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

Secom Co., Ltd.

Annual Report 2008

29

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2008 and 2007

In millions of yen

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

	March 31	March 31

ASSETS

2007

2008

Current assets:
Cash and cash equivalents (Note 5)........................................................................ ¥0,214,577 ¥0,193,215
Time deposits (Note 12)............................................................................................
8,820
7,194
Cash deposits (Note 6)..............................................................................................
63,69775,329
Short-term investments (Note 7).............................................................................
6,540
14,892
Notes and accounts receivable, trade ....................................................................
88,411
85,971
Due from subscribers ..............................................................................................
29,947
27,963Inventories (Notes 8 and 12)....................................................................................
118,442
98,337
Short-term receivables (Notes 12 and 20)..............................................................
17,871
19,727
Allowance for doubtful accounts.............................................................................
(1,827)(1,944)
Deferred insurance acquisition costs (Note 13)......................................................
6,624
5,695
Deferred income taxes (Note 16).............................................................................
17,395
16,947
Other current assets..................................................................................................
10,041
10,912
			 Total current assets............................................................................................
580,538
554,238

2008$02,145,770
88,200636,970
65,400884,110
299,470
1,184,420
178,710(18,270)
66,240173,950
100,410
5,805,380

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

196,688
46,81470,265
13,37011,290(8,826)329,601

204,142
38,832
71,271
13,457
10,139(9,282)
328,559

1,966,880
468,140
702,650
133,700
112,900(88,260)
3,296,010

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

78,818143,661
244,933
71,945
5,977
545,334(293,823)
251,51177,273143,012233,323
69,446
5,261
528,315(277,810)
250,505

788,180
1,436,610
2,449,330
719,450
59,7705,453,340(2,938,230)
2,515,110

Other assets:
Deferred charges (Note 2 (12)).................................................................................
46,151
Goodwill (Note 11)....................................................................................................
16,141Other intangible assets (Notes 11 and 12)..............................................................
21,127
Prepaid pension and severance costs (Note 14)....................................................
9,135
Deferred income taxes (Note 16).............................................................................
11,321
			103,875
			 Total assets......................................................................................................... ¥1,265,525

45,20817,363
23,41915,817
6,073
107,880¥1,241,182

461,510
161,410211,270
91,350113,210
1,038,750$12,655,250

See accompanying notes to consolidated financial statements.

30

Secom Co., Ltd.

Annual Report 2008

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

In millions of yen

	March 31	March 31

LIABILITIES AND SHAREHOLDERS’ EQUITY

2007

2008

Current liabilities:
Bank loans (Notes 6 and 12)..................................................................................... ¥0,133,056 ¥0,126,964
Current portion of long-term debt (Notes 12 and 19)............................................
9,061
10,044
Notes and accounts payable, trade.........................................................................
30,95628,892Other payables..........................................................................................................
29,05829,903
Deposits received (Note 6).......................................................................................
36,66750,689Deferred revenue......................................................................................................
43,49642,555
Accrued income taxes..............................................................................................
24,69325,023
Accrued payrolls.......................................................................................................
22,572
19,047
Other current liabilities (Note 16)............................................................................
17,66814,993
			 Total current liabilities.......................................................................................
347,227
348,1102008$ 1,330,560
90,610309,560
290,580
366,670
434,960
246,930
225,720
176,680
3,472,270

Long-term debt (Notes 12 and 19)..............................................................................
Guarantee deposits received.......................................................................................
Accrued pension and severance costs (Note 14).......................................................
Deferred revenue..........................................................................................................
Unearned premiums and other insurance liabilities (Note 13).................................
Investment deposits by policyholders (Note 13).......................................................
Deferred income taxes (Note 16).................................................................................
Other liabilities..............................................................................................................
			 Total liabilities....................................................................................................

44,18330,581
18,41922,28363,20587,252
10,075
5,235
628,460

40,15330,21018,446
21,71658,266
93,361
12,635
5,242
628,139441,830
305,810
184,190
222,830
632,050
872,520
100,750
52,3506,284,600

Minority interests in subsidiaries ..............................................................................

62,511

61,311

625,110

Commitments and contingent liabilities (Note 23)

Shareholders’ equity (Note 17):
Common stock:		 Authorized 900,000,000 shares;		 issued 233,288,717 shares in 2008 and 2007.....................................................
66,37866,378Additional paid-in capital.........................................................................................
79,99879,998Legal reserve.............................................................................................................
10,0209,923
Retained earnings.....................................................................................................
471,066
428,850
Accumulated other comprehensive income (loss):		 Unrealized gains (losses) on securities (Note 7).................................................
(3,137)
8,101
		 Unrealized losses on derivative instruments (Note 22).....................................
(94)
(53)
		 Pension liability adjustments (Note 14)...............................................................
(4,726)1,272
		 Foreign currency translation adjustments..........................................................
(74)
2,113
			
(8,031)
11,433
Common stock in treasury, at cost:
8,323,599 shares in 2008 and 8,318,900 shares in 2007.......................................
(44,877)(44,850)
			 Total shareholders’ equity.................................................................................
574,554551,732
			 Total liabilities and shareholders’ equity......................................................... ¥1,265,525 ¥1,241,182

Secom Co., Ltd.

663,780
799,980
100,200
4,710,660(31,370)(940)(47,260)(740)(80,310)(448,770)
5,745,540$12,655,250

Annual Report 2008

31

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2008

2008

In millions of yen

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

Years ended March 31

Year ended March 31

2006

2008

Net sales and operating revenue .......................................................................... ¥706,695 ¥636,678 ¥580,526
Costs and expenses:
Cost of sales......................................................................................................... 454,165
410,275
364,932
Selling, general and administrative expense (Notes 2 (18) and 18)................ 144,782
127,062
128,077
Impairment loss on long-lived assets (Note 10)................................................
16
1,176
821
Impairment loss on goodwill (Note 11).............................................................
1,128
2,966
149
Loss on sales and disposal of property, plant and equipment, net.................
976
781
2,164
Settlement loss of benefit obligation on transfer to defined
contribution pension plan (Note 14)................................................................
—
—
2,490
				
601,067
542,260
498,633				 Operating income..................................................................................... 105,628
94,41881,893
Other income:Interest and dividends.........................................................................................
2,969
2,993
2,209
Gain on sales of securities, net (Notes 7 and 9)................................................
2,020
1,772
10,044Gain on private equity investments...................................................................
4,070
—
—
Other (Note 15)....................................................................................................
3,952
3,672
3,683
				
13,011
8,437
15,936
Other expenses:
Interest..................................................................................................................
2,094
1,815
1,877
Loss on other-than-temporary impairment of investment securities.............
1,912
1,026
2,263
Other (Note 15)....................................................................................................
4,370
4,678
3,961
				
8,376
7,519
8,101
				 Income before income taxes................................................................... 110,263
95,33689,728
Income taxes (Note 16):
Current..................................................................................................................
42,76940,13634,931
Deferred................................................................................................................
4,337
430
2,973
				
47,10640,56637,904				 Income before minority interests in subsidiaries and equity				 in net income of affiliated companies .................................................
63,15754,77051,824
Minority interests in subsidiaries..........................................................................
(6,639)(4,649)(3,927)
Equity in net income of affiliated companies ......................................................
5,238
5,768
3,298
				 Income before cumulative effect of accounting change.......................
61,75655,88951,195
Cumulative effect of accounting change, net of tax (Note 2 (11))......................
—
—
(864)
				 Net income................................................................................................ ¥ 61,756 ¥055,889 ¥050,331$7,066,950

631,570(66,390)
52,380617,560—$ 617,560

In yenTranslation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

Per share data (Note 2 (20)):
Income before cumulative effect of accounting change—
		 —Basic..............................................................................................................
Cumulative effect of accounting change—
		 —Basic..............................................................................................................
Net income—		 —Basic..............................................................................................................
Cash dividends per share........................................................................................
See accompanying notes to consolidated financial statements.

32

Secom Co., Ltd.

Annual Report 2008

2007

4,541,650
1,447,820
160
11,2809,760—
6,010,670
1,056,280
29,69020,20040,70039,520130,110
20,94019,12043,70083,7601,102,630
427,690
43,370471,060

2008

2007

2006

2008

¥274.51¥248.42¥227.53

$2.75

—

—

(3.84)—

274.51¥ 80.00

248.42¥ 60.00

223.69¥ 50.00

2.75
$0.80

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2008
In millions of yen										 Accumulated
Common					
Number of		 Additional			other comstock					sharesCommonpaid-in
Legal
Retainedprehensive
in treasury,					issuedstock
capitalreserveearnings income (loss)
at costBalance, March 31, 2005 .......................................................................
233,288,717¥66,378¥79,996¥ 9,787¥347,516(¥ 1,282)(¥44,558)
Comprehensive income:Net income..........................................................................................
————
50,331——	Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized gains on securities—
			 Unrealized holding gains or losses arising during the period.......
—
—
—
—
—
8,896
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
(3,356)—
		 Unrealized gains on derivative instruments—
			 Unrealized holding gains or losses arising during the period......
—
—
—
—
—
97
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
18
—
		Minimum pension liability adjustments..........................................
—
—
—
—
—
(30)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
6,346
—
Total comprehensive income............................................................... 								Cash dividends.........................................................................................
————(11,251)——
Transfer to legal reserve...........................................................................
—
—
—
38
(38)
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(192)
Balance, March 31, 2006 .......................................................................
233,288,717
66,37879,996
9,825
386,558
10,689(44,750)
Comprehensive income:Net income..........................................................................................
————
55,889——	Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized gains on securities—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(1,562)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
(1,464)—
		 Unrealized losses on derivative instruments—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(113)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
30
—
		Minimum pension liability adjustments..........................................
—
—
—
—
—
(21)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
2,193
—
Total comprehensive income............................................................... 								Adjustments for initially applying SFAS No. 158, net of tax (Note 14)......
—
—
—
—
—
1,681
—
Cash dividends.........................................................................................
————(13,499)——
Transfer to legal reserve...........................................................................
—
—
—
98
(98)
—
—
Gain on disposal of treasury stock............................................................
—
—
2
—
—
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(100)
Balance, March 31, 2007 .......................................................................
233,288,717
66,37879,998
9,923
428,850
11,433(44,850)
Cumulative effect of a change in accounting principle-adoption of
EITF 06-2, net of tax (Note 2 (22))..........................................................
————(1,227)——
Comprehensive income:Net income..........................................................................................
————
61,756——	Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized losses on securities—
			 Unrealized holding gains or losses arising during the period....
—
—
—
—
—
(11,034)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
(204)
—
		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(54)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income....................................................
—
—
—
—
—
13
—
		 Pension liability adjustments—
			 Unrealized gains or losses arising during the period.................
—
—
—
—
—
(5,564)—
			 Less: Reclassification adjustment for gains or losses			realized in net income.....................................................
—
—
—
—
—
(434)
—
		 Foreign currency translation adjustments......................................
—
—
—
—
—
(2,187)—
Total comprehensive income...............................................................
							Cash dividends.........................................................................................
————(17,998)——
Changes in scope of consolidation...........................................................
—
—
—
—
(218)
—
—
Transfer to legal reserve...........................................................................
—
—
—
97
(97)
—
—
Gains and losses on disposal of treasury stock........................................
—
—
0
—
—
—
—
Net changes in treasury stock..................................................................
—
—
—
—
—
—
(27)
Balance, March 31, 2008 .......................................................................
233,288,717¥66,378¥79,998¥10,020¥471,066(¥ 8,031)(¥44,877)

Total¥457,837
50,331
8,896(3,356)
97
18
(30)
6,346
62,302(11,251)—(192)
508,696
55,889(1,562)(1,464)
(113)
30
(21)
2,193
54,952
1,681(13,499)—2(100)
551,732(1,227)61,756(11,034)
(204)
(54)
13
(5,564)(434)(2,187)42,292(17,998)
(218)
—
0
(27)
¥574,554

Translation into thousands of U.S. dollars (Note 3)										 Accumulated
Common							 Additional			other comstock						
Commonpaid-in
Legal
Retainedprehensive
in treasury,						
stock
capitalreserveearnings income (loss)
at costBalance, March 31, 2007....................................................................................................
$663,780$799,980 $ 99,230$4,288,500$114,330($448,500)
Cumulative effect of a change in accounting principle-adoption of
EITF 06-2, net of tax (Note 2 (22))......................................................................................
———(12,270)——
Comprehensive income:Net income......................................................................................................................
———
617,560——
	Other comprehensive income (loss), net of tax (Note 17):
		 Unrealized losses on securities—
			 Unrealized holding gains or losses arising during the period................................
————(110,340)—
			 Less: Reclassification adjustment for gains or losses
			
included in net income................................................................................
————(2,040)—		 Unrealized losses on derivative instruments—
			 Unrealized gains or losses arising during the period.............................................
—
—
—
—
(540)
—
			 Less: Reclassification adjustment for gains or losses
			
included in net income................................................................................
—
—
—
—
130
—
		 Pension liability adjustments—
			 Unrealized gains or losses arising during the period.............................................
————(55,640)—
			 Less: Reclassification adjustment for gains or losses			realized in net income.................................................................................
————(4,340)—		 Foreign currency translation adjustments..................................................................
————(21,870)—
Total comprehensive income...........................................................................................							Cash dividends.....................................................................................................................
———(179,980)——
Changes in scope of consolidation.......................................................................................
———(2,180)——Transfer to legal reserve.......................................................................................................
—
—
970
(970)
—
—
Gains and losses on disposal of treasury stock....................................................................
—
0
—
—
—
—
Net changes in treasury stock..............................................................................................
—
—
—
—
—
(270)
Balance, March 31, 2008 ...................................................................................................
$663,780$799,980 $100,200$4,710,660($ 80,310)($448,770)

Total$5,517,320(12,270)
617,560(110,340)(2,040)(540)
130(55,640)(4,340)(21,870)
422,920(179,980)(2,180)—0(270)$5,745,540

See accompanying notes to consolidated financial statements.

Secom Co., Ltd.

Annual Report 2008

33

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2008

2008

In millions of yen

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

Years ended March 31

Year ended March 31

2007

2006

Cash flows from operating activities:
Net income.......................................................................................................................... ¥ 61,756 ¥ 55,889 ¥ 50,331
Adjustments to reconcile net income to net cash provided
by operating activities—
		 Depreciation and amortization, including amortization of deferred charges............
58,19458,24852,339
		 Accrual for pension and severance costs, less payments..........................................
(4,083)(2,972)(3,209)
		 Settlement loss of benefit obligation on transfer to defined contribution
		 pension plan (Note 14).................................................................................................
—
—
2,490
		 Deferred income taxes...................................................................................................
4,337
430
2,973
		 Loss on sales and disposal of property, plant and equipment, net...........................
976
781
2,164
		 Impairment loss on long-lived assets (Note 10)..........................................................
16
1,176
821
		 Impairment loss on goodwill (Note 11)........................................................................
1,128
2,966
149
		 Gain on sales of securities, net.....................................................................................
(4,593)(5,715) (14,514)
		 Gain on private equity investments..............................................................................
(4,070)——		 Loss on liquidation of subsidiaries...............................................................................
485——
		 Loss on other-than-temporary impairment of investment securities........................
2,562
1,357
3,444
		 Equity in net income of affiliated companies...............................................................
(5,238)(5,768)(3,298)
		Minority interests in subsidiaries..................................................................................
6,639
4,649
3,927
		 Cumulative effect of accounting change, net of tax (Note 2 (11))..............................
——
864
		 Changes in assets and liabilities, net of effects from acquisitions and disposals:			 (Increase) decrease in cash deposits........................................................................
11,632(10,142)(4,381)
			 Increase in receivables and due from subscribers, net of allowances..................
(4,766)(13,798)(668)
			 Increase in inventories............................................................................................... (19,267)(17,264) (24,146)
			 Increase in deferred charges..................................................................................... (16,336)(18,267) (16,804)
			 Increase (decrease) in deposits received................................................................. (14,023)
9,022
4,175
			 Increase in deferred revenue.....................................................................................
1,468
2,137
3,804
			 Increase (decrease) in accrued income taxes..........................................................
(332)
1,697
5,590
			 Increase (decrease) in guarantee deposits received...............................................
329
2,318
(20)
			 Increase in unearned premiums and other insurance liabilities............................
4,939
4,936
6,878
			 Other, net.....................................................................................................................
10,820(3,794)
5,552

2008

$ 617,560
581,940(40,830)—
43,3709,760
160
11,280(45,930)(40,700)
4,850
25,620(52,380)
66,390—116,320(47,660)(192,670)(163,360)(140,230)
14,680(3,320)3,290
49,390108,200				 Net cash provided by operating activities............................................................

92,57367,88678,461

925,730

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...........................................
Proceeds from sales of investment securities.................................................................
Payments for purchases of investment securities...........................................................
Decrease in short-term investments.................................................................................
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.............................................................................................................................

(1,612)
4,277(45,332)
87,439(99,262)
6,397
(317)
(1,741)(1,207)(3,773)6,581(3,557)(2,425)
3,919(46,378)
132,923(103,242)
32,548
4,648(5,158)(474)(6,898)15,740(3,167)101
10,995(44,272)
99,889(68,597)868(1,190)—
3,065(11,338)
18,365(4,030)(16,120)
42,770(453,320)
874,390(992,620)
63,970(3,170)(17,410)(12,070)(37,730)
65,810(35,570)				 Net cash provided by (used in) investing activities.............................................

(52,107)

22,0363,856(521,070)

Cash flows from financing activities:
Proceeds from long-term debt..........................................................................................
Repayments of long-term debt.........................................................................................
Increase in bank loans, net................................................................................................
Decrease in investment deposits by policyholders.........................................................
Dividends paid....................................................................................................................
Increase in treasury stock, net...........................................................................................
Other, net.............................................................................................................................

12,955(12,792)
6,075(6,109)(17,998)(27)(1,430)12,154(52,269)
20,687(94,424)(13,499)
(100)
(920)

10,575(11,400)
4,387(39,934)(11,251)
(192)
(940)

129,550(127,920)
60,750(61,090)(179,980)(270)(14,300)(193,260)				 Net cash used in financing activities....................................................................

(19,326)(128,371)(48,755)

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

222

620

470

2,220

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

21,362
193,215(37,829)
34,032231,044 197,012

213,620
1,932,150

Cash and cash equivalents at end of year............................................................................ ¥214,577¥193,215 ¥231,044$2,145,770

See accompanying notes to consolidated financial statements.

34

Secom Co., Ltd.

Annual Report 2008

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2008

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, and information and communication related and other services. With these services
combined, the Company is focusing on its “Social System
Industry,” a network of integrated systems and services,targeted at the needs of people and business.
The Company’s principal business activities are security
services including on-line centralized security services forcommercial and residential premises, static guard services,armored car services for cash collection and deposit, andthe development, manufacturing and sale of various security
equipment. The Company also has been diversifying theoperation of its services covering: fire protection services,
including automatic fire alarm systems and fire extinguishing systems; home and other medical services; non-life
insurance services; geographic information services using
geographic information system (“GIS”) and surveying andmeasuring technology; information and communication
related services, including information security services,­software development and system integration activities;
development and sale of real estate; lease of real estateand other services.
2. Significant Accounting Policies
The parent company and its Japanese subsidiaries main­
tain their records and prepare their statutory financial statements in accordance with accounting principles generally
accepted in Japan. Certain adjustments and reclassifications
have been incorporated in the accompanying financial
statements to c­ onform with accounting principles generally
accepted in the United States of America. These adjustments
were not recorded in the statutory books of account.
Significant accounting policies followed in the preparationof the accompanying consolidated financial statements are
summarized below:(1) Basis of Consolidation and Investments in Affiliated­Companies
The consolidated financial statements include the accountsof the parent company and those of its majority owned subsidiaries. The consolidated financial statements also include
variable interest entities to which the Company is the primary beneficiary. All significant intercompany transactions
and accounts have been eliminated in consolidation.
Investments in 20 to 50 percent owned companies, inwhich the ability to exercise significant influence exists, areaccounted 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.
On occasion, a consolidated subsidiary or affiliatedcompany accounted for using the equity method may issue
its shares to third parties as either a public or private offeringor upon ­conversion of convertible bonds to common stock at
amounts per share in excess of or less than the Company’s
average per share carrying value. With respect to suchtransactions, where the sale of such shares is not a part of abroader corporate reorganization contemplated or plannedby the Company, the resulting gains or losses arising fromthe change in ownership interest are recorded in income forthe year the transaction occurs.
(2) Consolidation of Variable Interest Entities
In December 2003, the Financial Accounting Standards
Board (“FASB”) issued FASB Interpretation No. 46 (revised
December 2003) (“FIN No. 46R”), “Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51.” FIN No.
46R addresses the consolidation and ­disclosure by business­enterprise of a variable interest entity (“VIE”) as definedin the Interpretation. FIN No. 46R requires that the primary
beneficiary—a party that absorbs a majority of the entity’s
expected loss and receives a majority of the entity’s expected
residual returns, or both, as a result of holding variable­interests—consolidates the VIE and an enterprise that holds­significant variable interests but is not the ­primary beneficiary discloses certain required information about the VIE. FIN
No. 46R was effective immediately for all new VIEs created or
acquired after January 31, 2003. For VIEs created or acquired
prior to February 1, 2003, FIN No. 46R was e­ ffective for theCompany on April 1, 2004.
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 to build, maintain and operate correctional
facilities. Certain organizations are considered as VIEs
under FIN No. 46R. In March 2006, the Company provided
additional loans and acquired additional variable interestsin three organizations managing hospitals and healthcare-related organizations. As a result of the acquisitions,the Company has become the primary beneficiary of theseorganizations and has consolidated these organizations since
March 2006. The aggregated fair value of current assets,
goodwill, and other non-current assets acquired are ¥1,894
million, ¥1,711 million and ¥6,795 million, respectively,
and liabilities assumed are ¥4,144 million. The results of
their operations have been included in the consolidated
statements of income since the date of acquisition. The
consolidated pro forma information that would show the
Company’s consolidated results of operations for the year
ended March 31, 2006 has not been disclosed based onmateriality considerations.
Total assets held by VIEs to which the Company is theprimary beneficiary were ¥17,284 million ($172,840 thousand)and ¥18,405 million at March 31, 2008 and 2007, respectively.
Total assets held by VIEs to which the Company holds significant variable interests but is not the primary beneficiary at
March 31, 2008 and 2007 were ¥45,889 million ($458,890
thousand) and ¥44,105 million, respectively. The Company’s
maximum exposure to losses related to VIEs at March 31,
2008 and 2007 were ¥9,164 million ($91,640 thousand) and¥10,302 million, ­respectively.

Secom Co., Ltd.

Annual Report 2008

35

CONSOLIDATED FINANCIAL STATEMENTS

The Company also provided loans and guarantees to realestate investment companies. Certain investment companies
were considered as VIEs under FIN No. 46R. Total assets heldby these VIEs to which the Company was primary beneficiaryat March 31, 2006 were ¥10,638 million. In September 2006,
the Company acquired 100% ownership of these VIEs andconsolidated as its subsidiaries. There are no such VIEs towhich the Company holds significant variable interests but
was not primary
beneficiary at March 31, 2008.
­(3) Revenue Recognition
The Company generates revenue principally through salesof security services, merchandise and software, and insurance services under separate contractual arrangements. The
Company recognizes revenue when persuasive evidence ofan arrangement exists, delivery has occurred or services havebeen rendered, title and risk of loss have been transferred tothe customer, the sales price is fixed or determinable, andcollectibility is probable.
Revenue from security services is recognized over thecontractual period or, in the case of specific services, whensuch services are rendered. Subscribers are generally
requested to prepay a portion of service charges which arecredited to deferred revenue and taken into income ratably
over the ­covered service period. Revenue from installation
services of security equipment related to on-line centralized security ­services is deferred and recognized over thecontractual period of security services after completion of theinstallation. The related installation costs are also deferred
and amortized over the ­contractual period (Note 2 (12)).
The Company enters into arrangements with multiple
elements, which may include any combination of security
equipment, installation and security service. The Company
allocates revenue to each element based on its relative fairvalue if such ­element meets criteria for treatment as a separate unit of accounting as prescribed in the Emerging Issues
Task Force (“EITF”) No. 00-21, “Accounting for Revenue
Arrangement with Multiple Deliverables.” Otherwise, revenue is deferred until the undelivered elements are fulfilled
as a single unit of accounting.
Revenue from sales of merchandise and software is­recognized when the merchandise and software are received
by the customer and, in the case of installations, when such
installations are completed.
Revenue from construction contracts for fire protection
services is recognized when constructions are completed.
Revenue from long-term contracts for geographic­informa­tion services is recognized under the percentageof-­completion method.
Property and casualty insurance premiums are earned­ratably over the terms of the related insurance contracts.
Unearned ­premiums are earned ratably over the terms of theunexpired portion of premiums written.

36

Secom Co., Ltd.

Annual Report 2008

Revenue from sales of equipment under sales-type leases
is recognized at the inception of the lease. Unearned incomeon sales-type leases and direct-financing leases is recognizedover the life of each respective lease using the interest
method. Leases not qualifying as sales-type leases or directfinancing leases are accounted for as operating leases andthe related ­revenue is recognized over the lease term.
Taxes collected from customers and remitted to governmental authorities on revenue-producing transactions areaccounted for on a net basis and therefore are excluded fromnet 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 effect at year-end and all income and expense
accounts are translated at average rates of exchange
during the year. The resulting translation adjustments areaccumulated and reported as part of other comprehensive
income (loss).
Foreign currency receivables and payables of the Company
are translated 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 statements of cash flows, theCompany considers all highly liquid investments purchasedwith initial maturities of three months or less to be cash
equivalents.
(6) Investments in Debt and Equity Securities
The Company classifies investments in debt and equity
securities as “available-for-sale” or “held-to-maturity.”
The Company has no securities classified as “trading.”“Held-to-maturity” securities are those securities in which
the company has the ability and intent to hold 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 areclassified as “available-for-sale” are recorded at fair value.
Unrealized holding gains and losses on securities classified
as “available-for-sale” are reported as part of other comprehensive income (loss), net of tax. Debt securities classified as“held-to-maturity” are reported at ­amortized 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 is charged to income and a new cost basis
for the securities is established. To determine whether an
impairment is other-than-temporary, the Company periodically reviews the fair value of available-for-sale securities
for possible impairment by taking into consideration thefinancial and operating conditions of the issuer, the generalmarket conditions in the issuer’s industry, the degree andperiod of the decline in fair value and other ­relevant factors.
Other investments in non-public companies are recorded
at cost as fair value is not readily determinable. The
Company periodically evaluates the values of other investments in ­non-public companies for possible impairment
by taking into consideration the financial and operating
conditions of the issuer, the general market conditions in theissuer’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 to income.
(7) Private Equity Investments
The Company accounts for private equity investmentsin accordance with “AICPA Audit and Accounting Guide:
Investment Companies,” which investments are accounted
for at fair value, based on the Company’ assessment ofeach underlying investment. The investments, by theirnature, have little or no price transparency. Investments
are initially carried at cost as an approximation of fair value.
Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are alsomade, in the absence of third-party transactions, if it isdetermined that the expected realizable value of the­investment has declined below the carrying value.
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 andother related products, are stated at the lower of cost or
market. Cost is determined, in the case of real estate, basedon the specific identification method and, in the case of otherinventories, primarily using the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful
accounts to ensure trade and other receivables are notoverstated due to uncollectibility. Allowance for doubtful
accounts is maintained for all customers based on a variety
of factors, including the length of time receivables are
past due, macroeconomic conditions, significant one-time
events and historical experience. An additional reserve forindividual accounts is recorded when the Company becomesaware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position.
If circumstances related to customers change, estimates ofthe ­recoverability of receivables would be further adjusted.

(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring
new insurance policies are deferred and are being amortizedprincipally over the premium-paying period of the related­insurance policies applying a percentage relationship of cost
incurred to premiums from contracts 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. Depreciationis computed primarily using the ­declining-­balance method
at rates based on the estimated useful lives of the assets.
Assets leased to others under operating leases are primarily
depreciated using the straight-line method over the estimated useful lives. Depreciation expense was ¥37,241 million($372,410 thousand), ¥38,719 mil­lion and ¥33,042 million forthe years ended March 31, 2008, 2007 and 2006, respectively.
Maintenance, repairs and renewals are charged to income
as incurred.
The estimated useful lives of depreciable assets areas ­follows:		 Buildings
22 to 50 years
		 Security equipment and control stations
5 to 8 years
		Machinery, equipment and automobiles
2 to 20 years
In March 2005, the FASB issued FASB Interpretation
No. 47 (“FIN No. 47”), “Accounting for Conditional Asset
Retirement Obligations—an interpretation of FASB statement
No. 143.” FIN No. 47 clarifies that the term “conditional asset
retirement obligation” as used in Statement of Financial
Accounting Standards (“SFAS”) No. 143, “Accounting for
Asset Retirement Obligations,” refers to a legal obligationof an entity to perform an asset retirement activity in which
the timing and/or method of settlement are conditional ona future event that may or may not be within the control ofthe entity. Such an obligation to perform the asset retirement
activity is unconditional even though uncertainty exists
about the timing and/or method of settlement. Accordingly,
an entity is required to ­recognize a liability for the value of aconditional asset retirement obligation if the fair value of theliability can be reasonably estimated. FIN No. 47 is effective
no later than the end of fiscal years ended after December
15, 2005 and required to be adopted by the Company on
March 31, 2006. The Company has determined that conditional legal obligations exist for ­certain of its leased facilities.
As a result of adoption of FIN No. 47, on March 31, 2006, theCompany recognized a one-time expense of ¥864 ­million as acumulative effect of accounting change, and the Company’s
buildings and improvements, and liabilities increased by¥694 million and ¥2,162 million, respectively.

Secom Co., Ltd.

Annual Report 2008

37

CONSOLIDATED FINANCIAL STATEMENTS(12) Deferred Charges
Deferred charges primarily consist of costs related to
installation services of security equipment related to on-line
centralized security services. The installation costs aredeferred and amortized using the straight-line method overthe contractual period of security services after completionof the installation. Amortiza­­tion expense was ¥14,953 million($149,530 thousand), ¥14,474 million and ¥14,045 million forthe years ended March 31, 2008, 2007 and 2006, respectively.
(13) Impairment or Disposal of Long-Lived Assets
In accordance with SFAS No. 144, “Accounting for
Impairment or Disposal of Long-Lived Assets,” the Company
reviews the carrying amount of its long-lived assets held
and used, other than goodwill and intangible assets withindefinite lives, and assets to be disposed of, whenever
events or changes in circumstances ­indicated that the carrying amount may not be recoverable. Long-lived assets to beheld and used are reviewed for impairment by comparing
the carrying amount of the assets with their estimatedfuture 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 the asset carrying amount andthe fair value. Long-lived assets that are to be disposed ofother than by sale are considered held and used until they
are disposed of. Long-lived assets that are to be disposed ofby sale are reported at the lower of their ­carrying amount orfair value less cost to sell. Reductions in carrying amount are­recognized in the period in which the long-lived assets areclassified as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair valueof assets of business acquired. Pursuant to SFAS No. 142,
“Goodwill and Other Intangible Assets,” goodwill and intangible assets acquired in a purchase business combinationand determined to have an indefinite useful life are notamortized, but instead tested for impairment at least annually. SFAS No. 142 also requires that intangible assets withestimable ­useful lives be amortized over their respective
estimated useful lives to their estimated residual ­values, andreviewed for impairment in accordance with SFAS No. 144.
The Company conducts its annual impairment test at the endof each 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 onreported claims and incurred but not reported claims, which
are computed based on past experience for unpaid losses.

38

Secom Co., Ltd.

Annual Report 2008(16) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases, andoperating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary
differences and carryforwards are expected to be realized
or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the periodthat 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 FIN No. 48,“Accounting for Uncertainty in Income Taxes—an Interpretationof FASB Statement No. 109,” which requires a more-likelythan-not threshold for financial statement recognition andmeasurement of tax positions taken or expected to be taken
in a tax return.
The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in income taxes in the
consolidated statement of income.
(17) Research and Development
Research and development costs are charged to income
as incurred.
(18) Advertising Costs
Advertising costs are charged to income as incurred,
except for the costs related to insurance policies. Advertisingcosts for acquiring new insurance policies are deferred andamortized as part of insurance acquisition costs. Advertisingexpenses included in selling, general and administrative
expenses for the years ended March 31, 2008, 2007 and 2006
were ¥5,996 million ($59,960 thousand), ¥5,348 million and¥6,746 million, respectively.
(19) Derivative Financial Instruments
The Company accounts for derivative financial instrumentsin accordance with SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended.
The Company recognizes all derivative financial instruments in the consolidated financial statements at fairvalue regardless of the purpose or intent for holding them.
Changes in the fair value of derivative financial instruments
are either recognized periodically in income or in shareholders’ 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 fair values of derivative financial instruments
accounted for as a fair value hedge are recorded in income
along with the portion of the change in the fair value of thehedged item that relates to the hedged risk. Changes in thefair value of derivative financial instruments accounted for asa cash flow hedge, to the extent it is effective as a hedge, arerecorded 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
which include their risk management objective and strategy
for undertaking various hedge transactions. In addition,formal assessment is made at the hedge’s inception andperiodically on an on-going basis, as to whether the derivatives used in hedging activities are highly effective in offsetting changes in fair values or cash flow of hedged items.
Hedge accounting is discontinued for ineffective hedges, ifany. Discontinued hedges are recognized in current income.
(20) Per Share Data
Basic Earnings per Share (“EPS”) is computed based on
the average number of shares of common stock outstanding
for the period. The average number of shares of common
stock outstanding for the years ended March 31, 2008, 2007
and 2006 was 224,967 thousand shares, 224,974 thousand
shares and 225,002 thousand shares, respectively. There
were no potentially dilutive shares outstanding during theyears ended March 31, 2008, 2007 or 2006.
Cash dividends per share shown in the accompanying
consolidated statements of income are computed based on
dividends approved and paid in each fiscal year.
(21) Use of Estimates
The preparation of the consolidated financial statements
requires management of the Company to make a number of
estimates and assumptions relating to the reported amountsof assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues andexpenses during the period. Significant items subject to such
estimates and assumptions include the carrying amounts
of inventories, investment securities, other investments,
property, plant and equipment, goodwill and other intangible
assets; valuation allowances for receivables and deferredincome taxes; valuation of derivative instruments; and assets
and obligations related to employee benefits. Actual results
could differ from those estimates.
(22) Recent Pronouncements
In June 2006, the FASB ratified the EITF consensus on EITF
Issue No. 06-2 (“EITF 06-2”), “Accounting for Sabbatical
Leave and Other Similar Benefits Pursuant to FASBStatement No. 43.” EITF 06-2 provides guidance for an
accrual of compensated absences that require a minimum
service period but have no increase in the benefit even withadditional years of service. EITF 06-2 is effective for fiscal
years beginning after December 15, 2006 and was adopted
by the Company in the fiscal year beginning April 1, 2007.

Accordingly, the Company recorded an increase in the beginning balance of accrued payrolls of ¥2,265 million ($22,650
thousand) and an increase in the beginning balance ofdeferred income taxes (Other assets) of ¥846 million ($8,460
thousand) as of April 1, 2007, with a decrease in the beginning balance of retained earnings of ¥1,227 million ($12,270
thousand).
In September 2006, the FASB issued SFAS No. 157, “Fair
Value Measurements.” SFAS No. 157 defines fair value,establishes a framework for measuring fair value, andexpands disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007, and is required to be adopted by
the Company in the fiscal year beginning April 1, 2008. In
February 2008, the FASB issued Staff Positions (“FSP”)
No. FAS 157-1, “Application of FASB Statement No. 157
to FASB to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements
for Purposes of Lease Classification or Measurement under
Statement 13” and No. FAS 157-2, “Effective Date of FASBStatement No. 157,” which delays the effective date of
SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed atfair value in the financial statements on a recurring basis (atleast annually) and remove certain leasing transactions fromits scope. It is not anticipated that the adoption will have amaterial impact on the Company’s consolidated results ofoperations or financial position.
In February 2007, the FASB issued SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities—
Including an amendment of SFAS No. 115.” SFAS No. 159
provides companies with an option to report selected financial assets and liabilities at fair value. Unrealized gains andlosses on items for which the fair value option has been
elected are recognized in earnings. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007, and isrequired to be adopted by the Company in the fiscal year
beginning April 1, 2008. It is not anticipated that the adoption
will have a material impact on the Company’s consolidated
results of operations or financial position.
In December 2007, the FASB issued SFAS No. 141(R),“Business Combinations.” SFAS No. 141(R) establishes
principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrollinginterest in the acquiree and the goodwill acquired. SFAS
No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of thebusiness combination. SFAS No. 141(R) is effective for fiscal
years beginning after December 15, 2008 and is required tobe adopted by the Company in the fiscal year beginning April
1, 2009. The Company is currently evaluating the effectof adopting SFAS No. 141(R) on its consolidated
financial statements.

Secom Co., Ltd.

Annual Report 2008

39

CONSOLIDATED FINANCIAL STATEMENTS

In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51.” SFAS No. 160
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 and losses
attributable to the noncontrolling interest and changes inownership interests in a subsidiary. SFAS No. 160 also
requires additional disclosures that identify and distinguishbetween the interests of the controlling and noncontrolling
owners. SFAS 160 is effective for fiscal years beginning after
December 15, 2008 and is required to be adopted by theCompany in the fiscal year beginning April 1, 2009. The
Company is currently evaluating the effect of adopting
SFAS No. 160 on its consolidated financial statements.

The value of the transaction was determined based on the
average closing price of Nohmi Bosai’s common stocks on
the Tokyo Stock Exchange over the one month period (fromOctober 23, 2006 to November 21, 2006). Price per sharewas ¥760, which represents a 5.6 percent discount from theaverage share price.
The following table summarizes the estimated fair valuesof the assets acquired and liabilities assumed at the dateof acquisi­tion. The excess of the fair value of acquired net
assets over cost was deducted on a pro rata basis to all
acquired assets except financial assets other than investments accounted for under the equity method, deferred tax
assets, prepaid pension and severance costs, and any othercurrent assets.

(23) Reclassifications
The accompanying consolidated financial statements forthe years ended March 31, 2007 and 2006 have been reclassified to conform to the presentation used for the year ended
March 31, 2008.

Cash and cash equivalents........................................
Receivables and othercurrent assets............................................................
Investments andlong-term receivables...............................................
Property, plant and equipment..................................
Intangible assets.........................................................
Total assets acquired..............................................
Current liabilities.........................................................
Other liabilities............................................................
Total liabilities assumed.........................................
Minority interests in subsidiaries..............................
Net assets acquired................................................

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 therate of ¥100=US$1, the rate ­prevailing on the Tokyo Foreign
Exchange Market on March 31, 2008. These ­translations
should not be construed as representing that the yenamounts actually represent, or have been or could be
converted into U.S. dollars at that rate.
4. Acquisition
In December 2006, the Company acquired 18,500,000 newly
issued shares—equivalent to 30.8 percent of total outstanding common stocks—of Nohmi Bosai Ltd. (“Nohmi Bosai”),
listed on the First Section of the Tokyo Stock Exchange for an
aggregate amount of ¥14,060 million. Nohmi Bosai operates
automatic fire alarms, fire extinguishing and other fire protection systems. As a result of this new share acquisition,
the Company owns 50.4 percent of the total outstanding­common stocks of Nohmi Bosai. The operating results ofNohmi Bosai and its subsidiaries (collectively, “Nohmi
Bosai group”) have been included in the consolidated
financial statements since the date of acquisition. The
Company has been in an alliance with Nohmi Bosai, which
had been accounted for under the equity method before
this new share acquisition. Purpose of this acquisition is toreinforce its alliance with Nohmi Bosai by integrating theCompany’s expertise in security systems with Nohmi
Bosai’s fire protection technologies.

		In millions of yen¥17,513
41,991
9,015
5,973
4,769
79,26127,001
7,757
34,758124¥44,379

Substantially all of the trademarks (including trade names)
assigned for ¥1,879 million out of total intangible assets
acquired for ¥4,769 million are not subject to amortization.
¥2,890 million of acquired intangible assets were assigned
to assets subject to amortization, which have a weightedaverage useful life of approximately 16 years, including
customer contracts and related customer relationships of¥1,908 million with a 20-year weighted-average useful life.
The following unaudited pro forma information shows
the Company’s consolidated results of operations for theyear ended March 31, 2007 and 2006 as though Nohmi Bosaigroup had been consolidated at the beginning of the years.
Unaudited
In millions of yen
Years ended March 31

Pro forma net sales and operating
revenue...............................................
Pro forma net income..........................

2007

2006

¥686,429
56,090¥653,872
50,573
UnauditedIn yenYears ended March 31

Pro forma net income per share:—Basic..............................................

40

Secom Co., Ltd.

Annual Report 2008

2007

2006

¥249.32¥224.77

The unaudited pro forma data is not necessarily indicativeof the Company’s consolidated results of operations thatwould actually have been reported if the transaction in fact
had occurred at the beginning of the years, and is not necessarily representative of the Company’s consolidated resultsof ­operations for any future period.

to-maturity” investments at March 31, 2008 and 2007 wereas ­follows:

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2008 and 2007
were comprised as follows:

Short-term investments:
Available-for-sale:
		 Debt securities........... ¥Held-to-maturity:
		 Debt securities...........
		¥

		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31
2008

Cash...........................................
Time deposits............................
Call loan.....................................
Investment securities...............
			 . ..........................................

2007

2008

¥149,874 ¥140,849
42,936 34,087
19,000 15,000
2,767
3,279
¥214,577 ¥193,215$1,498,740
429,360
190,000
27,670$2,145,770

Investment securities include commercial papers andmoney management funds. These agreements mature within
three months and the carrying values approximate ­market.
The Company has not experienced any losses throughdefault of the financial institutions and does not ­anticipate
default of any outstanding agreements.
6. Cash Deposits
The Company operates cash collection and deposit services
for financial institutions relating to cash dispensers locatedoutside of financial institution facilities and also operates cash
collection service for entities other than financial institutions.
Cash deposit balances of ¥63,697 million ($636,970 thousand)and ¥75,329 million at March 31, 2008 and 2007, respectively,
are segregated from cash and cash equivalents and are
restricted as to use by the Company. The Company funds
most of the necessary cash through bank overdrafts anddeposits. Bank loans and deposits received, which relate tothese operations, were ¥30,402 million ($304,020 thousand)and ¥32,619 million ($326,190 thousand), respectively, atMarch 31, 2008, and ¥27,668 million and ¥47,166 million,
respectively, at March 31, 2007. 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(non-current) 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-

In millions of yen
March 31, 2008
Gross unrealized
Cost

Gains

LossesFair value

5,051

¥

1

¥

115

¥

4,937

1,603
6,654

¥

0
1

¥

0
115

¥

1,603
6,540

Investment securities:
Available-for-sale:		 Equity securities........ ¥ 62,195
		 Debt securities...........
85,426
Held-to-maturity:
		 Debt securities...........
8,242
		
¥155,863¥5,051918¥ 8,485
1,962¥ 58,761
84,382

1¥5,970348¥10,795

7,895¥151,038

In millions of yen
	March 31, 2007
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
		 Debt securities........... ¥ 14,829 ¥Held-to-maturity:
		 Debt securities...........
113		¥ 14,942 ¥Gains

LossesFair value

1

¥

51

¥ 14,779

—
1

¥

—
51

113
¥ 14,892¥3,065
1,015¥ 77,127
88,251

20¥4,1003,393¥168,771

Investment securities:
Available-for-sale:		 Equity securities........ ¥ 60,394 ¥19,798
		 Debt securities...........
88,344922
Held-to-maturity:
		 Debt securities...........
3,413
—
			
¥152,151 ¥20,720

In thousands of U.S. dollars
March 31, 2008
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
		 Debt securities.......... $Held-to-maturity:
		 Debt securities..........
		
$

Gains

LossesFair value

50,510 $10 $1,150 $

49,37016,03066,540 $010 $01,150 $

16,03065,400Investment securities:
Available-for-sale:		 Equity securities....... $ 621,950 $50,510 $ 84,850 $ 587,610
		 Debt securities..........
854,260
9,180
19,620843,820
Held-to-maturity:
		 Debt securities..........
82,42010
3,480
78,950		
$1,558,630 $59,700 $107,950 $1,510,380

Secom Co., Ltd.

Annual Report 2008

41

CONSOLIDATED FINANCIAL STATEMENTS

Gross unrealized losses on, and fair value of, “availablefor-sale” and “held-to-maturity” securities, aggregated byinvest­ment category and the length of time that individual
securities have been in a continuous unrealized loss position,
at March 31, 2008 were as follows:				Less than 12 months				
Fair value

In millions of yen
March 31, 2008
12 months or longer

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

¥31,795
19,194¥50,989¥7,416
1,141¥8,557¥ 3,476
25,996¥29,472¥1,069936¥2,005

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

¥ 1,175¥ 325¥ 2,794¥

23

In thousands of U.S. dollars
March 31, 2008
Less than 12 months

12 months or longer				
Fair value

Gross		Grossunrealized		 unrealized
lossesFair value
lossesAvailable-for-sale:
Equity securities........ $317,950
Debt securities........... 191,940
		 Total......................... $509,890$74,160
11,410$85,570$ 34,760
259,960$294,720$10,690
9,360$20,050

Held-to-maturity:
Debt securities........... $ 11,750$ 3,250$ 27,940$

230

Based on relevant factors, the Company has determinedthat these investments are not considered other-than-­temporary impaired at March 31, 2008.
At March 31, 2008, debt securities principally consisted ofshort-term investments in monetary trusts, Japanese govern­
ment bonds, corporate bonds, U.S. treasury securities andU.S. Government Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-tomaturity” debt securities by contractual maturity at March
31, 2008 are as follows:

Due within 1 year..........
Due after 1 year
through 5 years...........
Due after 5 years
through 10 years.........
Due after 10 years . ......
		 ..................................

Fair value¥ 5,051¥ 4,937

Held-to-maturity

Cost

Fair value

Cost Fair value

Due within 1 year.......... $ 50,510
Due after 1 year
through 5 years........... 421,230
Due after 5 years
through 10 years......... 364,400
Due after 10 years . ......
68,630		 .................................. $904,770$ 49,370$16,030 $16,030

418,970

14,920361,290
63,560$893,190

400
400
67,100 63,620$98,450 $94,980

14,930During the years ended March 31, 2008, 2007 and 2006,
the net ­unrealized gains on “available-for-sale” securities
included as part of other comprehensive income (loss), netof tax, decreased by ¥11,238 million ($112,380 thousand) and¥3,026 ­million and increased by ¥5,541­million, respectively.
Proceeds from the sale of “available-for-sale” securities
for the years ended March 31, 2008, 2007 and 2006 were
¥106,925 million ($1,069,250 thousand), ¥109,405 million and¥74,869 million, respectively. On those sales, the gross realized gains and gross realized losses, using moving-­average
cost basis, for the years ended March 31, 2008, 2007 and2006 were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2008

2007

2006

2008

Gross realized gains........ ¥3,005
Gross realized losses.......
623¥4,076295¥5,71674$30,050
6,230

The Company maintains long-term investment securities,
included as investment securities, issued by a number of
non-public companies. The aggregate carrying amount of theinvestments in non-public companies, at cost net of otherthan-temporary impairment, was ¥45,303 million ($453,030
thousand) and ¥35,351 million at March 31, 2008 and 2007,
respectively. The corresponding fair value at that date was
not computed as such estimation was not practicable.

Held-to-maturity
Cost Fair value

		 In thousands ofMarch 31, 2008
Available-for-sale

March 31, 2008
Available-for-sale

8. Inventories
Inventories at March 31, 2008 and 2007 comprised the­following:

In millions of yen

Cost

In thousands of U.S. dollars¥1,603In millions of yen¥1,603

U.S. dollars

	March 31	March 31

42,12336,440
6,863¥90,477

41,897
36,1296,356¥89,319

1,492
40
6,710
¥9,845

1,493
40
6,362
¥9,498

		

2008

2008

2007

Security-related products............... ¥ 7,732 ¥ 7,603
Fire protection-related products.... 13,747 13,599
Real estate....................................... 91,182 72,218
Information and other-related
products.........................................
5,781
4,917
			 .............................................. ¥118,442 ¥98,337$

77,320137,470
911,820

57,810$1,184,420

Work in process for real estate inventories at March 31,
2008 and 2007, amounting to ¥73,312 million ($733,120
thousand) and ¥64,257 million, respectively, are included inreal estate.

42

Secom Co., Ltd.

Annual Report 2008

9. Investments in Affiliated Companies
The Company has investments in affiliated companies thatare accounted for under the equity method. Investments
principally consist of investments in Taiwan Secom Co., Ltd.,a 28.1 percent owned affiliate, which is listed on the Taiwan
Stock Exchange; S1 Corporation, a 27.3 percent owned
affiliate, which is listed on the Korea Stock Exchange;
Toyo Tech Co., Ltd., a 27.8 percent owned affiliate acquired—amounting to ¥5,146 million—in December 2006, which islisted on the Second Section of the Osaka Securities Exchange;
and Tokyo Biso Kogyo Corporation, a 36.6 percent owned
new affiliate by additionally acquiring ¥1,740 million ($17,400
thousand)—equivalent to 16.6 percent of total outstanding
common stocks—in May 2007 and March 2008, which islisted on the Second Section of the Tokyo Stock Exchange.
In December 2006, the Company additionally acquired
18,500,000 newly issued shares of Nohmi Bosai, listed on theFirst Section of the Tokyo Stock Exchange, and as a result theCompany held 50.4 percent of its ownership. Nohmi Bosai
had been accounted for under the equity method before theacquisition and has been consolidated as its subsidiaries
since the date of acquisition. (For more details, see Note 4.)
Summarized financial information regarding the affiliated­companies accounted for under the equity method was
as ­follows:

Four listed affiliated companies accounted for under theequity method with an aggregated carrying amount of¥37,035 million ($370,350 thousand) and ¥29,652 ­million atMarch 31, 2008 and 2007, respectively, had a quoted market
value of ¥80,984 million ($809,840 thousand) and ¥71,917­million at March 31, 2008 and 2007, respectively.
The amounts of goodwill were ¥2,863 million ($28,630
thousand) and ¥2,851 million at March 31, 2008 and 2007,
respectively.
In November 2006, the parent company sold the outstanding shares of Miyagi Network Inc., a 39.4 percent owned
affiliate, to Mediatti Communications, Inc. for ¥1,419 million.
The sales resulted in a gain of ¥855 million.
In March 2006, the parent company sold 23.8 percent of
the outstanding shares of Japan Cablenet Holdings Limited,a 26.0 percent owned affiliate, to KDDI Corporation for¥12,393 million. The sale resulted in a gain of ¥6,710 million.
A summary of transactions and balances with the affiliatedcompanies accounted for under the equity method ispresented below:

2008

2007

2006

2008

		 In thousands ofSales..............................

¥2,447¥1,843¥1,926$24,470

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

¥1,734¥3,777¥6,077$17,340

In millions of yen

U.S. dollars

	March 31	March 31

		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31

2007

2008

		 In thousands ofCurrent assets.............................. ¥ 96,089 ¥ 78,568
Non-current assets...................... 134,467 121,889$ 960,890
1,344,670

	March 31	March 31

Total assets............................... ¥230,556 ¥200,457$2,305,560

Current liabilities.......................... ¥ 48,212 ¥ 40,444
Non-current liabilities..................
36,84637,559
Shareholders’ equity................... 145,498 122,454$ 482,120
368,460
1,454,980

Total liabilities andshareholders’ equity.............. ¥230,556 ¥200,457$2,305,560

		

2008

		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2006

2008

Net sales...................... ¥202,335 ¥196,486 ¥213,967

2008$2,023,350

Gross profit................. ¥ 64,213 ¥ 67,315 ¥ 71,863$ 642,130

Net income.................. ¥ 22,576 ¥ 18,851 ¥ 15,371$ 225,760

2007

Dividends received from affiliated companies for the years
ended March 31, 2008, 2007 and 2006 were ¥2,657 million($26,570 thousand), ¥2,193 million and ¥2,068 million,
respectively.

In millions of yen

U.S. dollars

		

2008

2007

2008

Notes and accounts
receivable, trade...........................

¥509

¥811

$5,090Loans receivable.............................

¥ 98

¥100

$ 980

Notes and accounts payable..........

¥331

¥205

$3,310

Guarantees for bank loans.............

¥ 10

¥

$ 100

9

The Company's equity in undistributed income of affiliates
at March 31, 2008 and 2007 included in retained earnings
was ¥15,818 million ($158,180 thousand) and ¥13,925 million,
respectively.
10. Long-Lived Assets
The Company has assessed the potential impairment for its
long-lived assets. As a result of significant decreases in rental
rates, market prices and revenue forecasts, and changes ofassumptions regarding useful lives before sale, the Company
principally recognized impairment losses on medical services
equipment for the year ended March 31, 2007 and idle properties for the year ended March 31, 2006. The fair value wasdetermined by the estimated present value of future cash
flows or appraisal value.

Secom Co., Ltd.

Annual Report 2008

43

CONSOLIDATED FINANCIAL STATEMENTS

Impairment loss on long-lived assets by ­business segment
for the years ended March 31, 2008, 2007 and 2006 was
as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2007

2006

2008

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

2008¥— ¥ —
16
32
0 1,134
—
—

¥ 63
—
—
—

$ —
160
0
—

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

—

10

—

—

—
—

—
—

59
699

—
—

¥16 ¥1,176

¥821

$160

11. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding
goodwill at March 31, 2008 and 2007 were as ­follows:
In millions of yen
March 31, 2008
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... ¥30,055
Other............................................
4,911
		 Total . ....................................... ¥34,966(¥16,488)(1,764)(¥18,252)¥13,567
3,147¥16,714

Unamortized intangible assets...... ¥ 4,413¥¥ 4,413		—In millions of yen

		March 31, 2007
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... ¥31,750
Other............................................
6,092
		 Total . ....................................... ¥37,842(¥16,370)(2,194)(¥18,564)¥15,380
3,898¥19,278

Unamortized intangible assets...... ¥ 4,141¥¥ 4,141

44

Secom Co., Ltd.

Annual Report 2008—

In thousands of U.S. dollars
March 31, 2008
Gross		carrying Accumulated
amount amortization

Net
carrying
amountAmortized intangible assets:
Software...................................... $300,550
Other............................................ 49,110
		 Total . ....................................... $349,660($164,880) $135,670(17,640)
31,470($182,520) $167,140

Unamortized intangible assets...... $ 44,130$— $ 44,130

The net carrying amount of amortized and unamortizedintangible assets acquired in a purchase business combination in December 2006 were ¥2,841 million and ¥1,879
million, respectively, at March 31, 2007.
Aggregate amortization expense for the years ended
March 31, 2008, 2007 and 2006 was ¥5,999 million ($59,990
thousand), ¥5,055 million and ¥5,251 million, respectively.
Amortized intangible assets are amortized using the straightline method over the estimated useful lives. The weighted
average amortization period for internal use software isapproximately five years.
The estimated aggregate amortization expense for­intangible assets for the next five years is as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009......................................................
2010......................................................
2011......................................................
2012......................................................
2013......................................................

¥5,396
3,742
2,942
2,502
891

$53,960
37,42029,42025,0208,910

The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2008 and 2007 wereas follows:
In millions of yen					 Information and				 Geographic communication
		
Security	Medical information
related and		services
services
services other services

March 31, 2006.......... ¥1,302 ¥9,383 ¥3,771
Goodwill acquired
during the year........
——
4
Disposal.....................
———
Impairment losses....
— (2,336)(152)
Translation
adjustment..............
155——
March 31, 2007.......... 1,457
7,047
3,623
Goodwill acquired
during the year........
117——
Disposal.....................
——(1)
Impairment losses....
(117)
(876)
—
Translation
adjustment..............
(30)——
March 31, 2008.......... ¥1,427 ¥6,171 ¥3,622

Total¥5,877 ¥20,333
—
(163)
(478)

4
(163)
(2,966)

—
5,236

155
17,363

—
(180)
(135)

117
(181)
(1,128)—(30)¥4,921 ¥16,141

In thousands of U.S. dollars					 Information and				 Geographic communication
		
Security	Medical information
related and		services
services
services other services

Total

March 31, 2007.......... $14,570 $70,470 $36,230 $52,360 $173,630
Goodwill acquired
during the year........ 1,170
—
—
—
1,170
Disposal.....................
——(10) (1,800) (1,810)
Impairment losses.... (1,170) (8,760)—(1,350) (11,280)
Translation
adjustment..............
(300)
—
—
—
(300)
March 31, 2008.......... $14,270 $61,710 $36,220 $49,210 $161,410

The Company principally recognized impairment losses
related to goodwill allocated to the reporting units in the
medical services segment of ¥876 million ($8,760 thousand)and ¥2,336 million for the year ended March 31, 2008 and2007, respectively, due to decreases in the estimated fairvalue of these reporting units mainly caused by decreasesof expected cash 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 ¥133,056 million ($1,330,560 thousand) and¥126,964 million at March 31, 2008 and 2007, respectively,
are generally comprised of 30 to 365 day notes. Theirweighted average interest rates were 1.37 percent and1.27 percent at March 31, 2008 and 2007, 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
future loans with such banks, collateral (including sums on
deposit with such banks) or guarantors shall be provided
immediately upon request. Further, any collateral furnishedpursuant to such agreements or otherwise will be applicable
to all indebted­ness to such banks. The Company has notbeen requested to submit such additional security.
At March 31, 2008, Pasco Corporation (“PASCO”) andNohmi Bosai, subsidiaries of the parent company, had
unused committed lines of credit from short-term arrangements aggregating ¥5,500 million ($55,000 thousand) and¥4,000 million ($40,000 thousand), respectively. The lines ofcredit expire in July 2008 and March 2010, respectively.
PASCO uses these lines of credit as a backup and does notintend to extend them after July 2008. Under the agreements, PASCO and Nohmi Bosai are required to pay committed fees at an annual rate of 0.40 percent and 0.15 percent,respectively, on the unused portion of the lines of credit. At
March 31, 2008, Secom Home Life Co., Ltd. (“Secom HomeLife”), a subsidiary of the parent company, had overdraft
agreements with six banks and its unused lines of credit
amounted to ¥38,050 million ($380,500 thousand). However,

Secom Home Life incurs no fee on the unused portion of thelines of credit. The overdraft agreements expire in the period
from April 2008 to March 2009. Secom Home Life has theability and intent to extend these overdraft agreements
under similar terms and conditions.
Long-term debt at March 31, 2008 and 2007 comprisedthe ­following:
		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31

		

2008

2007

Loans, principally from banks
due 2007–2027 with interest
rates ranging from 0.00 to
5.83%in 2008 and 2007:
Secured........................................... ¥20,624 ¥17,252
Unsecured...................................... 5,249
2,456
0.46% unsecured bonds due 2007....
—1,500
0.61% unsecured bonds due 2010....
750
1,050
0.91% unsecured bonds due 2010....
660
880
Unsecured bonds due 2009–2014
with floating interest rates basedon 6-month TIBOR plus
0.15%–0.20%.................................... 14,051 13,868
Obligations under capital leases,
due 2007–2026 (Note 19)................. 11,910 13,191
			 ................................................. 53,244 50,197
Less:
Portion due within one year........... 9,061 10,044
			 ................................................. ¥44,183 ¥40,153

2008$206,240
52,490
—
7,500
6,600

140,510
119,100
532,440
90,610$441,830

Property, plant and equipment with a carrying amount of¥51,764 million ($517,640 thousand), inventories with a carrying amount of ¥71,525 million ($715,250 thousand), investment securities with a carrying amount of ¥870 million($8,700 thousand), time deposits of ¥1,191 million ($11,910
thousand), short-term and long-term receivables of ¥993 million ($9,930 thousand) and other intangible assets and otherwith a carrying amount of ¥1,593 million ($15,930 thousand)were pledged as ­collateral for bank loans and long-term debt
at March 31, 2008.
The aggregate annual maturities on long-term debt after
March 31, 2008 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009.....................................................
2010.....................................................
2011.....................................................
2012.....................................................
2013.....................................................
Thereafter............................................
............................................................

Secom Co., Ltd.

¥ 9,061
12,402
11,186
6,459
6,061
8,075
¥53,244

Annual Report 2008

$ 90,610
124,020
111,860
64,59060,61080,750$532,440

45

CONSOLIDATED FINANCIAL STATEMENTS

13. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”),
a subsidiary of the parent company, maintains accounting
records as noted in Note 2 in accordance with the accounting
principles and ­practices generally accepted in Japan, whichvary in certain respects from account­ing principles generally
accepted in the United States of America. Those differences
are principally, (a) that insurance acqui­sition costs arecharged to income when incurred in Japan whereas in the
United States of America those costs are deferred and amortized generally over the premium-­paying period of the insurance policies, (b) that liabilities related to incurred but notreported claims are computed based on related regulationsin Japan whereas in the United States of America those liabilities are computed based on past experience for unreported losses, and (c) that unearned premiums are calculated
based on the ­documents authorized by the Super­visory
Authorities in Japan whereas in the United States of America
unearned premiums are reflected based on the lapse and­surrender over the contract period.
In addition, under certain property and casualty insurance
contracts with a refund clause and long-term insurance policies that ­provide refunds at maturity, such as personal accident and fire, the policyholder receives a refund if premiums
have been fully paid unless a substantial settlement (asdefined in the ­policy) has occurred. The Company has provided for such refundable amounts by classifying a portionof the net pre­mi­ums written, together with interest thereon,as investment deposits by policyholders. Contract and policy
terms are ­principally five years.
For purposes of preparing the consolidated financial state­ments, appropriate adjustments have been made to reflect
such items in accordance with U.S. generally accepted
account­ing principles.
The net equity of Secom Insurance at March 31, 2008 and2007 was ¥35,218 million ($352,180 thousand) and ¥30,553
million, respectively.
Net sales and operating revenue of Secom Insurance
include net realized investment gains and losses, including
the results on sales of securities, loss on other-thantemporary impairment of investment securities and impairment loss on long-lived assets. Net realized investment gains
for the years ended March 31, 2008, 2007 and 2006 were
¥1,922 million ($19,220 thousand), ¥3,612 million and¥3,290 million, respectively.

46

Secom Co., Ltd.

Annual Report 2008

14. Pension and Severance Costs
Employees of the parent company and its domestic­subsidiaries whose services are terminated are, under most­circumstances, eligible for lump-sum benefits and/or ­eligible
for pension benefits.
The parent company and certain domestic subsidiaries
have adopted a cash balance pension plan and a defined
contribution pension plan. Benefits under the cash balance
pension plan are calculated by the amount equal to a certain
percentage of employee’s annual income over their period ofservice, plus interest calculated by the 3-year average yieldfor 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 tothe 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 ratio of the accumulated amount in
the cash balance pension plan and the amount of contributions to the defined contribution pension plan changed to
70 percent and 30 percent, including portions funded in priorperiods. The contribution from the cash balance pension
plan to the defined contribution plan, which was equivalent
to the benefit transferred to the defined contribution pension
plan, was ¥4,257 million. In accordance with SFAS No. 88,“Employer’s Accounting for Settlements and Curtailmentsof Defined Benefit Pension and for Termination Benefits,”
the Company accounted for these transfers as a partial­settlement of benefit obligation and recognized settlement
losses of ¥2,490 million as “Settlement loss of benefit obligation on transfer to defined contribution pension plan” in the
consolidated statements of income for the year ended March
31, 2006.
On March 31, 2007, the Company adopted the recognitionand disclosure provisions of SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statement
No. 87, 88, 106, and 132(R).” SFAS No. 158 required theCompany to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected­benefit obligations) of its pension plans in the consolidatedbalance sheet at March 31, 2007, with a corresponding
adjustment to accumulated other comprehensive income(loss), net of tax. The adjustment to accumulated other comprehensive income (loss) at adoption represents the unrecognized actuarial loss and unrec­ognized prior service benefit,
both of which were previously netted against the plan’sfunded status in the consolidated balance sheets pursuant to
the provisions of SFAS No. 87. These amounts will be subsequently recognized as net periodic pension and severance
costs pursuant to the Company’s historical accounting policy
for amortizing such amounts. In addition, actuarial gains andlosses that arise in subsequent periods and are not recognized as net periodic pension and severance cost in the same
periods will be ­recognized as other comprehensive income(loss). Those amounts will be subsequently recognized as acomponent of net periodic pension and severance cost on thesame basis as the amounts recognized in accumulated other­comprehensive income (loss) at adoption of SFAS No. 158.
The incremental effects of adopting the provision of SFAS
No. 158 on the consolidated balance sheet at March 31, 2007
are as follows:
In millions of yen
		Before		After
		Application of		 Application of
		SFAS No. 158 Adjustments SFAS No. 158

Prepaid pension andseverance costs........................
Deferred income taxes(Other assets)...........................
Accrued pension andseverance costs........................
Minority interestsin subsidiaries..........................
Accumulated othercomprehensive
income (loss)............................

¥13,239¥2,578¥15,817

7,107(1,034)

6,073

17,914532

18,446

61,706(395)

61,311

13,114(1,681)

11,433

Net periodic pension and severance costs for the years
ended March 31, 2008, 2007 and 2006 were as follows:

The changes in benefit obligation, assets and funded­status were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31

		

2008

2007

Change in benefit obligation:
Benefit obligation
at beginning of year.................. ¥71,000 ¥57,975
Service cost..................................
4,511
3,998
Interest cost..................................
1,424
1,146
Actuarial loss................................
337
208
Benefits paid................................ (5,452) (3,495)
Acquisition...................................
— 11,168
Benefit obligation
at end of year............................. 71,820 71,000
Change in plan assets:
Fair value of plan assets
at beginning of year.................. 68,371 57,118
Actual return (loss) on
plan assets.................................. (7,792)
4,685
Employer contribution.................
5,509
4,818
Benefits paid................................ (3,552) (2,518)
Acquisition...................................
—
4,268
Fair value of plan assets
at end of year............................. 62,536 68,371
Funded status at the end of year.... (¥ 9,284) (¥ 2,629)

2008$710,000
45,11014,2403,370(54,520)—718,200

683,710(77,920)
55,090(35,520)—625,360($ 92,840)

Amounts recognized in the consolidated balance sheet atMarch 31, 2008 and 2007 consist of:		 In thousands ofIn millions of yen

U.S. dollars

		 In thousands ofYears ended
Year ended	March 31	March 31

Years ended
Year ended	March 31	March 31

		In millions of yen

2008

2007

2006

Net periodic pension andseverance costs:
Service cost....................... ¥4,511 ¥3,998 ¥3,629
Interest cost....................... 1,424 1,146 1,097
Expected return onplan assets....................... (1,808) (1,620) (1,550)
Amortization of priorservice benefit................. (1,715) (1,715) (1,715)
Recognized actuarialloss................................... 1,005 1,123
962
		 Net periodic pension
		 and severance costs... ¥3,417 ¥2,932 ¥2,423

U.S. dollars

2008$45,110
14,240(18,080)(17,150)
10,050$34,170

2008

2007

Prepaid pension andseverance costs.............................. ¥ 9,135 ¥ 15,817
Accrued pension andseverance costs.............................. (18,419) (18,446)
			 Net amount recognized....... (¥ 9,284) (¥ 2,629)

2008$ 91,350(184,190)($ 92,840)

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the year
ended March 31, 2008 were summarized as follows:		 In thousands ofIn millions of yen

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

Secom Co., Ltd.

¥ 9,937(1,005)
1,715¥10,647

Annual Report 2008

U.S. dollars$ 99,370(10,050)
17,150$106,470

47

CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2008 and 2007 consist of:

The weighted-average asset allocation of the Company’s­pension plans at March 31, 2008 and 2007 were as follows:		 In thousands of		March 31

Years ended
Year ended	March 31	March 31

Asset category:
Equity securities...................................................
Debt securities.....................................................
Call loan................................................................
Other.....................................................................
		 Total...................................................................

In millions of yen

		

2008

U.S. dollars

2008

2007

Actuarial loss.................................... ¥22,703 ¥13,771
Prior service benefit......................... (14,327) (16,042)
			 Net amount recognized....... ¥ 8,376 (¥ 2,271)$227,030(143,270)$ 83,760

The estimated prior service benefit and actuarial loss forthe defined benefit pension plans that will be amortized fromaccumulated other comprehensive income (loss) into net
periodic benefit cost over the next year are ¥1,715 million($17,150 thousand) and ¥868 million ($8,680 thousand),
respectively.
The accumulated benefit obligation for the pension planwas ¥66,079 million ($660,790 thousand) and ¥65,283 million
at March 31, 2008 and 2007, respectively.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans
with ­accumulated benefit obligation in excess of plan assets
were ¥27,588 million ($275,880 thousand), ¥24,775 million($247,750 thousand) and ¥9,335 million ($93,350 thousand),
respectively, at March 31, 2008, and ¥28,207 million, ¥25,401
million and ¥9,853 million, respectively, at March 31, 2007.
The Company uses March 31 as the measurement date forthe domestic pension plan.
Weighted-average assumptions used to determine
the benefit obligation at March 31, 2008 and 2007 wereas follows:		March 31

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

2008

2007

2.0%
2.7

2.0%
2.7

Weighted-average assumptions used to determine net pension and severance costs for the years ended March 31, 2008,2007 and 2006 were as follows:
Years ended	March 31

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

2008

2007

2006

2.0%
3.0
2.7

1.9%
3.0
2.7

2.0%
3.0
2.7

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 actual­historical returns of each plan asset category.

48

Secom Co., Ltd.

Annual Report 2008

2008

2007

26.6% 39.9%
20.9
26.9
11.6
6.0
40.9
27.2
100.0% 100.0%

The Company’s investment policy is designed to ensurethat sufficient plan assets are available to provide future­payments of pension benefits to the eligible plan participants. The policy does not use target allocations for the individual asset catego­ries. Plan assets are invested primarily inequity and debt securities, and mutual funds with the objective to minimize risk and achieve the expected rate of return.
The investment results are periodically monitored and asset
allocation is adjusted as necessary.
The Company expects to contribute ¥5,499 million ($54,990
thousand) to its domestic defined benefit plans in the year
­ending March 31, 2009.
The following benefit payments, which reflect future­services, as appropriate, are expected to be paid.
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009.....................................................
2010.....................................................
2011.....................................................
2012.....................................................
2013.....................................................
2014–2018............................................

¥ 5,582
4,567
4,528
4,581
4,900
23,140$ 55,820
45,67045,28045,81049,000231,400

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,
2008, 2007 and 2006 were ¥1,413 million ($14,130 thousand),¥1,392 million and ¥1,365 ­million, respectively.
15. Exchange Gains and Losses
Other expense for the year ended March 31, 2008 includes
net exchange losses of ¥826 million ($8,260 thousand). Other
income for the years ended March 31, 2007 and 2006
includes net exchange gains of ¥76 million and ¥664 million.

16. Income Taxes
Total income taxes for the years ended March 31, 2008,2007 and 2006 were allocated as follows:

The significant components of deferred tax assets andliabilities at March 31, 2008 and 2007 were as follows:­		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2006

2008

Net Income.......................... ¥47,106 ¥40,566 ¥37,904
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains(losses) on securities.... (8,189) (3,437) 3,672
Unrealized gains(losses) on derivative
instruments...................
(8)
(17)
79
Pension liability
adjustments................... (3,901)——
	Minimum pension
liability adjustments.....
—
(20)
(27)
Foreign currencytranslation
adjustments...................
(497)
476
971
Cumulative effect ofchange in accounting
principle-adoptionof EITF 06-2........................
(846)
—
—
Adjustments for initiallyapplying SFAS No. 158.....
—
897—
		 . .................................... ¥33,665 ¥38,465 ¥42,599

2008$471,060

2007(81,890)(80)(39,010)—(4,970)(8,460)—$336,650

The parent company and its domestic subsidiaries were
­subject to a corporate tax of 30 percent, an inhabitants tax ofapproximately 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, 2008, 2007 and 2006.
Reconciliations of the differences between income taxes­computed at statutory tax rates and consolidated income
taxes from continuing operations were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2008

2007

2006

Income taxes computed
at statutory tax rate of
40.5%................................. ¥44,658 ¥38,611 ¥36,340
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions........................ 2,309
1,552
1,366
Reversal of valuation
allowance due toutilization of operating
loss carryforwards........ (1,260) (1,629)(642)
Per capita tax...................
805
713
699
Other, net.........................
594
1,319
141
		 Consolidated
		 income taxes............. ¥47,106 ¥40,566 ¥37,904

2008$446,580

		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31

		

2008

2007

Deferred tax assets:
Deferred revenue........................ ¥13,601 ¥13,201
Operating loss carryforwards....
9,907
9,544
Adjustment of book value atthe date of acquisition—
		 Land and buildings.................
4,899
5,147
		 Other assets.............................
2,764
2,764
Accrued pension andseverance costs.........................
7,149
7,400
Property, plant andequipment................................
6,524
6,795
Accrued bonus............................
5,053
4,781
Vacation accrual..........................
3,427
2,287
Intangible assets.........................
2,634
1,955
Allowance for doubtful
accounts....................................
2,239
2,350
Unrealized losses on securities.
1,941—
Investment securities..................
1,641
2,980
Other............................................
9,014
8,915
		 Gross deferred tax assets....... 70,793 68,119
		 Less: Valuation allowance...... (17,068) (15,591)
		 Total deferred tax assets........ 53,725 52,528
Deferred tax liabilities:
Deferred installation costs........... (8,408) (8,483)
Investments in affiliatedcompanies................................... (7,496) (6,732)
Adjustment of book value atthe date of acquisition—
		 Land and buildings................... (5,180) (5,607)
		 Long-term receivables.............. (1,740) (1,752)
Unearned premiums andother insurance liabilities........... (3,324) (2,347)
Prepaid pension andseverance costs........................... (3,189) (5,918)
Unrealized gains on securities.....
— (6,825)
Other.............................................. (7,157) (5,457)
		 Gross deferred tax liabilities.... (36,494) (43,121)
			 Net deferred tax assets......... ¥17,231 ¥ 9,407

2008$136,010
99,07048,99027,64071,49065,24050,53034,27026,34022,39019,41016,41090,140707,930(170,680)
537,250(84,080)(74,960)(51,800)(17,400)(33,240)(31,890)—(71,570)(364,940)$172,310

The valuation allowance principally relates to deferred tax
assets of the subsidiaries with operating loss carryforwards,
for tax purposes, that are not expected to be realized. The netchange in the total valuation allowance for the years ended
March 31, 2008 and 2007 was an increase of ¥1,477 million($14,770 thousand) and ¥245 million, respectively.

23,090(12,600)
8,050
5,940
$471,060

Secom Co., Ltd.

Annual Report 2008

49

CONSOLIDATED FINANCIAL STATEMENTS

In assessing the realizability of deferred tax assets, theCompany management considers whether it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable
income during the periods in which those 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 of historicaltaxable 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, 2008 and 2007.
Net deferred tax assets at March 31, 2008 and 2007 arereflected in the accompanying consolidated balance sheets
under the following captions:
		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31

		

2008

2008

2007

Deferred income taxes(Current assets)............................. ¥17,395 ¥16,947
Deferred income taxes(Other assets)................................ 11,321
6,073
Other current liabilities...................
(1,410)(978)
Deferred income taxes(Liabilities)..................................... (10,075) (12,635)
		 Net deferred tax assets . ........ ¥17,231 ¥ 9,407$173,950
113,210(14,100)(100,750)$172,310

The Company has not recognized deferred tax liabilities of¥806 million ($8,060 thousand) for a portion of undistributed
earnings of foreign subsidiaries totaling ¥8,941 million($89,410 thousand) at March 31, 2008 because they are notexpected to be remitted in the foreseeable future.
At March 31, 2008, the operating loss carryforwards ofdomestic subsidiaries amounted to ¥20,503 million ($205,030
thousand) and are 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

2009......................................................
2010......................................................
2011......................................................
2012......................................................
2013......................................................
2014......................................................
2015......................................................
..............................................................

50

Secom Co., Ltd.

Annual Report 2008

¥

56
481
4,155
4,229
2,522
4,270
4,790
¥20,503

$

560
4,810
41,55042,29025,22042,70047,900$205,030

The operating loss carryforwards of overseas subsidiaries
at March 31, 2008 amounted to ¥7,041 million ($70,410 thousand), a part of which will begin to expire in the year ending
March 31, 2009.
The Company adopted the provisions of FIN No. 48 on
April 1, 2007. The adoption of FIN No. 48 did not have amaterial effect on the Company’s financial position andresults of operations.
The total amount of unrecognized tax benefits as of thedate of adoption of FIN No. 48 and that as of March 31, 2008
were insignificant. Also there were no movements of thegross amounts in unrealized tax benefits and the amounts ofinterest and penalties recognized due to the unrecognizedtax benefits during the year ended March 31, 2008.
Although the Company believes its estimates of unrecognized tax benefits are reasonable, uncertainties regarding thefinal 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 of March 31, 2008, the Company does
not expect significant changes to the unrecognized tax­benefits within the next twelve months.
The Company files tax returns in Japan and various foreign
jurisdictions. In Japan, the Company is no longer subject toregular income tax examinations by the tax authorities foryears before 2004. In other foreign tax jurisdictions, major
subsidiaries are no longer subject to income tax examinations
by tax authorities for years before 2007 with few exceptions.
17. Shareholders’ Equity(1) Retained Earnings
The Japanese Corporate Law, enforced on May 1, 2006,
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 the aggregate
amount of additional paid-in capital and legal reserve equals
25 percent of the ­common stock account.
The amount available for dividends under the Japanese­Corporate Law is based on the amount recorded in the­parent company’s nonconsolidated statutory financial statements in accordance with the accounting principle generally
accepted in Japan. Such amount was ¥363,068 million($3,630,680 thousand) at March 31, 2008.
Subsequent to March 31, 2008, the parent company’s Boardof Directors declared an annual cash dividend of ¥19,122
million ($191,220 thousand) to shareholders of record on
March 31, 2008. The dividend declared was approved at thegeneral shareholders’ meeting held on June 26, 2008.
Dividends are recorded in the period they are declared.
The Japanese Corporate Law provides that a company
can make dividends of surplus anytime with resolution of
the shareholders.

(2) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) for theyears ended March 31, 2008, 2007 and 2006 is as follows:
In millions of yen
Pre-tax
amountTax(expense) Net-of-tax
or benefit
amount

For the year ended March 31, 2008:
Unrealized 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 holding 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)
For the year ended March 31, 2007:
Unrealized gains on securities—
		 Unrealized holding gains
		 or losses arising during
		 the period..................................... (¥ 2,924)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income.......................... (3,539)
Unrealized losses on derivative
instruments—
		 Unrealized holding gains
		 or losses arising during
		 the year.........................................
(132)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income..........................
32
	Minimum pension
liability adjustments........................
(41)
Foreign currencytranslation adjustments...................
2,669
			 Other comprehensive
			 income (loss)............................ (¥ 3,935)¥1,362 (¥ 1,562)

2,075(1,464)

19

(113)

(2)

30

20

(21)

(476)

2,193

¥2,998 (¥937)

In millions of yen
Pre-tax
amountTax(expense) Net-of-tax
or benefit
amount

For the year ended March 31, 2006:
Unrealized gains on securities—
		 Unrealized holding gains
		 or losses arising during
		 the period...................................... ¥14,660 (¥5,764) ¥ 8,896
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income........................... (5,448)
2,092(3,356)
Unrealized gains on derivative
instruments—
		 Unrealized holding gains
		 or losses arising during
		 the year..........................................
163
(66)
97
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income...........................
31
(13)
18
	Minimum pension
liability adjustments.........................
(57)
27
(30)
Foreign currencytranslation adjustments.................... 7,317
(971)
6,346
			 Other comprehensive
			 income (loss)............................. ¥16,666 (¥4,695) ¥11,971
In thousands of U.S. dollars
Pre-tax
amountTax(expense) Net-of-tax
or benefit
amount

For the year ended March 31, 2008:
Unrealized losses on securities—
		 Unrealized holding gains
		 or losses arising during
		 the period................................. ($189,140) $ 78,800 ($110,340)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income......................
(5,130)3,090(2,040)
Unrealized losses on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year............
(610)
70
(540)
		 Less: Reclassification
		 Less: adjustment for gains
		 Less: or losses included in		 Less: net income......................
120
10
130
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period......... (92,090) 36,450 (55,640)
		 Less: Reclassification		adjustment for gains
		or losses realized		in net income..................
(6,900)2,560(4,340)Foreign currencytranslation adjustments............... (26,840)
4,970 (21,870)
			 Other comprehensive
			 income (loss)........................ ($320,590) $125,950 ($194,640)

Secom Co., Ltd.

Annual Report 2008

51

CONSOLIDATED FINANCIAL STATEMENTS

18. Research and Development Expenses
Research and development expenses included in selling,
general and administrative expenses for the years ended
March 31, 2008, 2007 and 2006 were ¥5,792 million ($57,920
thousand), ¥5,875 million and ¥4,061 million, respectively.
19. Lessee
The Company leases certain office space, employee
residen­tial facilities, computer and transportation equipment.
Some leased buildings and computer and transportationequipment are held under capital leases. The other leases areclassified as ­operating leases.
On April 23, 1996, the Company entered into a long-termlease agreement for a building and land in Mitaka, Tokyo.
The lease agreement extends for 30 years beginning May
1, 1996. For financial reporting purposes, the portion of thelease relating to the building has been classified as a capitallease; accordingly, an asset of approximately ¥5,086 million($50,860 thousand) has been recorded in the building andimprovements account. The portion of the lease relating to
the land has been classified as an operating lease. The future
minimum lease payments for the site at March 31, 2008 were
¥5,920 ­million ($59,200 thousand).
A summary of leased assets under capital leases at March
31, 2008 and 2007 is as follows:		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31

		

Buildings and improvements........
Machinery, equipment
and automobiles...........................
Other intangible assets..................
Accumulated depreciation.............
		 . ................................................

2007

2008

¥ 5,208 ¥ 5,208

2008$ 52,080

15,672 16,531
791
723(10,814) (10,488)¥10,857 ¥11,974

156,720
7,910(108,140)$108,570

Depreciation expenses under capital leases for the years
ended March 31, 2008, 2007 and 2006 were ¥4,089 million($40,890 thousand), ¥3,704 million and ¥3,576 million,­respectively.

52

Secom Co., Ltd.

Annual Report 2008

The following is a schedule by year of future minimum
lease payments under capital leases together with the present
value of the net minimum lease payments at March 31, 2008:
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009........................................................
2010........................................................
2011........................................................
2012........................................................
2013........................................................
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........................................

¥ 3,675
2,727
1,822
1,171
640
4,524
14,5592,649$ 36,750
27,27018,22011,7106,400
45,240145,590
26,49011,910
3,282

119,100
32,820¥ 8,628$ 86,280

Rental expenses under operating leases for the years
ended March 31, 2008, 2007 and 2006 were ¥15,912 million($159,120 thousand), ¥15,771 million and ¥15,415 million,
respectively.
A significant portion of such rentals relates to cancelable
short-term leases for office space and employee residential
facilities, many of which are renewed upon expiration.
On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The
lease agreement extends for 20 years beginning December 8,
2000. For financial reporting purposes, the lease has beenclassified as an operating lease. Based on the agreement,
annual lease payments for the site are approximately ¥1,339
million ($13,390 thousand) over a 20-year period.
The future minimum lease payments required underoperat­ing leases that have initial or remaining non-­cancelable lease terms in excess of one year at March 31,
2008 are as follows:		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009........................................................
2010........................................................
2011........................................................
2012........................................................
2013........................................................
Thereafter...............................................
Total future minimum lease
payments..........................................

¥ 2,504
2,329
2,255
2,233
2,219
20,908$ 25,040
23,29022,55022,33022,190209,080¥32,448$324,48020. Lessor
The Company’s leasing operations consist principally ofleasing of security equipment and real estate for office andmedical 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. The otherleases are ­classified as o
­ perating leases.
A summary of lease receivables under sales-type anddirect-financing leases at March 31, 2008 and 2007 is
as follows:		 In thousands ofIn millions of yen

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

2008

2007

2008

¥48,206 ¥32,375(3,576) (2,034)$482,060(35,760)

3,480 2,161(13,069) (6,289)
35,041 26,213(7,820) (6,340)

34,800(130,690)
350,410(78,200)¥27,221 ¥19,873$272,210

The following is a schedule by year of future minimum
lease payments to be received under sales-type leases anddirect-financing leases at March 31, 2008:
		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009........................................................
2010........................................................
2011........................................................
2012........................................................
2013........................................................
Thereafter...............................................
Total future minimum lease
payments to be received.................

¥ 9,317
7,647
6,170
4,279
2,369
18,424$ 93,170
76,47061,70042,79023,690184,240¥48,206$482,060

A summary of investment in property on operating leases
and property held for lease at March 31, 2008 and 2007 is
as follows:		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31

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

2008

		In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2009........................................................
2010........................................................
2011........................................................
2012........................................................
2013........................................................
Thereafter...............................................
Total future minimum rentals...........

¥ 2,622
760
760
760
760
12,104¥17,766$ 26,220
7,600
7,600
7,600
7,600
121,040$177,660

U.S. dollars

	March 31	March 31

		The future minimum rentals on non-cancelable operatingleases at March 31, 2008 are as follows:

2007

2008

¥27,223 ¥25,686
26,955 26,299
775
775(7,634) (6,881)¥47,319 ¥45,879$272,230
269,550
7,750(76,340)$473,190

21. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of financial instruments in cases forwhich it is ­practicable.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits; Notes and Accounts Receivable, Trade; Due from Subscribers; Short-Term Receivables; Bank Loans; Notes andAccounts Payable, Trade; Other Payables; Deposits Received;and Accrued ­Payrolls
The carrying amounts approximate fair value because of
the short-term maturities of such instruments.
(2) Short-term Investments; Investment Securities
The fair values of short-term investments and investment
securities are principally based on quoted market price.
(3) Long-Term Receivables
The fair values of long-term receivables are based on thepresent value of future cash flows through estimated maturity, discounted using estimated market discount rates. The
carrying amount of long-term receivables approximatesfair value.
(4) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current­portion was estimated based on the discounted amounts offuture cash flows of each instrument at the Company’s current
incremental borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are
estimated by discounting future cash flows using the interest
rates currently being offered for similar contracts.
(6) Derivatives
The fair values of interest rate swaps and embedded derivatives are estimated using current market pricing models by
obtaining quotes from ­financial institutions.

Secom Co., Ltd.

Annual Report 2008

53

CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts and estimated fair values of thefinan­cial instruments excluding debt and equity securities
which are disclosed in Note 7 at March 31, 2008 and 2007 are
as follows:		

In millions of yen

		March 31
Carrying
amountNon-derivatives:
Liabilities—
		 Long-term debt
		 including current		 portion.......................... ¥53,244
		 Investment deposits
		 by policyholders........... 87,252
Derivatives:
Assets—		 Interest rate swaps.........
—
Liabilities—
		 Interest rate swaps.........
135
		 Embedded derivatives....
514

2008

2007

Estimated
fair value

Carrying Estimatedamount fair value¥53,344 ¥50,197¥50,134

89,37393,361

95,246

—

8

8

135
514

84
—

84
—

In thousands of U.S. dollars
	March 31
2008
Carrying Estimatedamount fair value

Non-derivatives:
Liabilities—
		 Long-term debt including current		 portion..................................................
		 Investment deposits
		 by policyholders...................................
Derivatives:
Assets—		 Interest rate swaps.................................
Liabilities—
		 Interest rate swaps.................................
		 Embedded derivatives............................

$532,440 $533,440
872,520 893,730
—

—

1,350
5,140

1,350
5,140

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

54

Secom Co., Ltd.

Annual Report 2008

22. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instrumentsin the normal course of business to reduce exposure tofluctuations in interest rate. The Company assesses interest
rate risk by con­tinu­ally monitoring changes in the exposureand 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 toderivative financial instru­ments, but it is not expected thatany counterparties will fail to meet their obligations, because
most of the counterparties are internationally recognizedfinancial 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
in interest 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 byentering into receive-floating, pay-fixed interest rate swaps
under which the Company receives floating interest rate
­proceeds and makes fixed interest rate payments, thereby­effectively creating fixed-rate debt.
(3) Cash Flow Hedge
The Company ­designates interest rate swap agreements
as cash flow hedges for variability of cash flows originatedfrom floating rate borrowings. The interest rate swap
­agreements mature at various dates through 2012. The­effective portion of changes in fair values of derivative­instruments designated as cash flow hedges of 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 immediately. The sum of the amount of the hedge
ineffectiveness and net gains or losses excluded from theassessment of hedge effectiveness is not material for theyears ended March 31, 2008, 2007 and 2006 as the criticalterms of most of the interest rate swap agreements matchthe terms of the hedged debt obligations. Approximately¥23 million ($230 thousand) of net derivative losses included
in other comprehensive income (loss), net of tax at March 31,
2008, will be reclassified into current income within 12
months from that date. At March 31, 2008 and 2007, thenotional principal amounts of interest rate swap agreements
designated as cash flow hedges were ¥21,111 million($211,110 thousand) and ¥23,052 million, respectively.
(4) Derivative Instruments Not Designated as Hedges
Certain subsidiaries enter into interest rate swap agreements to change the effective interest rates on debt securities
held as investments with the objective of increasing current
interest income. Certain subsidiaries hold embedded derivatives that must be separated from the host debt securities
and accounted for as derivative instruments, which are also
to increase investment income. Changes in fair value of theabove noted derivative financial instruments, which are not­designated as hedges, are reported in current income.
23. Commitments and Contingent Liabilities
The Company has commitments outstanding at March
31, 2008 for the ­purchase of property, plant and equipment
approximated ¥10,843 million ($108,430 thousand).
The Company provides guarantees to third parties mainlywith respect to bank loans extended to its affiliated companies and other entities. Such guarantees are provided toenhance the credit standing of the affiliated companies andother entities. For each guarantee provided, the Company
would have to per­form under the guarantee, if the affiliatedcompanies and other entities default on a payment within
the guaranteed period of one to five years. The maximum
amount of undiscounted pay­ments the Company would haveto make in the event of default amounts to ¥3,975 million($39,750 thousand) at March 31, 2008. The carrying amountsof the liabilities recognized for the Company’s obligations
under these ­guarantees at March 31, 2008 and 2007 weredeemed insignificant.
In July 2004, Fujitsu Ltd. filed a lawsuit against Secom
Insurance in the Tokyo District Court, claiming compensation for costs related to a systems development order in
the amount of ¥2,500 million ($25,000 thousand). Secom
Insurance is not only contesting this lawsuit on the grounds
that it is without merit, but has also filed a countersuit
claiming damages in the amount of ¥1,000 million ($10,000
thousand), which is ­pending at March 31, 2008.

PASCO filed a lawsuit against Sumitomo Mitsui Banking
Corporation (“SMBC”) for obtaining a confirmation judgmentto the effect that it does not owe an obligation in the amountof ¥2,010 million ($20,100 thousand) to SMBC with theTokyo District Court on October 31, 2005. SMBC alleged thatit made a loan to a third party and acquired from the third
party its claim against PASCO for an alleged sale of equipment to PASCO as a collateral for the loan, and demanded
PASCO to pay such claim to SMBC. However, upon carefully
investigating the case with counsel, the Company believes
that the alleged transactions were null and void, and theCompany’s pleading should be admitted. Furthermore, on
December 5, 2005, SMBC brought a cross action against
PASCO in relation to a demand for payment of a transferred
receivable. Subsequently, both actions were consolidated
according to a court procedure. The existence of the debt in
the above-mentioned sum is still being disputed in court at
March 31, 2008.
24. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2008

2007

2006

Cash paid during theyear for:
Interest.............................. ¥ 2,082 ¥ 1,865 ¥ 1,873
Income taxes.................... 43,067 38,360 28,959
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases....... ¥ 2,668 5,395 2,253

Secom Co., Ltd.

Annual Report 2008

2008

$ 20,820
430,670$ 26,680

55

CONSOLIDATED FINANCIAL STATEMENTS

25. Segment Information
The Company has applied SFAS No. 131, “Disclosuresabout Segments of an Enter­prise and Related Information,”
which requires disclosure of financial and descriptive information about the Company’s reportable operating segments.
The ­operating segments reported below are the segmentsof the Company for which separate financial information isavailable and for which ­operating profit/loss amounts areevaluated regu­larly by ­management in deciding how toallocate resources and assess performance.
The Company has six reportable business segments:
security services, fire protection services, medical services,
insurance services, geographic information services, andinformation and communication related and other services.
From December 2006, the Company newly established abusiness segment, the fire protection services, due to theacquisition of Nohmi Bosai group.
The security services segment provides various types ofsecu­rity services by utilizing the Company’s unique security
systems and manufacturing and selling security equipment.
The fire protection services segment provides various typesof fire protection equipment, such as automatic fire alarmand fire extinguishing and other fire protection systems
for office buildings, plants, tunnels, ships, residences andcultural monuments. The medical ser­vices segment provides
intravenous solutions to patients at home, home-based
nursing care services, medical data trans­mission services byutilizing the Company’s network and leas­ing of real estate
for medical institutions. Also the VIEs to which the Company
is primary beneficiary manage hospitals and healthcare-related institutions. The insurance services segment
represents non-life insurance-related underwriting businessin the Japanese market. The geographic information services
segment represents surveying and measuring services and
GIS services. The information and communication related
and other services ­segment represents the Company’s
network business, development and sales of real estate andleasing of real estate, and management of hotel business.
Corporate expenses consist principally of general and­administrative expenses of the planning, personnel andadmin­istrative departments of the parent company andadministrative ­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 whenused jointly. Corporate assets, which are held by the parent
company and the foreign holding company for general andadministra­tive facilities, ­consist principally of cash and cash
equivalents, short­-term investments, investment securities,
land, buildings, machinery and equipment.

56

Secom Co., Ltd.

Annual Report 2008

Information by business and geographic segments for theyears ended March 31, 2008, 2007 and 2006 is as follows:(1) Business Segment Information
		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2008

2007

2006

Net sales andoperating revenue:
Security services—		 Customers.................. ¥435,306 ¥415,410 ¥400,044
		 Intersegment..............
1,375
1,491
1,317
			 .................................. 436,681
416,901
401,361
Fire protection
services—
		 Customers.................. 82,572
27,448—
		 Intersegment..............
4,046
944
—
			 .................................. 86,618
28,392—
	Medical services—		 Customers.................. 50,741
45,852
39,215
		 Intersegment..............
127
233
220
			 .................................. 50,868
46,08539,435
Insurance services—		 Customers.................. 33,229
31,97829,537
		 Intersegment..............
2,894
2,702
2,496
			 .................................. 36,123
34,68032,033
Geographic
information
services—
		 Customers.................. 39,376
36,43835,271
		 Intersegment..............
321
138
113
			 .................................. 39,697
36,57635,384
Information andcommunication
related and otherservices—
		 Customers.................. 65,471
79,55276,459
		 Intersegment..............
8,700
9,096
6,406
			 .................................. 74,171
88,64882,865
Total............................... 724,158
651,282
591,078
Eliminations.................. (17,463)(14,604)(10,552)
		 Total net sales and		 operating revenue.... ¥706,695 ¥636,678 ¥580,526

2008$4,353,060
13,7504,366,810
825,720
40,460866,180
507,410
1,270
508,680
332,290
28,940361,230

393,760
3,210
396,970

654,71087,000741,710
7,241,580(174,630)$7,066,950

		 In thousands of		 In thousands ofYears ended
Year ended	March 31	March 31

Years ended
Year ended	March 31	March 31

In millions of yen

2008

2007

Operating income (loss):
Security services......... ¥103,137 ¥ 96,162
Fire protection
services......................
4,948
1,815
	Medical services.........
(1,083)(2,914)
Insurance services......
3,766
3,752
Geographic
information
services......................
1,439
394
Information andcommunication
related and otherservices......................
5,391
7,335
Total............................. 117,598
106,544
Corporate expenses
and eliminations.......
(11,970)(12,126)
Operating income....... ¥105,628 ¥ 94,418
Other income..............
13,011
8,437
Other expenses...........
(8,376)(7,519)
		 Income before		 income taxes.......... ¥110,263 ¥ 95,336

2006

U.S. dollars

2008¥86,660$1,031,370—(1,321)
5,061

49,480(10,830)
37,660900

14,3905,643
96,94353,9101,175,980(15,050)¥81,893
15,936(8,101)(119,700)$1,056,280
130,110(83,760)¥89,728$1,102,630

		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31
2008

2007

2006

Assets:Security services......... ¥ 472,071 ¥ 467,071 ¥ 438,989
Fire protection
services......................
80,777
77,850—	Medical services......... 119,251
105,158
102,838
Insurance services...... 188,538
196,798
284,911
Geographic
information
services......................
58,03855,12455,448
Information andcommunication
related andother services............ 195,284
178,532
145,757
Total............................. 1,113,959 1,080,533 1,027,943
Corporate items.......... 104,752
121,817
159,210Investments
in and loans
to affiliatedcompanies.................
46,814
38,832
38,075
		 Total assets............... ¥1,265,525 ¥1,241,182 ¥1,225,228

In millions of yen

2008$ 4,720,710
807,770
1,192,510
1,885,380
580,380

1,952,840
11,139,590
1,047,520

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

U.S. dollars

2008

2007

2006

2008

¥47,191¥49,168¥44,942$471,910

1,171
3,816
1,225

326
3,202
1,206

—
1,629
1,143

11,71038,16012,250

1,666

1,631

1,494

16,6602,758
57,827367

2,414
57,947301

2,690
51,898441

27,580578,270
3,670¥58,194¥58,248¥52,339$581,940¥33,192¥33,306¥29,351$331,920

1,556
4,674
8

364
5,985
49

—
8,474
1,733

15,56046,740
80

1,450

1,882

436

14,5005,880
46,76063

6,163
47,74912

7,448
47,442120

58,800467,600
630¥46,823¥47,761¥47,562$468,230

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 formore than 10 percent of total revenues.

468,140$12,655,250

Secom Co., Ltd.

Annual Report 2008

57

CONSOLIDATED FINANCIAL STATEMENTS

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 segmentby the Company’s management.
		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2008

2007

2006

Electronic security
services...................... ¥296,167 ¥285,858 ¥277,892
Other security
services:
Static guard
services..................
46,64842,144
41,480
Armored car
services..................
19,547
20,30819,369Merchandise andother ..........................
72,944
67,10061,303
Total security
services.................. ¥435,306 ¥415,410 ¥400,044

2008$2,961,670

466,480
195,470
729,440$4,353,060(2) Geographic Segment Information
Net sales and operating revenue attributed to countries
based on location of customers and long-lived assets for theyears ended March 31, 2008, 2007 and 2006 were as follows:		 In thousands ofIn millions of yen

U.S. dollars

Years ended
Year ended	March 31	March 31
2006

2008

Net sales andoperating revenue:
Japan....................... ¥684,909 ¥620,435 ¥564,803
Other........................
21,786
16,243
15,723
		 Total...................... ¥706,695 ¥636,678 ¥580,526

2008$6,849,090
217,860$7,066,950

2007

		 In thousands ofIn millions of yen

U.S. dollars

	March 31	March 31
2006

2008

Long-lived assets:
Japan...................... ¥345,318 ¥347,546 ¥330,752
Other.......................
6,185
5,023
5,609
		 Total..................... ¥351,503 ¥352,569 ¥336,361

2008$3,453,180
61,850$3,515,030

2007

There are no individually material countries with respect to
net sales and operating revenue and long-lived assets
included in other areas.

58

Secom Co., Ltd.

Annual Report 2008

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 as of March 31, 2008
and 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of theyears in the three-year period ended March 31, 2008, all expressed in Japanese yen. These consolidated financial statements
are the responsibility of the Company’s management. 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. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate 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, ­evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our 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, 2008 and 2007, and the results of their operations and their cash
flows for each of the years in the three-year period ended March 31, 2008, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 2 of the notes to the consolidated financial statements, SECOM CO., LTD. and subsidiaries changed
their method of accounting for conditional asset retirement obligations in the year ended March 31, 2006.
The accompanying consolidated financial statements as of and for the year ended March 31, 2008 have been translated
into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, theconsolidated financial statements expressed in Japanese yen have been translated into United States dollars on the basis set
forth in Note 3 of the notes to the consolidated financial statements.

Tokyo, Japan
June 26, 2008

Secom Co., Ltd.

Annual Report 2008

59

OTHER FINANCIAL DATACONTENTS
Summary of Selected Financial Data........................................................................ 61
Common Stock Data......................................................................................................... 63

60

Secom Co., Ltd.

Annual Report 2008

SUMMARY OF SELECTED FINANCIAL DATASECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2008

2007

2006

2005

2004

2003

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue................................................... ¥706,695 ¥636,678 ¥580,526 ¥552,354 ¥517,435 ¥497,691
400,044415,410382,360
367,482
Security services:......................................................................... 435,306
352,985
61.6%
68.9%
65.3%
69.2%
71.0%
				 As a percentage of net sales and operating revenue....
70.9%
296,167
277,892
285,858
271,872
263,900
		 Electronic security services—
257,075
41.9
47.9
44.9
49.2
51.0
				 As a percentage of net sales and operating revenue....
51.6
		 Other security services—
41,48042,14438,30237,537
			 Static guard services............................................................ 46,648
35,908
6.6
7.1
6.6
6.9
7.2
				 As a percentage of net sales and operating revenue....
7.2
19,36920,30818,462
18,618
			 Armored car services........................................................... 19,547
17,261
2.8
3.3
3.2
3.4
3.6
				 As a percentage of net sales and operating revenue....
3.5
60,84962,452
56,76456,155					 Subtotal.......................................................................... 66,195
53,16961,303
67,10053,72447,427
		Merchandise and other........................................................... 72,944
42,741
10.3
10.6
10.6
9.7
9.2
				 As a percentage of net sales and operating revenue....
8.6—
27,448——Fire protection services............................................................... 82,572
—
11.7
—
4.3
—
—
				 As a percentage of net sales and operating revenue....
—39,21545,852
34,68821,147
	Medical services.......................................................................... 50,741
19,637
7.2
6.7
7.2
6.3
4.1
				 As a percentage of net sales and operating revenue....
3.9
29,537
31,97826,46523,536
Insurance services....................................................................... 33,229
15,234
4.7
5.1
5.0
4.8
4.5
				 As a percentage of net sales and operating revenue....
3.1
35,27136,43834,91532,346
Geographic information services............................................... 39,376
39,525
5.6
6.1
5.7
6.3
6.3
				 As a percentage of net sales and operating revenue....
8.0
Information and communication related
76,45979,55273,92672,924and other services..................................................................... 65,471
70,310
9.2
13.2
12.5
13.4
14.1
				 As a percentage of net sales and operating revenue....
14.1
Net income, cash dividends and shareholders’ equity
Net income....................................................................................... ¥ 61,756
Cash dividends (paid)(2)................................................................... 17,998
Shareholders’ equity....................................................................... 574,554
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
		 Bank loans................................................................................
		 Current portion of long-term debt..........................................
		 Convertible bonds....................................................................
		 Straight bonds..........................................................................
		 Other long-term debt...............................................................
			 Total debt...............................................................................
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)........................................

¥ 55,889
13,499551,732¥ 50,331
11,251
508,696¥ 52,133
10,127457,837¥ 23,479
9,003
415,852¥ 30,275
9,330
372,518

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

17.7
2.1
—
5.2
9.2
34.2
65.8
100.0
2.0
5.6

20.0
3.3
0.0
5.2
11.4
39.9
60.1
100.0
2.6
8.1

8.2
2.3

9.1
2.5

9.0
2.7

9.1
2.6

10.1
2.8

10.3
3.0

63.8
2.81
53.7

62.3
2.54
53.5

60.5
2.39
48.8

60.0
2.43
39.3

54.8
1.74
15.9

50.6
1.37
15.2

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

Secom Co., Ltd.

Annual Report 2008

61

SUMMARY OF SELECTED FINANCIAL DATA

2008

2007

2006

2005

2004

2003

Number of shares outstanding
Issued...................................................................... 233,288,717 233,288,717 233,288,717 233,288,717 233,281,133 233,281,133
8,323,599
8,318,900
8,301,997
8,266,043
8,228,652
8,200,245
Owned by the Company.......................................
Balance................................................................... 224,965,118 224,969,817 224,986,720 225,022,674 225,052,481 225,080,888
Per share information¥ 274.51¥ 248.42¥ 223.69¥ 231.66¥ 104.32¥ 132.87
Basic net income per share (in yen) (1) .................
80.00
60.00
50.00
45.00
40.00
40.00
Cash dividends paid per share (in yen) (2) . ..........
2,553.97
2,452.47
2,261.00
2,034.63
1,847.80
1,655.04
Shareholders’ equity per share (in yen) (3) . .........
448.19427.34396.31410.29294.56321.88Cash flow per share (in yen) (1) (e) . .........................
1.90
2.23
2.66
2.19
2.46
1.84
Price/Book value ratio............................................
17.63
22.02
26.91
19.25
43.52
22.88
Price/Earnings ratio...............................................
10.80
12.80
15.19
10.87
15.41
9.44
Price/Cash flow ratio..............................................
4,840
5,470
6,020
4,460
4,540
3,040
Stock price at year-end (in yen)............................
Notes: (a) Net income/Total assets(b) Net income/Shareholders’ equity(c) Including discontinued operations(d)		(Income before income taxes + Interest expense)/Interest expense(e) (Net income + Depreciation and amortization - Dividends approved) /Average number of shares outstanding during each period

62

Secom Co., Ltd.

Annual Report 2008

(1) Per share amounts are based on the average number of shares
outstanding during each period.
(2) Subsequent to March 31, 2008, cash dividends of ¥19,122 million(¥85.00 per share) were approved at the general shareholders‘meeting on June 26, 2008 (see Note 17 of the accompanying notes
to consolidated financial statements).
(3) Per share amounts are based on the number of shares outstandingat the end of each period, minus treasury stock.

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

Shareholder Information
Number of shareholders........................................
Common shares held by:
Financial institutions...........................................
Securities firms...................................................
Other corporations..............................................
Foreign investors................................................
Individuals and others........................................
		 Total..................................................................

2008

2007

2006

2005

2004

2003

28,51230,68319,807

21,327

21,72020,23033.84%
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%37.04%
2.19
4.29
37.22
19.26
100.00%46.14%
2.04
4.60
28.64
18.58
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2006
2007

2008

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

¥6,460
6,010
6,310
6,360
5,860
5,830
6,340
6,200

¥5,090
5,160
5,670
5,250
5,360
5,060
5,480
4,720

¥17,563.37
16,385.96
17,225.83
18,215.35
18,240.30
18,261.98
17,458.98
14,691.41¥14,218.60
14,437.24
15,725.94
16,642.25
17,028.41
15,273.68
14,837.66
11,787.51

Secom Co., Ltd.

Annual Report 2008

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, 2008, 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 2008