Consolidated Financial Statements for the First Three Quarters of Fiscal Year ending March 31, 2015
29-Jan-2015
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation (NESIC)

Stock exchange listing: Tokyo
Code number:
1973

http://www.nesic.co.jp/english/index.html
1. Consolidated Results for the First Three Quarters (April 1, 2014 to December 31, 2014) of Fiscal Year ending March 31, 2015
(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 sales(¥ million)

Year-on-yearchange (%)

Operatingincome(¥ million)

Year-on-yearchange (%)

Ordinaryincome(¥ million)

Year-on-yearchange (%)

9 months ended
12/2014200,403

10.1

8,385

8.4

8,563

8.3

9 months ended
12/2013

181,941

13.8

7,738

17.5

7,907

22.4

Net income(¥ million)

Year-on-yearchange (%)

Net income
per share(¥)

Net income
per share(diluted) (¥)

9 months ended
12/2014

5,127

6.9

103.13—9 months ended
12/2013

4,798

26.1

96.50

—

Total assets(¥ million)

Net assets(¥ million)

Owners'equity ratio(%)

Net assets
per share (¥)

184,650

90,45448.1

1,785.17(2) Financial Position

31/12/2014

31/03/2014
189,059
89,16646.3
1,760.06
c.f. Owners' equity: 31/12/2014: ¥88,760 million; 31/03/2014: ¥87,514 million

2. Dividends
1stquarter

Dividends per share (¥)
3rd
InterimYear-endquarter

Full year

FY ended 3/2014

—

30.00

—

30.00

60.00

FY ending 3/2015

—

32.00

—

32.00
(projected)

64.00(projected)

Note: Revisions to projected dividends for the quarter under review: no3. Financial Forecasts for Fiscal Year ending March 31, 2015 (April 1, 2014 to March 31, 2015)(Percentages represent change compared to the previous corresponding period.)(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥ million)(%)

Net income
per share(¥)

285,000

5.4

15,0004.0

15,000

3.2

9,000

9.0

181.01

Net sales

Current forecastfor FY ending 3/2015

Operating income

Ordinary income

Net income

Note: Revisions to projected results for the quarter under review: noCautionary 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 on definite 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-vis systems and services provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response to intensified competition.
Factors affecting results are not limited to the ones mentioned above.

4． Business Results（1）Business Results for the First Nine Months for the Fiscal Year Ending March 31, 2015

During the first 9 months for the fiscal year ending March 31, 2015 (the period from April 1, 2014 toDecember 30, 2014), the outlook for the Japanese economy remained uncertain, given thereactionary decline after the last-minute surge in demand stemming from the consumption tax hikeand concern over a downturn in overseas economies. Nonetheless, the economy generally staged amoderate recovery due to the government’s economic measures and financial policy.

Under these economic conditions, our business remained steady overall in the fields of informationand communication technology (ICT), in which NEC Networks & System Integration Corporation (“theCompany”) operates, although it varied from field to field.

First, in the corporate market, while corporate managers continued to hold conservative views oninvestment effects, there was a recovery in investment appetite against the backdrop of an economicrecovery. Work style reforms, and particularly recent ICT investments for enhancing business
management and competitiveness, showed encouraging signs

In the telecommunication carriers’ market, there were continuous investments in the development ofhigh-speed broadband networks, especially LTE networks. However, carriers’ overall capitalspending went through a difficult stage with the completion of large investments in base stations for
new frequency ranges, although they had been strong until the first half of the previous fiscal year.

In the central and local governments market, ICT-related public investments with the concept ofsafety and security remained strong. Investments in the digitization of fire-fighting radio systems
peaked out in the second half in terms of orders. Nevertheless, the construction of systems is brisk,
aimed at completion before the deadline in May 2016.

In this market environment, the Company and its consolidated subsidiaries (hereinafter the“Group”) strengthened their sales capabilities, and introduced to regional offices and branches thehead office’s initiative of opening EmpoweredOffice* to customers. The Group also strengthened
its ability to provide comprehensive services, using M&A carried out in the previous fiscal year
alongside the establishment of a strategic base for further strengthening its maintenance/technicalservices/SCM (Supply Chain Management) platform, which is one of the Group’s strengths, in theTokyo Bay area. The Group also took aggressive steps to deal with projects that are in full swing,
including dealing with digitization of fire-fighting and disaster-prevention network systems

As a result, the Group posted the following consolidated results for the quarter under review:

Net sales¥200,403 million

10,1% increase year on year

Operating income¥8,385 million

8.4% decrease year on year

Ordinary income¥8,563 million8.3% decrease year on year

Net income¥5,125 million

6.9% decrease year on year

¥222,459 million

8.7% increase year on year

＜Reference＞
Orders received

Net sales rose 10.1% year on year, to ¥200,403 million. While sales from the construction of largebase stations declined, the Group aggressively took steps to capture business opportunities fromincreases in ICT investments in the area of corporate networks, as well as public investment infire-fighting and disaster prevention systems and other systems for securing public security andsafety.
In addition, Q&A Corporation and NEC Magnus Communications, Ltd., which the Group madeconsolidated subsidiaries in June and October 2013, respectively, contributed to the results. Orders
received expanded 8.7% year on year, to ¥222,459 million.
Turning to profit, operating income, ordinary income and net income increased year on year to¥8,385 million, ¥8,563 million, and ¥5,127 million respectively, reflecting increased sales.

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

Net sales by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructure

OtherTotal

1Q-3Q Fiscal 2015.369,809

55,593

61,427

13,572200,403

1Q-3Q Fiscal 2014.3

62,95754,18051,375

13,428

181,941

Increase or decrease

6,852

1,413

10,051

144

18,461

10.9

2.6

19.6

1.1

10.1

Ratioofdecrease (%)

increaseor（Million yen）

Reference: Orders received by business segment
Enterprises

CarrierSocialNetworks

Networks

Infrastructure

OtherTotal

1Q-3Q Fiscal 2015.3

74,29656,46978,246

13,447

222,459

1Q-3Q Fiscal 2014.3

63,24354,74773,18913,426204,607

Increase or decrease

11,053

1,721

5,057

20

17,852

17.5

3.1

6.9

0.28.7

Ratioofincrease

ordecrease (%)1). Enterprise Networks business (¥69,809 million, up 10.9% year on year)
The Group’s sales focus on its office innovation solution EmpoweredOffice* increased further
in aggressively response to customer needs for management innovation. As part of its
initiatives to expand and strengthen its system for providing comprehensive services to help
customers improve their operations and management, in June 2013 the Group made Q&ACorporation, which has an advantage in technical support and consulting, its consolidated
subsidiary. Reflecting these initiatives, net sales rose 10.9% year on year, to ¥69,809 million.
2). Carrier Networks business (¥55,593million, up 2.6% year on year)
Despite the effect of decreased telecommunications carriers’ capital spending, such as areactionary decline in the construction of large base stations associated with new frequency
ranges in the previous fiscal year, net sales increased 2.8% year on year, to ¥55,685 million,
due to the effect of having made NEC Magnus Communications, Ltd., which has its own
network technology and security technology, its consolidated subsidiary in October 2013.

3). Social Infrastructure business (¥61,427million, up 19.6% year on year)
The Group actively responded to increasing ICT investments for security and safety in thepublic sector, especially investments in the digitization of fire-fighting and disaster prevention
systems. As a result, net sales climbed 19.6% year on year, to ¥61,427 million.

*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

Enterprises Networks

Total office solutions based on ICT with securities or environmental solutions
and 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 (from mobilecommunications base stations to core networks), including systems integration,Carrier Networks

installation, and related services such as operations and monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT platforms anddata centers and related operations, monitoring services
Service integration of ICT infrastructure for governments and public utilities

Social Infrastructure(broadcasters, electric power companies, etc.), such as systems integration,
installation, operation, and monitoring, and operations in markets other than theTokyo, Nagoya, and Osaka areas

OthersToyo Networks & System Integration Co., Ltd. and sales of purchased equipment*The Group has reviewed its operational structure, aiming to enhance it by restructuring it in accordancewith markets. In the fiscal year under review, the Group has changed the contents of business segments,
and construction work for carriers, including the construction of mobile communications base stations, hasbeen transferred from Social Infrastructure segment to Carrier Networks segment, among other changes.
Segment information for the previous fiscal year has been changed to reflect the change in the content ofbusiness segments.

（2） Outlook for the Fiscal Year Ending March 31, 2015

Looking ahead, there are still uncertain factors in the domestic economy, including downside risks
in the trend of telecommunications carriers’ capital spending. That said, the business environment
surrounding the Group is expected to remain steady, as ICT investments by companies show
recovery and the central and local governments aggressively make investments in infrastructure forpublic safety and security.
Under these environments, the consolidated results forecast for the fiscal year ending March 31,
2015 is the same as the previous forecast.

Net sales¥285 billion

5.4% increase year on yearOperating income¥15 billion

4.0% increase year on year

Ordinary income¥15 billion

3.2% increase year on year

Net income¥9 billion

9.0% increase year on year

5. Consolidated Financial Statements(1) Consolidated Balance Sheets(Millions of yen)

As ofDecember 31, 2014

As ofMarch 31, 2014

39,85588,3883,148
11,551
9,691-63
152,571

44,434
95,975
2,308
5,841
8,852
-59
157,351

10,922

10,959

3,231
3,052
6,284

3,502
3,014
6,516

16,472-1,60014,872
32,079184,650

15,834-1,602
14,231
31,708
189,059

ASSETSCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets(Millions of yen)

As ofDecember 31, 2014

As ofMarch 31, 2014

39,117
1,557
174
2,262
29313
294
18,86862,61843,191
1,742
171
4,711104374
357
19,34069,994

4,391
26,0601,126
31,577
94,195

4,518
24,152
1,227
29,89899,893

13,122
16,65062,267-68
91,972

13,122
16,65061,474-64
91,18242-169-3,085-3,211
1,694
90,454
184,65025-233-3,459-3,668
1,652
89,166
189,059

LIABILITIESCurrent liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Provision for directors' bonuses
Provision for product warranties
Provision for loss on order received
OtherTotal current liabilities
Non-current liabilities
Long-term loans payable
Net defined benefit liability
Other
Total non-current liabilities
Total liabilities
NET ASSETS

Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

(2) Consolidated Statements of Income(Millions of yen)
FY03/2015 1Q-3Q(9 months ended12/2014)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income of insurance
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on retirement of non-current assets
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on step acquisitions
Gain on bargain purchaseTotal extraordinary income
Extraordinary losses
Area business restructuring cost
Loss on sales of shares of subsidiaries
Loss on retirement of non-current assets
Total extraordinary losses
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests in income
Net income

FY03/2014 1Q-3Q(9 months ended
12/2013)200,403
168,445
31,957
23,571
8,385

181,941
152,935
29,006
21,267
7,738

51
121
322
495

27
151
392
571

57
70
189
317
8,563

63
48
290
402
7,907

―
―
―

477
170
648

258
―
―
258
8,304
3,054
5,250
123
5,127

160
369
285
814
7,741
2,865
4,875
77
4,798

(Millions of yen)
FY03/2015 1Q-3Q(9 months ended12/2014)

Income before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to minority interests

FY03/2014 1Q-3Q(9 months ended12/2013)

5,250

4,875

16
109
374
500
5,751

19183
―202
5,078

5,583
167

4,951126(3) Consolidated Statements of Cash Flows(Millions of yen)

Cash flows from operating activities
Income before income taxes and minority interests
Depreciation
Area business restructuring cost
Loss (gain) on sales of shares of subsidiaries
Loss (gain) on step acquisitions
Amortization of goodwill
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for retirement benefits
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on order received
Interest and dividend income
Interest expenses
Share of (profit) loss of entities accounted for using equity method
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Remeasurements of defined benefit plans
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activitiesCash flows from investing activities
Purchase of securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Payments of loans receivableCollection of loans receivable
Payments for liquidation of subsidiaries
Purchase of shares of subsidiaries
Payments for transfer of business
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Repayments of long-term loans payable
Proceeds from sale and purchase of treasury stock, net
Cash dividends paid
Cash dividends paid to minority shareholders
Other, netNet cash provided by (used in) financing activities
Effect of exchange rate change 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

FY03/2015 1Q-3Q(9 months ended
12/2014)

FY03/2014 1Q-3Q(9 months ended12/2013)

8,304
2,047
258――
270―
2―
-39
-74
-59
-62-6157-6
7,826-6,555374-4,107
467
-848
7,793
61
-51
-5,629
2,173

7,741
1,875
160
369-477
241
-170
203
2,330
―
-75
-176
-512
-34
63
13
18,476-1,761―-7,875-739-1,702
17,94934-56-5,561
12,365-5,0005,000-2,196
15
-507
-6-4
5
-109
―
―
-250
-3,054――-1,411
0
-644
-51
-27
24
―
-1,479-1,857698-4,747

-210
-124
-3
-3,072-16-358-3,78587-4,57844,43439,855-14-103-6-2,774-3-371-3,27376
4,421
30,31534,736

(4) Segment Information
Business Segment
First three quarters of fiscal year ending March 2015 (9 months ended December 2014)(Millions of yen)Enterprises
Networks
Orders received
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

Carrier
Networks

SocialInfrastructures

OthersAdjustments

Total

74,29656,46978,246

13,447-

222,459

69,80969,8094,337

55,59355,593
4,815

61,42761,427
4,986

13,572
13,572131(5,885)

200,403
200,4038,385First three quarters of fiscal year ended March 2014 (9 months ended December 2013)(Millions of yen)Enterprises
Networks
Orders received
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

Carrier
Networks

SocialInfrastructures

OthersAdjustments

Total

63,24354,74773,18913,426-204,60762,957
62,957
4,437

54,18054,1804,368

51,37551,375
3,756

13,42813,428836(5,660)181,941
181,941
7,738