Consolidated Financial Statements for the Fiscal Year ended March 31, 2018
27-Apr-2018
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

http://www.nesic.co.jp/english/index.html
1. Consolidated Results for the Fiscal Year ended March 31, 2018
(Rounded down to the nearest million yen.)(1) Net Sales and Income(Percentages represent change compared with the same period of the previous fiscal year.)
Net income
attributable toOrdinary income Year-on-year change
Year-on-year
owners of thechange (%)(¥ million)(%)
parent(¥ million)
FY ended March/18
267,939
3.9
11,057
10.9
10,957
9.8
7,357
12.3
FY ended March/17
257,912
-7.9
9,974
-29.3
9,975
-29.4
6,549
9.2
（Note) Comprehensive income : 31/3/2018 : ¥8,712 million (51.4%) ; 31/3/2017 : ¥5,753 million (61.9%)
Net sales(¥ million)

Year-on-yearchange (%)

Operatingincome(¥ million)

Year-on-yearchange (%)

Profitper share (¥)

Profit per
share(diluted) (¥)

Return on
equity (%)

Ordinary
Operatingincome/ Total income/ Net
assets (%)
sales (%)

FY ended March/18
148.23
—
7.6%
5.4%
4.1%
5.1%
3.9%
FY ended March/17
131.94—
7.0%（Reference) Equity in earnings (losses) of affiliates (million) : 31/3/2018 : ¥-25million ; 31/3/2017 : －(2) Financial Position
Total assets(¥ million)

Net assets(¥ million)

Owner's equity
ratio (%)

Net assets per
share (¥)

31-Mar-18
208,050
101,73247.8
2,004.04
31-Mar-17
197,469
96,67447.9
1,906.03
c.f. Owner's equity: 31/3/2018 ¥99,473million ; 31/3/2017 ¥94,611million(3) Cash FlowsFY ended March/18
FY ended March/17

Net cash provided by (used Net cash provided by (usedin) operating activities
in) investing activities(¥ million)(¥ million)
4,779(2,802)
22,634(2,697)

Net cash provided by (used in)financing activities(¥ million)(4,366)(4,144)

Cash and cash equivalents
at end of year(¥ million)
57,28159,648

Total dividends
paid(full year)
3,573
3,673

Payout ratio
Dividends/(consolidated Net assets) (%)(consolidated
54.6
3.8
49.9
3.8

2. Dividends

FY ended 3/2017
FY ended 3/2018
FY ending 3/2019（Projected)

1stquarter———

Dividends per share (¥)
3rdYear-endquarter
36.00
—
36.00
37.00
—
37.00

Interim

38.00

—

38.00

Full year
72.00
74.00
76.00

50.3

3. Financial Forecasts for Fiscal Year ending March 31, 2019

Net sales(¥ million)
6 Months ending
9/2018FY ending 3/2019(%)(Percentages represent change compared to the previous corresponding period.)
Net income
attributable
Net income attributable toOperating income
Ordinary income
to owners ofowners of the parent
the parent
per share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

124,000

3.4

2,000

(20.5)

2,000(24.2)

1,300(19.5)

26.19

280,000

4.5

11,5004.0

11,500

5

7,500

1.9

151.10Cautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based
ondefinite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors affecting
actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vissystems andservices provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response tointensifiedcompetition.Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the Fiscal Year Ended March 31, 2018
During the fiscal year ended March 31, 2018 (the period from April 1, 2017 to March 31, 2018),
the Japanese economy continued to experience a moderate recovery, supported by the effectsof various policies and a moderate increase in capital spending together with improvements incorporate earnings and employment.

In the fields of information and communication technology (ICT) , in which NEC Networks& System Integration Corporation (“the Company”) operates, differences were observed ineach field under these economic conditions.
First, in the corporate market, while corporate managers continued to hold critical views on
the effects of investment, there was active investment for enhancing business management
and competitiveness, including investment in work style innovation. In the telecom carrierbusiness, restraints on capital spending for network infrastructure have bottomed out and signsof a modest recovery have have begun to emerge.

In the central and local governments aswell as the public interest market, investment in improvements in safety and security and otherurban infrastructure remained

healthy ; however, the competitive environment remained

harsh in part, showing weakness. In addition, following the revision of the Feed-In Tariff (FIT)
Act , demand for the construction of solar power generation plants has become brisk. Overseas,
meanwhile, particularly in Asia, there is demand for the construction of infrastructure such as
mobile communications networks; however, there was weakness in some areas where there
were delays in projects.

In this market environment, the Company and its consolidated subsidiaries (hereinafter the“Group”) stepped up their actions for business related to work style reform, including“EmpoweredOffice ,” and new technologies and themes such as robotics and digitaltransformation in response to the growing momentum of work style reforms. Needs forteleworking, in particular, have been growing recently, and in July 2017, the Company
introduced teleworking throughout the organization based on the results of an internal field trialthat had been underway since 2015. At the same time, the Company implemented actions toincrease sales. Customer outreach was also strengthened, specifically the renewal of theshowroom at the head office, EmpoweredOffice Center, and offices for sales and SE byincorporating the advanced technologies and services. In addition, the CVC fund wasestablished in February 2018 to step up the actions for the creation of new business throughopen innovation with venture enterprises. In addition, the Group bolstered its overseas
business, in particular offering both the expertise it has developed through its abundantachievements with domestic telecom carriers and its high quality construction knowhow－

1 －developed with domestic telecom carriers to overseas telecom carriers. Meanwhile, in projects
for the construction of large mega-solar power generation plants, orders for which werereceived during the previous fiscal year, construction proceeded steadily under the companywide project management system.
As a result, the Group posted the following consolidated results for the year under review:¥267,939 million

3.9%

increase year on year

Operating income¥11,057 million

10.9%

increase year on year

Ordinary income¥10,957 million

9.8%

increase year on year

Net income attributable¥7,357 million

12.3%

increase year on year

¥287,831 million

3.1%

increase year on year

Net sales

to owners of the parent＜Reference＞
Orders received

Net sales increased 3.9% year on year, to ¥267,939 million. This was caused by growth insales of services for telecom carriers in the Carrier Networks business, the contribution to salesof projects for the construction of large mega-solar power generation plants, orders for whichwere received in the previous fiscal year, and increased sales in the key areas under the
medium-term business strategy (announced in May 2016), including the area related to work
style innovation. Orders received increased 3.1% year on year, to ¥287,831 million, due mainly
to the new orders received for the construction of large mega-solar power generation plants
and growth in orders for central and local governments with a large projects acquisition in thesocial infrastructures segment.
On the profit front, operating income increased 10.9% year on year, to ¥11,057 million,
ordinary income grew 9.8% year on year, to ¥10,957 million, and net income attributable toowners of the parent rose 12.3% year on year, to ¥7,357 million. This was a result primarily of
an improved sales mix and continuous cost structural reforms in the Enterprise Networks
business and Carrier Networks business, which offset a decline in the Social Infrastructures
business segment due to a higher cost of sales ratio and an increase in selling, general andadministrative expenses.

－

2 －Operating results by business segment were as follows:Operating results by businesssegment were as follows:（Million yen）

Net sales by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

Other

Total

Fiscal 2018.3

110,887

64,902

85,192

6,957

267,939

Fiscal 2017.3

107,366
3,520

61,5793,322

82,362
2,830

6,602
354

257,912
10,027

3.3

5.4

3.4

5.4

3.9

Increase (decrease)
Ratio of increase(decrease) (%)（Million yen）

Reference: Orders received by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

Other

Total

Fiscal 2018.3

125,826

68,54387,046

6,414

287,831

Fiscal 2017.3

116,958

68,67586,546

7,060

279,241

8,867

(132)

500

(645)

8,590

7.6

(0.2)

0.6

(9.1)

3.1

Increase (decrease)
Ratio of increase(decrease) (%)

1. Enterprise Networks business
ICT investment in work style reform remained active and EmpoweredOffice, an officeinnovation solution business, achieved growth. In addition, the electric facilities in the
project received in the previous fiscal year for the construction of large mega-solar power
generation plants contributed to the sales. As a result, net sales increased 3.3% year on
year, to ¥110,887 million.
2. Carrier Networks business
Sales rose 5.4% year on year, to ¥64,902 million, thanks to the expansion of businessfor telecom carriers and the contribution of the panel works to sales in the project for theconstruction of large mega-solar power generation plants for which orders werereceived in the previous fiscal year.
3. Social Infrastructures business
Sales climbed 3.4% year on year, to ¥85,192 million, reflecting the contribution of civilengineering and development in the project for the construction of large mega-solar power
generation plants, which were received in the previous fiscal year, offsetting a decrease insales in the overseas business.

－

3 －*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT and
facility installation to enable more intellectual and creative styles of work through process
reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmental
responsiveness.

<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
Service integration of ICT solutions, mainly for the enterprises market
Total office solutions based on ICT with securities or environmental

Enterprise Networks

solutionsand related operation/monitoring services, as well as outsourcing
services using our own contact centers and data centers
Service integration mainly for telecom carriers’ ICT platforms (frommobile communications base stations to core networks), including
systems integration, installation, and related services such as

Carrier Networks

operations and monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT
platforms and data centers and related operations, monitoring services
Development, manufacturing, sales and systems integration of network
equipment and other equipment.
Service integration of ICT infrastructure for governments and public
utilities (broadcasters, electric power companies, etc.), such as systems

Social Infrastructures

integration, installation, operation, and monitoring, and operations inmarkets other than the Tokyo, Nagoya, and Osaka areas. Overseas
subsidiaries

Others

Mainly sales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2019
The Japanese economy is expected to show a tendency of a moderate recovery for the fiscal
year ending March 31, 2019, mainly due to the effects of the government’s economic measuresand the improvement of employment and income conditions. However, there also remains a riskof downward pressure on the domestic economy such as sharp changes in foreign exchange
and a fear of an overseas economic downturn.
In the ICT field in which the Company operates, favorable conditions are generally expectedwith an increase in companies’ investment appetite centered around work style reform and therecovery of capital spending on network infrastructure mainly in the base stations amongtelecom carriers. On the other hand, in central and local governments and the public interest
market, investment in broadcasting, CATV, disaster prevention, etc. is expected to increase with
low investment in some areas where fierce competition will continue and in the off-demandseason of projects. In addition, overseas business conditions will remain both favorable and－4 －unfavorable, as in the fiscal year ended March 31, 2018.
In the fiscal year ending March 31, 2019, the Company forecasts that sales will increase 4.5%,
to ¥280 billion, due to the strengthening of the actions for the business under focus in themedium-term business strategy, especially the business related to work style innovation, andthe business directed at telecom carriers with the expectation of the recovery of capital spending
as well as the steady conduct of the large-scale projects whose orders were received in theprevious fiscal year.
In the Enterprise Networks business, the Company will seek to actively expand the business,taking advantage of customers’ increasing willingness to make ICT investments relating to work
style reform. We will also continue to step up the actions for AI and other advanced technologies
and services.
In the Carrier Networks business, the Company will strengthen the actions for the businessdirected at telecom carriers, especially the works for base stations on which capital spending isrecovering. At the same time, the Company will step up the business activities directed atoverseas telecom carriers as well as in the business and public sectors by making the most of
our assets for domestic telecom carriers. In addition, we will take active actions in the IoT andother fields where future growth is expected, including the creation and proposal of new valueadded services.
In the Social Infrastructures business, we will work actively on the business that is expected
to experience steady investment, such as broadcasting/CATV and disaster prevention, withdifferences in the business conditions by field.
On the profit front, the Company will make active investments for growth, including response
to digital transformation and other new technologies and the development of human resources,
with an eye toward future growth in the medium to long term. Given the effects of the
improvement of Social Iinfrastructures business and an increase in earnings, among otherfactors, operating income and ordinary income are both forecast to increase to ¥11.5 billion year
on year, and net income profit attributable to owners of the parent is expected to increase to¥7.5 billion year on year.
Net sales¥280 billion

4.5% increase year on year

Operating income¥11.5 billion

4.0% increase year on year

Ordinary income¥11.5 billion

5.0% increase year on year

Net income attributable¥7.5 billion

1.9% increase year on year

to owners of the parent(3)Profit Distribution Policy and Dividends for the Fiscal Year Ended March 2018 and the Fiscal

Year Ending March 2019
We view the distribution of a reasonable share of profits to shareholders as one of our top
management priorities, and make every effort to reinforce the Company’s managementfoundation, strengthen its financial standing, and increase its earning capacity. While wealso place a great deal of importance on increasing our corporate value through growth byaccelerating strategic investment in M&A, strengthening the business foundation andcreating new businesses that will allow us to expand our future businesses that will beareas of focus, we strive to continually meet the expectations of our shareholders in our
profit distribution.
On that basis, in line with forecasts made previously, we have decided to increase our－

5 －year-end dividend to ¥37 per share and our annual dividend to ¥74 per share for the fiscal
year ended March 2018, rising ¥2 from the previous fiscal year.
The dividend per share for the fiscal year ending March 2019 is expected to be ¥38 forboth the interim and year-end periods, increasing our annual dividend to ¥76.

－

6 －

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2017
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Purchased goods,materials and supplies
Work in process
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures (net)
Machinery and vehicles
Accumulated depreciation
Machinery and vehicles (net)
Furniture and fixtures
Accumulated depreciation
Furniture and fixtures (net)Land
Construction in progress
Other
Accumulated depreciation
Other (net)Total property and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Asset for retirement benefits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Short-term bank loans
Current installments of long-term debt
Accrued income taxes
Accrued consumption taxes
Advanced received
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As ofMarch 31, 2018

59,64891,152
2,679
5,815
4,102
5,694
(92)
168,999

57,281
104,405
2,379
5,858
4,524
5,414
(121)
179,742

9,875(5,726)
4,148
187
(155)
32
14,435(10,854)
3,581
2,507
382
443
(375)
67
10,7199,763(5,849)
3,914
182
(150)
31
14,826(11,358)
3,467
2,410
222
258
(212)
45
10,093

1,689
2,871
4,561

1,394
3,990
5,384

421
324
8,881
3,612
(51)
13,18828,469197,469

516
444
8,596
3,309
(37)
12,82928,308208,050

36,474
4,069
171
2,964
1,965
4,678
67
123
645
12,33763,49840,302
4,086
3,171
3,768
2,415
3,811
102
116
557
14,541
72,874

4,014
31,206
2,075
37,296
100,795

842
30,4282,172
33,444
106,318

13,122
16,652
70,622(272)
100,124

13,122
16,65574,357(276)
103,85835(394)(5,154)(5,513)
2,062
96,674
197,46942(374)(4,053)(4,385)
2,258
101,732
208,050

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
FY Mar/2017

FY Mar/2018

Net sales

257,912

267,939

Cost of sales

215,326

223,674

Gross profit

42,58544,265

Selling, general and administrative expenses

32,611

33,208Operating income

9,974

11,057

Non-operating income
Interest income

38

35

Insurance income

190

197

Other

303

202

Total non-operating income

532

435

Interest expenses

85

127

Loss on disposal of property and equipment

100

120

Business reconstruction expenses for subsiriaries

112

56

-

60

Other

232

170

Total non-operating expenses

532

535

9,975

10,957

Non-operating expenses

Relocation expenses for subsidiaries

Ordinary income
Extraordinary income
Gain on sale of non-current assets-

283

Gain on sale of investment in affiliates-

38

Total extraordinary income-

322

Extraordinary losses
Shutdown expenses for sabsidiaries

93-

Total extraordinary losses

93-

Income before income taxes

9,881

11,279

Income taxes - current

2,973

4,548

Income taxes - deferred

(16)

(790)

Income taxes

2,957

3,757

Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

6,923
374

7,521
164

6,549

7,357

(Millions of yen)

(Millions of yen)

FY Mar/2017
Net income

FY Mar/2018
6,923

7,521

Other comprehensive income
Net unrealized holding loss on other securities
Foreign currency translation adjustments
Adjustments for retirement benefit
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income

4

7

(38)

81

(1,136)

1,101

-

0

(1,170)

1,190

5,753

8,712

5,398

8,486

355

225

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows

Cash flows from operating activities
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables(Increase) decrease in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors and corporate auditors
Increase (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales contracts
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Proceeds from sale of investment securities
Loans receivable madeCollection of loans receivable
Proceeds from sales of investments in affiliates
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Net (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(Millions of yen)
FY Mar/2017

FY Mar/2018

9,881
2,834
255
54
8
810
(31)
(66)
242
(50)
85
13,463678(2,640)(447)
1,654
26,73350(85)(4,063)
22,634

11,279
2,526
251
12
310
872
34
(7)
(90)
(46)
127
(13,061)
266
3,801
451
1,874
8,604
47
(127)
(3,744)
4,779(1,886)
2
-688
－
(9)
3
(1)
5
－
(122)
(2,697)(1,628)386-1,532
11
(27)
4
(2)
3
74
(92)
(2,802)

23
(163)
(2)
(3,521)(14)(466)(4,144)(33)
15,75843,88959,648

(111)
(171)
(4)
(3,620)(23)(435)(4,366)22(2,366)
59,64857,281

(4) Segment Information
Business Segment

Year ended March 31, 2018
(Millions of yen)Enterprise Networks

Orders received
Sales(1) Sales to third(2) Intersegment sales
Total
Operating income (loss)

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

125,826

68,54387,046

6,414---

287,831

110,887--110,887
10,79764,902--64,902
5,021

85,192--85,192
3,399

6,957
--6,957263------(8,424)

267,939--267,939
11,057

Year ended March 31, 2017
(Millions of yen)Enterprise Networks

Orders received
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

116,958

68,67586,546

7,060---

279,241

107,366--107,366
8,823

61,579--61,579
3,569

82,362--82,362
6,029

6,602
--6,602
246------(8,693)

257,912--257,912
9,974