence of the aforementioned factors, net income

Net sales and operating revenue from electronic security services

attributable to SECOM CO., LTD., climbed 53.8%, or ¥16.4 billion,

amounted to ¥299.1 billion, a decline of 1.5%, or ¥4.4 billion,to ¥47.0 billion, and represented 7.0% of net sales and operating

owing to the impact of currency exchange rate fluctuations onrevenue, up from 4.5% in the previous period. Net income attribut-

the results of overseas subsidiaries.

able to SECOM CO., LTD. per share was ¥215.51, up from

Other security services include static guard services—which are¥137.42. A proposal to pay annual cash dividends of ¥85.00 per

staffed by highly trained professionals—for security situations thatshare was approved at the general shareholders’ meeting on

require human judgment and flexible responses, and armored carJune 25, 2010.

services, for the transport of cash and valuables by specially fittedarmored cars and security professionals. Net sales and operating
revenue from static guard services was down 3.7%, or ¥1.8 billion,to ¥46.2 billion, and that from armored car services slipped 2.4%,
or ¥487 million, to ¥19.8 billion.
The merchandise and other category encompasses sales of awide range of security products, including access-control systems,
CCTV surveillance systems, fire extinguishing systems and external monitoring systems, which can be free-standing or connected
to on-line security systems. Net sales and operating revenue in thiscategory declined 9.0%, or ¥5.8 billion, to ¥59.3 billion.

Annual Report 2010

Secom Co., Ltd.

25

FINANCIAL REVIEW

Operating income in the security services segment edged down

response personnel—should the subscriber be involved in an

0.8%, or ¥852 million, to ¥101.6 billion, while the operating margin­accident, and MEDCOM, an unrestricted cancer treatment ­policyrose to 23.8%, from 23.4%. The decline in segment operatingthat covers the entire cost of medical treatment for cancer.

income reflected lower net sales and operating revenue, while

Segment net sales and operating revenue climbed 31.4%,

the improvement in the operating margin was attributable toor ¥7.7 billion, to ¥32.1 billion. The segment generated an operat-­successful cost-cutting efforts.

ing loss of ¥1.5 billion, compared with an operating loss of ¥8.2
billion in the previous period. This improvement was attributable

Fire Protection Services

largely to a decrease in loss on other-than-temporary impairment

The fire protection services segment includes automatic fire alarmof investment securities, combined with an increase in net

systems, fire extinguishing systems and other fire protection sys-

­premiums written.

tems for a wide range of applications, including office buildings,
plants, tunnels, cultural properties, ships and residences. Segment

Geographic Information Services

net sales and operating revenue amounted to ¥84.4 billion, downThis segment comprises a variety of GIS-based services tailored to

6.0%, or ¥5.4 billion, reflecting decreased sales of fire alarm sys-

the needs of the public and private sectors, as well as surveying

tems for residences. Segment operating income fell 21.7%, orand measuring, and construction consulting services. Net sales¥1.2 billion, to ¥4.2 billion, and the operating margin declined toand operating revenue in the geographic information services seg-

5.0%, from 6.0% in the previous period.

ment rose 4.3%, or ¥1.7 billion, to ¥42.1 billion. This reflected
steadily expanding sales of geospatial data-based services to

Medical Services

national and local governments in Japan and government agen-The medical services segment includes home medical services,cies in foreign countries, as well as operational support services forcomprising pharmaceutical dispensing and delivery and homeprivate-sector customers. Segment operating income rose 6.5%,

nursing services, remote image diagnosis support services, elec-or ¥132 million, to ¥2.2 billion, owing to strict process manage-

tronic medical report systems, sales of medical equipment, thement and cost-cutting efforts. The operating margin was 5.2%,

operation of residences for seniors, personal care services, theup from 5.1% in the previous period.

leasing of real estate for medical institutions, and others. The­segment also includes the operations of variable interest entities

Real Estate Development and Sales

to which the Company is primary beneficiary, which manage

This segment comprises the development and sales of condomini-­hospitals and health care-related institutions.

ums that are equipped with advanced security and contingency

Net sales and operating revenue in the medical services seg-planning features. Net sales and operating revenue in the real

ment increased 7.8%, or ¥4.1 billion, to ¥56.4 billion. Operating

estate development and sales segment fell 44.9%, or ¥11.0 billion,

income amounted to ¥2.3 billion, up from ¥11 million in the previ-to ¥13.5 billion, owing to efforts to restrict the selection of proper-

ous period. This increase was attributable to improved results forties for development and sales in response to flagging market con-the entities managing hospitals and health care-related institutions

ditions. The segment reported an operating loss of ¥3.7 billion,

and contributions from a newly consolidated subsidiary.

compared with ¥17.6 ­billion in the previous period. This improvement was due mainly to a decrease in write-down on real estate

Insurance Services

inventories.

In addition to security services, which are preventative by nature,26

we offer non-life insurance, which looks after customers in the

Information and Communication Related and Other Services

event of misfortune. We have developed and marketed a broad

This segment consists primarily of information and communication

range of distinctive non-life insurance policies, including Security

related services—including information security systems and net-

Discount Fire Policy, a commercial fire insurance policy, andwork system operations services, which protect subscribers’ infor-

SECOM Anshin My Home, a comprehensive fire insurance policy

mation security in the event of a major disaster—and real estatefor households—both of which offer discounts on premiums toleasing. Segment net sales and operating revenue amounted tocustomers who have installed on-line security systems, recogniz-¥33.5 billion, down 5.7%, or ¥2.0 billion, owing to a temporary

ing this as a risk-mitigating factor. Other offerings include SECOM

dip in business conditions. Segment operating income declined

Anshin My Car, a comprehensive automobile insurance policy that

14.0%, or ¥628 million, to ¥3.9 billion, pushing the operatingoffers on-site support services—provided by our on-line emergency­margin down to 11.5%, from 12.6% in the previous period.

Secom Co., Ltd.

Annual Report 2010

Financial Position

Total assets as of March 31, 2010, amounted to ¥1,138.1 billion,

necessitated an increase in security equipment and control

0.4%, or ¥5.0 billion, lower than at the end of the previous period.

­stations, although this was offset by an increase in accumulated

Total current assets, at ¥500.8 billion, were up 1.7%, or ¥8.3 bil-

depreciation ­resulting from the depreciation of assets.

lion. This was attributable largely to increases in cash and cash

Other assets were down 2.9%, or ¥2.9 billion, to ¥97.5 billion.

equivalents (for more details, please see Cash Flows, which fol-This reflected such factors as a decline in deferred income taxes

lows this section), although these were partially offset by a decline

attributable to an increase in valuation allowances for certainin cash deposits and collection of notes and accounts receivables,­subsidiaries, which was partially offset by an increase in software.

trade. Owing to the increase in total current assets, as well as to a

Total liabilities fell 9.0%, or ¥49.7 billion, to ¥503.7 billion. Total

decrease in total current liabilities (see below), the current ratio

current liabilities amounted to ¥235.5 billion, down 16.9%, orrose to 2.1 times, from 1.7 times at the end of the previous period.

¥48.0 billion, owing to the application of firm cash flows to theInvestments and long-term receivables declined 4.9%, or ¥14.4

repayment of bank loans. The decrease in total liabilities alsobillion, to ¥276.5 billion, reflecting sales of investment securities

reflected a decline in investment deposits by policyholders as

and the redemption of bonds to prepare for the payment of­insurance policies with maturity refunds reached maturity.

refunds on insurance policies at maturity.

Total SECOM CO., LTD. shareholders’ equity amounted toProperty, plant and equipment, less accumulated depreciation,¥569.8 billion, up 7.8%, or ¥41.1 billion, owing primarily to anrose 1.6%, or ¥4.0 billion, to ¥263.3 billion. This was due primarily

increase in retained earnings, as well as to unrealized holding gains

to the addition of a subsidiary, engaged in the leasing of real estate

on securities—compared with unrealized holding losses on securi-

to medical institutions, to the medical services segment, resulting

ties for the previous period—which reduced accumulated otherin increases in buildings and improvements and in land. An

comprehensive loss, a net figure. Shareholders’ equity ratio roseincrease in the number of security services subscribers also

to 50.1%, from 46.3% at the end of the previous period.

SECOM CO., LTD.
Shareholders’ Equity
per Share

Total Assets(In billions of yen)

(In yen)

3,000

1,500

2,400

1,200

1,800

900

1,200

600

600

300

0

06 07 08 09 10

0

06 07 08 09 10

Annual Report 2010

Secom Co., Ltd.

27

FINANCIAL REVIEWCash Flows

The Company is committed to maintaining sufficient liquidity toincrease in the number of security services subscribers, and pay-allow flexibility in its operations and ensure a solid financial founda-

ments for long-term receivables of ¥5.0 billion. Cash provided bytion. To the best of its ability, the Company is also firmly committed

investing activities included net proceeds from sales and redemp-

to financing related strategic investments with cash generated bytion of short-term investments and investment securities of ¥24.0

its operating activities.

billion and proceeds from long-term receivables of ¥6.0 billion.

Net cash provided by operating activities amounted to ¥116.7

Investing activities used ¥39.3 billion less cash than in the previous

billion. The principal items contributing to this result were net

period, as net proceeds from sales and redemptions of short-term

income of ¥53.0 billion, depreciation and amortization of ¥55.1

investments and investment securities amounted to ¥24.0 billion,­billion, a decrease in cash deposits of ¥7.8 billion, loss on other-compared to net payments of ¥332 million in the ­previous period

than-temporary impairment of investment securities of ¥6.3 billion.

and purchases of property, plant and equipment decreased.

Cash used in operating activities included an increase in deferred

Net cash used in financing activities amounted to ¥85.7 billion.

charges of ¥14.5 billion. Net cash provided by operating activities

This included a decrease in bank loans, net, of ¥35.2 billion, awas ¥9.3 billion higher than in the previous period, owing to thedecrease in investment deposits by policyholders of ¥23.8 billion

increase in net income, which was partially offset by decreases

and dividends paid to SECOM CO., LTD. shareholders of ¥18.5

in non-cash expenses, including loss on other-than-temporary

billion. Financing activities used ¥24.2 billion less than in the previ-

impairment of investment securities and write-down of real estateous period. This was due largely to the absence of a ¥30.0 billion­inventories, and to an increase in inventories, compared with aoutlay for the purchase of treasury stocks in the previous period.

decrease in the previous period.

The Company’s operating, investing and financing activities

Net cash used in investing activities came to ¥10.6 billion.

resulted in cash and cash equivalents at the end of the year of

Significant factors included payments for purchase of property,¥180.1 billion, an increase of ¥20.8 billion from ¥159.4 billion atplant and equipment of ¥38.3 billion, a result of the purchase of

the end of the ­previous period.

security equipment and control stations necessitated by an

Depreciation andAmortization

Capital Expenditures(In billions of yen)

Cash Flows(In billions of yen)

(In billions of yen)

60

50

48

40

36

30

24

20

12

10

150
100
50
0

0

06 07 08 09 10

0

–50
–100
–150
06 07 08 09 10

08

09

10

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

28

Secom Co., Ltd.

Annual Report 2010

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

Annual Report 2010

Secom Co., Ltd.

29

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2010 and 2009		In millions of yen

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

March 31

March 31

2009

2010

Current assets:
Cash and cash equivalents (Notes 5 and 22)............................................................... ¥0,180,144 ¥ 159,393
Time deposits (Note 12)...............................................................................................
7,337
8,775
Cash deposits (Note 6)................................................................................................
48,862
56,668
Short-term investments (Notes 7 and 22).....................................................................
13,327
13,830Notes and accounts receivable, trade..........................................................................
76,84880,457
Due from subscribers...................................................................................................
29,322
29,384Inventories (Note 8)......................................................................................................
98,25596,071
Short-term receivables (Notes 12 and 20)....................................................................
16,16515,009Allowance for doubtful accounts..................................................................................
(2,223)(2,782)
Deferred insurance acquisition costs (Note 13).............................................................
6,145
6,559
Deferred income taxes (Note 16)..................................................................................
15,737
16,245
Other current assets....................................................................................................
10,873
12,932
			 Total current assets...............................................................................................
500,792
492,541$01,937,032
78,892525,398
143,301
826,323
315,290
1,056,505
173,817(23,903)
66,075
169,215
116,915
5,384,860

ASSETS

2010

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

148,069
42,61370,852
13,438
9,412(7,848)276,536

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

1,592,140
458,204
761,849
144,495
101,205(84,387)
2,973,506

Property, plant and equipment (Notes 10, 12, 19 and 20):
Land............................................................................................................................
Buildings and improvements........................................................................................
Security equipment and control stations......................................................................
Machinery, equipment and automobiles.......................................................................
Construction in progress..............................................................................................
			Accumulated depreciation............................................................................................
			90,521
156,137
257,395
70,4993,022
577,574(314,246)
263,328

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

973,344
1,678,892
2,767,688
758,054
32,495
6,210,473(3,378,989)
2,831,484

Other assets:
Deferred charges (Note 2 (12)).....................................................................................
44,125
Goodwill (Note 11).......................................................................................................
13,152Other intangible assets (Notes 11 and 12)....................................................................
22,497
Prepaid pension and severance costs (Note 14)...........................................................
4,742
Deferred income taxes (Note 16)..................................................................................
12,975
			
97,491
			 Total assets........................................................................................................... ¥1,138,147

46,196
15,44018,921
823
19,020100,400¥1,143,141

474,462
141,419
241,903
50,989139,516
1,048,289$12,238,139

See accompanying notes to consolidated financial statements.

30

Secom Co., Ltd.

Annual Report 2010

		In millions of yen

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

March 31

March 31

2009

2010

LIABILITIES AND EQUITY

2010

Current liabilities:
Bank loans (Notes 6 and 12)........................................................................................ ¥0, 43,025 ¥ 78,180
Current portion of long-term debt (Notes 12, 19 and 21)..............................................
10,801
15,967
Notes and accounts payable, trade..............................................................................
25,33628,942Other payables............................................................................................................
23,193
23,111
Deposits received (Note 6)...........................................................................................
28,34833,475
Deferred revenue.........................................................................................................
44,24842,646
Accrued income taxes.................................................................................................
21,064
19,126
Accrued payroll............................................................................................................
21,31623,526
Reserve for litigation loss (Note 24)..............................................................................
1,770
2,415
Other current liabilities (Note 16)...................................................................................
16,385
16,049283,437
			 Total current liabilities............................................................................................
235,486
Long-term debt (Notes 12, 19 and 21)............................................................................
Guarantee deposits received...........................................................................................
Accrued pension and severance costs (Note 14).............................................................
Deferred revenue.............................................................................................................
Unearned premiums and other insurance liabilities (Note 13)...........................................
Investment deposits by policyholders (Notes 13 and 21)..................................................
Deferred income taxes (Note 16).....................................................................................
Other liabilities (Notes 21, 22 and 23)..............................................................................
			 Total liabilities........................................................................................................

41,572
34,82916,50320,07874,46662,226
10,4038,120
503,683

36,40432,25817,81421,30868,86986,064
1,224
5,973
553,351$462,634
116,140
272,430
249,387
304,817475,785
226,495
229,204
19,032
176,183
2,532,107
447,011374,505
177,452
215,892
800,710
669,097
111,860
87,312
5,415,946

Commitments and contingent liabilities (Note 24)

Equity:SECOM CO., LTD. shareholders’ equity (Note 17):
Common stock:		 Authorized 900,000,000 shares;		 issued 233,288,717 shares in 2010 and 2009........................................................
66,37866,378Additional paid-in capital..............................................................................................
81,09679,995
Legal reserve...............................................................................................................
10,053
10,036
Retained earnings........................................................................................................
510,927
482,488
Accumulated other comprehensive income (loss):		 Unrealized holding gains (losses) on securities (Note 7).............................................
5,603(3,597)
		 Unrealized losses on derivative instruments (Note 23)...............................................
(18)
(187)
		 Pension liability adjustments (Note 14).......................................................................
(10,711)(11,878)
		 Foreign currency translation adjustments..................................................................
(18,622)(19,618)(35,280)			
(23,748)
Common stock in treasury, at cost:
15,254,334 shares in 2010 and 15,251,520 shares in 2009......................................
(74,907)(74,896)528,721
			 Total SECOM CO., LTD. shareholders’ equity........................................................
569,799
61,069Noncontrolling interests...................................................................................................
64,665
589,790
			 Total equity...........................................................................................................
634,464
			 Total liabilities and equity....................................................................................... ¥1,138,147 ¥1,143,141

Annual Report 2010

713,742872,000
108,097
5,493,839
60,247(194)(115,172)(200,237)(255,356)(805,452)
6,126,870
695,323
6,822,193$12,238,139

Secom Co., Ltd.

31

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2010
		In millions of yen

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

Years ended March 31

Year ended March 31

2008

2010

Net sales and operating revenue . ...................................................................... ¥670,644 ¥684,016 ¥701,836
Costs and expenses:
Cost of sales (Note 8).......................................................................................... 433,139 462,149 452,048
Selling, general and administrative expense (Notes 2 (19) and 18)....................... 137,720 141,960 142,390
Impairment loss on long-lived assets (Note 10)...................................................
292
76
16
Impairment loss on goodwill (Note 11).................................................................
245
1,578
1,128
Loss on sales and disposal of fixed assets, net...................................................
2,070
1,994
976

$7,211,226

2010

4,657,409
1,480,860
3,140
2,634
22,258

				

573,466

607,757

596,558

6,166,301				 Operating income.....................................................................................

97,17876,259105,278

1,044,925

Other income:Interest and dividends.........................................................................................
Reversal of reserve for litigation loss (Note 24).....................................................
Gain on sales of securities, net (Notes 7 and 9)...................................................
Gain on private equity investments......................................................................
Other (Note 15)...................................................................................................

1,317
781
—
—
3,254

2,232
—
—
1,403
2,124

3,007
—
2,020
4,070
3,920

14,161
8,398——
34,989

				

5,352

5,759

13,01757,548Other expenses:
Interest................................................................................................................
Loss on sales of securities, net (Note 7)..............................................................
Loss on other-than-temporary impairment of investment securities (Note 22)......
Loss on private equity investments.....................................................................
Loss related to spectrum reallocation (Note 24)...................................................
Provision for loss on litigation (Note 24)...............................................................
Other (Notes 15 and 23).....................................................................................

1,799
7
1,764
1,367
1,254
—
1,663

2,022
231
8,831
—
—
2,415
5,356

2,093
—
1,912
—
—
—
3,994

19,34475
18,968
14,69913,484—
17,882

				

7,854

18,855

7,999

84,452				 Income from continuing operations before income taxes and				 equity in net income of affiliated companies............................................

94,676

63,163

110,296

1,018,021

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

38,7496,882

41,682(5,423)42,4504,341

416,656
74,000				

45,631

36,25946,791490,656				 Income from continuing operations before equity				 in net income of affiliated companies .....................................................
Equity in net income of affiliated companies .....................................................

49,0452,620

26,904
8,733

63,505
5,238

527,365
28,173				 Income from continuing operations .........................................................
Income (loss) from discontinued operations, net of tax (Note 25)......................

51,665
1,354

35,637(149)

68,743(348)

555,538
14,559				 Net income .............................................................................................
Less: Net income attributable to noncontrolling interests.................................

53,019(6,030)35,488(4,928)68,395(6,639)570,097(64,839)				 Net income attributable to SECOM CO., LTD........................................... ¥ 46,989 ¥ 30,560 ¥ 61,756$ 505,258		In yenTranslation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2008

2010

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

¥209.41 ¥138.05 ¥275.91
6.10(0.63)(1.40)
215.51137.42274.51

$2.25
0.07
2.32

Cash dividends per share....................................................................................

¥ 85.00 ¥ 85.00

$0.91

2010

See accompanying notes to consolidated financial statements.

32

2009

Secom Co., Ltd.

Annual Report 20102009

¥ 80.00

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2010
In millions of yen										 Accumulated					
Number of		 Additional			other com					shares Common
paid-in
Legal
Retainedprehensive
					issuedstock
capitalreserveearnings income (loss)

Commonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest

Total

Balance, March 31, 2007 ................................................... 233,288,717 ¥66,378 ¥79,998 ¥ 9,923¥428,850¥11,433 (¥44,850)
Cumulative effect of a change in accounting principleadoption of ASC 710, net of tax (Note 2 (16))......................
————(1,227)——
Comprehensive income:Net income.......................................................................
————
61,756——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding losses on securities........................
—
—
—
—
—
(11,238)—
		 Unrealized losses on derivative instruments.................
—
—
—
—
—
(41)
—
		 Pension liability adjustments........................................
—
—
—
—
—
(5,998)——
		 Foreign currency translation adjustments.....................
————(2,187)—
Total comprehensive income............................................
							Cash dividends paid to SECOM CO., LTD. shareholders.......
————(17,998)——
Cash dividends paid to noncontrolling interests.....................
—
—
—
—
—
—
—
Changes in scope of consolidation........................................
—
—
—
—
(218)
—
—
Transfer to legal reserve.........................................................
—
—
—
97
(97)
—
—
Equity transactions with noncontrolling interests and other....
—
—
—
—
—
—
—
Gains and losses on disposal of treasury stock......................
—
—
0
—
—
—
—
Net changes in treasury stock...............................................
—
—
—
—
—
—
(27)

¥551,732¥61,311¥613,043(1,227)(192)(1,419)61,756

6,639

68,395(11,238)(41)(5,998)(2,187)42,292(17,998)
—
(218)
—
—
0
(27)

(1,657)
(11)
(798)
96
4,269
—
(1,415)——(1,462)——(12,895)(52)(6,796)(2,091)
46,561(17,998)(1,415)(218)—(1,462)0(27)

Balance, March 31, 2008 ................................................... 233,288,717
66,37879,99810,020471,066(8,031)(44,877)
Comprehensive income:Net income.......................................................................
————
30,560——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding losses on securities........................
—
—
—
—
—
(460)
—
		 Unrealized losses on derivative instruments.................
—
—
—
—
—
(93)
—
		 Pension liability adjustments........................................
—
—
—
—
—
(7,152)—
		 Foreign currency translation adjustments.....................
—
—
—
—
—
(19,544)—
Total comprehensive income............................................								Cash dividends paid to SECOM CO., LTD. shareholders.......
————(19,122)——
Cash dividends paid to noncontrolling interests.....................
—
—
—
—
—
—
—
Transfer to legal reserve.........................................................
—
—
—
16
(16)
—
—
Equity transactions with noncontrolling interests and other....
—
—
—
—
—
—
—
Gains and losses on disposal of treasury stock......................
—
—
(3)
—
—
—
—
Net changes in treasury stock...............................................
—
—
—
—
—
—
(30,019)574,554

62,511

637,065

30,5604,928

35,488(460)(93)(7,152)(19,544)
3,311(19,122)———(3)(30,019)

159
(20)
(959)
(622)
3,486
—
(1,701)—(3,227)
—
—

(301)
(113)
(8,111)(20,166)
6,797(19,122)(1,701)—(3,227)(3)(30,019)

Balance, March 31, 2009 ................................................... 233,288,717
66,37879,995
10,036482,488(35,280)(74,896)
Comprehensive income:Net income.......................................................................
————
46,989——Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding gains on securities.........................
—
—
—
—
—
9,200
—
		 Unrealized gains on derivative instruments..................
—
—
—
—
—
169
—
		 Pension liability adjustments........................................
—
—
—
—
—
1,167
—
996
—
		 Foreign currency translation adjustments.....................
—
—
—
—
—
Total comprehensive income............................................
							Cash dividends paid to SECOM CO., LTD. shareholders.......
————(18,533)——
Cash dividends paid to noncontrolling interests.....................
—
—
—
—
—
—
—
Transfer to legal reserve.........................................................
—
—
—
17
(17)
—
—
Equity transactions with noncontrolling interests and other....
—
—
1,101
—
—
—
—
Gains and losses on disposal of treasury stock......................
—
—
(0)
—
—
—
—
Net changes in treasury stock...............................................
—
—
—
—
—
—
(11)

528,72161,069589,790

46,9896,030

53,019

9,200
169
1,167
996
58,521(18,533)
—
—
1,101
(0)
(11)

211
47
372
212
6,872
—
(1,759)—(1,517)
—
—

9,411
216
1,539
1,208
65,393(18,533)(1,759)
—
(416)
(0)
(11)

Balance, March 31, 2010 ................................................... 233,288,717¥569,799¥64,665¥634,464¥66,378¥81,096¥10,053¥510,927(¥23,748) (¥74,907)

Translation into thousands of U.S. dollars (Note 3)										 Accumulated							 Additional			other com						 Common
paid-in
Legal
Retainedprehensive						
stock
capitalreserveearnings income (loss)

Commonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest

Total

Balance, March 31, 2009........................................................................... $713,742 $860,161 $107,914 $5,188,043($379,355) ($805,333)
Comprehensive income:Net income.............................................................................................
———
505,258——
Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized holding gains on securities...............................................
————
98,924—
		 Unrealized gains on derivative instruments........................................
—
—
—
—
1,817
—
		 Pension liability adjustments..............................................................
————
12,548—
		 Foreign currency translation adjustments...........................................
————
10,710—Total comprehensive income.................................................................. 							Cash dividends paid to SECOM CO., LTD. shareholders.............................
———(199,279)——
Cash dividends paid to noncontrolling interests...........................................
—
—
—
—
—
—
Transfer to legal reserve...............................................................................
—
—
183
(183)
—
—
Equity transactions with noncontrolling interests and other..........................
—
11,839————Gains and losses on disposal of treasury stock............................................
—
(0)
—
—
—
—
Net changes in treasury stock.....................................................................
—
—
—
—
—
(119)

$5,685,172

Balance, March 31, 2010 ......................................................................... $713,742 $872,000 $108,097 $5,493,839$6,126,870$695,323 $6,822,193

Annual Report 2010

Secom Co., Ltd.

($255,356) ($805,452)$656,656 $6,341,828

505,258

64,839570,097

98,924
1,817
12,548
10,710629,257(199,279)——
11,839
(0)
(119)

2,269
505
4,000
2,280
73,893—(18,914)—(16,312)——101,193
2,322
16,54812,990703,150(199,279)(18,914)—(4,473)(0)(119)

See accompanying notes to consolidated financial statements.

33

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2010
		In millions of yen

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

Years ended March 31

Year ended March 31

2010

2009

2008

Cash flows from operating activities:
Net income............................................................................................................................ ¥ 53,019 ¥ 35,488 ¥ 68,395
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 11)............................................................................................
55,13054,62558,194
		 Accrual for pension and severance costs, less payments..................................................
(3,723)(5,313)(4,083)
		 Deferred income taxes, including discontinued operations.................................................
6,885(5,416)
4,337
		 Loss on sales and disposal of fixed assets, net.................................................................
2,070
1,994
976
		 Impairment loss on long-lived assets (Note 10)..................................................................
292
76
16
		 Write-down on real estate inventories (Note 8)...................................................................
1,285
8,366
—
		 (Gain) loss on private equity investments...........................................................................
1,367(1,403)(4,070)		 Provision (reversal of reserve) for litigation loss (Note 24)....................................................
(781)
2,415
—
		 Impairment loss on goodwill (Note 11)...............................................................................
245
1,578
1,128
		 Gain on sales of securities, net (Note 7).............................................................................
(1,302)(299)(4,593)
		 Loss on liquidation of subsidiaries.....................................................................................
—
32
485
		 Loss on other-than-temporary impairment of investment securities...................................
6,321
19,5142,562
		 Equity in net income of affiliated companies.......................................................................
(2,620)(8,733)(5,238)
		 Gain on sales of discontinued operations (Note 25)...........................................................
(777)
—
—
		 Changes in assets and liabilities, net of effects from acquisitions and disposals:
			 Decrease in cash deposits............................................................................................
7,806
7,030
11,632
3,845
8,525(4,766)
			 (Increase) decrease in receivables and due from subscribers, net of allowances............
			 (Increase) decrease in inventories..................................................................................
(3,386)
10,099(19,267)
			 Increase in deferred charges.........................................................................................
(14,502)(15,972) (16,336)
			 Decrease in deposits received.......................................................................................
(5,133)(3,136) (14,023)
			 Increase (decrease) in deferred revenue.........................................................................
255(1,037)
1,468
			 Increase (decrease) in accrued income taxes.................................................................
2,021(5,530)(332)
			 Increase in guarantee deposits received........................................................................
2,541
1,811
329
			 Increase in unearned premiums and other insurance liabilities.......................................
5,598
5,664
4,939
			 Other, net......................................................................................................................
233(2,968)
10,820$ 570,097
592,796(40,032)
74,032
22,2583,140
13,817
14,699(8,398)2,634(14,000)—
67,968(28,173)(8,355)83,93541,344(36,409)(155,935)(55,194)
2,742
21,731
27,32360,1942,506				 Net cash provided by operating activities..................................................................

116,689

107,410

92,573

1,254,720

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

1,413
1,765
(38,283)(7,231)44,857(24,585)
3,776
5,185
996
—
250
(5,014)
6,043
226

(12)
206
(44,790)(4,166)
60,118(57,133)(3,317)—(1,498)—87(6,796)
7,160
222(1,612)
4,277(45,332)(5,134)87,439(99,262)
6,397
—
(317)
(1,741)(1,207)(3,773)
6,581
1,577

15,194
18,978(411,645)(77,752)
482,333(264,355)
40,60255,753
10,710—2,688(53,914)64,9782,430				 Net cash used in investing activities..........................................................................

(10,602)(49,919)(52,107)(114,000)

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

6,885(12,951)(35,156)(23,838)(18,533)(1,759)(11)(324)

11,396(13,411)(55,161)(1,188)(19,122)(1,701)(30,019)(711)

12,955(12,792)
6,075(6,109)(17,998)(1,415)(27)(15)

74,032(139,258)(378,021)(256,322)(199,279)(18,914)(119)(3,484)(921,365)				 Net cash used in financing activities..........................................................................

(85,687)(109,917)(19,326)

Effect of exchange rate changes on cash and cash equivalents ........................................

351(2,758)

222

3,774

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

20,751
159,393(55,184)
214,577

21,362
193,215

223,129
1,713,903¥159,393 ¥214,577$1,937,032

Cash and cash equivalents at end of year............................................................................. ¥180,144
See accompanying notes to consolidated financial statements.

34

2010

Secom Co., Ltd.

Annual Report 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2010

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the areas of security services, fire
protection services, medical services, insurance services,
geographic information services, real estate development andsales, and information and communication related and otherservices. With these services combined, the Company is focusing
on the establishment of a “Social System Industry,” a network ofintegrated systems and services, targeted at the needs of people
and business.
The Company’s principal business activities are security services,
including on-line security services for commercial and residential
premises, static guard services, armored car services for cash
collection and deposit and security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services; insurance services, focusing on non-life insurance services;
geographic information services using geographic information
system (“GIS”) and surveying and measuring technology; realestate development and sales, focusing on the development andsale of condominiums that feature security services and disasterprevention services; and information and communication related
services, centered on information security services and the provision of comprehensive information networks designed to assist
people and companies in the event of a major disaster; lease of realestate and other services.
2. Significant Accounting Policies
The parent company and its Japanese subsidiaries ­maintain theirrecords and prepare their statutory financial ­statements in accordance with accounting principles generally accepted in Japan(“Japanese GAAP”). Certain adjustments and reclassifications havebeen incorporated in the accompanying financial statements to­conform with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). These adjustments were
not recorded in the statutory books of account.
Significant accounting policies used in the preparation of theaccompanying consolidated financial statements are summarized
below:(1) Basis of Consolidation and Investments in Affiliated­Companies
The consolidated financial statements include the accounts ofthe parent company and those of its majority owned ­subsidiaries.
All significant intercompany transactions and accounts have been
eliminated in consolidation.
Investments in companies in which the ability to exercise significant influence exists (generally 20 to 50 percent owned companies), are accounted for under the equity method. Consolidated
income includes the Company’s current equity in the net income ofaffiliated companies, after elimination of intercompany profits.
The excess of cost over underlying identifiable net assets at
acquisition dates of investments in subsidiaries and affiliated­companies is recorded as goodwill.

(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variable­interest entities (“VIEs”) to which the Company is the primary
beneficiary.
The Company provides loans and guarantees to ­organizations
managing hospitals and health care-related institutions and to a PFI(Private Finance Initiative) organization which was established tobuild, maintain and operate correctional facilities. Certain organizations are considered VIEs under Accounting Standards Codification(“ASC”) 810, “Consolidation” (former FASB Interpretation (“FIN”)
No. 46 (revised December 2003), “Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51”).
Total assets held by VIEs to which the Company is the primary
beneficiary were ¥16,554 million ($178,000 thousand) and ¥16,594
million at March 31, 2010 and 2009, respectively. Total assets heldby VIEs to which the Company holds ­significant variable interests
but is not the primary beneficiary at March 31, 2010 and 2009 were¥48,301 million ($519,366 thousand) and ¥46,654 million, respectively. The Company’s maximum exposure to losses related to VIEs
at March 31, 2010 and 2009 were ¥9,309 million ($100,097
thousand) and ¥9,794 million, ­respectively.
(3) Revenue Recognition
The Company generates revenue principally through sales of
security services, merchandise and software, and insurance services under separate contractual arrangements. The Company
recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, title
and risk of loss have been transferred to the customer, the sales
price is fixed or determinable, and collectibility is probable.
Revenue from security services is recognized over the contractual period or, in the case of specific services, when such services
are rendered. Subscribers are generally requested to prepay a
portion of service charges which are credited to deferred revenue
and taken into income ratably over the ­covered service period.
Revenue from installation services of security equipment related toon-line centralized security ­services is deferred and recognized overthe contractual period of security services after completion of theinstallation. The related installation costs are also deferred andamortized over the ­contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security service. The Company allocates revenue to eachelement based on its relative fair value if such ­element meets
criteria for treatment as a ­separate unit of accounting as prescribedin ASC 605, “Revenue Recognition” (former Emerging Issues Task
Force (“EITF”) No. 00-21, “Accounting for Revenue Arrangementwith Multiple Deliverables”). Otherwise, revenue is deferred until theundelivered ­elements are fulfilled as a single unit of accounting.
Revenue from sales of merchandise and software is ­recognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.

Annual Report 2010

Secom Co., Ltd.

35

CONSOLIDATED FINANCIAL STATEMENTS

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

36

Secom Co., Ltd.

Annual Report 2010

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 inmarket value.
Other investments in non-public companies are recorded at cost
as fair value is not readily determinable. The Company periodicallyevaluates the values of other investments in ­non-public companies
for possible impairment by taking into consideration the financial
and operating conditions of the issuer, the general market
conditions in the issuer’s industry and the period of the decline in
the estimated fair value and other relevant factors. If the impairment
is determined to be other-than-temporary, other investments in
non-public companies are written down to their impaired value
through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies”(former AICPA Audit and Accounting Guide: Investment
Companies), in which investments are accounted for at fair value
based on the Company’s assessment of each underlying investment. The investments, by their nature, have little or no pricetransparency. Investments are initially carried at cost as an approximation of fair value. Adjustments to carrying value are made if thereis evidence of a change in fair value. Downward adjustments arealso made, in the absence 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 ¥23,520
million ($252,903 thousand) and ¥20,861 million at March 31, 2010
and 2009, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire
­protection-related products, real estate and information and otherrelated products, are stated at the lower of cost or market. Cost isdetermined, in the case of real estate, based on the specific identification method and, in the case of other inventories, primarily using
the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade and other receivables are not overstated due touncollectibility. Allowance for doubtful accounts is maintained for all
customers based on a variety of factors, including the length oftime 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 financial­obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If
circumstances related to customers change, estimates of the­recoverability of receivables would be further adjusted.

(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related ­insurance policies applying
a percentage relationship of cost incurred to premiums from­contracts issued to applicable unearned ­premiums throughout
the period of the contract.
(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant ­leasehold
improvements, are carried at cost and depreciated at rates basedon the estimated useful lives of the assets. From April 1, 2008,
depreciation is computed using the straight-line method for assets
other than security equipment and control stations. Prior to April 1,
2008, these assets were depreciated primarily using the decliningbalance method. Security equipment and control stations are
depreciated by using the declining-balance method. Assets leased
to others under operating leases are depreciated using the straightline method over the estimated useful lives. Depreciation expense
was ¥34,033 million ($365,946 thousand), ¥33,417 mil­lion and¥37,241 million for the years ended March 31, 2010, 2009 and2008, respectively. Maintenance, repairs and renewals are charged
to income as incurred.
The estimated useful lives of depreciable assets are as ­follows:		 Buildings
22 to 50 years
		 Security equipment and control stations
5 to 8 years
		 Machinery, equipment and automobiles
2 to 20 years
Effective April 1, 2008, the Company adopted the straight-line
method of depreciation for assets other than security equipment
and control stations. In accordance with ASC 250, “Accounting
Changes and Error Corrections” (former Statement of Financial
Accounting Standards (“SFAS”) No. 154, “Accounting Changes
and Error Corrections, a replacement of APB Opinion No. 20 and
FASB Statement No. 3”), this change in depreciation method istreated on a prospective basis as a change in estimate. Prior period
results have not been restated. The Company has unified its
accounting policy within the Group, as it believes that the change
of depreciation method for assets other than security equipment
and control stations better reflects the pattern of consumption of
the future benefits to be derived from those assets being
depreciated and provides a better matching of costs and revenues
over the assets’ estimated useful lives.
The Company recognizes an asset retirement liability if the fairvalue of the obligation can be reasonably estimated. Assetretirement obligations include those for which an entity has a legal
obligation to perform an asset retirement activity, however, thetiming and/or method of settling the obligation are conditional on afuture event that may or may not be within the control of the entity.
(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment related to on-line security services.
The installation costs are deferred and amortized using the straightline method over the contractual period of security services after
completion of the installation. Amortiza­­tion expense was ¥15,312
million ($164,645 thousand), ¥15,359 million and ¥14,953 million
for the years ended March 31, 2010, 2009 and 2008, respectively.

(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment”(former SFAS No. 144, “Accounting for Impairment or Disposal ofLong-Lived Assets”), the Company reviews the carrying amount of
its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of,whenever events or changes in circumstances ­indicated that thecarrying amount may not be recoverable. Long-lived assets to beheld and used are reviewed for impairment by comparing thecarrying 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. The
impairment loss would be calculated as the difference between theassets’ carrying amount and the fair value. Long-lived assets thatare to be disposed of other than by sale are considered held andused until they are disposed of. Long-lived assets that are to bedisposed of by sale are reported at the lower of their c­ arryingamount or fair value less cost to sell. Reductions in the carrying
amount are ­recognized in the period in which the long-lived assets
are classified as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of
assets of business acquired. Pursuant to ASC 350, “Intangibles—
Goodwill and Other” (former SFAS No. 142, “Goodwill and Other
Intangible Assets”), goodwill and i­ntangible assets acquired in apurchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for
impairment at least annually. This accounting standard also requiresthat intangible assets with estimable u­ seful lives be amortized overtheir respective estimated useful lives to their estimated residual­values, and reviewed for impairment in accordance with ASC 360.
The Company conducts its annual impairment test at the end ofeach fiscal year.
(15) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of
insurance contracts and are earned on a pro-rata basis over theremaining contract period. Other insurance liabilities consist
principally of liabilities for unpaid claims and adjustment expenses,
which are estimates of payments to be made on reported claims
and incurred but not reported claims, which are computed basedon past experience for unpaid losses.
(16) Compensated Absences
In June 2006, the Financial Accounting Standards Board(“FASB”) ratified ASC 710, “Compensation—General” (former EITF
consensus on EITF Issue No. 06-2, “Accounting for Sabbatical
Leave and Other Similar Benefits Pursuant to FASB Statement
No. 43”). This accounting standard provides guidance for an
accrual of compensated absences that require a minimum service
period but have no increase in the benefit even with additional
years of service. On April 1, 2007, the Company adopted thisaccounting standard and increased the beginning balance ofaccrued payroll by ¥2,265 million and deferred income taxes(Other assets) by ¥846 million, respectively, and decreased the­beginning balance of retained ­earnings by ¥1,227 million.

Annual Report 2010

Secom Co., Ltd.

37

CONSOLIDATED FINANCIAL STATEMENTS(17) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets andliabilities 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 theyears 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
not that a tax benefit will not be realized.
On April 1, 2007, the Company adopted ASC 740, “Income
Taxes” (former FIN No. 48, “Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement No. 109”), which
requires a more-likely-than-not threshold for financial statement
recognition and measurement of tax positions taken or expected tobe taken in a tax return. The benefit of the tax position is measured
at the largest amount of benefit that is greater than 50 percent likelyof being realized upon settlement with the appropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.

effective as a hedge, are recorded in other comprehensive income(loss), net of tax. Changes in the fair value of derivative financial
instruments not qualifying as a hedge are reported in income.
The Company meets the documentation requirements necessaryfor effective hedges which include their risk management objective
and strategy for undertaking various hedge transactions. In
addition, formal assessment is made at inception of the hedge andperiodically on an on-going basis, as to whether the derivatives
used in hedging activities are highly effective in off-setting changes
in fair values or cash flow of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Discontinued hedges arerecognized in income.

(18) Research and Development
Research and development costs are charged to income
as incurred.

(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 dateof the consolidated financial statements and the reported amountsof revenues and expenses during the period. Actual results could
differ from those estimates. Significant items subject to such
estimates and assumptions include the carrying amounts of inventories, investment securities, other investments, property, plant andequipment, goodwill and other intangible assets; valuation allowances for receivables and deferred income taxes; valuation ofderivative instruments; assets and obligations related to employee
benefits; income tax uncertainties; reserve for litigation loss; andother contingencies.

(19) Advertising Costs
Advertising costs are charged to income as incurred, except forthe costs related to insurance policies. Advertising costs for acquiring new insurance policies are deferred and amortized as part of
insurance acquisition costs. Advertising expenses included inselling, general and administrative expenses for the years ended
March 31, 2010, 2009 and 2008 were ¥4,665 million ($50,161
thousand), ¥5,292 million and ¥5,829 million, respectively.
(20) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with ASC 815, “Derivatives and Hedging” (former SFAS
No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended).
The Company recognizes all derivative financial instruments inthe consolidated financial statements at fair value regardless of the
purpose or intent for holding them. Changes in the fair value ofderivative financial instruments are either recognized periodically inincome or in equity as a component of 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 fairvalues of derivative financial instruments accounted for as a fairvalue hedge are recorded in income along with the portion of thechange in the fair value of the hedged item that relates to thehedged risk. Changes in the fair value of derivative financial instruments accounted for as a cash flow hedge, to the extent it is38

Secom Co., Ltd.

Annual Report 2010(21) Per Share Data
Basic Earnings per Share (“EPS”) is computed based on the
average number of shares of common stock outstanding for theperiod. The average number of shares of common stock outstanding for the years ended March 31, 2010, 2009 and 2008 was
218,035 thousand shares, 222,378 thousand shares and 224,967
thousand shares, respectively. There were no potentially dilutive
shares outstanding during the years ended March 31, 2010, 2009or 2008.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.

(23) Recent Pronouncements
In June 2009, the FASB issued the Accounting Standards
Codification, which compiles all generally accepted accounting
principles in the United States of America and establishes the
Accounting Standards Codification as the single official sourceof authoritative generally accepted accounting standards. Thisaccounting standard is effective for fiscal years ending after
September 15, 2009 and was adopted by the Company in thefiscal year ended March 31, 2010. The adoption of this accounting
standard had no impact on the Company’s consolidated results ofoperations and financial positions.
In December 2007, the FASB issued ASC 805, “Business
Combinations” (former SFAS No. 141(R), “Business Combinations”).
This accounting standard establishes principles and requirements
for how an acquirer recognizes and measures in its financial

statements the identifiable assets acquired, the liabilities assumed,
any noncontrolling interest in the acquiree and the goodwill
acquired. This accounting standard also establishes disclosure
requirements to e
­ nable the evaluation of the nature and financial
effects of the business combination. This accounting standard iseffective for fiscal years beginning after December 15, 2008 and
was adopted by the Company in the fiscal year ended March 31,
2010. The adoption of this accounting standard did not have amaterial impact on the Company’s ­consolidated results of­operations and financial positions.
In December 2007, the FASB issued ASC 810, “Consolidation”(former SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51”). Thisaccounting standard requires that the noncontrolling interest in
the equity of a subsidiary be accounted for and reported as equity,
provides revised guidance on the treatment of net income andlosses attributable to the noncontrolling interest and changes inownership interests in a subsidiary. This accounting standard also
requires additional disclosures that identify and distinguish between
the interests of the controlling and noncontrolling owners. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2008 and was adopted by the Company in thefiscal year ended March 31, 2010. Upon the adoption of thisaccounting standard, noncontrolling interests, which were previously referred to as minority interests and classified between total
liabilities and shareholders’ equity on the consolidated balance
sheets, are now included as a separate component of total equity.
The presentation of consolidated statements of income and cash
flows has also been changed. In addition, in accordance with therequirements of this accounting standard, certain reclassificationsof previously reported amounts have been made to the consolidated balance sheet at March 31, 2009, the consolidated statements of income and the consolidated statements of cash flows forthe years ended March 31, 2009 and 2008.
In December 2008, the FASB issued ASC 715, “Compensation—
Retirement Benefits” (former FSP FAS No. 132(R)-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets”). Thisaccounting standard requires additional disclosures about assets
held in an employer’s defined benefit pension or other postretirement plan. This accounting standard is effective for fiscal years ending after December 15, 2009 and was adopted by the Company inthe fiscal year ended March 31, 2010.
In April 2009, the FASB issued ASC 320, “Investment—Debt
and Equity Securities” (former FSP FAS No. 115-2 and 124-2,“Recognition and Presentation of Other-Than-Temporary
Impairments”). This accounting standard revises the recognitionand presentation requirements for other-than-­temporary impairments for debt securities, and contains additional disclosure
requirements related to debt and equity securities. This accounting
standard is effective for fiscal years ending after June 15, 2009 andwas adopted by the Company in the fiscal year ended March 31,
2010. The adoption of this accounting standard did not have amaterial impact on the Company’s consolidated results of­operations and financial positions.

In September 2009, the FASB issued Accounting Standards
Update (“ASU”) No. 2009-13, “Multiple-Deliverable Revenue
Arrangements, a consensus of the FASB Emerging Issues Task
Force.” This accounting standard addresses the accounting for
multiple-deliverable arrangements to enable the vender to accountfor products or services separately rather than as a combined unit,
and also addresses how to separate deliverables and how tomeasure and allocate arrangement consideration to one or moreunits of accounting. This accounting standard will be effective
prospectively for revenue arrangements entered into or materiallymodified in fiscal years beginning on or after June 15, 2010 and will
be adopted by the Company in the fiscal year beginning April 1,
2011. It is not anticipated that the adoption will have a material
impact on the Company’s consolidated results of operations or
financial positions.
In October 2009, the FASB issued ASU No. 2009-14, “Certain
Revenue Arrangements That Include Software Elements, aConsensus of the FASB Emerging Issues Task Force.” Thisaccounting standard modifies the scope of the software revenue
recognition guidance and excludes tangible products containing
software components and nonsoftware components that function
together to deliver the tangible product’s essential functionality
from the scope. This accounting standard is effective for the
fiscal years beginning after June 15, 2010, and will be adopted
by the Company in the fiscal year beginning April 1, 2011. It isnot ­anticipated that the adoption will have a material impact
on the Company’s consolidated results of operations or
financial positions.
In December 2009, the FASB issued ASU No. 2009-17,“Improvements to Financial Reporting by Enterprises Involved with
Variable Interest Entities.” This accounting standard codifies former
SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),”issued in June 2009 in the ASC 810. This accounting standard
requires an enterprise to perform an analysis to identify the primary
beneficiary of a variable interest entity and also requires ongoingreassessments of whether an enterprise is the primary beneficiaryof a variable interest entity. This accounting standard is effective forthe fiscal years beginning after November 15, 2009, and will be
adopted by the Company in the fiscal year beginning April 1, 2010.
The Company is currently evaluating the effect of adopting this­accounting standard on its consolidated financial statements.
(24) Reclassifications
The accompanying consolidated financial statements forthe years ended March 31, 2009 and 2008 have been ­reclassified to conform to the presentation used for the year
ended March 31, 2010.
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 ¥93=US$1, therate ­prevailing on the Tokyo Foreign Exchange Market on March
31, 2010. These ­translations should not be construed as representing that the yen amounts actually represent, or have been or could
be converted into U.S. dollars at that rate.

Annual Report 2010

Secom Co., Ltd.

39

CONSOLIDATED FINANCIAL STATEMENTS

4. Acquisitions
In July 2009, the Company acquired all outstanding shares of
MAC International Co., Ltd. by repossession of the Company’s
long-term receivables of ¥3,733 million ($40,140 thousand) andother short-term receivables of ¥1,000 million ($10,752 thousand).
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.
Short-term loans of ¥5,684 million ($61,118 thousand) andlong-term debt of ¥868 million ($9,333 thousand) to domestic
subsidiaries were eliminated in consolidation.
		In millions of yen

Cash and cash equivalents......................
Other current assets................................
Investments and long-term receivables....
Property, plant and equipment.................
Goodwill..................................................
Other assets............................................
Total assets acquired...........................
Current liabilities......................................
Other liabilities.........................................
Total liabilities assumed........................
Net assets acquired.............................

¥ 1,037
322
8,941
4,138
702
20
15,1605,798
4,629
10,427¥ 4,733

In thousands of
U.S. dollars$ 11,151
3,462
96,14044,495
7,548
215
163,01162,34549,774112,119$ 50,892

In February 2010, MAC International Co., Ltd. was merged into
Secom Medical System Co., Ltd., a subsidiary of the Company.
The pro-forma result related to this acquisition is not disclosed
because the impact on the consolidated financial statements is
not material.
5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2010 and 2009 werecomprised as follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2009

2010

Cash........................................... ¥125,552 ¥100,327
Time deposits..............................
15,42919,609Call loan......................................
36,50036,500Investment securities...................
2,663
2,957
			 . .......................................... ¥180,144 ¥159,393$1,350,022
165,903392,473
28,634$1,937,032

2010

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate ­fair value. The
Company has not experienced any losses through default of
the financial institutions and does not a­ nticipate default of any­outstanding agreements.
6. Cash Deposits
The Company operates cash collection and deposit services forfinancial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection­service for entities other than financial institutions. Cash deposit

40

Secom Co., Ltd.

Annual Report 2010balances of ¥48,862 million ($525,398 thousand) and ¥56,668­million at March 31, 2010 and 2009, respectively, are segregatedfrom cash and cash equivalents and are restricted as to use by theCompany. The Company funds most of the cash for such operations through bank overdrafts and deposits. Bank loans anddeposits received, which relate to these operations, were ¥24,492
million ($263,355 thousand) and ¥23,790 million ($255,806 thousand), respectively, at March 31, 2010, and ¥26,894 million and¥29,084 million, respectively, at March 31, 2009. As part of its fee
arrangement, the Company is reimbursed for the interest cost of
the related overdrafts.
7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities (noncurrent) include debt and equity securities. The related aggregate
fair value, gross unrealized gains, gross unrealized losses and cost
pertaining to “available-for-sale” and “held-to-maturity” investments
at March 31, 2010 and 2009 were as ­follows:
In millions of yen
March 31, 2010
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
		 Debt securities............. ¥ 12,379
Held-to-maturity:
		 Debt securities.............
40		
¥ 12,419
Investment securities:
Available-for-sale:		 Equity securities........... ¥ 37,173
		 Debt securities.............
61,397
Held-to-maturity:
		 Debt securities.............
6,086
		
¥104,656

Gains

LossesFair value

¥ 908

¥ —

¥ 13,287

—
¥ 908

¥

0
0

40
¥ 13,327¥7,153
2,446

¥330
—

¥ 43,996
63,8438¥9,607

0
¥330

6,094
¥113,933

In millions of yen
March 31, 2009
Gross unrealized
Cost

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

Gains

Losses

—
22

¥ 133
216

¥

2
24

—
¥ 349

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

Fair value

577
11,768

In thousands of U.S. dollars
March 31, 2010
Gross unrealized
Cost

Gains

Short-term investments:
Available-for-sale:
		 Debt securities............ $ 133,108 $Held-to-maturity:
		 Debt securities............
430
		$ 133,538 $LossesFair value

In millions of yen
March 31, 2010

9,763 $

— $ 142,871—
9,763 $

0430
0 $ 143,301

Investment securities:
Available-for-sale:		 Equity securities.......... $ 399,709 $ 76,914 $3,548 $ 473,075
		 Debt securities............
660,183
26,301—
686,484
Held-to-maturity:
		 Debt securities............
65,44186
065,527
		
$1,125,333 $103,301 $3,548 $1,225,086

Gross unrealized losses on, and fair value of, “available-forsale” and “held-to-maturity” securities, aggregated by invest­ment
category and the length of time that individual securities have been
in a continuous unrealized loss position, at March 31, 2010 wereas follows:		

In millions of yen

		March 31, 2010

Less than 12 months				
Fair value

The cost and fair value of “available-for-sale” and ”held-to-­maturity” debt securities by contractual maturity at March 31, 2010
are as follows:

12 months or longer

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

¥4,085—¥4,085

¥330
—
¥330

¥—
—
¥—

¥—
—
¥—

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

¥ 231

¥

¥—

¥—

0

In thousands of U.S. dollars
March 31, 2010
Less than 12 months

12 months or longer				
Fair value

Gross		unrealized		
lossesFair value

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

$43,925—$43,925$3,548—$3,548

$—
—
$—

$—
—
$—

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

$ 2,484

$

$—

$—

0

Gross
unrealized
lossesBased on the Company’s ability and intent to hold the investment
for a reasonable period of time sufficient for a recovery of fair value,
the credit condition of the issuers and other relevant factors, theCompany does not consider these investments to be other-thantemporary impaired at March 31, 2010.
At March 31, 2010, debt securities principally consisted of shortterm investments in monetary trusts, Japanese ­govern­ment bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.

Available-for-saleDue within 1 year.............
Due after 1 year
through 5 years.............
Due after 5 years
through 10 years...........
Due after 10 years ..........
		 ..................................

Held-to-maturity

Cost

Fair value¥12,379¥13,287

33,21733,74910

1017,520
10,660¥73,776

19,038
11,056¥77,130—
6,076¥6,126—
6,084¥6,134¥

Cost

Fair value

40

¥

40

In thousands of U.S. dollars
March 31, 2010
Available-for-sale
Cost

Fair value

Due within 1 year............. $133,108
Due after 1 year
through 5 years............. 357,172
Due after 5 years
through 10 years........... 188,387
Due after 10 years .......... 114,624
		 .................................. $793,291$142,871

Held-to-maturity
Cost$362,892
204,710
118,882$829,355

Fair value

430 $

430

108

108

—
—
65,333 65,419$65,871 $65,957

During the years ended March 31, 2010, 2009 and 2008, the net­ nrealized gains and losses on “available-for-sale” securitiesu
included as part of other comprehensive income (loss), net of tax,
increased by ¥9,200 million ($98,924 thousand), and decreased by¥460 ­million and ¥11,238 million, respectively.
Proceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2010, 2009 and 2008 were ¥31,328 million($336,860 thousand), ¥59,340 million and ¥106,925 million,
respectively. On those sales, the gross r­ealized gains and grossrealized losses, using moving-­average cost basis, for the years
ended March 31, 2010, 2009 and 2008 were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2010

2009

2008

2010

Gross realized gains........... ¥1,499
Gross realized losses..........
383

¥679
325

¥3,005623$16,118
4,118

The Company maintains long-term investment securities,
included as investment securities, issued by a number of­non-­public companies. The aggregate carrying amount of theinvestments in non-public companies, at cost net of other-thantemporary impairment, was ¥10,624 million ($114,237 thousand)and ¥10,714 million at March 31, 2010 and 2009, respectively. The
corresponding fair value at that date was not computed as such
estimation was not practical.

Annual Report 2010

Secom Co., Ltd.

41

CONSOLIDATED FINANCIAL STATEMENTS

8. Inventories
Inventories at March 31, 2010 and 2009 comprised the­following:

		 In thousands of		 In thousands of		

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

2009

2010

In millions of yen

U.S. dollars

March 31

March 31

Net sales....................... ¥153,990 ¥177,465 ¥202,335$1,655,806

2009

2010

Gross profit.................... ¥ 44,395 ¥ 54,621 ¥ 64,213$ 477,366

85,376132,032
800,247

Net income
attributable toaffiliated companies..... ¥ 14,105 ¥ 18,574 ¥ 22,576$ 151,667

2010

Security-related products.................. ¥ 7,940 ¥ 7,333
Fire protection-related products......... 12,279 16,241
Real estate........................................ 74,423 67,614
Information and other-related
products..........................................
3,613
4,883
			 .............................................. ¥98,255 ¥96,071$

38,850$1,056,505

Work in process for real estate inventories at March 31, 2010
and 2009, amounting to ¥55,916 million ($601,247 thousand) and¥61,437 million, respectively, are included in real estate.
The amount of write-down on real estate inventories included incost of sales for the years ended March 31, 2010 and 2009 were¥1,285 million ($13,817 thousand) and ¥8,366 million, respectively.
9. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a27.1 percent owned affiliate, which is listed on the Korea Exchange;
Toyo Tech Co., Ltd., a 27.8 percent owned affiliate, which is listedon the Second Section of the Osaka Securities Exchange; andTokyo Biso Kogyo Corporation, a 36.6 percent owned new affiliate
by additionally acquiring ¥1,740 m­ illion—equivalent to 16.6 percent
of total outstanding common stock—in May 2007 and March 2008,
which is listed on the Second Section of the Tokyo Stock
Exchange.
Combined financial information regarding the affiliated ­companies
accounted for under the equity method was as ­follows:		 In thousands ofIn millions of yen		In millions of yen

2010

U.S. dollars

March 31

March 31

2009

2010

Dividends received from affiliated companies for the years ended
March 31, 2010, 2009 and 2008 were ¥2,295 million ($24,677
thousand), ¥2,503 million and ¥2,657 million, respectively.
Four listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥31,834 million($342,301 thousand) and ¥29,752 m­ illion at March 31, 2010 and2009, respectively, had a quoted market value of ¥60,911 million($654,957 thousand) and ¥53,118 m­ illion at March 31, 2010 and2009, respectively.
The amounts of goodwill were ¥2,175 million ($23,387 thousand)and ¥2,710 million at March 31, 2010 and 2009, respectively.
A summary of transactions and balances with the affiliatedcompanies accounted for under the equity method is presented
below:
		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2010

2009

2008

2010

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

¥1,597¥1,737¥2,584$17,172

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

¥6,504¥8,293¥6,237$69,935

		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2010

2009

2010

Notes and accounts
receivable, trade.............................. ¥ 432¥ 461$ 4,645¥$

		Current assets................................ ¥ 85,620 ¥ 90,419
Non-current assets......................... 122,321 106,004$ 920,645
1,315,280

Loans receivable................................ ¥Notes and accounts payable............. ¥2,189¥2,949$23,538

Total assets................................ ¥207,941 ¥196,423$2,235,925

Guarantees for bank loans................. ¥¥$Current liabilities............................. ¥ 39,388 ¥ 39,994
Non-current liabilities......................
35,512
34,486Equity............................................. 133,041 121,943$ 423,527
381,850
1,430,548

Total liabilities and equity............. ¥207,941 ¥196,423$2,235,925

87
—

92
8

935

The Company's equity in undistributed income of affiliates at
March 31, 2010 and 2009 included in retained earnings was¥22,819 million ($245,366 thousand) and ¥23,147 million,
respectively.
10. Long-Lived Assets
The Company has assessed the potential impairment for its
long-lived assets. The fair value was determined by the estimatedpresent value of future cash flows or appraisal value.

42

Secom Co., Ltd.

Annual Report 2010—

Impairment loss on long-lived assets by ­business segment for
the years ended March 31, 2010, 2009 and 2008 was as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31Aggregate amortization expense for the years ended March 31,
2010, 2009 and 2008 was ¥5,785 million ($62,205 thousand),¥5,850 million and ¥5,999 million, respectively. Amortized intangible
assets are amortized using the straight-line method over the estimated useful lives. The weighted average amortization period forinternal use software is approximately five years.
The estimated aggregate amortization expense for ­intangible
assets for the next five years is as follows:

2010

2009

2008

2010

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

¥ 83
15
—
—

¥34
—
—
—

¥—
16
0
—

$ 893
161
—
—

149

42

—

1,602

—

—

—

—

2011......................................................
2012......................................................
2013......................................................
2014......................................................
2015......................................................

45
—

—
—

—
—

484
—

The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2010 and 2009 were as
follows:

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

¥292

¥76

¥16

$3,14011. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding goodwill
at March 31, 2010 and 2009 were as ­follows:
In millions of yen
March 31, 2010
Gross		carrying Accumulated
amountamortization

Net
carrying
amountAmortized intangible assets:
Software........................................ ¥33,989
Other.............................................
5,024
		 Total . ........................................ ¥39,013(¥18,041)(2,532)(¥20,573)¥15,948
2,492¥18,440

Unamortized intangible assets........... ¥ 4,057¥¥ 4,057—

In millions of yen
March 31, 2009
Gross		carrying Accumulated
amountamortization

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

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

In thousands of U.S. dollars
March 31, 2010
Gross		carrying Accumulated
amountamortization

Net
carrying
amountAmortized intangible assets:
Software........................................ $365,472
Other............................................. 54,022
		 Total . ........................................ $419,494($193,989) $171,483(27,226)
26,796($221,215) $198,279

Unamortized intangible assets........... $ 43,624$

		Years ending March 31
In millions of yen

In thousands of
U.S. dollars¥5,448
4,527
3,365
2,482
1,402

$58,581
48,67736,183
26,68815,075In millions of yen						
				 Geographic
Real estate		Security
Medical information development		
services
services
servicesand sales

Information andcommunication
related andother services

Total

¥135

¥5,399¥20,790

(135)
—

(478)
4,921

(4,649)16,141

—
—

—
—

1,541
—

—

(175)

(1,578)

—
135

—
5,399

(664)
21,549

(135)
—

(653)
4,746

(6,109)15,440———(2,919)702(2,919)

—

—

(245)

—
135

—
2,002

174
18,698(135)¥ —(175) (5,546)¥1,827 ¥13,152

Annual Report 2010

Secom Co., Ltd.

Goodwill................ ¥1,544 ¥9,598 ¥4,114
Accumulated
impairment
losses..................
(117) (3,427)(492)
March 31, 2008..... 1,427 6,171 3,622
Goodwill acquired
during the year.... 1,386—
155
Disposal................
———
Impairment
losses..................
(407)
(996)
—
Translation
adjustment..........
(664)
—
—
Goodwill................ 2,148 9,598 4,269
Accumulated
impairment
losses..................
(406) (4,423)(492)
March 31, 2009..... 1,742 5,175 3,777
Goodwill acquired
during the year....
—702—
Disposal................
———
Impairment
losses..................
—
(245)
—
Translation
adjustment..........
174——
Goodwill................ 2,322 9,970 4,269
Accumulated
impairment
losses..................
(406) (4,338)(492)
March 31, 2010.... ¥1,916 ¥5,632 ¥3,777— $ 43,624

43

CONSOLIDATED FINANCIAL STATEMENTS

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

Total

Goodwill................ $23,097 $103,204 $45,903 $1,452 $58,054 $231,710
Accumulated
impairment
losses.................. (4,366) (47,559) (5,290) (1,452)(7,022) (65,689)
March 31, 2009..... 18,731
55,645 40,613— 51,032 166,021
Goodwill acquired
during the year....
—
7,548
—
—
—
7,548
Disposal................
———— (31,387) (31,387)
Impairment
losses..................
—(2,634)———(2,634)
Translation
adjustment.......... 1,871
—
—
—
—
1,871
Goodwill................ 24,968 107,204 45,903 1,452 21,527 201,054
Accumulated
impairment
losses.................. (4,366) (46,645) (5,290) (1,452) (1,882) (59,635)
March 31, 2010.... $20,602 $ 60,559 $40,613 $ — $19,645 $141,419

The Company principally recognized impairment losses related
to goodwill allocated to reporting units in the medical services­segment of ¥245 million ($2,634 thousand) and ¥996 million forthe years ended March 31, 2010 and 2009, respectively, and in
the security services segment of ¥407 million for the year ended
March 31, 2009, due to decreases in the estimated fair value ofthese reporting units mainly caused by decreases of projectedcash flows.
The fair value was deter­mined by the estimated present value of
future cash flows or quoted market prices.
12. Bank Loans and Long-Term Debt
Bank loans of ¥43,025 million ($462,634 thousand) and ¥78,180
million at March 31, 2010 and 2009, respectively, are generallycomprised of 30 to 365 day notes. Their weighted average interest
rates were 1.24 percent and 1.28 percent at March 31, 2010 and2009, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebted­ness to suchbanks. The Company has not been requested to submit such
additional security.
At March 31, 2010, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a shortterm arrangement of ¥4,000 million ($43,011 thousand). The line ofcredit expires in March 2013. Under the agreement, Nohmi Bosai
Ltd. is required to pay committed fees at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2010, the Company had overdraft agreements with 16 banks andits unused lines of credit amounted to ¥105,625 million ($1,135,753
thousand). The Company incurs no fee on the unused portion of
the lines of credit. The overdraft agreements expire in the period
from April 2010 to March 2011. The Company has the ability and44

Secom Co., Ltd.

Annual Report 2010

intent to extend these overdraft agreements under similar terms
and conditions.
Long-term debt at March 31, 2010 and 2009 comprisedthe ­following:
		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2009

2010

2010

Loans, principally from banks
due 2009–2027 with interest
rates ranging from 0.76% to10.05% in 2010 and 2009:
Secured............................................ ¥20,461 ¥20,811
Unsecured........................................ 3,037
4,336
0.61% unsecured bonds due 2010......
150
450
0.91% unsecured bonds due 2010......
220
440
1.14% unsecured bonds due 2013...... 4,080
4,590
1.13% unsecured bonds due 2014...... 1,730—
Unsecured bonds due 2009–2015
with floating interest rates basedon 6-month TIBOR plus
0.00%–0.20%.................................... 12,588 12,230
Obligations under capital leases,
due 2009–2026 (Note 19)................... 10,107
9,514
			 ................................................. 52,373 52,371
Less: Portion due within one year......... 10,801 15,967
			 ................................................. ¥41,572 ¥36,404$220,011
32,6561,613
2,366
43,871
18,602

135,355
108,677
563,151
116,140$447,011

Property, plant and equipment with a carrying amount of ¥60,411
million ($649,581 thousand), investment securities with a carrying
amount of ¥646 million ($6,946 thousand), time deposits of ¥1,741
million ($18,720 thousand), short-term and long-term receivables of¥1,295 million ($13,925 thousand) and other intangible assets andother with a carrying amount of ¥818 million ($8,796 thousand)were pledged as ­collateral for bank loans and long-term debt at
March 31, 2010.
The aggregate annual maturities on long-term debt after March
31, 2010 are as follows:		Years ending March 31
In millions of yen

2011.....................................................
2012.....................................................
2013.....................................................
2014.....................................................
2015.....................................................
Thereafter..............................................
............................................................

¥10,801
8,521
12,892
7,718
5,918
6,523
¥52,373

In thousands of
U.S. dollars$116,140
91,624
138,624
82,98963,634
70,140$563,151

13. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a­subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with Japanese GAAP, which vary incertain respects from U.S. GAAP. Those differences are principally,(a) that insurance acqui­sition costs are charged to income whenincurred under Japanese GAAP whereas under U.S. GAAP, thosecosts are deferred and amortized generally over the premium-­
paying period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas under U.S. GAAP, those liabilities arecomputed based on past experience for unreported losses, and(c) that unearned premiums are calculated based on the documents authorized by the Supervisory Authorities in Japan whereas
under U.S. GAAP, unearned premiums are reflected based on thelapse and ­surrender over the contract period.
In addition, under certain property and casualty insurance
contracts with a refund clause and long-term insurance policies
that p­ rovide refunds at maturity, such as personal accident and fire,the policyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the ­policy) has
occurred. The Company has provided for such refundable amounts
by classifying a portion of the net pre­mi­ums written, together withinterest thereon, as investment deposits by policyholders. Contract
and policy terms are p­ rincipally 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, 2010 and 2009was ¥52,262 million ($561,957 thousand) and ¥47,753 million,
respectively.
Net sales and operating revenue of Secom Insurance include net
realized investment gains and losses, including the results on salesof securities, loss on other-than-temporary impairment of investment securities and impairment loss on long-lived assets. Net
realized investment gains and losses for the years ended March 31,
2010, 2009 and 2008 were losses of ¥3,309 million ($35,581 thousand) and ¥10,152 million, and gains of ¥1,922 million, respectively.
Loss on other-than-temporary impairment of investment securities
for the years ended March 31, 2010, 2009 and 2008 were ¥4,558
million ($49,011 thousand), ¥10,683 million and ¥650 million,
respectively.

In March 2009, Pasco Corporation and its domestic
subsidiaries settled and transferred a portion of the tax-qualified
non-­contributory pension plan to the defined contribution pension
plan. In accordance with ASC 715, “Compensation—Retirement
Benefits” (former SFAS No. 88 “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits”), the Company accounted for thesetransfers as a partial settlement of benefit obligation. The amount ofsettlement loss was immaterial for the year ended March 31, 2009.
Net periodic pension and severance costs for the years ended
March 31, 2010, 2009 and 2008 were as follows:

14. Pension and Severance Costs
Employees of the parent company and its domestic ­subsidiaries
whose services are terminated are, under most ­circumstances,eligible for lump-sum benefits and/or ­eligible for pension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefits under the cash balance pension plan arecalculated by the amount equal to a certain percentage of employee’s annual income over their period of service, plus interest calculated by 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.
Specified percentage of employees’ annual income is contributed
to the defined contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accord­ingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.

				 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

Net periodic pension andseverance costs:
Service cost......................... ¥4,424 ¥4,694 ¥4,511
Interest cost......................... 1,476 1,430 1,424
Expected return onplan assets........................ (1,997) (1,952) (1,808)
Amortization of priorservice benefit................... (1,682) (1,713) (1,715)
Recognized actuarial loss....
901
861 1,005
		 Net periodic pension
		 and severance costs...... ¥3,122 ¥3,320 ¥3,417

2010$47,570
15,871(21,473)(18,086)
9,688$33,570

The changes in benefit obligation, assets and funded s­ tatus wereas follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2010

2010

Change in benefit obligation:
Benefit obligation
at beginning of year.................. ¥72,090 ¥71,820
Service cost................................
4,424
4,694
Interest cost................................
1,476
1,430
Actuarial (gain) loss.....................
(873)
818
Benefits paid...............................
(4,593)(4,989)Settlement..................................
—(1,683)
Benefit obligation
at end of year...........................
72,52472,090Change in plan assets:
Fair value of plan assets
at beginning of year..................
55,09962,536
Actual return (loss) on plan
assets.......................................
3,436(9,887)
Employer contribution.................
5,323
5,979
Benefits paid...............................
(3,095)(3,529)Fair value of plan assets
at end of year...........................
60,76355,099Funded status
at the end of year......................... (¥11,761) (¥16,991)

Annual Report 2010

$775,161
47,57015,871(9,387)(49,387)—
779,828

592,462
36,94657,237(33,280)
653,365($126,463)

Secom Co., Ltd.

45

CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the consolidated balance sheet at March
31, 2010 and 2009 consist of:		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2009

2010

2010

Prepaid pension andseverance costs............................ ¥ 4,742 ¥ 823
Accrued pension andseverance costs............................ (16,503) (17,814)
			 Net amount recognized........ (¥11,761) (¥16,991)$ 50,989(177,452)($126,463)

Other changes in plan assets and benefit obligations ­recognizedin other comprehensive income (loss) for the year ended March 31,
2010 were summarized as follows:		 In thousands ofIn millions of yen

U.S. dollars(¥2,312)
(901)
1,682
(¥1,531)($24,860)(9,688)18,086($16,462)

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

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2010 and 2009 consist of:		 In thousands of		In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2010

Actuarial loss...................................... ¥30,690 ¥33,903
Prior service benefit............................ (10,854) (12,536)
			 Net amount recognized........... ¥19,836 ¥21,367$330,000(116,710)$213,290

2010

The estimated prior service benefit and actuarial loss for thedefined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit
cost over the next year are ¥1,682 million ($18,086 thousand) and¥901 million ($9,688 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥66,486 million ($714,903 thousand) and ¥66,154 million at March
31, 2010 and 2009, respectively.
The projected benefit obligation, accumulated benefit ­obligationand fair value of plan assets for the pension plans with­accumulated benefit obligation in excess of plan assets were¥26,563 million ($285,624 thousand), ¥23,411 million ($251,731
thousand) and ¥10,142 million ($109,054 thousand), respectively,
at March 31, 2010, and ¥26,072 million, ¥23,093 million and¥8,361 million, respectively, at March 31, 2009.
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, 2010 and 2009 were as follows:		 March 31

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

46

Secom Co., Ltd.

Annual Report 2010

2010

2009

2.2%
2.6

2.1%
2.7

Weighted-average assumptions used to determine net p­ ensionand severance costs for the years ended March 31, 2010, 2009
and 2008 were as follows:
Years ended March 31
2010

2009

2008

2.1%
3.0
2.7

2.0%
3.0
2.7

2.0%
3.0
2.7

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

The Company determines the expected long-term rate of return
based on the expected long-term return of the various asset categories in which it invests. The Company considers the current
expectations for future returns and the actual h­ istorical returns ofeach plan asset category.
The weighted-average asset allocation of the Company’s ­pension
plans at March 31, 2009 was as follows:
Asset category:
Equity securities......................................................................
Debt securities........................................................................
Call loan.................................................................................
Other......................................................................................
		 Total....................................................................................

6.9%
43.5
16.2
33.4
100.0%The Company’s investment policy is designed to ensure thatsufficient plan assets are available to provide future ­payments ofpension benefits to the eligible plan participants. The policy does
not use target allocations for the individual asset catego­ries. Plan
assets are invested primarily in equity and debt securities, andpooled funds with the objective to minimize risk and achieve theexpected rate of return. The investment results are periodicallychecked and asset allocation is adjusted as necessary.
The following table represents the fair value of the Company’s
pention plan assets at March 31, 2010. The three levels of input
used to measure fair value are more fully described in Note 22.
		Level 1

Cash and cash
equivalents................
Equity securities
Japanesecompanies.............
Foreigncompanies.............
Debt securities
Government
bonds....................
Nongovernment
bonds....................
Pooled funds...............
Call loans.....................
Insurance contracts.....
Other...........................
Total............................

¥ 1,222

Level 2¥—¥In millions of yen
Level 3

Total—

¥ 1,222

3,371

—

7

3,378

0

—

—

0

8,878

837

61

9,776

1,418
33
—
—
—
¥14,922—18,040
8,998
3,428
377
¥31,680702
12,994——397¥14,161

2,120
31,067
8,998
3,428
774
¥60,763

In thousands of U.S. dollars
Level 1

Level 2

Level 3

Cash and cash
equivalents................ $ 13,140 $— $—Equity securities
Japanesecompanies.............
36,247—75
Foreigncompanies.............
0——
Debt securities
Government
bonds....................
95,462
9,000
656
Nongovernment
bonds....................
15,247—
7,548
Pooled funds...............
355
193,978 139,720
Call loans.....................
—
96,753—
Insurance contracts.....
—
36,860—
Other...........................
—
4,054
4,270
Total............................ $160,451 $340,645 $152,269$ 13,140
36,322
0
105,118
22,795334,053
96,75336,8608,324$653,365* The plan’s equity securities include common stock of the Company and its
domestic subsidiaries in the amount of ¥23 million ($247 thousand) at March 31,
2010.
* The plan’s government bonds invest approximately 80% in Japanese bonds and
20% in foreign bonds. The nongoverment bonds invest approximately 70% inJapanese bonds and 30% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds isclassified into level 2, and invests approximately 40% in equity securities, 50% 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 intolevel 3.

The following table represents the changes in level 3 investments
for the year ended March 31, 2010.

In millions of yen

Equitysecurities

Debt
securities

			
NonJapanese Government government
companies
bonds
bonds

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

¥—

¥26

Pooledfunds¥ 55 ¥11,177

Other

Total

¥250 ¥11,508

—

(1)

—

(301)

—

(302)

—

5

647

431

181

1,264

4
3
¥ 7

31
—
¥61

—
1,687
—
—
¥702 ¥12,994

In thousands of U.S. dollars

Total

Equitysecurities

Debt
securities

			
NonJapanese Government government
companies
bonds
bonds

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

$—

$280

—

(10)

—

—

54

6,957

43
32
$75

332
—
$656

Pooled
funds

Other

Total

$ 591 $120,183 $2,689 $123,743(3,237)—(3,247)

4,634 1,946

13,591— 18,140 (365) 18,150———
32$7,548 $139,720 $4,270 $152,269

The Company expects to contribute ¥5,588 million ($60,086
thousand) to its domestic defined benefit plans in the year e­ nding
March 31, 2011.
The following benefit payments, which reflect future s­ ervices, as
appropriate, are expected to be paid.
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2011.....................................................
2012.....................................................
2013.....................................................
2014.....................................................
2015.....................................................
2016–2020............................................

¥ 4,112
4,201
4,443
4,612
3,871
23,687$ 44,215
45,172
47,774
49,591
41,624
254,699

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, 2010, 2009 and2008 were ¥1,468 million ($15,785 thousand), ¥1,469 million and¥1,413 ­million, respectively.
15. Exchange Gains and Losses
Other income for the year ended March 31, 2010 includes net
exchange gains of ¥552 million ($5,935 thousand). Other expense
for the year ended March 31, 2009 and 2008 include net exchange
losses of ¥1,564 million and ¥826 million, respectively.

(34) 1,688—
3¥397 ¥14,161

Annual Report 2010

Secom Co., Ltd.

47

CONSOLIDATED FINANCIAL STATEMENTS

16. Income Taxes
Total income taxes for the years ended March 31, 2010, 2009
and 2008 were allocated as follows:		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

Income fromcontinuing operations.......... ¥45,631 ¥36,259 ¥46,791
Income (loss) fromdiscontinued operations......
(317)
316
315
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized holding gains(losses) on securities........ 5,401(452) (8,189)
Unrealized gains(losses) on derivative
instruments......................
107
(102)
(8)
Pension liability
adjustments.....................
857 (4,863) (3,901)
Foreign currencytranslation
adjustments..................... 1,020
(859)
(497)
Cumulative effect ofchange in accounting
principle-adoptionof ASC 710..........................
—
—
(846)
		 . .................................... ¥52,699 ¥30,299 ¥33,665

2010$490,656(3,409)58,076
1,151
9,215
10,967—$566,656

The parent company and its domestic subsidiaries were ­subject
to a corporate tax of 30 percent, an inhabitants tax of approximately 20.3 percent, and a deductible enterprise tax of approximately 7.4 percent, which, in the aggregate, indicate a statutory tax
rate in Japan of approximately 40.5 ­percent for the years ended
March 31, 2010, 2009 and 2008.
Reconciliations of the differences between income taxes­computed at statutory tax rates and income taxes from continuing
operations were as follows:		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

Income taxes computed
at statutory tax rate of
40.5%................................. ¥38,344 ¥25,581 ¥44,670
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions.......................... 7,280 10,124
2,308
Reversal of valuation
allowance due toutilization of operating
loss carryforwards...........
(955)(187) (1,260)
Per capita tax....................
817
807
802
Other, net..........................
145
(66)
271
		 Income taxes
		 from continuing		 operations.................... ¥45,631 ¥36,259 ¥46,791

48

Secom Co., Ltd.

Annual Report 20102010

$412,301

78,280(10,269)
8,785
1,559

$490,656

The significant components of deferred tax assets and liabilities­
at March 31, 2010 and 2009 were as follows:		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2009

2010

2010

Deferred tax assets:
Loss carryforwards......................... ¥19,489 ¥17,465
Deferred revenue............................ 12,118 12,896
Adjustment of book value atthe date of acquisition—
		 Land and buildings.....................
6,887
7,320
		 Other assets...............................
405
462
Property, plant andequipment...................................
6,184
6,137
Accrued pension andseverance costs...........................
6,144
6,810
Accrued bonus...............................
5,166
5,323
Allowance for doubtful
accounts......................................
3,742
3,957
Vacation accrual.............................
3,649
3,589
Investment securities......................
2,593
3,505
Intangible assets.............................
2,213
4,006
Write-down on real estate
inventories....................................
1,467
2,573
Unrealized holding losses on
securities......................................
—
1,405
Other.............................................. 10,145
9,387
		 Gross deferred tax assets........... 80,202 84,835
		 Less: Valuation allowance........... (32,095) (26,863)
		 Total deferred tax assets............. 48,107 57,972
Deferred tax liabilities:
Deferred installation costs............... (7,721) (8,137)
Adjustment of book value atthe date of acquisition—
		 Land and buildings..................... (5,871) (4,514)
		 Other assets............................... (1,591) (1,734)
Investments in affiliatedcompanies.................................... (4,611) (2,705)
Unrealized holding gains on
securities...................................... (3,002)—
Unearned premiums andother insurance liabilities............... (2,166) (2,679)
Prepaid pension andseverance costs........................... (1,506)(104)
Other.............................................. (4,687) (4,982)
		 Gross deferred tax liabilities......... (31,155) (24,855)
			 Net deferred tax assets .......... ¥16,952 ¥33,117$209,559
130,301
74,054
4,355
66,49566,06455,54840,23739,23727,882
23,797
15,774—
109,085
862,388(345,108)
517,280(83,021)(63,129)(17,107)(49,581)(32,280)(23,290)(16,194)(50,398)(335,000)$182,280

The valuation allowance principally relates to deferred tax assetsof the subsidiaries with operating loss carryforwards, for tax purposes, that are not expected to be realized. The net change in the
total valuation allowance for the years ended March 31, 2010, 2009
and 2008 was an increase of ¥5,232 million ($56,258 thousand),¥9,795 million and ¥1,477 million, respectively.

In assessing the realizability of deferred tax assets, the Company
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 thegeneration of future taxable income during the periods in whichthose temporary differences become deductible. The Company
management considered the sched­uled reversal of deferred tax
liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based upon the level ofhistorical taxable income and projec­tions for future taxable income
over the periods in which the deferred tax assets are deductible,
the Company management believes it is more likely than not that
the Company will realize the benefits of these deductible
differences, net of the existing valuation allowance at March 31,
2010 and 2009.
Net deferred tax assets at March 31, 2010 and 2009 arereflected in the accompanying consolidated balance sheets under
the following captions:
		 In thousands of		In millions of yen

U.S. dollars

March 31

March 31

2009

2010

2010

Deferred income taxes(Current assets)............................... ¥15,737 ¥16,245
Deferred income taxes(Other assets).................................. 12,975 19,020
Other current liabilities.......................
(1,357)(924)
Deferred income taxes(Liabilities)........................................ (10,403) (1,224)
		 Net deferred tax assets ............. ¥16,952 ¥33,117$169,215
139,516(14,591)(111,860)$182,280

The Company has not recognized deferred tax liabilities of ¥588
million ($6,323 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥10,127 million ($108,892 thousand) at
March 31, 2010 as they are not expected to be remitted in theforeseeable future.
At March 31, 2010, the operating loss carryforwards of domestic
subsidiaries amounted to ¥45,549 million ($489,774 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to seven years, as follows:		 In thousands ofExpires in the years ending March 31
In millions of yen
U.S. dollars

2011......................................................
2012......................................................
2013......................................................
2014......................................................
2015......................................................
2016......................................................
2017......................................................
..............................................................

¥ 1,919
3,177
1,617
3,740
3,051
22,7689,277¥45,549$ 20,634
34,161
17,387
40,21532,806244,81799,754$489,774

The operating loss carryforwards of overseas subsidiaries at
March 31, 2010 amounted to ¥4,095 million ($44,032 thousand), apart of which will begin to expire in the year ending March 31, 2011.

The Company adopted the provisions of ASC 740, “Income
Taxes” (former FIN No. 48), on April 1, 2007. The adoption of thisaccounting standard did not have a material effect on the
Company’s consolidated results of operations and financial
positions.
The total amount of unrecognized tax benefits as of the dateof adoption of this accounting standard and for the years ended
March 31, 2010, 2009 and 2008 were insignificant. Also there were
no movements of the gross amounts in unrealized tax benefits
and the amounts of interest and penalties recognized due to theunrecognized tax benefits during the years ended March 31, 2010,2009 and 2008.
Although the Company believes its estimates of unrecognizedtax benefits are reasonable, uncertainties regarding the final
determination of income tax audit settlements and any related
litigation could affect the total amount of unrecognized tax benefits
in the future periods. Based on the information available as ofMarch 31, 2010, the Company does not expect significant changes
to the unrecognized tax b­ enefits within the next twelve months.
The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regularincome tax examinations by the tax authorities for years before
2007. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2009 with few exceptions.
17. Shareholders’ Equity(1) Retained Earnings
The Japanese Corporate Law provides that an amount equal to
10 percent of surplus distributed by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25 percent of the c­ ommon stock account.
The amount available for dividends under the Japanese­Corporate Law is based on the amount recorded in the p­ arent
company’s nonconsolidated statutory financial statements inaccordance with Japanese GAAP. Such amount was ¥373,683
million ($4,018,097 thousand) at March 31, 2010.
Subsequent to March 31, 2010, the parent company’s Board of
Directors declared an annual cash dividend of ¥85.00 ($0.91) per
share, totaling ¥18,533 million ($199,279 thousand), to shareholders of record on March 31, 2010. The dividend declared wasapproved at the general shareholders’ meeting held on June 25,
2010. Dividends are recorded in the year they are declared.
The Japanese Corporate Law provides that a company
can make dividends of surplus anytime with resolution of
the shareholders.
(2) Common Stock in Treasury
The Company may repurchase its common stock from the market pursuant to the Japanese Corporate Law. For the year ended
March 31, 2009, 6,928 thousand shares were repurchased for theaggregate cost of ¥30,019 million.

Annual Report 2010

Secom Co., Ltd.

49

CONSOLIDATED FINANCIAL STATEMENTS(3) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) for the years
ended March 31, 2010, 2009 and 2008 is as follows:
In millions of yen
Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2010:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period................. ¥11,598 (¥4,382) ¥ 7,216
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................
3,003(1,019)1,984
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.....................
(5)
—
(5)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................
281
(107)
174
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period.................
2,724(1,140)1,584		 Less: Reclassification		adjustment for gains
		or losses realized		in net income........................
(700)
283
(417)
Foreign currencytranslation adjustments.......................
2,016(1,020)996
			 Other comprehensive
			 income (loss)............................... ¥18,917 (¥7,385) ¥11,532
For the year ended March 31, 2009:
Unrealized holding losses on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period....................................... (¥17,054)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................ 16,142
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.....................
(263)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................
68
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period................. (11,602)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income........................
(413)
Foreign currencytranslation adjustments....................... (20,403)
			 Other comprehensive
			 income (loss)............................... (¥33,525)

50

Secom Co., Ltd.

Annual Report 2010

In millions of yen
Pre-tax
amount(6,080)10,062

106

(157)

(4)

64

4,559

(7,043)

304

(109)

859

(19,544)¥6,276 (¥27,249)

Net-of-tax
amount

For the year ended March 31, 2008:
Unrealized holding losses on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period....................................... (¥18,914) ¥ 7,880 (¥11,034)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................
(513)
309
(204)
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.....................
(61)
7
(54)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income............................
121
13
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period................. (9,209)
3,645(5,564)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income........................
(690)
256
(434)
Foreign currencytranslation adjustments....................... (2,684)
497(2,187)
			 Other comprehensive
			 income (loss)............................... (¥32,059) ¥12,595 (¥19,464)
In thousands of U.S. dollars
Pre-tax
amount¥6,532 (¥10,522)

Tax(expense)or benefit

Tax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2010:
Unrealized holding gains on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period................................... $124,710 ($47,119) $ 77,591
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income........................
32,290 (10,957) 21,333
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses(54)		 arising during the year.................
—(54)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income........................
3,022 (1,151)
1,871
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period.............
29,290 (12,258) 17,032
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income....................
(7,527) 3,043(4,484)Foreign currencytranslation adjustments...................
21,677 (10,967) 10,710
			 Other comprehensive
			 income (loss)........................... $203,408 ($79,409) $123,999

18. Research and Development Expenses
Research and development expenses included in selling, generaland administrative expenses for the years ended March 31, 2010,2009 and 2008 were ¥5,952 million ($64,000 thousand), ¥5,943
million and ¥5,792 million, respectively.
19. Lessee
The Company leases certain office space, employee residen­tial
facilities, computer and transportation equipment. Some leased
buildings, computer and transportation equipment are held undercapital leases. Other leases are classified as ­operating leases.
On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The leaseagreement extends for 30 years beginning May 1, 1996. For­financial reporting purposes, the portion of the lease relating to thebuilding has been classified as a capital lease; accordingly, an assetof approximately ¥5,086 million ($54,688 thousand) has beenrecorded in the building and improvements account. The portion of
the lease relating to the land has been classified as an operatinglease. The future minimum lease payments for the site at March 31,
2010 were ¥5,266 ­million ($56,624 thousand).
A summary of leased assets under capital leases at March 31,
2010 and 2009 is as follows:		 In thousands of		Buildings and improvements..............
Machinery, equipment
and automobiles..............................
Other intangible assets......................
Accumulated depreciation.................
		 . ................................................

In millions of yen

U.S. dollars

March 31

March 31

2009

2010

¥ 5,243 ¥ 5,243$ 56,376

13,359 12,043
409
593(10,085) (9,811)¥ 8,926 ¥ 8,068

143,645
4,398(108,441)$ 95,9782010

Depreciation expenses under capital leases for the years ended
March 31, 2010, 2009 and 2008 were ¥3,402 million ($36,581
thousand), ¥3,328 million and ¥4,089 million, ­respectively.
The following is a schedule by year of future minimum lease­payments under capital leases together with the present value ofthe net minimum lease payments at March 31, 2010:
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2011........................................................
2012........................................................
2013........................................................
2014........................................................
2015........................................................
Thereafter.................................................
Total minimum lease payments.................
Less: Amount representing interest...........
Present value of net minimum
lease payments (Note 12).......................
Less: Current portion................................
Long-term capital leaseobligations..........................................

¥ 3,143
2,132
1,372
906
645
3,817
12,015
1,908$ 33,796
22,925
14,752
9,742
6,935
41,043
129,193
20,516

10,107
2,877

108,677
30,935¥ 7,230$ 77,742

Rental expenses under operating leases for the years ended
March 31, 2010, 2009 and 2008 were ¥14,290 million ($153,656
thousand), ¥15,494 million and ¥15,912 million, respectively. A­significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon ­expiration.
On December 8, 2000, the Company entered into a lease­agreement for a building and land in Shibuya, Tokyo. The leaseagreement extends for 20 years beginning December 8, 2000. For
financial reporting purposes, the lease has been classified as an
operating lease. Based on the agreement, annual lease payments
for the site are approximately ¥1,339 million ($14,398 thousand)over a 20-year period.
The future minimum lease payments required under operat­ing
leases that have initial or remaining non-­cancelable lease terms inexcess of one year at March 31, 2010 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2011........................................................
2012........................................................
2013........................................................
2014........................................................
2015........................................................
Thereafter.................................................
Total future minimum lease
payments...........................................

¥ 2,350
2,291
2,210
2,191
2,188
16,527$ 25,269
24,63423,76323,55923,527
177,710¥27,757$298,462

20. Lessor
The Company’s leasing operations consist principally of leasingof security equipment and real estate for office and medical
institutions. Most of the security equipment and certain real estate
for medical institutions on lease are classified as sales-type leases
or direct-financing leases. Other leases are ­classified as ­operatingleases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2010 and 2009 is as follows:		 In thousands of		Total minimum lease payments
to be received..................................
Estimated executory cost..................
Estimated unguaranteed
residual value...................................
Unearned income..............................
Lease receivables, net.......................
Less: Current portion.........................
Long-term lease receivables, net...

In millions of yen

U.S. dollars

March 31

March 31

2009

2010

¥57,334 ¥48,511(4,746) (3,620)$616,495(51,032)

7,190 3,474(16,049) (12,264)
43,729 36,101(8,778) (8,287)¥34,951 ¥27,814

77,312(172,571)
470,204(94,387)$375,817

2010

Annual Report 2010

Secom Co., Ltd.

51

CONSOLIDATED FINANCIAL STATEMENTS

The following is a schedule by year of future minimum lease­ ayments to be received under sales-type leases and direct-­pfinancing leases at March 31, 2010:
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2011........................................................
2012........................................................
2013........................................................
2014........................................................
2015........................................................
Thereafter.................................................
Total future minimum lease
payments to be received.....................

¥10,992
9,068
7,030
5,005
3,240
21,999$118,194
97,50575,59153,817
34,839236,549(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are­estimated by discounting future cash flows using the interest rates
currently being offered for similar contracts.

¥57,334$616,495(6) Derivatives
The fair values of interest rate swaps are estimated using current
market pricing models by obtaining quotes from f­inancial institutions.

A summary of investment in property on operating leases andproperty held for lease at March 31, 2010 and 2009 is as follows:		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 312010

		In millions of yen¥34,822 ¥32,579
31,029 29,660
662
662(9,689) (8,539)¥56,824 ¥54,362$374,430
333,645
7,118(104,182)$611,011

		March 312010

The future minimum rentals on non-cancelable operating leases
at March 31, 2010 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2011........................................................
2012........................................................
2013........................................................
2014........................................................
2015........................................................
Thereafter.................................................
Total future minimum rentals.................

¥ 2,790
1,113
1,113
1,113
1,113
12,786¥20,028$ 30,000
11,968
11,968
11,968
11,968137,483$215,355

21. Fair Value of Financial Instruments
The following methods and assumptions were used to ­estimate
the fair value of financial instruments in cases for which it is­practicable.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits;
Notes and Accounts Receivable, Trade; Due from Subscribers;
Short-Term Receivables; Bank Loans; Notes and Accounts
Payable, Trade; Other Payables; Deposits Received; andAccrued ­Payrolls
The carrying amounts approximate fair value because of theshort-term maturities of such instruments.
(2) Short-Term Investments; Investment Securities
The fair values of short-term investments and investment­securities are principally based on quoted market price.
(3) Long-Term Receivables
The fair values of long-term receivables are based on the present
value of future cash flows through estimated maturity, discounted
using estimated market discount rates. The carrying amount oflong-term receivables approximates fair value.

52

Secom Co., Ltd.

Annual Report 2010

The carrying amounts and estimated fair values of the finan­cial
instruments excluding debt and equity securities which are­disclosed in Notes 2 (7) and 7 at March 31, 2010 and 2009 are
as follows:

2009

		

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

(4) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current ­portion was
estimated based on the discounted amounts of future cash flows ofeach instrument at the Company’s current incremental borrowing
rates for similar liabilities.

2009

2010
Carrying
amountNon-derivatives:
Liabilities—
		 Long-term debt
		 including current		 portion............................ ¥52,373
		 Investment deposits
		 by policyholders.............. 62,226
Derivatives:
Liabilities—
		 Interest rate swaps
		 (Other liabilities)...............
203

Estimated
fair value

Carrying
amountEstimated
fair value¥52,582 ¥52,371¥52,451

63,80386,06487,891

203

242

242

In thousands of U.S. dollars
March 31, 2010
Carrying
amountNon-derivatives:
Liabilities—
		 Long-term debt including current		 portion....................................................
		 Investment deposits
		 by policyholders......................................
Derivatives:
Liabilities—
		 Interest rate swaps (Other liabilities)..........

Estimated
fair value$563,151 $565,398
669,097 686,054
2,183

2,183

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

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures” (former
SFAS No. 157), defines fair value as the price that would bereceived to sell an asset or paid to transfer a liability (an exit price)in the principal or most advantageous market for the asset or­liability in an orderly transaction between market participants at themeasurement date. This accounting standard establishes a threelevel fair value hierarchy that prioritizes the inputs used to measurefair value as follows:
Level 1— Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable,
and inputs that are derived principally from or corroborated by observable market data by correlation orother means.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’ own
assumptions about the assumptions that market­participants would use in establishing a price.
The following table presents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2010 and 2009, consistent with the fair value hierarchy
provisions of ASC 820.
		

In millions of yen
March 31, 2010

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

Level 1

Level 255

¥ 2,608¥

76,09376,14839,39842,00629,155
29,155

144,646
147,309

—
—

203
203

—
—

203
203

¥

Liabilities:
Derivatives(Other liabilities)......
Total liabilities...............

Level 3

—

		

Total

¥

2,663

Liabilities:
Derivatives(Other liabilities)......
Total liabilities...............

Level 1

Level 2350

¥ 2,607¥

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

¥

—
—

242
242

March 31, 2010
Level 1

Level 3

—

—
—

Total

¥

2,957

157,067
160,024242
242

Level 2

Level 3

Assets:Cash equivalents..... $591 $ 28,043 $—Short-term
investments andinvestment
securities...............
818,204 423,634 313,495
Total assets.................
818,795 451,677 313,495
Liabilities:
Derivatives(Other liabilities)......
Total liabilities...............

—
—

2,183
2,183

—
—

Total

$

28,634

1,555,333
1,583,967

2,183
2,183

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are notactive.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market price in active markets with
sufficient volume and frequency of transactions.
Level 2 assets are comprised principally of debt securities, which
are valued using quoted prices for similar assets in active markets,or quoted price for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date.
Derivative Financial Investments
Derivative financial instruments are comprised of interest rate
swaps. These derivative instruments are valued using observable
market data and classified as Level 2 liabilities.
The following table presents the changes in Level 3 assets­ easured on a recurring basis for the years ended March 31, 2010mand 2009.
		 In thousands ofIn millions of yen
March 31, 2009

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

In thousands of U.S. dollars

		In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2010

Balance at beginning of year............... ¥26,983 ¥40,980
Total gains or losses(realized or unrealized):		 Included in earnings....................
(1,808) (3,907)
		 Included in other		 comprehensive income (loss)....
504 (1,705)
Purchase, issuances andsettlements, net............................
3,229 (2,393)
Foreign currency translation
adjustments..................................
247 (5,992)
Balance at end of year........................ ¥29,155 ¥26,983$290,140

2010

Annual Report 2010

(19,441)5,419
34,721
2,656$313,495

Secom Co., Ltd.

53

CONSOLIDATED FINANCIAL STATEMENTS

Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with carrying amount of ¥10,973
million ($117,989 thousand) were written down to their fair value of¥10,623 million ($114,226 thousand), resulting in an other-thantemporary impairment charge of ¥350 million ($3,763 thousand),
which was included in earnings for the year ended March 31,
2010. For the year ended March 31, 2009, non-marketable
equity s­ ecurities with carrying amount of ¥10,830 million were
written down to their fair value of ¥10,714 million, resulting in another-than-­temporary impairment charge of ¥116 million, which
was included in earnings. All impaired non-marketable equity
securities were classified as Level 3 assets, as the Company uses
unobservable inputs to value these investments.
Long-lived assets (Note 10) and goodwill (Note 11) are also­measured at fair value on a nonrecurring basis. All impaired longlived assets and goodwill were classified as Level 3 assets, as theCompany uses ­unobservable inputs to value these assets.
23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rate. The Company assesses interest rate risk by con­tinually monitoring changes in the exposure and by evaluating
hedging opportunities. The Company does not hold or issue
derivative financial instruments for trading purposes. The Company
is also exposed to credit-related losses in the event of non-­perfomance by counterparties to derivative financial instru­ments,
but it is not expected that any counterparties will fail to meet their
obligations, because most of the counterparties are internationallyrecognized financial institutions and contracts are diversified to a­number of major financial institutions.
(2) Interest Rate Risk Management
The Company’s exposure to the market risk of changes ininterest rates relates ­primarily to its debt obligations. The Company
principally enters into interest rate swap agreements to manage
fluctuations in cash flows resulting from changes in interest rates.
Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate ­proceeds and makes fixed interest rate payments,
thereby e­ ffectively creating fixed-rate debt.
(3) Cash Flow Hedge
The Company ­designates interest rate swap agreements as cash
flow hedges for variability of cash flows originated from floating
rate borrowings. The interest rate swap ­agreements mature atvarious dates through 2012. The ­effective portion of changes in fairvalues of derivative i­nstruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The
ineffective portion of changes in fair values are reported in income

54

Secom Co., Ltd.

Annual Report 2010

immediately. The sum of the amount of the hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the years ended March 31, 2010,2009 and 2008 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
Approximately ¥10 million ($108 thousand) of net derivative losses
included in other comprehensive income (loss), net of tax at March
31, 2010, will be reclassified into current income within 12 months
from that date. At March 31, 2010 and 2009, the notional principal
amounts of interest rate swap agreements designated as cash flow
hedges were ¥2,000 million ($21,505 thousand) and ¥8,723 million,
respectively.
(4) Derivative Instruments Not Designated as Hedges
Certain subsidiaries enter into interest rate swap agreements to
reduce exposure to fluctuations in interest rates relating primarily todebt obligations. Changes in fair value of the above noted derivative financial instruments, which are not ­designated as hedges, arereported in current income.
Fair values of derivative instruments reflected in the consolidatedbalance sheet as of March 31, 2010 are as follows:
Derivatives designated as hedging instruments
Liabilities:
		 In thousands ofLocationInterest rate swaps

Other liabilities

In millions of yen

U.S. dollars

Fair value

Fair value

¥25

$269

Derivatives not designated as hedging instruments
Liabilities:
		 In thousands ofLocationInterest rate swaps

Other liabilities

In millions of yen

U.S. dollars

Fair value

Fair value¥178$1,914

Effects of derivative instruments on the consolidated statements
of income for the year ended March 31, 2010 are as follows:
Derivatives designated as cash flow hedging instruments
Gains (losses) recognized in other comprehensive income(effective portion)

			 In thousands of		In millions of yen
U.S. dollars

Interest rate swaps		

(¥6)

($65)

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

			 In thousands ofLocation
In millions of yen
U.S. dollars

Interest rate swaps

Other expenses(¥358)($3,849)

Derivatives not designated as hedging instruments

			 In thousands ofLocation
In millions of yen
U.S. dollars

Interest rate swaps

Other expenses(¥81)($871)

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2010
for the p­ urchase of property, plant and equipment of approximately¥4,684 million ($50,366 thousand).
The Company provides guarantees to third parties mainly withrespect to bank loans extended to its affiliated companies andother entities. Such guarantees are provided to enhance the credit
standing of the affiliated companies and other entities. For eachguarantee provided, the Company would have to per­form under
the guarantee, if the affiliated companies and other entities default
on a payment within the guaranteed period of one to four years.
The maximum amount of undiscounted pay­ments the Company
would have to make in the event of default amounts to ¥3,532
million ($37,978 thousand) at March 31, 2010. The carrying
amounts of the liabilities recognized for the Company’s obligations
under these g­ uarantees at March 31, 2010 and 2009 were deemed
insignificant.
Loss related to spectrum reallocation is for disposal andreplacement of equipments, since the allotted spectrum currently
used in COCO-SECOM will no longer be available after July 2012as a result of spectrum reallocation by the government.
Pasco Corporation filed a lawsuit against Sumitomo Mitsui
Banking Corporation asking for a confirmatory judgment to theeffect that it does not owe an obligation in the amount of ¥2,010
million ($21,613 thousand) to Sumitomo Mitsui Banking
Corporation with the Tokyo District Court on October 31, 2005.
Sumitomo Mitsui Banking Corporation alleged that it made a loan
to a third party and acquired from the third party its claim against
Pasco Corporation for an alleged sale of equipment to Pasco
Corporation, as collateral for the loan, and demanded Pasco
Corporation to pay such claim to Sumitomo Mitsui Banking
Corporation. On December 5, 2005, Sumitomo Mitsui Banking
Corporation brought a cross action against Pasco Corporation in­relation to a demand for payment of a transferred receivable.
Subsequently, both actions were consolidated according to a court
procedure. The oral argument was concluded on October 31,
2008, and on March 27, 2009 Tokyo District Court rendered thefollowing judgement;

Pasco Corporation appealed the case to the Tokyo High Court
on April 6, 2009.
Following the decision, Pasco Corporation provided a reserve for
litigation loss of ¥2,415 million for the year ended March 31, 2009.
On May 10, 2010, Pasco Corporation and Sumitomo Mitsui
Banking Corporation reached a settlement under which Pasco
Corporation will pay to Sumitomo Mitsui Banking Corporation an
amount of ¥1,750 million ($18,817 thousand), after several oralproceedings and ­settlement negotiations at the Tokyo High Court.
Pursuant to the settlement, Pasco Corporation accounted ¥781
million ($8,398 thousand) as a reversal of reserve for litigation loss
for the year ended March 31, 2010, and provided anew ¥1,770
million ($19,032 thousand), a sum of the above settlement amountand related litigation expenses, on the consolidated balance sheet
as of March 31, 2010.
Other than those above, it is not anticipated that damages, if any,
resulting from other legal actions will have a material impact on the
Company’s consolidated financial statements.

1.		Pasco Corporation must pay money to Sumitomo Mitsui
Banking Corporation in an amount of ¥2,010 million ($21,613
thousand) as well as interest at the rate of 6 percent per annumon ¥600 million ($6,452 thousand), from November 1, 2005, andon ¥1,410 million ($15,161 thousand), from December 1, 2005,
up to the full payment of the respective amounts;
2.		Pasco Corporation incurs the cost of lawsuits including the costcaused by supplementary participation; and3.		The judgement can be provisionally executed.

2,795

25. Discontinued Operations
The Company accounted for the sale of certain businesses inaccordance with ASC 205-20, “Discontinued Operations” (former
SFAS No. 144). The Company sold all of the shares of Japan Image
Communications Co., Ltd., and Asia Pacific Business Link Ltd.,
included in the information and communication related and otherservices segment, in August and December 2009, respectively. The
Company reported the operating results related to these ­operations
as discontinued operations. Prior period figures have been restated.
Discontinued operations for the years ended March 31, 2010,2009 and 2008 were as follows:		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

Net sales andoperating revenue................ ¥2,135 ¥4,755 ¥4,859
Income (loss) form
discontinued operations
before income taxes............
260
167
(33)
Gain on sales of
discontinued operations......
777——
Income taxes.........................
317
(316)
(315)
Income (loss) fromdiscontinued operations,net of tax............................. ¥1,354 (¥ 149) (¥ 348)
Attributable tononcontrolling interests........ (¥ 23) ¥ 10 ¥ 33
Attributable to
SECOM CO., LTD. . ............ ¥1,331 (¥ 139) (¥ 315)

Annual Report 20102010

$22,957

8,355
3,409

$14,559($247)$14,312

Secom Co., Ltd.

55

CONSOLIDATED FINANCIAL STATEMENTS

Income (loss) from discontinued operations, net of tax, by business segment for the years ended March 31, 2010, 2009 and 2008
were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2010

2009

2008

2010

Security services....................
¥110
Medical services....................
1
Real estate development
and sales.............................
—
Information andcommunication related
and other services............... 1,243
Income (loss) fromdiscontinued operations,net of tax............................. ¥1,354

¥231
3

¥252
—

$1,183
11

0

4

—

(383)

(604)

13,365(¥149)(¥348)$14,559

26. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2009

2008

Cash paid during theyear for:
Interest................................ ¥ 1,830 ¥ 1,978 ¥ 2,082
Income taxes...................... 36,719 47,419 43,067
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases.......... 3,963
803 2,668
Acquisitions (Note 4)—
		 Fair value of		 assets acquired.............. 15,160——
		 Fair value of		 liabilities assumed........... 10,427——
		 Total considerations.......... ¥ 4,733 ¥
—¥
—

2010

$ 19,677
394,828

42,613163,011
112,119$ 50,892

27. Segment Information
The Company has applied ASC 280, “Segment Reporting”­(former SFAS No. 131, “Disclosures about Segments of anEnterprise and Related Information”), which requires disclosure offinancial and descriptive ­information about the Company’s reportable operating segments. The o­ perating segments reported below
are the segments of the Company for which separate financial
information is available and for which o­ perating profit/loss amounts
are evaluated regu­larly by ­management in deciding how to allocate
resources and assess performance.

56

Secom Co., Ltd.

Annual Report 2010

The Company has seven reportable business segments: security
services, fire protection services, medical services, insurance services, geographic information services, real estate development
and sales, and information and communication related and otherservices. During the year ended March 31, 2009, the Company
decided to separately disclose the real estate development andsales, which was previously included in the information and­communication related and other services segment, due to thefact that the reporting loss exceeded the quantitative threshold.
Accordingly, segment information of all prior periods has been
restated to conform to the presentation used for the year ended
March 31, 2009.
The security services segment provides various types of secu­rity
services by utilizing the Company’s unique security systems andmanufacturing and selling security equipment. The fire protection
services segment provides various types of fire protection equipment, such as automatic fire alarm and fire extinguishing and otherfire protection systems for office buildings, plants, tunnels, ships,
residences and cultural monuments. The medical ser­vices segmentprovides intravenous solutions to patients at home, home-based­nursing care services, medical data trans­mission services byutilizing the Company’s network and leas­ing of real estate for
medical institutions. In addition, the VIEs to which the Company isprimary beneficiary manage hospitals and health ­care-related
institutions. The insurance services s­ egment represents non-life
insurance-related underwriting business in the Japanese market.
The geographic information services segment represents surveying
and measuring services and GIS services. The real estate development and sales ­segment represents development and sales ofcondominiums that reinforce security. The information and communication related and other services ­segment represents theCompany’s network business, leasing of real estate and­management of hotel business.
Corporate expenses consist principally of general andadministrative expenses of the planning, personnel and admin­
istrative departments of the parent company and administrative
departments of the foreign holding company.
Intersegment sales are priced on a basis intended to­approximate amounts charged to unaffiliated customers.
Identifiable assets are those assets used exclusively in the­operations of each segment or which are allocated 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 and cash equivalents, short­term investments, investment securities, land, buildings, machineryand equipment.

Information by business and geographic segments for the years
ended March 31, 2010, 2009 and 2008 is as follows:(1) Business Segment Information
		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

2009

Net sales andoperating revenue:
Security services—		 Customers.................... ¥424,385 ¥436,918 ¥435,306
		 Intersegment.................
1,975
1,516
1,375
			 .................................. 426,360
438,434
436,681
Fire protection services—		 Customers.................... 80,132
84,17582,572
		 Intersegment.................
4,297
5,659
4,046
			 .................................. 84,429
89,834
86,618
Medical services—		 Customers.................... 56,309
52,22050,741
		 Intersegment.................
123
123
127
			 .................................. 56,432
52,34350,868Insurance services—		 Customers.................... 29,142
21,53033,229
		 Intersegment.................
2,982
2,919
2,894
			 .................................. 32,124
24,44936,123
Geographic information
services—
		 Customers.................... 41,918
40,20739,376
		 Intersegment.................
140
117
321
			 .................................. 42,058
40,324
39,697
Real estate development
and sales—
22,07229,928		 Customers.................... 13,268
		 Intersegment.................
188
2,361
—
			 .................................. 13,456
24,43329,928
Information andcommunication related
and other services—		 Customers.................... 25,490
26,89430,684
		 Intersegment.................
8,044
8,671
8,571
			 .................................. 33,534
35,56539,255
Total................................ 688,393
705,382
719,170
Eliminations..................... (17,749)(21,366)(17,334)
		 Total net sales and		 operating revenue....... ¥670,644 ¥684,016 ¥701,836$4,563,280
21,236
4,584,516
861,634
46,205907,839
605,473
1,323
606,796
313,355
32,064345,419450,7311,505
452,236

		 In thousands of2010

274,086
86,495360,581
7,402,075(190,849)$7,211,226

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

2009

Operating income (loss):
Security services............ ¥101,623 ¥102,475 ¥103,137
Fire protection
services.......................
4,193
5,353
4,948
Medical services............
2,254
11(1,083)
Insurance services.........
(1,503)(8,222)
3,766
Geographic information
services.......................
2,177
2,045
1,439
Real estate development
and sales.....................
(3,702)(17,577)
673
Information andcommunication related
and other services.......
3,850
4,478
4,368
Total.............................. 108,892
88,563
117,248
Corporate expenses
and eliminations...........
(11,714)(12,304)(11,970)
Operating income.......... ¥ 97,178 ¥ 76,259 ¥105,278
Other income.................
5,352
5,759
13,017
Other expenses.............
(7,854)(18,855)(7,999)
		 Income from continuing		 operations before		 income taxes
		 and equity in net
		 income of affiliated		 companies................ ¥ 94,676 ¥ 63,163 ¥110,296$1,092,719
45,08624,237(16,161)
23,409(39,806)
41,3981,170,882(125,957)$1,044,925
57,548(84,452)$1,018,021

		 In thousands of2010

142,667
2,021
144,688

In millions of yen

In millions of yen

U.S. dollars

March 31

March 31

2008

2010

2009

Assets:Security services............ ¥ 398,333 ¥ 390,414 ¥ 468,182
Fire protection
services.......................
79,761
81,40480,777
Medical services............ 131,061
122,960
119,251
Insurance services......... 190,329
197,844
188,538
Geographic
information services.....
58,09258,141
58,038
Real estatedevelopment
and sales.....................
77,94876,09597,261
Information andcommunication related
and other services.......
89,911
96,47698,081
Total.............................. 1,025,435 1,023,334 1,110,128
Corporate items.............
70,09979,735
108,583
Investments in andloans to affiliatedcompanies...................
42,61340,072
46,814
		 Total assets................. ¥1,138,147 ¥1,143,141 ¥1,265,525

Annual Report 2010

$ 4,283,151
857,645
1,409,258
2,046,548
624,645
838,150
966,785
11,026,182
753,753458,204$12,238,139

Secom Co., Ltd.

57

CONSOLIDATED FINANCIAL STATEMENTS

		 In thousands of2010

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

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

2009

¥45,694¥45,428¥47,191$491,333

1,428
2,253
1,017

1,250
2,026
1,220

1,171
3,816
1,225

15,35524,226
10,935

1,857

1,675

1,666

19,968

46

58

51

495

2,577
54,872258

2,680
54,337288

2,707
57,827367

27,710590,0222,774¥55,130¥54,625¥58,194$592,796¥27,154¥29,722¥33,192$291,978

1,804
4,069
275

1,524
2,153
309

1,556
4,674
8

19,39843,753
2,957

883

299

1,450

9,495

2

7

258

21

4,477
38,66455

10,614
44,628227

5,622
46,76063

48,140415,742591¥38,719¥44,855¥46,823$416,333

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

The following table is a breakdown of security services revenue
to external customers by service category. The security services
business is managed as a single operating segment by the­Company’s management.
		 In thousands of2010

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

2009

Electronic security
services....................... ¥299,089 ¥303,505 ¥296,167
Other security services:
Static guard
services...................
46,21347,99946,648
Armored car
services...................
19,823
20,31019,547
Merchandise andother ..........................
59,26065,10472,944
Total security
services................... ¥424,385 ¥436,918 ¥435,306$3,216,011
496,914
213,151
637,204$4,563,280(2) Geographic Segment Information
Net sales and operating revenue attributed to countries based on
location of customers and long-lived assets for the years ended
March 31, 2010, 2009 and 2008 were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2008

2010

Net sales andoperating revenue:
Japan........................ ¥651,161 ¥663,984 ¥680,334
Other.........................
19,483
20,03221,502
		 Total....................... ¥670,644 ¥684,016 ¥701,836$7,001,731
209,495$7,211,226

2010

2009

		 In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2008

2010

Long-lived assets:
Japan....................... ¥352,028 ¥351,143 ¥345,318
Other........................
3,834
4,925
6,185
		 Total...................... ¥355,862 ¥356,068 ¥351,503$3,785,247
41,226$3,826,473

2010

2009

There are no individually material countries with respect to
net sales and operating revenue and long-lived assets included inother areas.
28. Subsequent Events
The Company has evaluated subsequent events through June25, 2010, the date at which the financial statements were available
to be issued, and determined there are no other items to disclose.

58

Secom Co., Ltd.

Annual Report 2010

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

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

We have audited the accompanying consolidated balance sheets of SECOM CO., LTD. and subsidiaries (the “Company”) as of March 31,
2010 and 2009, and the related consolidated statements of income, changes in equity and cash flows for each of the years in the threeyear period ended March 31, 2010, all expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s m­ anagement. 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 to obtain reasonable assurance about whether the financial statements are free of material­misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, e­ vidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by­management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and subsidiaries as of March 31, 2010 and 2009, and the results of their operations and their cash flows for each of theyears in the three-year period ended March 31, 2010, in conformity with accounting principles generally accepted in the United States ofAmerica.
As discussed in Note 2 to the consolidated financial statements, the Company changed their method of accounting for noncontrollinginterests with the adoption of Accounting Standards Codification Topic 810, Consolidation, in the year ended March 31, 2010.
The accompanying consolidated financial statements as of and for the year ended March 31, 2010 have been translated into UnitedStates dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial­statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 to the consolidated
financial statements.

Tokyo, Japan
June 25, 2010

Annual Report 2010

Secom Co., Ltd.

59

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

60

Secom Co., Ltd.

Annual Report 2010

SUMMARY OF SELECTED FINANCIAL DATASECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2010

2009

2008

2007

2006

2005

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue........................................................ ¥670,644 ¥684,016 ¥701,836 ¥631,945 ¥575,856 ¥547,799
436,918
435,306
415,410400,044382,360
Security services:............................................................................ 424,385
63.9%
63.3%
62.0%
65.7%
69.5%
69.8%
				 As a percentage of net sales and operating revenue............
303,505
299,089
296,167
285,858
277,892
271,872
		 Electronic security services—
44.4
44.6
42.2
45.2
48.3
49.6
				 As a percentage of net sales and operating revenue............
		 Other security services—
47,99946,64842,144
41,48038,302
			 Static guard services............................................................... 46,213
7.0
6.9
6.6
6.7
7.2
7.0
				 As a percentage of net sales and operating revenue............
20,31019,547
20,30819,36918,462
			 Armored car services.............................................................. 19,823
3.0
3.0
2.8
3.2
3.4
3.4
				 As a percentage of net sales and operating revenue............
68,30966,19562,452
60,84956,764					 Subtotal........................................................................... 66,036
65,10472,944
67,10061,30353,724
		 Merchandise and other............................................................... 59,260
9.5
8.8
10.4
10.6
10.6
9.8
				 As a percentage of net sales and operating revenue............
84,17582,57227,448——Fire protection services................................................................... 80,132
12.3
11.9
11.8
4.3
—
—
				 As a percentage of net sales and operating revenue............
52,22050,74145,852
39,21534,688
Medical services............................................................................. 56,309
7.6
8.4
7.2
7.3
6.8
6.3
				 As a percentage of net sales and operating revenue............
21,53033,22931,97829,537
26,465
Insurance services.......................................................................... 29,142
3.2
4.3
4.7
5.1
5.1
4.8
				 As a percentage of net sales and operating revenue............
40,20739,37636,43835,271
34,915
Geographic information services..................................................... 41,918
5.9
6.3
5.6
5.8
6.1
6.4
				 As a percentage of net sales and operating revenue............
22,07229,92845,431
41,967
39,699Real estate development and sales................................................ 13,268
3.2
2.0
4.3
7.2
7.3
7.3
				 As a percentage of net sales and operating revenue............
Information and communication related
26,89430,68429,38829,822
29,672and other services........................................................................ 25,490
3.9
3.8
4.4
4.6
5.2
5.4
				 As a percentage of net sales and operating revenue............
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD..................................... ¥ 46,989
Cash dividends (paid)(2)....................................................................... 18,533
SECOM CO., LTD. shareholders’ equity............................................. 569,799
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)...............................................

¥ 30,560
19,122528,721¥ 61,756
17,998574,554¥ 55,889
13,499551,732¥ 50,331
11,251
508,696¥ 52,133
10,127457,837

6.5
1.6
2.6
3.6
14.3
85.7
100.0
4.1
8.2

11.9
2.4
1.9
3.6
19.8
80.2
100.0
2.7
5.8

17.5
1.2
1.8
4.0
24.5
75.5
100.0
4.9
10.7

17.4
1.4
1.9
3.6
24.3
75.7
100.0
4.5
10.1

15.2
6.4
1.6
3.6
26.8
73.2
100.0
4.1
9.9

16.1
1.7
6.4
3.9
28.1
71.9
100.0
4.5
11.4

8.2
2.1

7.9
2.2

8.2
2.3

9.1
2.5

9.0
2.7

9.1
2.6

64.9
2.55
53.5

64.4
2.66
32.4

63.8
2.81
53.7

62.3
2.54
53.5

60.5
2.39
48.8

60.0
2.43
39.3

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

Annual Report 2010

Secom Co., Ltd.

61

SUMMARY OF SELECTED FINANCIAL DATA

2010

2009

2008

2007

2006

2005

Number of shares outstanding
233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
Issued8,323,599
8,318,900
8,301,997
8,266,043
Owned by the Company........................................... 15,254,334 15,251,520
Balance.................................................................... 218,034,383 218,037,197 224,965,118 224,969,817 224,986,720 225,022,674
Per share information
Net income attributable to SECOM CO., LTD.
¥ 137.42¥ 274.51¥ 248.42¥ 223.69¥ 231.66¥ 215.51
per share (in yen) (1) .................................................
85.00
80.00
60.00
50.00
45.00
85.00
Cash dividends paid per share (in yen) (2) ..................
2,424.91
2,553.97
2,452.47
2,261.00
2,034.63
2,613.34
SECOM CO., LTD. shareholders’ equity
per share (in yen) (3) .................................................
299.72448.19427.34396.31410.29383.36
Cash flow per share (in yen) (1) (e) ................................
1.50
1.90
2.23
2.66
2.19
1.57
Price/Book value ratio...............................................
26.41
17.63
22.02
26.91
19.25
18.98
Price/Earnings ratio..................................................
12.11
10.80
12.80
15.19
10.87
10.67
Price/Cash flow ratio................................................
3,630
4,840
5,470
6,020
4,460
4,090
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

62

Secom Co., Ltd.

Annual Report 2010

(1) Per share amounts are based on the average number of shares
outstanding during each period.
(2) Subsequent to March 31, 2010, cash dividends of ¥18,533 million (¥85.00
per share) were approved at the general shareholders’ meeting on June 25,2010 (see Note 17 of the accompanying notes to consolidated financial
statements).
(3) Per share amounts are based on the number of shares outstanding at theend of each period, minus treasury stock.

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

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

2010

2009

2008

2007

2006

2005

31,48830,85928,51230,68319,807

21,327

0.08%
31.34
4.28
3.73
40.77
19.80
100.00%

0.00%
35.67
2.55
3.76
38.17
19.85
100.00%

—%
33.84
3.86
3.81
41.71
16.78
100.00%

—%
32.21
3.68
3.86
42.43
17.82
100.00%

—%
33.04
2.16
3.92
43.40
17.48
100.00%

—%
34.32
1.99
4.13
40.75
18.81
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2008
2009

2010

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

Price per share (in yen)

Nikkei Stock Average (in yen)

High

Low

High

Low

¥5,330
5,310
4,700
4,700
4,100
4,600
4,640
4,540

¥4,710
4,300
2,790
3,100
3,420
3,900
3,940
3,965

¥14,489.44
13,603.31
11,368.26
9,239.24
10,135.82
10,639.71
10,638.06
11,097.14¥12,656.42
11,259.86
7,162.90
7,054.98
8,351.91
9,050.33
9,081.52
9,932.90

Annual Report 2010

Secom Co., Ltd.

63

COMMON STOCK DATACOMMON STOCK ISSUES
			
		
		
Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

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

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

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

Remarks

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

Notes: 1. The above is a record of SECOM’s common stock issues since the common stock was listed on the Tokyo Stock Exchange in June 1974.
2. As of March 31, 2010, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

64

Secom Co., Ltd.

Annual Report 2010

CONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONTENTSCONDENSED CONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP)................................................................................. 66
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP)................................................................................. 68

Annual Report 2010

Secom Co., Ltd.

65

CONSOLIDATED FINANCIAL DATA (BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED CONSOLIDATED BALANCE SHEETS (BASED ON JAPANESE GAAP)SECOM CO., LTD. and Subsidiaries
As of March 31
In millions of yen

ASSETS

2010

2009

2008

2007

2006

2005

Current assets:
Cash on hand and in banks................................................. ¥ 146,929 ¥0,127,476 ¥0,200,403 ¥0,181,266 ¥ 271,780 ¥0,246,693
Cash deposits for armored car services...............................
48,861
56,667
63,69675,328——Call loans.............................................................................
36,50036,50019,00015,00025,00010,000Notes and accounts receivable, trade..................................
73,844
77,39885,59583,39752,66750,183Due from subscribers...........................................................
20,824
20,13921,125
19,217
17,678
16,204
Short-term investments........................................................
15,98916,786
9,306
18,171
83,80973,252
Lease receivables and investment in leased assets..............
14,742
14,993————Inventories...........................................................................
——
27,08025,94564,19440,979Merchandises and products.................................................
10,987
10,730————Real estate inventories.........................................................
18,493
6,177
90,23071,724——Work in process...................................................................
1,427
2,174
—
—
—
—
Costs on uncompleted construction contracts.....................
5,312
9,534
—
—
—
—
Work in process for real estate inventories...........................
55,916
60,950————Raw materials and supplies..................................................
5,932
5,840
—
—
—
—
Deferred income taxes.........................................................
11,684
11,135
11,84011,5979,462
8,207
Short-term loans receivable.................................................
3,088
4,125
7,246
5,097
15,564
46,375
Other...................................................................................
15,275
15,57813,827
19,66013,41917,676
Allowance for doubtful accounts..........................................
(2,207)(2,762)(1,813)(1,923)(1,617)(1,297)				 Total current assets...................................................
483,600
473,445547,538
524,484
551,959
508,274

Fixed assets:
Tangible assets:
		 Buildings and improvements............................................
		 Security equipment and control stations...........................
		 Land.................................................................................
		 Other................................................................................

97,692
63,03493,424
18,86985,41565,63189,29722,92384,54565,45081,71633,63687,306
63,67580,341
29,48577,27063,07065,542
28,18372,816
64,104
65,151
21,509Intangible assets..................................................................

21,885

21,331

22,332

23,294

24,384

27,582

Investments and others:
		 Investment securities........................................................
187,777
201,923
241,957
243,148
231,096
243,031
		 Long-term loans receivable..............................................
50,48859,88054,59955,22357,56442,983
		 Prepaid pension and severance costs..............................
18,61818,876
17,834
15,817
11,186
1,527
		 Deferred income taxes.....................................................
19,84824,41322,74015,654
11,256
18,509		 Other................................................................................
44,63046,12947,57945,692
41,21742,258
		 Allowance for doubtful accounts.......................................
(18,403)(19,122)(17,455)(15,161)(13,401)(10,292)				 Total fixed assets.......................................................
597,864
616,698
654,936
644,478
597,370
589,183
Deferred assets.....................................................................
213
338
365
219
47
90
				 Total assets .............................................................. ¥1,081,679 ¥1,090,483 ¥1,202,840 ¥1,169,182 ¥1,149,377 ¥1,097,548

66

Secom Co., Ltd.

Annual Report 2010

In millions of yen

LIABILITIES

2010

2009

2008

2007

2006

2005

Current liabilities:
Notes and accounts payable, trade..................................... ¥ 24,774 ¥0,028,374 ¥0,030,459 ¥0,028,469 ¥ 18,652 ¥0,015,693
Bank loans..........................................................................
48,09485,383136,034
129,169
112,868
108,172
Current portion of straight bonds........................................
1,761
5,036
1,936
3,356
32,210690
Lease obligations................................................................
247
202
—
—
—
—
Payables—other.................................................................
23,35923,19528,98829,88826,34018,959Accrued income taxes........................................................
20,907
18,983
24,61024,97322,15916,197
Accrued consumption taxes...............................................
3,302
2,932
3,456
3,366
2,588
2,698
Accrued expenses..............................................................
3,633
3,534
3,641
3,198
2,085
2,275
Deferred revenue................................................................
33,554
31,29832,061
31,18830,74728,532
Accrued bonuses................................................................
12,13912,741
12,21011,4098,981
8,758
Reserve for litigation losses.................................................
1,770
2,415
—
—
—
—
Accrued bonuses to directors and corporate auditors...........
—
—
—
80
—
—
Reserve for losses on construction contracts......................
145
—
—
—
—
—
Other..................................................................................
36,66042,55846,33758,66546,80544,245				 Total current liabilities...............................................
210,353
256,655
319,737
323,766
303,440
246,222Long-term liabilities:
Straight bonds....................................................................
Long-term loans.................................................................
Lease obligations................................................................
Guarantee deposits received...............................................
Deferred income taxes........................................................
Accrued pension and severance costs................................
Accrued retirement benefits for directors andcorporate auditors............................................................
Investment deposits by policyholders, unearned
premiums and other insurance liabilities............................
Other..................................................................................
				 Total long-term liabilities...........................................
				 Total liabilities...........................................................
Minority interests in subsidiaries .............................
Shareholders’ equity
Common stock...................................................................
Capital surplus....................................................................
Retained earnings...............................................................
Unrealized gains (losses) on securities.................................
Foreign currency translation adjustments............................
Common stock in treasury, at cost......................................
				 Total shareholders’ equity.........................................
				 Total liabilities, minority interests in				 subsidiaries and shareholders’ equity .................... ¥17,006
16,085501
36,777
8,399
13,264

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

13,52420,024—32,532
5,042
16,096

13,941
14,363—32,164
2,717
17,596

11,18013,444—28,982
1,079
11,36240,94014,513—28,737423
12,617

2,398

2,244

2,220

2,300

1,565

—

150,180
1,557
246,171456,525

167,0111,621
251,218
507,874

162,329
1,057
252,828
572,565

160,142
1,073
244,299
568,065

245,644
1,043
314,303617,743

278,278
1,724
377,234
623,457

—

—

—

—

35,46932,163

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

—
—
—
—
—
—
—

66,377
83,054
388,077
13,230(9,825)(44,749)
496,164

66,37782,553
346,510
8,167(17,123)(44,558)
441,927

— ¥

— ¥

— ¥

— ¥1,149,377 ¥1,097,548

Net Assets
Shareholders’ equity:
Common stock................................................................... ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥Capital surplus....................................................................
83,054
83,054
83,056
83,056
Retained earnings...............................................................
507,434
478,355
475,987432,696
Common stock in treasury, at cost......................................
(74,907)(74,896)(44,877)(44,850)				 Total shareholders’ equity.........................................
581,959
552,891
580,543537,279
Valuation, translation adjustments and others:
Unrealized gains (losses) on securities.................................
Deferred losses on hedges..................................................
Foreign currency translation adjustments............................
				 Total valuation, translation adjustments				 and others..............................................................
Minority interests in subsidiaries ........................................

— ¥
—
—
—
—

—
—
—
—
—

4,521
(17)
(27,871)(3,901)(27)(30,008)(3,306)(90)(9,907)

10,157(51)(7,253)

—
—
—

—
—
—

(23,367)(33,937)(13,304)

2,853

—

—

66,562

63,65463,03560,983

—

—

—
— ¥

—
—

				 Total net assets........................................................
625,153582,608630,274
601,116				 Total liabilities and net assets.................................... ¥1,081,679 ¥1,090,483 ¥1,202,840 ¥1,169,182 ¥Annual Report 2010

Secom Co., Ltd.

67

CONSOLIDATED FINANCIAL DATA (BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED CONSOLIDATED STATEMENTS OF INCOME (BASED ON JAPANESE GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2010

68

2009

2008

2007

2006

2005

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

¥654,678 ¥678,400¥682,619 ¥613,976¥567,315 ¥547,230(3.5%)(0.6%)
11.2%
8.2%
3.7%
3.8%

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

415,39063.4

444,77165.6

433,030
63.4

388,78763.3

351,02061.9

341,466
6­2.4

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

239,28836.6

233,62834.4

249,58936.6

225,18936.7

216,29438.1

205,764
37.6

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

140,749
21.5

145,99421.5

144,883
21.3

127,348
20.7

122,185
21.5

122,720
22.4

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

98,53915.1

87,63412.9

104,706
15.3

97,84015.9

94,10916.6

83,04315.2

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

9,158
9,371

12,957
9,666

20,125
10,552

15,087
10,207

15,792
13,232

11,942
11,507

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

98,32715.0

90,92413.4

114,278
16.7

102,720
16.7

96,66917.1

83,47815.3

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

3,370
5,463

482
27,875

2,748
4,984

2,601
3,317

9,349
11,18911,381
10,105

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

96,233
14.7

63,531
9.4

112,043
16.4

102,005
16.6

94,82916.7

84,754
15.5

Income taxes—current...........................................................
Income taxes—deferred.........................................................
Minority interest in subsidiaries...............................................

38,172
4,944
5,505

41,768(3,244)
3,504

42,602
2,656
5,278

39,961(660)
4,404

34,8883,131
3,815

28,7234,145
3,367

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

47,611
7.3
121.4

21,5023.2(65.0)

61,506
9.0
5.5

58,2999.5
10.0

52,9949.3
9.2

48,517
8.9
18.0

Secom Co., Ltd.

Annual Report 2010

NONCONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONTENTSCONDENSED NONCONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP)................................................................................. 70
CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP)................................................................................. 72

Annual Report 2010

Secom Co., Ltd.

69

NONCONSOLIDATED FINANCIAL DATA (BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED NONCONSOLIDATED BALANCE SHEETS (BASED ON JAPANESE GAAP)SECOM CO., LTD.
As of March 31
In millions of yen

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

2010

2009

2008

2007

2006

2005

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

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

¥ 77,130
60,821
534
11,661
6,760
2,921
454
6,298
952
1,913
4,714
236

¥ 71,818
67,799667
10,972
6,952
2,218
452
5,991
1,024
2,014
4,750
463

¥167,097
—
476
9,475
6,447
3,876
451
5,928
950
1,798
4,531
298

¥135,400
—
552
9,008
6,228
5,822
451
6,740
1,056
1,728
4,629
17,493

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

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

17,782
2,720(568)
194,333

13,9102,615(541)
191,111

12,5872,314(604)
215,630

24,4042,614(2,299)213,831

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

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

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

21,969122
62,4191,267
3,239
25,9131,961
14

22,124136
60,2841,364
4,216
32,0922,980
22

22,811
166
59,442
1,467
4,379
32,2001,919
32

23,943
132
59,836
1,423
4,514
35,1791,692
47Intangible assets:
		 Telephone rights...............................................................
		 Telephone and telegraph utility rights................................
		 Software...........................................................................
		 Other................................................................................

—
—
7,580
975

—
—
6,578
542

—
—
7,184
516

—
83
4,755
3,419

0
112
6,420
83

1,946
147
6,401
84

21,76921,26728,66843,165

46,16627,654

193,899

192,775

194,110

166,839

149,535

159,772

1,874
5,088
55

1,874
8,468
40

1,874
8,453
31

1,074
18,30824

974
18,630
24

667
3,122
22

128,727
134,636
8,583
8,702
25,816
26,412
14,364
14,561
14,09914,763
4,334
4,896
800
1,065
(12,544)(13,354)
533,572
545,056¥668,207 ¥679,858

66,354
8,859
26,165
13,769
6,760
4,893
975
(6,812)478,710¥673,043

52,9298,973
24,855
12,213
5,139
4,893
983
(7,200)463,680¥654,791

40,085
9,006
22,175
8,670
6,206
4,893
955
(7,998)428,359¥643,990

14,1608,816
20,335
1,257
10,4505,153
2,877(4,760)384,880¥598,711

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

70

Secom Co., Ltd.

Annual Report 2010

In millions of yen

LIABILITIESCurrent liabilities:
Accounts payable...............................................................
Bank loans..........................................................................
Current portion of straight bonds.........................................
Lease obligations................................................................
Payables—other.................................................................
Payables—construction......................................................
Accrued income taxes........................................................
Accrued consumption taxes...............................................
Accrued expenses..............................................................
Deposits received...............................................................
Deferred revenue................................................................
Accrued bonuses................................................................
Other..................................................................................
				 Total current liabilities...............................................
Long-term liabilities:
Straight bonds....................................................................
Lease obligations................................................................
Guarantee deposits received...............................................
Accrued pension and severance costs................................
Accrued retirement benefits for directors andcorporate auditors............................................................
Other..................................................................................
				 Total long-term liabilities...........................................
				 Total liabilities...........................................................
Shareholders’ equity
Common stock...................................................................
Capital surplus:
		 Additional paid-in capital.................................................
				 Total capital surplus..................................................
Retained earnings:
		 Legal reserve...................................................................
		 Voluntary reserve:
			 Reserve for system developments...............................
			 Reserve for tax deferral on asset replacement..............
			 General reserve............................................................
				 Total voluntary reserve..............................................
		 Unappropriated retained earnings....................................
				 Total retained earnings.............................................
Unrealized gains on securities.............................................
Common stock in treasury, at cost......................................
				 Total shareholders’ equity.........................................
				 Total liabilities and shareholders’ equity ...................
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....................................

2009

2010

¥

2,009
24,492—51
10,811
3,425
14,637
1,491
555
23,62522,5585,493
2,133
111,287¥

2,319
60,893—43
10,981
3,742
11,8491,622
597
28,451
22,735
5,537
1,928
150,704

2008

2007

2,757
30,401——
10,8383,607
15,8341,566
640
31,29922,903
5,372
1,958
127,180¥002,573
27,667——
12,596
3,825
15,7752,029
639
41,60322,7355,207
895
135,548

¥

2006

2005

3,168
26,06930,000—12,987
3,634
15,312
1,509
651
34,442
22,371
5,232
1,938
157,317¥002,113
31,473——
10,201
3,113
10,2791,306
599
31,146
21,727
4,967
1,764
118,694¥—
182
17,965
4,394—
192
18,146
4,766——
18,174
5,087——
18,4495,370——
18,244
5,581

30,000—18,014
5,713

1,174
272
23,989135,276

1,104
12
24,221
174,926

1,070—
24,333
151,513

1,268—
25,088160,637

1,201—
25,027
182,344——
53,728172,423

—

—

—

—

66,377

66,377

—
—

—
—

—
—

—
—

83,054
83,05482,55382,553

—

—

—

—

9,028

9,028

—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—

800
24
2,212
3,036
339,293351,3585,604(44,749)
461,646¥643,990

800
25
2,212
3,037
306,766
318,832
3,082(44,558)
426,288¥598,711

¥

¥

¥

¥

¥

¥

¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,054—
83,054

83,054—
83,054

83,054
1
83,056

83,054
1
83,056

—
—
—

—
—
—

9,028

9,028

9,028

9,028

—

—

800
2,212
445,579
457,620(74,907)532,145800
2,212
418,306
430,347(74,896)504,883

800
2,212
405,015
417,055(44,877)
521,612800
2,212
372,966
385,006(44,850)
489,590

—
—
—
—
—
—

—
—
—
—
—
—

786

48

(82)

4,564

—

—

786
532,931¥668,20748
504,932¥679,858(82)
521,529¥673,043

4,564
494,154¥654,791

—
—
—

—
—
—

¥

Annual Report 2010

—

¥

—

Secom Co., Ltd.

71

NONCONSOLIDATED FINANCIAL DATA (BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME (BASED ON JAPANESE GAAP)SECOM CO., LTD.
Years ended March 31
In millions of yen
2010

72

2009

2008

2007

2006

2005

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

¥328,773 ¥336,893¥337,611 ¥326,076¥313,096 ¥297,782(2.4%)(0.2%)
3.5%
4.1%
5.1%
3.2%
291,325
294,386
291,350
282,247
272,876
261,918
(1.0)
1.0
3.2
3.4
4.2
2.0
37,44742,506
46,261
43,82940,22035,863(11.9)
(8.1)
5.5
9.0
12.1
13.5

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

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

193,84257.5
161,548
54.9
32,29476.0

192,41757.0
158,03154.2
34,386
74.3

183,34156.2
151,53253.7
31,80972.6

171,80354.9
142,473
52.2
29,32972.9

164,51855.2
138,298
52.8
26,21973.1

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

140,07242.6
130,976
45.0
9,095
24.3

143,05042.5
132,83845.1
10,21224.0

145,19343.0
133,31845.8
11,87425.7

142,73443.8
130,71546.3
12,01927.4

141,29345.1
130,40247.8
10,89027.1

133,26344.8
123,620
47.2
9,643
26.9

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

68,54420.8

70,43420.9

71,03821.0

69,33021.3

69,121
22.0

67,232
22.6

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

71,52721.8

72,61621.6

74,15522.0

73,40422.5

72,172
23.1

66,031
22.2

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

9,225
3,290

9,721
3,990

9,607
4,575

7,942
4,763

6,299
7,506

6,241
6,052

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

77,462
23.6

78,34623.3

79,18723.5

76,58323.5

70,96422.7

66,21922.2

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

561
4,639

67
27,068

2,221
566

1,246
1,141

6,147
5,615

1,083
5,915

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

73,38422.3

51,34515.2

80,842
23.9

76,68823.5

71,49622.8

61,388
20.6

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

27,57837.6

18,93136.9

30,79538.1

29,443
38.4

27,617
38.6

23,684
38.6

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

45,80613.9
41.3

32,4149.6(35.2)

50,04614.8
5.9

47,245
14.5
7.7

43,87914.0
16.4

37,704
12.7
10.0

Secom Co., Ltd.

Annual Report 2010

CORPORATE INFORMATION(As of June 30, 2010)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG AZSA & Co.*
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan* Effective July 1, 2010, KPMG AZSA & Co. became KPMG AZSA LLC.

MAJOR CONSOLIDATED SUBSIDIARIES		Issued capital(In millions of yen)

Percentageof equity/
voting rights

Lines of business(As of June 30, 2010)

Domestic<Security services>
Secom Joshinetsu Co., Ltd.

¥3,530		(50.9)%

Security services

Secom Hokuriku Co., Ltd.

201		

59.1

Security services

Secom Yamanashi Co., Ltd.

15		

70.0

Security services

Secom Mie Co., Ltd.

50		

51.0

Security services

Secom Sanin Co., Ltd.

286		

67.0

Security services

Secom Miyazaki Co., Ltd.

30		

68.3

Security services

Secom Jastic Co., Ltd.

210		

100.0

Security services

Secom Jastic Joshinetsu Co., Ltd.

40		(100.0)

Security services

Secom Jastic Hokuriku Co., Ltd.

10		(100.0)

Security services

Secom Jastic Miyazaki Co., Ltd.

10		(100.0)

Security services

Secom Jastic Akita Co., Ltd.

10		

100.0

Security services

Secom Jastic Sanin Co., Ltd.

10		(100.0)

Security services

Secom Jastic Yamanashi Co., Ltd.

10		(100.0)

Security services

Secom Static Hokkaido Co., Ltd.

50		

100.0

Security services

Secom Static Tohoku Co., Ltd.

50		

100.0

Security services

Secom Static Nishi-Nihon Co., Ltd.

50		

100.0

Security services

Secom Static Kansai Co., Ltd.

50		

100.0

Security services

Secom Sado Co., Ltd.

24		(54.5)

Security services

JK. Siress Co., Ltd.

10		(100.0)

Security services

Japan Safety Guard Co., Ltd.

100		

60.0

Security services

Meian Co., Ltd.

60		

51.0

Security services
Installation and maintenance of security equipment

2,358		

(67.8)

Secom Tech Sanin Co., Ltd.

Secom Techno Service Co., Ltd.

23		(100.0)Installation of security equipment

Secom Techno Joshinetsu Co., Ltd.

30		(80.5)

Installation of security equipment

Secom Win Co., Ltd.

15		(66.7)

Installation of security equipment and facilities

TES Co., Ltd.

20		(100.0)

Maintenance of equipment

Secom Tohoku Enterprise Co., Ltd.

100		(100.0)Design, construction and maintenance of facilities

Secom Industries Co., Ltd.

499		

100.0

Manufacturing of security equipment

Otec Electronics Co., Ltd.

200		

82.0

Manufacturing and sales of security systems

Secom Alpha Co., Ltd.

271		

100.0

Sales of security and water-treatment equipment

Yanoshin Air Conditioning Co., Ltd.

80		(100.0)

Sales of air-conditioning equipment

Secom Mine Security Co., Ltd.

30		

100.0

Security services

Social Rehabilitation Support Kitsuregawa Co., Ltd.

10		

51.7

Operation of PFI correctional facilities

Secom Kitsuregawa Security Co., Ltd.

50		

100.0

Security services

Home Life Kanri Co., Ltd.

40		(100.0)Condominium management

Secom Home Service Co., Ltd.

32		

100.0

Lifestyle support 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.

Annual Report 2010

(Continued)

Secom Co., Ltd.

73

CORPORATE INFORMATION

MAJOR CONSOLIDATED SUBSIDIARIES		Issued capital(In millions of yen)

Percentageof equity/
voting rights

Lines of business(As of June 30, 2010)<Fire protection services>
Nohmi Bosai Ltd.

¥13,302		

(50.4)%

Manufacturing and sales of fire protection equipment

				and facilities

Nohmi Setsubi Co., Ltd.

(100.0)Installation of fire protection equipment
Installation of fire protection equipment30		

Ichibou Co., Ltd.

28		(73.2)

Kyushu Nohmi Co., Ltd.

30		(100.0)Installation and maintenance of fire protection equipment

Chiyoda Service Co., Ltd.

20		(70.0)

Building management

Bosai Engineering Corporation40		

(100.0)Installation of fire protection equipment

Nohmi System Co., Ltd.

20		(100.0)

Maintenance of fire protection equipment

Iwate Nohmi Co., Ltd.

30		(100.0)Installation of fire protection equipment

Tohoku Bosai Plant Co., Ltd.

12		(100.0)Installation of fire protection equipment

Aomori Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Osaka Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Nissin Bohsai Co., Ltd.

50		(100.0)Installation of fire protection equipment

Chiba Nohmi Co., Ltd.

10		(100.0)Installation of fire protection equipment

Shikoku Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Nohmi Techno Engineering Co., Ltd.

40		(100.0)Installation of environmental monitoring systems

Akita Nohmi Co., Ltd.

20		(100.0)Installation of ­fire protection equipment

Fukushima Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Tohoku Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Nohmi Plant Niigata Co., Ltd.

20		(100.0)Installation of fire protection equipment

Hokkaido Nohmi Co., Ltd.

20		(100.0)Installation of fire protection equipment

Yashima Bosai Setsubi Co., Ltd.

20		

(75.5)

Installation of fire protection equipment<Medical services>
6,545		

100.0Home health/nursing care and other medical-related services

Mac Corporation

Secom Medical System Co., Ltd.

95		(100.0)

Sales of medical equipment

Yoshikikaku Co., Ltd.

20		(100.0)Operation of restaurants and shops at medical facilities

Kensei Co., Ltd.

100		(100.0)Management of pharmacies

Ryomay Royal Life Co., Ltd.

210		

86.5

Management of nursing homes

Alive Medicare Co., Ltd.

50		(100.0)Management of nursing homes

Secom Medical Resource Co., Ltd.

10		(100.0)

Medical staffing solutions

Secomfort Co., Ltd.

100		(100.0)Management of nursing homes

Secomfort West Co., Ltd.

100		(100.0)Management of nursing homes

US Chemical Co., Ltd.

3		(100.0)Management of pharmacies

Secom Insurance Service Co., Ltd.

225		(100.0)

Secom General Insurance Co., Ltd.

16,809		

97.1<Insurance services>
Non-life insurance agency
Non-life insurance

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.

74

Secom Co., Ltd.

Annual Report 2010

(Continued)

MAJOR CONSOLIDATED SUBSIDIARIES		Issued capital(In millions of yen)

Percentageof equity/
voting rights

Lines of business(As of June 30, 2010)<Geographic information services>¥8,758		

69.8%

Geographic information services

Pasco Space Mapping Technology Co., Ltd.

Pasco Corporation25		

(100.0)Geographic information services

GIS Hokkaido Co., Ltd.

190		(100.0)Geographic information services

GIS Tohoku Co., Ltd.

50		(84.6)

Geographic information services

GIS Kanto Co., Ltd.

40		(52.6)

Geographic information services

GIS Tokai Co., Ltd.

50		(100.0)Geographic information services

GIS Kansai Co., Ltd.

99		(100.0)Geographic information services

Pasco Road Center Co., Ltd.

50		(72.2)

Geographic information services

Tokyo Digital Map Corporation

10		(100.0)Geographic information services

Mid Map Tokyo Corporation15		

(60.0)

Geographic information services

Grafica Co., Ltd.

20		

(51.0)

Geographic information services

3,700		

99.9Development of residential buildings

1,469		

100.0Information, communication, information security<Real estate development and sales>
Secom Home Life Co., Ltd.
<Information and communication related
and other services>
Secom Trust Systems Co., Ltd.

				

services and software development

Arai & Co., Ltd.

Real estate leasing

3,000		

86.7Arai Corporation, Inc.

10		

(100.0)Management of real estate

Secom Credit Co., Ltd.

400		

100.0

Credit services

Secom Corporation

100		

100.0

Printing services

Secom Auto Service Co., Ltd.

45		

100.0

Car maintenanceWonder Dream Co., Ltd.

490		

100.0

Employee welfare for SECOM Group

Secom Staff Service Co., Ltd.

50		(100.0)

Employment agency

The Windsor Hotels International Co., Ltd.

165		

90.0

Hotel management

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.

Annual Report 2010

(Continued)

Secom Co., Ltd.

75

CORPORATE INFORMATION

MAJOR CONSOLIDATED SUBSIDIARIES				Issued capital

Percentageof equity/
voting rights

Lines of business(As of June 30, 2010)

Overseas<Security services>
Secom Plc

£39,126 thousand

100.0%

Security services

Secom (China) Co., Ltd.

¥5,550 million

100.0

Holding company

Dalian Secom Security Co., Ltd.

US$2,000 thousand(95.0)

Security services

Shanghai Secom Security Co., Ltd.

US$3,500 thousand(65.0)

Security services

Beijing Jingdun Secom

US$2,500 thousand(80.0)

Security services

Qingdao Secom Security Co., Ltd.

US$1,000 thousand(80.0)

Security services

Guangdong Jinpeng Secom Security Co., Ltd.

US$2,000 thousand(90.0)

Security services

Fujian Secom Security Co., Ltd.

Rmb7,000 thousand(95.0)

Security services

Sichuan Secom Security Co., Ltd.

Rmb6,000 thousand(85.0)

Security services

Shaanxi Secom Security Co., Ltd.

Rmb6,000 thousand(85.0)

Security services

Zhejiang Secom Security Co., Ltd.

Rmb7,000 thousand(97.0)

Security services

Liaoning Secom Security Co., Ltd.

Rmb10,000 thousand(60.0)

Security services

Tianjin Secom Property Management Co., Ltd.

Rmb2,000 thousand(70.0)

Comprehensive building management services

P.T. Secom Indopratama

US$3,950 thousand

94.9

Security services

Thaisecom Pitakkij Co., Ltd.

THB378,857 thousand

70.0

Security services

Secom Australia Pty. Ltd.

AUD7,822 thousand

100.0

Security services

Secom Technical Services Unit Trust

AUD5,951 thousand(70.0)

Security services

Secom Australia (ACT) Unit Trust

AUD700 thousand(75.0)

Security services

Secom Vietnam Co., Ltd.

US$600 thousand

80.0

Security service-related consulting

US$14,300 thousand(100.0)Electronic Security Co., Ltd.

<Other services>
Shanghai Nohmi Secom

Manufacturing and sales of fire protection equipment

Fire Protection Equipment Co., Ltd.				

and facilities

Nohmi Taiwan Ltd.

Manufacturing and sales of fire protection equipment

NT$15,000 thousand(52.0)

				and facilities

P.T. Nusantara Secom InfoTech

Geographic information services andUS$3,304 thousand(100.0)				
Pasco Philippines Corp.

PHP20,400 thousand

software development(100.0)Geographic information services

Pasco China Corporation

Rmb5,329 thousand(99.0)

Geographic information services

Pasco (Thailand) Co., Ltd.

THB129,000 thousand(100.0)Geographic information services

EUR9,994 thousand(100.0)Geographic information services

US$40 thousand(50.1)

Geographic information services

Base Aerofotogrametria E Projetos S.A.

BRL5,000 thousand(51.0)

Geographic information services

Aerodata International Surveys BVBAEUR56 thousand(70.0)

Geographic information services

FM-International Oy
Pasco Map, LLC

The Westec Security Group, Inc.

US$0.3 thousand

100.0

Holding company

ClearLight Partners, LLC

US$134,093 thousand(99.7)

Investment

ClearLight Partners II, LLC

US$137,194 thousand(99.0)

Investment

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

76

Secom Co., Ltd.

Annual Report 2010

PROFILE

SECOM GROUP’S BASIC BUSINESS AREAS

SECOM AED Package Service

Centralized Security Systems

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

SECOM offers a wide range of services and ­productswith the aim of realizing the Social System Industry.
Security Services

S

ince its establishment in 1962, SECOM CO., LTD., a pioneer in Japan’s security services market,
has endeavored to contribute to society through its business activities, an approach that hasenabled it to respond swiftly to society’s evolving needs for security and peace of mind, as well as toachieve solid growth. Beginning with the development in 1966 of Japan’s first on-line security service,
SECOM has sought consistently to create security services that meet changing security needs—
including an on-line home security system in 1981 and COCO-SECOM, a mobile security system foroutdoor use, in 2001—and at the same time to secure broad acceptance of the concept of security
services in Japan.
In light of growing social unease and increasingly diverse and sophisticated security needs, SECOM
is leveraging its accumulated know-how in the security field, as well as its distinctive technology
development abilities and dependability as a security professional, to develop and promptly launch avariety of innovative products and services. Such efforts have enabled SECOM to achieve steady
growth.
SECOM’s overarching mission is encapsulated in its corporate message, “Providing reliable peaceof mind.” To this end, SECOM—comprising the parent company and the companies of the SECOM
Group—continues working to realize its vision for the future, the Social System Industry, which
describes a framework of distinctive, integrated products and services that make life more secure,convenient and comfortable. In addition to its core security services, SECOM’s business portfolio
today includes fire protection services, medical services, insurance services, geographic information
services, real estate development and sales, and information and communication related and otherservices, which SECOM combines into exclusive, tailored packages that enable it to provide safety
and security for people whenever and wherever necessary.
SECOM has also expanded into overseas markets, establishing a network of subsidiaries and affiliates in 11 countries and territories, where it provides services of the same high quality as it does inJapan. In particular, SECOM is focusing on the People’s Republic of China (PRC), where it is working
to expand its business area, thereby reinforcing its presence, in response to robust demand for security services fueled by sustained economic growth.

Fire
Dept.

Centralized Security Systems
Commercial Use:

SECOM AXSECOM AX is an on-line security s­ ystem with advanced on-site image sensors
that incorporate microphones to enable the SECOM control center staff to checkthe subscriber’s premises by listening and viewing.
SECOM IXSECOM IX is a remote imaging security system for c­ ommercial facilities offeringround-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 b­ uildings with morethan one tenant.
HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.

Residential Use:

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
basic ­intrusion- and fire-prevention services and emergency call services, as well
as gas leak monitoring and medical emergency call ­service options. The system
is linked around the clock with a SECOM control center, where personnel
respond immediately in the event of a problem by dispatching emergency
response personnel and, if necessary, contacting the appropriate authorities.
Subscribers are also eligible for telephone health counseling and other services

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

77

Secom Co., Ltd.

Merchandise

Subscriber

PoliceDept.

Annual Report 2010

Gas
Company• Alert emergency
services asnecessary

Alert using
1 telephone

3 Dispatch SECOM emergency

circuits

response personnel

SECOM
Emergency
Depot

SECOM
Control Center

2 Alert SECOM

emergency
response personnel

offered through SECOM Medical Club and have access to SECOM Home
Service, a suite of lifestyle support services.
SECOM CONDOMINIUM SECURITY SYSTEMSSECOM condominium security systems provide comprehensive building­management functions for condominiums and total safety with a centralized­security sys­tem for each unit in the building. SECOM MS-3, the top-of-the-line
system, can be used for buildings of any size, either as a retrofit or a new
installation.

Large-Scale Proprietary Security Systems

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

COCO-SECOM

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

Static Guard Services

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.

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

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

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

SECOM CCTV SYSTEMThe SECOM CCTV system is a multifunctional, cost-effective closed-circuit­surveillance camera system. The system provides stable monitoring evenin places where insufficient light makes clear images difficult and allows the
combined use of digital and analog cameras. It is also capable of detecting
attempts to disable or destroy the camera.
SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
SESAMO SERIESThe SESAMO series comprises access-control systems for use in ­corporate
offices, factories, parking facilities and any other security-sensitive areas.
These systems employ such technologies as contactless IC pass cards,
magnetic cards, personal identification numbers, f­ingerprint identification andpalm vein identification.
TOMAHAWK SERIESThe Tomahawk series is an extensive lineup of innovative ­extinguishingsystems, including Tomahawk Mach II residential-use fire extinguisher andTomahawk III high-speed automated fire extinguishing system withgas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat­resistance and performance.
SENSOR LIGHTSENSOR LIGHT is a sensor-equipped light activated automatically when thesensor detects human body temperature.
SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
PHYSICAL SECURITY PRODUCTS FOR HOMESSECOM offers a broad range of physical security products for homes. These
include SECOM Anshin Glass, a high-impact breakage-resistant window
glass designed to prevent intruders from entering through broken windows;
SECOM Window Frame, a window frame with reinforced stainless bars; andStrong Door, a door that cannot be forced open for an extended period oftime after it has been engaged.

Real Estate Development and Sales
REAL ESTATE DEVELOPMENT AND SALESSECOM offers Glorio condominiums.

Information and Communication Related and Other Services
SECURE DATA CENTERThe Secure Data Center provides a comprehensive service for e-business thatcombines SECOM’s expertise in both physical and information security.
DIGITAL AUTHENTICATION SERVICESSECOM offers public key infrastructure (PKI) services that provide an effectivemeans of establishing credibility among Internet users, including issuance ofdigital certificates and a set-up and operating service for organizations thatwish to establish their own digital certificate authority.
NETWORK SECURITY MONITORING SERVICESSECOM provides security and stability for clients’ IT systems around theclock. SECOM ­monitors and reports on threats to security, and on network
operating s­ tatus and network traffic.
Disaster Response Services
SECOM offers a variety of services, including SECOM Safety Confirmation
Service, which helps commercial subscribers ascertain the safety of employees
and collect and share information in the event of a major disaster, thereby
assisting them to reopen for business as soon as possible.

Annual Report 2010

Secom Co., Ltd.

78

DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS
Directors

Corporate Auditors
Teruo Ogino
Ken Tsunematsu
Hiroshi Yasuda
Kohei Yamashita

Makoto Iida

Juichi Toda

Founder

Co-Founder

Shuji Maeda

Minoru Takaoka

President andRepresentative Director

Executive Officer

Koichi Sato

SECOM CO., LTD.

Executive Officers

Hideo Morishita
Executive Officer

Executive Vice President

Katsuo Akiyama
SeniorManaging Executive Officer

Fumio Obata
Senior Executive Director

Katsuhisa Kuwahara
Kanemasa Haraguchi

Shuji Maeda

Chairman

Executive Vice Chairman

President andRepresentative Director

Executive Director

Yasuo Nakayama
Executive Director

Seiichi MoriManaging Executive Officer

Hiroshi Ito
Executive Director

Shunji Ogahara
Managing Executive Officer

Executive Officer

Takayuki Ito
Director

Ryohei Komatsu
Executive Officer

Teruo Kano
Executive Officer

SECOM CO., LTD.

Yukio Tsunoda

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

Executive Officer

Naohide Nakamura
Executive Officer

ANNUAL REPORT 2010

Shohei Kimura

Tsuneo Komatsuzaki

Tokyo 150-0001, Japan
http://www.secom.co.jp/

Masahiro Takeda
Executive Officer

Teruhisa Yoshimura
Executive Officer

Koichi Sato

Fumio Obata

Executive Vice President

Senior Executive
Director

Keitaro Arai
Executive Officer

Yasuyuki Yoshida
Executive Officer

Tatsuro Fuse
Executive Officer

ANNUAL REPORT 2010
Year ended March 31, 2010

Katsuhisa Kuwahara

Yasuo Nakayama

Hiroshi Ito

Executive Director

Executive Director

Executive Director(As of July 31, 2010)

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

Takayuki Ito
Director

Printed in Japan79

Secom Co., Ltd.

Annual Report 2010

DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS
Directors

Corporate Auditors
Teruo Ogino
Ken Tsunematsu
Hiroshi Yasuda
Kohei Yamashita

Makoto Iida

Juichi Toda

Founder

Co-Founder

Shuji Maeda

Minoru Takaoka

President andRepresentative Director

Executive Officer

Koichi Sato

SECOM CO., LTD.

Executive Officers

Hideo Morishita
Executive Officer

Executive Vice President

Katsuo Akiyama
SeniorManaging Executive Officer

Fumio Obata
Senior Executive Director

Katsuhisa Kuwahara
Kanemasa Haraguchi

Shuji Maeda

Chairman

Executive Vice Chairman

President andRepresentative Director

Executive Director

Yasuo Nakayama
Executive Director

Seiichi MoriManaging Executive Officer

Hiroshi Ito
Executive Director

Shunji Ogahara
Managing Executive Officer

Executive Officer

Takayuki Ito
Director

Ryohei Komatsu
Executive Officer

Teruo Kano
Executive Officer

SECOM CO., LTD.

Yukio Tsunoda

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

Executive Officer

Naohide Nakamura
Executive Officer

ANNUAL REPORT 2010

Shohei Kimura

Tsuneo Komatsuzaki

Tokyo 150-0001, Japan
http://www.secom.co.jp/

Masahiro Takeda
Executive Officer

Teruhisa Yoshimura
Executive Officer

Koichi Sato

Fumio Obata

Executive Vice President

Senior Executive
Director

Keitaro Arai
Executive Officer

Yasuyuki Yoshida
Executive Officer

Tatsuro Fuse
Executive Officer

ANNUAL REPORT 2010
Year ended March 31, 2010

Katsuhisa Kuwahara

Yasuo Nakayama

Hiroshi Ito

Executive Director

Executive Director

Executive Director(As of July 31, 2010)

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

Takayuki Ito
Director

Printed in Japan79

Secom Co., Ltd.

Annual Report 2010