Year ending December 31, 2017

Second Quarter of FY2017 Non-Consolidated Financial Results

August 8, 2017

(All financial information herein has been prepared in accordance with accounting principles generally accepted in Japan. This document is an
English translation from the original Japanese-language document. This translation is not subject to auditing standards in the U.S.)

Listed company name:

Original Engineering
Consultants Co., Ltd.
4642

Code number:

Stock listing:(URL

Tokyo Stock Exchange, Second Section

http://www.oec-solution.co.jp)

Representative:
Contact person:

Title President & Representative DirectorName:
Title Director & General Manager ofName:
Financial Affairs Division
Planned date of submitting quarterly earnings report: August 10, 2017
Date of scheduled payment of dividends: –Quarterly earnings supplementary explanatory documents: None
Quarterly earnings presentation: None

Nobuhiko Suga
Kaoru Kira

Tel: (03) 6757-8800(Amounts less than ¥1 million are truncated)

1. NON-CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER OF FY 2017
(January 1, 2017 to June 30, 2017)(1) Non-Consolidated Operating Results (accumulated)(Percentages represent year-on-year changes)
Net sales

Operating income

Million yen
Six-month period
ended June 30, 2017
Six-month period
ended June 30, 2016%

Ordinary income

Million yen%

ProfitMillion yen%

Million yen%

3,268

–655

–

653

–

544

–––––––––

Profit per share for thequarter
Yen
Six-month period
ended June 30, 2017
Six-month period
ended June 30, 2016

Profit per share-diluted forthe quarter
Yen

81.44

–––

Although the Company disclosed consolidated financial results for the second quarter of FY 2016, the Company is disclosing non-consolidated financial
results from the first quarter of FY 2017. Therefore, operating results (accumulated) for the second quarter of FY 2016 and year-on-year changes are notshown.

(2) Non-Consolidated Financial Position
Total assets
Million yen

Net assets
Million yen

Shareholders’ equity ratio%

As of June 30, 2017

6,916

5,147

74.4

As of December 31, 2016

6,073

4,652

76.6

(Reference) Shareholders’ equity:

As of June 30, 2017: ¥5,145 million

As of December 31, 2016: ¥4,651 million

2. DIVIDENDS(Record date)

End offirst quarter
Yen

Dividends per share
End ofFiscal
Interimthird quarteryear-end
YenYenYen

FY 2016–0.00

FY 2017–

0.00

FY 2017 (Forecast)(Note) Revision to the recently announced forecast of dividends: None

Full year
Yen–8.00

8.00

–

10.00

10.00

3. FORECAST OF NON-CONSOLIDATED RESULTS FOR FY 2017 (January 1, 2017 to December 31, 2017)(Percentages represent changes from the same period of the previous fiscal year)
Operating income
Ordinary income
ProfitProfit per share

Net sales
Full year

Million yen%

Million yen

5,800

3.8550%-3.4

Million yen
550%

Million yen%

Yen4252.963.55-6.0(Note) Revision to the recently announced forecast of results: None
With the transition toward a non-consolidated company from the first quarter of the FY 2017, forecasts of non-consolidated financial results are shown.

*NOTES(1) Application of accounting treatment unique to preparation of quarterly non-consolidated financial statements:
None(2) Changes in accounting policies, changes in accounting estimates and retrospective restatements:(i) Changes in accounting policies in accordance with revision of accounting standards: None(ii) Changes in accounting policies other than (i) above: None(iii) Changes in accounting estimates: None(iv) Retrospective restatements: None

(3) Number of outstanding shares (Common stock)(i) Number of shares outstanding at end of period, including treasury stock
As of June 30, 2017: 7,796,800 shares
As of December 31, 2016: 7,796,800 shares(ii) Number of shares of treasury stock at end of period
As of June 30, 2017: 1,108,135 shares
As of December 31, 2016: 1,109,267 shares(iii) Average number of shares outstanding for each period (cumulative second quarter)
As of June 30, 2017: 6,687,944 shares
As of June 30, 2016: 6,687,287 shares* These quarterly financial results are outside the scope of quarterly reviews.
Note regarding forecasts and forward-looking statements
The Company has not modified its forecast of the results for fiscal 2017, which it announced on February 10, 2017. The forecastspresented above are based on information available to the Company at the present time, and, accordingly, actual results may differ fromany expressed future performance herein due to various factors.
For matters relating to results forecasts, please refer to “(3) Explanation Regarding Future Forecasts such as Forecasts of Results” on page5.

Index of the Attachment
1.

QUALITATIVE INFORMATION REGARDING SECOND QUARTER FINANCIAL RESULTS ..............4(1) Explanation Regarding Business Results..........................................................................................................4(2) Explanation Regarding Financial Position........................................................................................................5(3) Explanation Regarding Future Forecasts such as Forecasts of Results ............................................................52.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES ...........................................................6(1) Quarterly Balance Sheets ..................................................................................................................................6(2) Quarterly Statements of Operations ..................................................................................................................8Cumulative Second Quarter ..............................................................................................................................8(3) Quarterly Statements of Cash Flows.................................................................................................................9(4) Notes Regarding the Quarterly Financial Statements .......................................................................................11(Matters Affecting the Assumption of a Going Concern) .................................................................................11(Notes Regarding Significant Changes in Shareholders’ Equity) ...................................................................11(Additional information) .................................................................................................................................11(Segment Information)......................................................................................................................................113

1. QUALITATIVE INFORMATION REGARDING SECOND QUARTER FINANCIALRESULTS(1) Explanation Regarding Business ResultsAccording to the Bank of Japan’s Tankan survey in June 2017, the diffusion index (DI) for major
manufacturing firms advanced five percentage points from the March 2017 survey to 17 percentage points, and thatfor major non-manufacturing firms it also advanced three percentage points from the previous survey to 23
percentage points. The DI for small and medium-sized enterprises improved for both manufacturing and nonmanufacturing industries, with the DI for small and medium-sized manufacturers advancing two percentage points
from the previous survey to seven percentage points, and that of non-manufacturers improving three percentage
points to seven percentage points. The forecasted DI for the three months ahead dropped two percentage points for
major manufacturers and five percentage points for major non-manufacturers, indicating that companies are cautious
about future business conditions reflecting uncertainty over the overseas economy.
Under the above-mentioned economic conditions, the Ministry of Land, Infrastructure, Transport and Tourism(MLIT), with which the Company has a close business relationship, drew up a budget for fiscal 2017. The totalsearmarked for “disaster prevention and safety subsidies” and “general social infrastructure development subsidies”
were roughly on the same levels as fiscal 2016. The total amount of the sewerage works expenses budget ofordinance-designated cities across Japan and Tokyo’s special wards increased 2.4% from fiscal 2016.
According to a provisional calculation of the Cabinet Office, Japan’s water and sewerage infrastructure assets
amount to approximately ¥130 trillion, which indicates that the water and sewerage infrastructure stock is the second
largest infrastructure stock in the country by sector after the road infrastructure stock. While water supply systems
have been established in nearly all areas, the pipeline renewal rate for water supply facilities is 0.79% (as of the endof fiscal 2013). If all the pipelines were to be renewed, it will take approximately 130 years. The demand forrenewal of pipelines that are being used over their statutory useful life (40 years) is reaching its peak. Whilesewerage systems have not been built in some areas, there still is room for new orders for the establishment ofrelated facilities, but such orders are decreasing overall. However, as with water supply facilities, given that many
facilities, which were established rapidly during the high-growth period, are reaching the end of their useful life eachyear, it is necessary to maintain and renew these infrastructure assets, which are indispensable for ensuring a safe,
secure, and cultural living environment. In addition, there are growing new needs, including flood control measures,for protecting human lives and assets from localized torrential rain and earthquakes that have recently been
occurring frequently, anti-seismic measures such as building quake-resistant toilet facilities, and sewerage systemreinforcement measures for building tsunami-resistant facilities.
The Company, in this operating environment, worked aggressively to win orders mainly in the water supply
field, particularly for services related to asset management in line with the Water Supply Division, Ministry ofHealth, Labour and Welfare’s new water supply vision that focuses on the key words of “safety, strength,sustainability, collaboration and challenge”. In the sewerage field, the Company pursued orders in line with theseven major themes set by the Sewerage and Wastewater Management Department of MLIT: Strengthening
earthquake recovery and reconstruction support and implementing national measures for safety and peace of mind;
early reduction of areas lacking sewerage infrastructure; promoting water environmental management; improving
facilities management and operations; strengthening sewerage management; promoting measures to achieve a lowcarbon, recycling-oriented society; and, promoting international water businesses through globalization and privatepublic initiatives. We also made efforts to obtain orders for services related to support by the Ministry of Internal
Affairs and Communications for introducing local public enterprise-based accounting into small-scale water supply
and sewerage operations, in accordance with the Local Public Enterprise Act, as well as sewerage operations
management strategy formulation operations and others. In overseas markets, the Company worked aggressively to
win orders by tapping into projects in emerging nations through public-private partnerships.
With regard to the OEC’s internal organization, the Company strove to improve revenue by boostingproductivity and reducing costs based on measures such as creating an organization focusing on the “Era ofMaintenance and Management;” promoting “Work-style Reforms” for the purpose of improving long work hours
and enhancing productivity; facilitating communication and information sharing between different levels; rapid
course correction of management issues based on confirming management benchmarks by departments on an asneeded basis; appropriate budget management for order-received projects; process management; outsourcingmanagement; upgrading the skills of in-house engineers; securing and fostering young human resources who willlead the next generation; and, expanding external networks.
As a result, orders received during the cumulative second quarter under review amounted to ¥2,473million, andnet sales amounted to ¥3,268 million. Operating income amounted to ¥655 million, and ordinary income amountedto ¥653 million. Profit amounted to ¥544 million.
Results by operating division were as follows.
[Engineering Consultant Department]
The Engineering Consultant Department received orders totalling ¥2,314 million during the quarter underreview. Sales by the department was ¥3,051 million.
4

[Information Processing Department]
In the Information Processing Department, orders received amounted to ¥158 million. Sales by the department
was ¥217 million.

(2) Explanation Regarding Financial Position
Cash and cash equivalents stood at ¥4,247 million at the end of the cumulative second quarter of the accounting
period under review. Significant factors contributing to this change include the posting of profit before income taxes
for the quarter and increases in notes and accounts receivable―trade.
The main factors contributing to changes in cash flows during the cumulative second quarter under review wereas follows:(Cash flows from operating activities)
Net cash provided in operating activities amounted to ¥1,824 million. Significant items within this figure
included profit before income taxes for the quarter of ¥653 million, a decrease in notes and accounts
receivable―trade of ¥885 million and an increase in advances received on uncompleted contracts of ¥431 million.
(Cash flows from investing activities)
Net cash provided by investing activities amounted to ¥180 million.
Significant factors contributing to this change included proceeds from redemption of investment securities of¥200 million.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥64 million.
Significant factors contributing to this change included cash dividends paid amounting to ¥54 million.
The Company prepared consolidated quarterly financial statements for the previous consolidated cumulative
second quarter. Therefore, as quarterly financial statements have not been prepared, year-on-year comparison
analysis is not presented.

(3) Explanation Regarding Future Forecasts such as Forecasts of Results
The Company has not changed its financial results forecast, which was announced on February 10, 2017, butwill promptly release a revised forecast when any correction is needed after examining various factors.

5

2. QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES(1) Quarterly Balance Sheets

Category

FY 2016(as of December 31, 2016)
Amount(thousand yen)

2Q under review(as of June 30, 2017)
Amount(thousand yen)

AssetsCurrent assets
Cash and deposits

3,022,855

4,963,202

Accounts receivable—completed operation

1,571,580

685,720

Costs on uncompleted services

12,622

6,883

Deferred tax assets

136,739

127,654

Other272,064

78,467

5,015,861

5,861,928

Property, plant and equipment

356,330

349,374

Intangible assets

119,486

117,075

Investments and other assets

582,000

588,438

1,057,818

1,054,889

6,073,679

6,916,817

Total current assets
Noncurrent assets

Total noncurrent assets
Total assets

6Category

FY 2016(as of December 31, 2016)
Amount(thousand yen)

2Q under review(as of June 30, 2017)
Amount(thousand yen)

Liabilities
Current liabilities
Accounts payable—operating

223,309122,312

Lease obligations

19,832

20,775

Income taxes payable

89,189120,540

Advances received on uncompleted contracts

215,306

647,110

Provision for bonuses

35,12953,041

Provision for loss on order received

20,527

17,104

Other426,785429,574

1,030,078

1,410,459

Provision for retirement benefits

250,255

223,907

Provision for share benefit

18,018

16,820

Lease obligations

48,29242,282

Asset retirement obligations

46,88947,502

Deferred tax liabilities

19,027

20,253

Other

8,400

8,400

390,882359,165

1,420,961

1,769,624

Capital stock

1,093,000

1,093,000

Capital surplus

2,886,615

2,886,615

Retained earnings

1,295,639

1,786,246

Treasury stock-670,434-669,954

Total shareholders’ equity

4,604,820

5,095,907

Valuation difference on available-for-salesecurities

46,61049,998

Total valuation and translation adjustments

46,61049,998

1,287

1,287

4,652,717

5,147,192

6,073,679

6,916,817

Total current liabilities
Noncurrent liabilities

Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity

Valuation and translation adjustments

Subscription rights to shares
Total net assets
Total liabilities and net assets

7

(2) Quarterly Statements of Operations(Cumulative Second Quarter)
Cumulative second quarter under review(from January 1, 2017 to June 30, 2017)
Amount(thousand yen)

Category
Contracts completed

3,268,651

Cost of completed work

2,013,716

Gross profit

1,254,935

Selling, general and administrative expenses

599,635

Operating income

655,299

Non-operating income
Interest income

120

Dividend income

3,085

Contribution received for operations performed by dispatchedemployees

3,210

Other4,094

Total non-operating income

10,510Non-operating expenses
Interest expenses

996

Expenses for securities transactions

8,657

Foreign exchange losses

2,077

Other355

Total non-operating expenses

12,088

Ordinary income

653,722

Profit before income taxes for the quarter

653,722

Income taxes―current

99,972

Income taxes―deferred

9,085

Total income taxes

109,057

Profit for the quarter

544,6648

(3) Quarterly Statements of Cash Flows
Cumulative second quarter under review(from January 1, 2017 to June 30, 2017)
Amount(thousand yen)

Category
Cash flows from operating activities
Profit before income taxes for the quarter

653,722

Depreciation and amortization

36,369

Increase/decrease in provision for bonuses

17,912

Increase/decrease in provision for loss on order received-3,423

Increase/decrease in provision for share benefit-1,198

Increase/decrease in provision for retirement benefits-26,347

Interest and dividends income-3,206

Interest expenses

996

Increase/decrease in notes and accounts receivable―trade885,859

Increase/decrease in costs on uncompleted services

5,738

Increase/decrease in notes and accounts payable―trade-100,996

Increase/decrease in advances received on uncompleted

431,804

contracts
Other-19,339

Subtotal

1,877,892

Interest and dividends income received

3,208Interest expenses paid

-996

Compensation income

10,000

Income taxes paid

-66,046

Net cash provided by (used in) operating activities

1,824,056

9

Cumulative second quarter under review(from January 1, 2017 to June 30, 2017)
Amount(thousand yen)

Category
Cash flows from investing activities
Increase/decrease in time deposits-31

Purchase of property, plant and equipment-4,477

Proceeds from redemption of investment securities

200,000

Purchase of intangible assets-14,467

Payments for lease and guarantee deposits-676

Proceeds from collection of lease and guarantee deposits

690

Other payments-4,163

Other proceeds

3,982

Net cash provided by (used in) investing activities

180,856

Cash flows from financing activities
Purchase of treasury stock-33

Repayments of lease obligations-10,441

Cash dividends paid

-54,057

Net cash used in financing activities-64,532

Effect of exchange rate change on cash and cash equivalents-65

Net increase/decrease in cash and cash equivalents

1,940,315

Balance of cash and cash equivalents at beginning of the year

2,306,994

Balance of cash and cash equivalents at the end of the quarter

4,247,310

10

(4) Notes Regarding the Quarterly Financial Statements(Matters Affecting the Assumption of a Going Concern)
No applicable items.
(Notes Regarding Significant Changes in Shareholders’ Equity)
No applicable items.
(Additional information)(Implementation guidance on recoverability of deferred tax assets)
The Company has applied the “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26, March 28, 2016) from the first quarter of the fiscal year under review.

(Segment Information)[Segment Information]
Cumulative second quarter under review (from January 1, 2017 to June 30 2017)
Since the Company’s business operations comprising engineering consulting and related services are conductedwithin a single business segment, segment information is omitted.

11