AUDITED FINANCIAL STATEMENTSCONTENTSCONSOLIDATED FINANCIAL STATEMENTS .................................................................. 38
CONSOLIDATED BALANCE SHEETS.......................................................................... 38
CONSOLIDATED STATEMENTS OF INCOME............................................................. 40
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY.......................................... 41
CONSOLIDATED STATEMENTS OF CASH FLOWS .................................................... 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................................. 43
INDEPENDENT AUDITOR’S REPORT............................................................................... 69

SECOM Annual Report 201237

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2012 and 2011

		In millions of yen

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

March 31

March 31

2011

2012

Current assets:
Cash and Cash equivalents (Notes 5 and 23)................................................................ ¥ 213,040 ¥ 193,942
Time deposits (Note 13)...............................................................................................
7,731
17,185
Cash deposits (Note 6).................................................................................................
54,01156,546
Short-term investments (Notes 7 and 23)......................................................................
17,294
6,393
Notes and accounts receivable, trade............................................................................
99,73886,511
Due from subscribers....................................................................................................
34,41635,886Inventories (Note 8)......................................................................................................
67,094
81,769
Short-term receivables (Notes 9, 13 and 21).................................................................
14,655
14,063
Allowance for doubtful accounts (Note 9)....................................................................
(1,335)(1,855)
Deferred insurance acquisition costs (Note 14)..............................................................
5,132
5,456
Deferred income taxes (Note 17)..................................................................................
12,853
15,438Other current assets.....................................................................................................
10,971
10,042
			Total current assets................................................................................................
535,600
521,376$ 2,598,049
94,280658,671
210,902
1,216,317
419,707818,220
178,720(16,280)
62,585
156,744
133,793
6,531,708

ASSETS

Investments and long-term receivables:
Investment securities (Notes 2 (7), 7, 13 and 23)...........................................................
Investments in affiliated companies (Note 10)...............................................................
Long-term receivables (Notes 9, 13 and 21)..................................................................
Lease deposits..............................................................................................................
Other investments........................................................................................................
Allowance for doubtful accounts (Note 9)....................................................................
			

140,014
39,73941,831
13,281
8,262(7,449)235,678

148,990
38,97842,672
13,636
9,842(7,858)
246,260

1,707,488
484,622510,134
161,963
100,756(90,841)2,874,122

Property, plant and equipment (Notes 11, 13, 20 and 21):Land.............................................................................................................................
Buildings and improvements.........................................................................................
Security equipment and control stations.......................................................................
Machinery, equipment and automobiles.......................................................................
Construction in progress..............................................................................................
			Accumulated depreciation............................................................................................
			103,127
193,245
273,645
87,1905,054
662,261(351,413)
310,848

96,420
193,445
264,693
84,374
2,913
641,845(339,330)
302,515

1,257,646
2,356,646
3,337,134
1,063,293
61,634
8,076,353(4,285,524)
3,790,829

Other assets:
Deferred charges (Note 2 (12)).....................................................................................
43,127
Goodwill (Note 12).......................................................................................................
14,235
Other intangible assets (Notes 12 and 13)....................................................................
22,305Prepaid pension and severance costs (Note 15).............................................................
7,846
Deferred Income taxes (Note 17)..................................................................................
10,185
			
97,698
			Total assets............................................................................................................ ¥1,179,824

45,634
14,45022,5936,500
11,824
101,001¥1,171,152

525,939
173,598
272,012
95,683
124,207
1,191,439$14,388,098

See accompanying notes to consolidated financial statements.

38

2012

SECOM Annual Report 2012		In millions of yen

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

March 31

March 31

2011

2012

LIABILITIES AND EQUITY

2012

Current liabilities:
Bank loans (Notes 6 and 13)......................................................................................... ¥ 40,762 ¥ 47,698
Current portion of long-term debt (Notes 13, 20 and 22).............................................
22,053
11,918Notes and accounts payable, trade...............................................................................
33,163
27,882Other payables.............................................................................................................
29,121
24,348Deposits received (Note 6)............................................................................................
26,877
24,737
Deferred revenue.........................................................................................................
40,27140,899Accrued income taxes..................................................................................................
15,46820,358
Accrued payrolls...........................................................................................................
26,272
24,691Other current liabilities (Notes 17, 22, 23, and 24)........................................................
22,27420,065
			Total current liabilities............................................................................................
256,261
242,596
Long-term debt (Notes 13, 20 and 22).............................................................................
Guarantee deposits received ...........................................................................................
Accured pension and severance costs (Note 15)...............................................................
Deferred revenue.............................................................................................................
Unearned premiums and other insurance liabilities (Note 14)...........................................
Investment deposits by policyholders (Notes 14 and 22)...................................................
Deferred income taxes (Note 17)......................................................................................
Other liabilities (Notes 22, 23, and 24).............................................................................
			Total liabilities........................................................................................................

37,02336,337
21,421
17,32583,99830,755
9,115
9,956
502,191

53,02036,202
21,16918,246
83,61541,643
9,827
10,025516,343$

497,098
268,939
404,427
355,134
327,768
491,110
188,634
320,390271,634
3,125,134
451,500
443,134
261,232
211,280
1,024,366
375,061
111,159
121,415
6,124,281

Commitments and contingent liabilities (Note 25)

Equity:SECOM CO.,LTD. shareholders’ equity (Note 18):
Common stock
		Authorized—900,000,000 shares		 issued 233,288,717 shares in 2012 and 2011.........................................................
66,37866,378Additional paid-in capital..............................................................................................
74,56175,555
Legal reserve................................................................................................................
10,175
10,104Retained earnings........................................................................................................
572,730
551,187
Accumulated other comprehensive income (loss):		 Unrealized gains on securities (Note 7)......................................................................
4,646
2,131
		 Unrealized losses on derivative instruments (Note 24)...............................................
—(6)
		 Pension liability adjustments (Note 15)......................................................................
(13,522)(11,909)
		 Foreign currency translation adjustments..................................................................
(28,453)(25,021)
			
(37,329)(34,805)
Common stock in treasury, at cost:
15,017,691 shares in 2012 and 15,258,553 shares in 2011.......................................
(73,660)(74,924)
			 Total SECOM CO., LTD. shareholders’ equity.........................................................
612,855
593,495
Noncontrolling interests...................................................................................................
64,77861,314
			Total equity...........................................................................................................
677,633
654,809
			 Total liabilities and equity...................................................................................... ¥1,179,824 ¥1,171,152

809,488909,280
124,085
6,984,512
56,659—(164,902)(346,988)(455,231)(898,293)
7,473,841
789,976
8,263,817$14,388,098

SECOM Annual Report 201239

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2012
		In millions of yen

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

Years ended March 31

Year ended March 31

2012

2010

2012

Net sales and operating revenue (Notes 14 and 23)........................................... ¥772,482 ¥751,868 ¥670,644
Costs and expenses:
Cost of sales (Note 8).......................................................................................... 536,268 498,957 433,139
Selling, general and administrative expense (Notes 2 (18) and 19)....................... 146,663 147,667 137,720
Loss on settlement of pre-existing relationship (Note 2 (2))..................................
—
3,212
—
Impairment loss on long-lived assets (Note 11)....................................................
8,133
3
292
Impairment loss on goodwill (Note 12)................................................................
1,218
—
245
Loss on sales and disposal of fixed assets, net......................................................
1,374
1,597
2,070

$9,420,512
6,539,853
1,788,573—
99,183
14,854
16,756693,656

651,436

573,466

8,459,219

				Operating income.....................................................................................

78,826

100,432

97,178961,293

Other income:Interest and dividends.........................................................................................
Reversal of reserve for litigation loss (Note 25).....................................................
Gain on sales of securities, net (Notes 7 and 10)..................................................
Gain on private equity investments (Note 23)......................................................
Other (Note 16)...................................................................................................

952
—
29
3,491
3,055

928
—
139
6,014
4,789

1,317
781
—
—
3,254

11,610—354
42,57337,256

7,527

11,8705,352

91,793

1,597
—
952
—
—
2,684

1,683
—
84
—
—
2,691

1,799
7
1,764
1,367
1,254
1,663

19,476—
11,610——32,732Other expenses:
Interest................................................................................................................
Loss on sales of securities, net (Note 7)................................................................
Loss on other-than-temporary impairment of investment securities (Note 23)......
Loss on private equity investments (Note 23).......................................................
Losses related to spectrum reallocation (Note 25)................................................
Other (Notes 16, 24 and 25)................................................................................

5,233

4,458

7,854

63,818				 Income from continuing operations before income taxes and				 equity in net income of affliated companies............................................

81,120107,844

94,676989,268

Income taxes (Note 17):
Current...............................................................................................................
Deferred..............................................................................................................

33,538
4,664

38,7654,512

38,7496,882

409,000
56,87838,202

43,27745,631

465,878				 Income from continuing operations before equity				 in net income of affiliated companies.....................................................
Equity in net income of affliated companies.....................................................

42,9184,880

64,567
5,028

49,0452,620

523,390
59,512				 Income from continuing operations..........................................................
Income from discontinued operations, net of tax (Note 26).............................

47,798—69,595—51,665
1,354

582,902—

				Net income...............................................................................................
Less: Net income attributable to noncontrolling interests...............................

47,798(6,561)

69,595(6,930)53,019(6,030)582,902(80,012)				 Net income attributable to SECOM CO., LTD............................................ ¥ 41,237 ¥ 62,665 ¥ 46,989$ 502,890

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

Years ended March 31

Year ended March 31

2012

2011

2010

2012

Per share data (Note 2 (20)):
Income from continuing operations attributable to SECOM CO., LTD...................
Income from discontinued operations attributable to SECOM CO., LTD...............
Net income attributable to SECOM CO., LTD.......................................................

¥188.97 ¥287.41——
188.97287.41¥209.416.10
215.51

$2.30
—
2.30

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

¥ 90.00 ¥ 85.00¥ 85.00$1.10

See accompanying notes to consolidated financial statements.

40

2011

SECOM Annual Report 2012

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2012
In millions of yen										Accumulated					 Number of		
Additional			other com					shares Common
paid-in
Legal
Retainedprehensive
					issuedstock
capitalreserveearnings income (loss)

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

Total

Balance, March 31, 2009 .................................................... 233,288,717 ¥66,378 ¥79,995 ¥10,036¥482,488(¥35,280) (¥74,896)¥528,721
Comprehensive income:Net income.......................................................................
————
46,989——46,989Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities..........................
—
—
—
—
—
9,200
—
9,200
		 Unrealized gains on derivative instruments...................
—
—
—
—
—
169
—
169
		 Pension liability adjustments........................................
—
—
—
—
—
1,167
—
1,167
		 Foreign currency translation adjustments.....................
—
—
—
—
—
996
—
996
Total comprehensive income.............................................
							58,521
Cash dividends paid to SECOM CO., LTD. shareholders..........
————(18,533)——(18,533)
Cash dividends paid to noncontrolling interests......................
—
—
—
—
—
—
—
—
Transfer to legal reserve.........................................................
—
—
—
17
(17)
—
—
—
Equity transactions with noncontrolling interests and other(Note 18).............................................................................
—
—
1,101
—
—
—
—
1,101
Gains and losses on disposal of treasury stock........................
—
—
(0)
—
—
—
—
(0)
Net changes in treasury stock.................................................
—
—
—
—
—
—
(11)
(11)

¥61,069¥589,790

6,030

53,019

211
47
372
212
6,872
—
(1,759)
—

9,411
216
1,539
1,208
65,393(18,533)(1,759)—(1,517)
—
—

(416)
(0)
(11)

Balance, March 31, 2010 .................................................... 233,288,717
66,37881,096
10,053510,927(23,748)(74,907)569,799
Cumulative effect adjustments resulting from adoption ofa new accounting standard on variable interest entities,
net of tax (Note 2 (2))..........................................................
————(3,821)——(3,821)
Comprehensive income:Net income.......................................................................
————
62,665——62,665
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding losses on securities.........................
—
—
—
—
—
(3,472)—(3,472)
		 Unrealized gains on derivative instruments...................
—
—
—
—
—
12
—
12
		 Pension liability adjustments........................................
—
—
—
—
—
(972)
—
(972)
		 Foreign currency translation adjustments.....................
—
—
—
—
—
(6,399)—(6,399)Total comprehensive income.............................................
							51,834
Cash dividends paid to SECOM CO., LTD. shareholders..........
————(18,533)——(18,533)
Cash dividends paid to noncontrolling interests......................
—
—
—
—
—
—
—
—
Transfer to legal reserve.........................................................
—
—
—
51
(51)
—
—
—
Equity transactions with noncontrolling interests and other(Note 18).............................................................................
——(5,541)——(226)—(5,767)
Gains and losses on disposal of treasury stock........................
—
—
(0)
—
—
—
—
(0)
Net changes in treasury stock.................................................
—
—
—
—
—
—
(17)
(17)

64,665

634,464—(3,821)

6,930

69,595

(61)
5
(640)
(381)
5,853
—
(1,822)—(3,533)17(1,612)(6,780)57,687(18,533)(1,822)—(7,382)——(13,149)(0)(17)

Balance, March 31, 2011 .................................................... 233,288,717
66,37875,555
10,104551,187(34,805)(74,924)
593,495
Comprehensive income:Net income.......................................................................
————
41,237——
41,237
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities..........................
—
—
—
—
—
2,515
—
2,515
		 Unrealized gains on derivative instruments...................
—
—
—
—
—
6
—
6
		 Pension liability adjustments........................................
—
—
—
—
—
(1,613)—(1,613)
		 Foreign currency translation adjustments.....................
—
—
—
—
—
(3,432)—(3,432)
Total comprehensive income.............................................
							38,713
Cash dividends paid to SECOM CO., LTD. shareholders..........
————(19,623)——(19,623)
Cash dividends paid to noncontrolling interests......................
—
—
—
—
—
—
—
—
Transfer to legal reserve.........................................................
—
—
—
71
(71)
—
—
—
Equity transactions with noncontrolling interests and other(Note 18).............................................................................
—
—
(642)
—
—
—
—
(642)
Gains and losses on disposal of treasury stock........................
—
—
(352)
—
—
—
—
(352)
Net changes in treasury stock (Note 18).................................
—
—
—
—
—
—
1,264
1,264

61,314

654,809

6,561

47,798

(29)
2
(340)
(264)
5,930
—
(1,851)—

2,486
8(1,953)(3,696)44,643(19,623)(1,851)
—

(615)
—
—

(1,257)
(352)
1,264

Balance, March 31, 2012 .................................................... 233,288,717¥64,778¥677,633¥66,378¥74,561¥10,175¥572,730(¥37,329) (¥73,660)¥612,855

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

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

Total

Balance, March 31, 2011........................................................................... $809,488 $921,402 $123,220 $6,721,793($424,451) ($913,707)$7,237,745
Comprehensive income:Net income.............................................................................................
———
502,890——502,890
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities................................................
————
30,672—30,672
		 Unrealized gains on derivative instruments.........................................
—
—
—
—
73
—
73
		 Pension liability adjustments..............................................................
————(19,671)—(19,671)		 Foreign currency translation adjustments...........................................
————(41,854)—(41,854)
Total comprehensive income................................................................... 							472,110
Cash dividends paid to SECOM CO., LTD. shareholders................................
———(239,306)——(239,306)
Cash dividends paid to noncontrolling interests............................................
—
—
—
—
—
—
—
Transfer to legal reserve...............................................................................
—
—
865
(865)
—
—
—
Equity transactions with noncontrolling interests and other (Note 18)..........
—(7,829)————(7,829)Gains and losses on disposal of treasury stock..............................................
—(4,293)————(4,293)
Net changes in treasury stock (Note 18).......................................................
—
—
—
—
—
15,414
15,414$747,732 $7,985,477

Balance, March 31, 2012 .......................................................................... $809,488 $909,280 $124,085 $6,984,512$789,976 $8,263,817($455,231) ($898,293)$7,473,841

80,012582,902(354)
24(4,146)(3,220)72,316—(22,573)—(7,499)——30,31897(23,817)(45,074)
544,426(239,306)(22,573)—(15,328)(4,293)
15,414

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201241

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2012
		In millions of yen

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

Years ended March 31

Year ended March 31

2012

2011

2010

Cash flows from operating activities:
Net income ........................................................................................................................... ¥ 47,798 ¥ 69,595 ¥ 53,019
Adjustments to reconcile net income to net cash provided by operating activities—
		 Depreciation and amortization, including amortization of deferred charges
58,11756,951
55,130		 (Notes 2 (11), 2 (12) and 12)............................................................................................
(3,268)(2,687)(3,723)
		 Accrual for pension and severance costs, less payments.....................................................
4,664
4,512
6,885
		 Deferred income taxes,including discontinued operations..................................................
1,374
1,597
2,070
		Loss on sales and disposal of fixed assets, net....................................................................
8,133
3
292
		Impairment loss on long-lived assets (Note 11)...................................................................
20,7231,482
1,285
		Write-down on real estate inventories (Note 8)..................................................................
(3,491)(6,014)
1,367
		(Gain) loss on private equity investments (Note 23)............................................................
—
—
(781)
		Reversal of reserve for litigation loss (Note 25)...................................................................
1,218
—
245
		Impairment loss on goodwill (Note 12)...............................................................................
(1,240)(1,658)(1,302)
		Gain on sales of securities, net (Notes 7,10 and 14)...........................................................
1,835
765
6,321
		Loss on other-than-temporary impairment of investment securities (Notes 14 and 23)........
(4,880)(5,028)(2,620)		Equity in net income of affiliated companies......................................................................
—
—
(777)
		Gain on sales of discontinued operations (Note 26)............................................................
—
3,212
—
		Loss on settlement of pre-existing relationship (Note 2 (2)).................................................
(799)(1,770)—		Payments for legal settlement (Note 25).............................................................................
				Changes in assets and liabilities, net of effects from acquisitions and disposals:..................
2,535(7,685)7,806
			(Increase) decrease in cash deposits...............................................................................
(12,306)(6,861)3,845
			(Increase) decrease in receivables and due from subscribers, net of allowances...............
(3,940)14,564(3,386)
			(Increase) decrease in inventories...................................................................................
(15,652)(15,097) (14,502)
			Increase in deferred charges..........................................................................................
10,030(182)(3,059)
			Increase (decrease) in notes and accounts payable.........................................................
2,123(4,236)(5,133)
			Increase (decrease) in deposits received..........................................................................
(1,332)(5,419)255
			Increase (decrease) in deferred revenue..........................................................................
(4,880)(1,231)
2,021
			Increase (decrease) in accrued income taxes...................................................................
161
1,367
2,541
			Increase in guarantee deposits received.........................................................................
383
9,148
5,598
			Increase in unearned premiums and other insurance liabilities........................................
4,906
7,297
3,292
			Other, net......................................................................................................................
112,625 116,689				 Net cash provided by operating activities................................................................... 112,212
Cash flows from investing activities:
9,230(9,665)
1,413(Increase) decrease in time deposits........................................................................................
179
780
1,765
Proceeds from sales of property, plant and equipment...........................................................
(53,496)(41,726) (38,283)
Payments for purchases of property, plant and equipment.....................................................
(5,887)(4,829)(7,231)
Payments for purchases of intangible assets...........................................................................
73,69337,18744,857
Proceeds from sales and redemptions of investment securities (Note 7)..................................
(66,283)(32,163) (24,585)
Payments for purchases of investment securities....................................................................
(4,357)(1,854)
3,776(Increase) decrease in short-term investments.........................................................................
—
—
5,185
Proceeds from sales in discontinued operations......................................................................
(1,275)(1,809)996
Acquisitions, net of cash acquired (Note 4).............................................................................
—
5,055
—
Proceeds from sales in investments in affiliated companies (Note 10).....................................
(1,680)164
250(Increase) decrease in short-term receivables ,net...................................................................
(1,741)(402)(5,014)
Payments for long-term receivables........................................................................................
4,322
1,965
6,043
Proceeds from long-term receivables......................................................................................
2,319
421
226
Other, net..............................................................................................................................
(44,976)(46,876) (10,602)
				Net cash used in investing activities...........................................................................
Cash flows from financing activities:
3,875
11,277
6,885
Proceeds from long-term debt...............................................................................................
(11,660)(11,597) (12,951)
Repayments of long-term debt..............................................................................................
(6,935)(312) (35,156)
Decrease in bank loans ,net...................................................................................................
(10,888)(20,583) (23,838)
Decrease in investment deposits by policyholders...................................................................
(19,623)(18,533) (18,533)
Dividends paid to SECOM CO., LTD. shareholders..................................................................
(1,851)(1,822)(1,759)Dividends paid to noncontrolling interests..............................................................................
Payments for acquisition of shares of consolidated subsidiaries from noncontrolling(466)(13,703)(399)
interest holders....................................................................................................................
(292)
(17)
(11)
Increase in treasury stock, net................................................................................................
124—
75
Other, net..............................................................................................................................
(47,716)(55,290) (85,687)
				Net cash used in financing activities...........................................................................
Cumulative effect adjustments resulting from adoption of a new accounting
—
3,905
—
standard on variable interest entities (Note 2 (2))...............................................................
(422)
(566)
351
Effect of exchange rate changes on cash and cash equivalents.........................................
19,098
13,79820,751
Net increase in cash and cash equivalents............................................................................
180,144 159,393
Cash and cash equivalents at beginning of year.................................................................. 193,942
Cash and cash equivalents at end of year............................................................................ ¥213,040 ¥193,942 ¥180,144
See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20122012

$ 582,902
708,744(39,854)
56,87816,75699,183
252,720(42,573)—
14,854(15,122)
22,378(59,512)——(9,744)30,915(150,073)(48,049)(190,878)
122,31725,890(16,244)(59,512)
1,963
4,671
59,8291,368,439
112,5612,183(652,390)(71,793)
898,695(808,329)(53,134)—(15,549)—(20,488)(21,232)
52,70728,281(548,488)
47,256(142,195)(84,573)(132,780)(239,306)(22,573)(5,683)(3,561)
1,513(581,902)—(5,146)
232,9032,365,146$2,598,049

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2012

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

In December 2009, the Financial Accounting Standards Board(“FASB”) issued Accounting Standards Update (“ASU”) No. 200917, “Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities,” which amends the AccountingStandards Codification (“ASC”) 810, “Consolidation.” Thisaccounting standard requires the reporting entity to consolidate avariable interest entity (“VIE”) as its primary beneficiary when it isdeemed to have a controlling financial interest in a VIE, meeting
both of the following characteristics:• The power to direct activities of a VIE that most significantly
impact the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentiallybe significant to the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.
This accounting standard is effective for fiscal years beginning
after November 15, 2009 and was adopted by the Company inthe fiscal year ended March 31, 2011. Due to the adoption of thisaccounting standard, certain organizations managing hospitals andhealth care-related institutions that were not consolidated prior to
March 31, 2010 were included in the scope of consolidation as ofApril 1, 2010. As a result, assets of ¥22,907 million and liabilities of¥26,728 million, after elimination of intercompany balances, were
included in the consolidated balance sheet at April 1, 2010. The
cumulative effect adjustments resulting from the adoption of thisaccounting standard decreased the beginning retained earnings forthe year ended March 31, 2011 by ¥3,821 million, net of tax. In
addition, the Company recognized ¥3,212 million as a loss on settlement of pre-existing relationship in the medical services segment,
related to the settlement of a lease contract between the Company
and an entity newly included in the scope of c­ onsolidation according
to the adoption of this accounting standard.
The Company provides investments, loans and guarantees to­organizations managing hospitals and health care-related institutions, to a company holding real estate, and to a PFI (Private FinanceInitiative) organization which was established to build, maintain andoperate correctional facilities. Certain of these organizations are
considered VIEs under ASC 810.
Total assets and liabilities held by VIEs of which the Company is
the primary beneficiary were ¥64,469 million ($786,207 thousand)and ¥71,268 million ($869,122 thousand), respectively, at March
31, 2012, and ¥67,860 million and ¥77,277 million, respectively, atMarch 31, 2011. Total assets and liabilities held by VIEs of which
the Company holds ­significant variable interests but is not the primary beneficiary were ¥33,735 million ($411,402 thousand) and¥34,908 million ($425,707 thousand), respectively, at March 31,
2012, and ¥31,642 million and ¥32,574 million, respectively, atMarch 31, 2011. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2012 and 2011 were ¥4,621 million ($56,354
thousand) and ¥4,568 million, ­respectively.
(3) Revenue Recognition
The Company generates revenue principally through sales of
security services, merchandise and software, and insurance services
under separate contractual arrangements. The Company recognizes
revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, title and risk ofloss have been transferred to the customer, the sales price is fixed
or determinable, and collectibility is probable.

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Consolidated Financial Statements

Revenue from security services is recognized over the contractual
period or, in the case of specific services, when such services are
rendered. Subscribers are generally requested to prepay a portion ofservice charges which are credited to deferred revenue and recognized in income ratably over the ­covered service period. Revenue
from the installation of security equipment used to provide on-line
centralized security ­services is deferred and recognized over thecontractual period of security services after completion of the installation. The related installation costs are also deferred and amortizedover the ­contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security service. The Company allocates revenue to eachelement based on its relative fair value if such ­element meets criteria for treatment as a ­separate unit of accounting as prescribed in
ASC 605, “Revenue Recognition.” Otherwise, revenue is deferred
until the undelivered ­elements are fulfilled as a single unit ofaccounting.
Revenue from sales of merchandise and software is r­ ecognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.
Revenue from long-term contracts for fire protection services andgeographic ­informa­tion services is principally recognized under thepercentage-of-­completion method.
Property and casualty insurance premiums are earned ­ratably over
the terms of the related insurance contracts. Unearned ­premiums
are earned ratably over the terms of the unexpired portion ofpremiums written.
Revenue from sales of real estate is recognized when the t­ itle of
the real estate is transferred to the customer.
Revenue from sales of equipment under sales-type leases isrecognized at the inception of the lease. Unearned income onsales-type leases and direct-financing leases is recognized over thelife of each respective lease using the interest method. Leases not
qualifying as sales-type leases or direct-financing leases areaccounted for as operating leases and the related ­revenue is­recognized over the lease term.
Taxes collected from customers and remitted to ­governmental
authorities on revenue-producing transactions are accounted for on
a net basis and therefore are excluded from net sales and operating
revenue in the consolidated ­statements of income.
(4) Foreign Currency Translation
All asset and liability accounts of foreign subsidiaries and affiliates
are translated into Japanese yen at the rates of exchange in effectat year-end and all income and expense accounts are translated ataverage rates of exchange during the year. The resulting translation
adjustments are accumulated and reported as part of other­comprehensive income (loss).
Foreign currency receivables and payables of the Company aretranslated into yen at the rate in effect at the balance sheet date
and the resulting translation gains and losses are credited or
charged to income for the year.

44

SECOM Annual Report 2012

(5) Cash Equivalents
For the purpose of the consolidated statements of cash flows, theCompany considers all highly liquid investments purchased withinitial ­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 arethose securities in which the Company has the ability and intent tohold the security until maturity. All securities not included in­“trading” or “held-to-maturity” are classified as “available-for-sale”
securities. Market­able debt and equity securities which are classified
as “available-for-sale” are recorded at fair value. Unrealized holding
gains and losses on securities classified as “available-for-sale” arereported as part of other comprehensive income (loss), net of tax.
Debt securities classified as “held-to-maturity” are reported at­amortized cost.
A decline in the fair value of any available-for-sale ­securities
below cost that is deemed to be other-than-­temporary results in a
reduction in carrying amount to fair value. The impairment ischarged to income and a new cost basis for the securities is established. To determine whether an impairment is other-than-­temporary, the Company considers the length of time and extent towhich the market value of the security has been less than its original cost, the financial condition, other specific factors affecting themarket value, deterioration of the credit condition of the issuers,
and whether or not the Company is able to retain the investment
for a period of time sufficient to allow for the ­anticipated recovery
in market value.
Other investments in non-public companies are recorded at cost
as fair value is not readily determinable. The Company periodicallyevaluates the values of other investments in ­non-public companies
for possible impairment by taking into consideration the financial
and operating conditions of the issuer, the general market conditions in the issuer’s industry and the period of the decline in theestimated fair value and other relevant factors. If the impairment isdetermined to be other-than-temporary, other investments in
non-public companies are written down to their impaired value
through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the ­investment has declined below thecarrying value.
The carrying value of private equity investments was ¥26,149
million ($318,890 thousand) and ¥25,980 million at March 31,
2012 and 2011, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.

(8) Inventories
Inventories, consisting of security-related products, fire
­protection-related products, real estate and information and otherrelated products, are stated at the lower of cost or market. Cost isdetermined, in the case of real estate, based on the specific identification method and, in the case of other inventories, primarily using
the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and otherreceivables are not overstated 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 for individual accounts isrecorded when the Company becomes aware of a customer’s
inability to meet its financial o­ bligations, such as in the case ofbankruptcy filings or deterioration in the customer’s operating
results or financial position. If circumstances related to customers
change, estimates of the r­ ecoverability of receivables would befurther adjusted.
(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related ­insurance policies applying apercentage relationship of cost incurred to premiums from c­ ontracts
issued to applicable unearned ­premiums throughout the period of
the contract.
(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant l­easehold
improvements, are carried at cost and depreciated at rates based on
the estimated useful lives of the assets. Depreciation is computed
using the straight-line method for assets other than security equipment and control stations. Security equipment and control stations
are depreciated by using the declining-balance method. Assets
leased to others under operating leases are depreciated using thestraight-line method over the estimated useful lives. Depreciation
expense was ¥37,120 million ($452,683 thousand), ¥35,634 mil­lionand ¥34,033 million for the years ended March 31, 2012, 2011 and2010, respectively. Maintenance, repairs and renewals are charged
to income as incurred.
The estimated useful lives of depreciable assets are as f­ ollows:		 Buildings
22 to 50 years
		 Security equipment and control stations
5 to 8 years
		 Machinery, equipment and automobiles
2 to 20 years(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment used to provide on-line security
systems. The installation costs are deferred and amortized using
the straight-line method over the contractual period of security
services after completion of the installation. Amortiza­­tion expense
was ¥14,877 million ($181,427 thousand), ¥15,081 million and¥15,312 million for the years ended March 31, 2012, 2011 and2010, respectively.
(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment,”
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 orchanges in circumstances ­indicated that the carrying amount may
not be recoverable. Long-lived assets to be held and used arereviewed for impairment by comparing the carrying amount of theassets with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss would berecognized during the period, and calculated as the difference
between the assets’ carrying amount and the fair value. Long-lived
assets that are to be disposed of other than by sale are considered
held and used until they are disposed of. Long-lived assets that are
to be disposed of by sale are reported at the lower of their ­carrying
amount or fair value less cost to sell. Reductions in the carrying
amount are ­recognized in the period in which the long-lived assets
are classified as held for sale.
(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of
assets of business acquired. Pursuant to ASC 350, “Intangibles—
Goodwill and Other,” goodwill and ­intangible assets acquired in apurchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually. This accounting standard also requires that intangible assets with estimable ­useful lives be amortized over theirrespective estimated useful lives to their estimated residual ­values,
and reviewed for impairment in accordance with ASC 360. The
Company conducts its annual impairment test at the end of eachfiscal 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 the remaining
contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment expenses, which are estimates of payments to be made on reported claims and incurred but
not reported claims, which are computed based on past ­experience
for unpaid losses.

The Company recognizes an asset retirement liability if the fairvalue of the obligation can be reasonably estimated. Asset retirement obligations include those for which an entity has a legal obligation to perform an asset retirement activity, however, the timing
and/or method of settling the obligation are conditional on a future
event that may or may not be within the control of the entity.

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Financial Review

Financial Section

Consolidated Financial Statements(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 thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases, and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in whichthose temporary differences and carryforwards are expected to berealized or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are recorded toreduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized.
The Company recognizes in the consolidated financial statements
the impact of a tax position, if any, based on the technical meritsof the position, when that position is more likely than not to besustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that is greater than
50 percent likely of being realized upon settlement with the­appropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements 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 forthe costs related to insurance policies. Advertising costs for acquiring new insurance policies are deferred and amortized as part of
insurance acquisition costs. Advertising expenses included in selling,
general and administrative expenses for the years ended March 31,
2012, 2011 and 2010 were ¥3,541 million ($43,183 thousand),¥4,034 million and ¥4,665 million, respectively.
(19) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with ASC 815, “Derivatives and Hedging.”
The Company recognizes all derivative financial instruments inthe consolidated financial statements at fair value regardless of the
purpose or intent for holding them. Changes in the fair value ofderivative financial instruments are either recognized periodically inincome or in equity as a component of other comprehensive
income (loss) depending on whether the derivative financial instruments qualify for hedge accounting, and if so, whether they qualify
as a fair value hedge or a cash flow hedge. Changes in the 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 the fair value of derivative financial instruments
accounted for as a cash flow hedge, to the extent it is effective as ahedge, are recorded in other comprehensive income (loss), net oftax. Changes in the fair value of derivative financial instruments not
qualifying as a hedge are reported in income.
The Company meets the documentation requirements necessaryfor effective hedges which include their risk management objective and strategy for undertaking various hedge transactions. In
addition, formal assessment is made at inception of the hedge andperiodically on an on-going basis, as to whether the derivatives

46

SECOM Annual Report 2012used in hedging activities are highly effective in off-setting changes
in fair values or cash flow of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Discontinued hedges arerecognized in income.
(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 forthe years ended March 31, 2012, 2011 and 2010 was 218,217
thousand shares, 218,032 thousand shares and 218,035 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2012, 2011 or 2010.
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 andassumptions relating to the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts ofrevenues and expenses during the period. Actual results could differ
from those estimates. Significant items subject to such estimatesand assumptions include the carrying amounts of inventories,
deferred insurance acquisition costs, investment securities, otherinvestments, property, plant and equipment, goodwill, other intangible assets, and unearned premiums and other insurance liabilities;
valuation of receivables; valuation allowances for deferred income
taxes; valuation of derivative instruments; assets and obligations
related to employee benefits; income tax uncertainties; and othercontingencies.
(22) Recent Pronouncements
In September 2009, the FASB issued ASU No. 2009-13,­“Multiple-Deliverable Revenue Arrangements, a Consensus of
the FASB Emerging Issues Task Force.” This accounting standard
addresses the accounting for multiple-deliverable arrangements toenable the vender to account for products or services separately
rather than as a combined unit, and also addresses how to separate
deliverables and how to measure and allocate arrangement
consideration to one or more units of accounting. This accounting
standard is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on orafter June 15, 2010, and was adopted by the Company in the fiscal
year ended March 31, 2012. The adoption of this accounting standard did not have a material impact on the Company’s consolidated
results of operations and financial position.
In October 2009, the FASB issued ASU No. 2009-14, “Certain
Revenue Arrangements That Include Software Elements, aConsensus of the FASB Emerging Issues Task Force.” Thisaccounting standard modifies the scope of the software revenue
recognition guidance and excludes tangible products containing
software components and nonsoftware components that function
together to deliver the tangible product’s essential functionality
from the scope. This accounting standard is effective for fiscal years
beginning on or after June 15, 2010, and was adopted by theCompany in the fiscal year ended March 31, 2012. The adoptionof this accounting standard did not have a material impact on the
Company’s consolidated results of operations and financial position.

In October 2010, the FASB issued ASU No. 2010-26,“Accounting for Costs Associated with Acquiring or Renewing
Insurance Contracts, a Consensus of the FASB Emerging Issues Task
Force.” This accounting standard redefines the definition of acquisition costs qualifying for deferral to be costs that are related directly
to the successful acquisition of new or renewal insurance contracts.
This accounting standard is effective for fiscal years beginning
after December 15, 2011, and will be adopted by the Company inthe fiscal year beginning April 1, 2012. The Company is currently
evaluating the effect of adopting this accounting standard on its
consolidated financial statements.
In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s
Determination of Whether a Restructuring Is a Troubled Debt
Restructuring.” This accounting standard provides the criteria
as to whether a loan modification constitutes a troubled debt
restructuring and requires additional disclosures about troubled
debt restructurings. This accounting standard is effective for fiscal
years beginning on or after June 15, 2011, and will be adopted by
the Company in the fiscal year beginning April 1, 2012. It is not
anticipated that the adoption will have a material impact on the
Company’s consolidated results of operations or financial position.
In May 2011, the FASB issued ASU No. 2011-04, “Amendments
to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.” This accounting standard
amends current U.S. GAAP to create more commonality with IFRSs
by changing the wording used to describe requirements in U.S.
GAAP for measuring fair value and for disclosing information about
fair value measurements. This accounting standard is effective
for fiscal years beginning after December 15, 2011, and will be
adopted by the Company in the fiscal year beginning April 1, 2012.
It is not anticipated that the adoption will have a material impact
on the Company’s consolidated results of operations or financial
position.
In June 2011, the FASB issued ASU No. 2011-05, “Presentationof Comprehensive Income.” In presenting other comprehensive
income and its components in financial statement, this accounting
standard eliminates the current option to present the components
of other comprehensive income as part of the statement of changes
in equity. This accounting standard also requires reclassifications
between other comprehensive income and net income to bedisclosed on the face of financial statements. Furthermore, in
December 2011, the FASB issued ASU No. 2011-12, “Deferralof the Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive
Income in Accounting Standards Update No. 2011-05.” These
accounting standards are effective for fiscal years beginning after
December 15, 2011, and will be adopted by the Company in thefiscal year beginning April 1, 2012. As these accounting standards
are a provision for presentation, the adoption will not have impact
on the Company’s consolidated results of operations or financial
position.
In September 2011, the FASB issued ASU No. 2011-08, “Testing
Goodwill for Impairment.” This accounting standard permit anentity to first assess qualitative factors to determine whether it ismore likely than not that the fair value of a reporting unit is lessthan its carrying amount as a basis for determining whether it isnecessary to perform the two-step goodwill impairment test. An
entity is not required to calculate the fair value of a reporting unit
unless the entity determines that it is more likely than not that its
fair value is less than its carrying amount. This accounting standard

is effective for fiscal years beginning after December 15, 2011,
and will be adopted by the Company in the fiscal year beginning
April 1, 2012. It is not anticipated that the adoption will havea material impact on the Company’s consolidated results of­operations or financial position.
In December 2011, the FASB issued ASU No. 2011-11,“Disclosures about Offsetting Assets and Liabilities.” This accounting standard requires entities to disclose both gross information andnet information about both instruments and transactions eligible
for offset in the statement of financial position and instruments andtransactions subject to an agreement similar to a master netting
arrangement. This accounting standard is effective for fiscal years
beginning on or after January 1, 2013, and will be adopted by
the Company in the fiscal year beginning April 1, 2013. As thisaccounting standard is a provision for disclosure, the adoption
will not have impact on the Company’s consolidated results of­operations or financial position.
(23) Reclassifications
The accompanying consolidated financial statements for the years
ended March 31, 2011 and 2010 have been ­reclassified to conformto the presentation used for the year ended March 31, 2012.
3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial statements solely for the convenience of the reader. The translations of
yen into U.S. dollars have been made at the rate of ¥82=US$1, therate ­prevailing on the Tokyo Foreign Exchange Market on March 31,
2012. These ­translations should not be construed as representingthat the yen amounts actually represent, or have been or could be
converted into U.S. dollars at that rate.
4. Acquisitions
In July 2009, the Company acquired all outstanding shares of
MAC International Co., Ltd. by foreclosing on the Company’s longterm receivables of ¥3,733 million and other short-term receivablesof ¥1,000 million due from MAC International Co., Ltd. The
following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition. Shortterm borrowing of ¥5,684 million and long-term debt of ¥868
million from domestic subsidiaries were eliminated in consolidation.
In millions of yen

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

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

In February 2010, MAC International Co., Ltd. was merged into
Secom Medical System Co., Ltd., a subsidiary of the Company.
The pro-forma results related to this acquisition are not disclosed
because the impact on the consolidated financial statements is
not material.

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Financial Section

Consolidated Financial Statements

5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2012 and 2011 werecomprised of the following:

In millions of yen
March 31, 2011
Gross unrealizedCost
		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2011

2012

¥145,450 ¥120,371
36,94841,42728,00029,5002,642
2,644¥213,040 ¥193,942$1,773,781
450,585
341,463
32,220$2,598,049

2012

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

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate f­ air value. The
Company has not experienced any losses through default of thefinancial institutions and does not ­anticipate default of any­outstanding agreements.
6. Cash Deposits
The Company operates cash collection and deposit services forfinancial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection­service for entities other than financial institutions. Cash deposit
balances of ¥54,011 million ($658,671 thousand) and ¥56,546­million at March 31, 2012 and 2011, respectively, are segregatedfrom cash and cash equivalents and are restricted as to use by theCompany. The Company funds most of the cash for such operations through bank overdrafts and deposits. Bank loans and deposits received, which relate to these operations, were ¥27,659 million($337,305 thousand) and ¥21,921 million ($267,329 thousand),
respectively, at March 31, 2012, and ¥29,387 million and ¥20,659
million, respectively, at March 31, 2011. As part of its fee arrangement, the Company is reimbursed for the interest cost of therelated overdrafts.
7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcost pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2012 and 2011 were as ­follows:
In millions of yen
March 31, 2012
Gross unrealized
Cost

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

48

Gains

¥17,245¥17,245¥¥¥28,606
60,406
7,461¥96,473

SECOM Annual Report 201252
52

Losses¥¥Fair value

33¥ 17,294¥ 17,294¥6,015
1,749

¥ 87
41

¥ 34,534
62,11455¥7,819

4
¥132

7,512
¥104,160

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

Gains

LossesFair value

6,358

¥

27

¥

2

¥

6,383

10
6,368

¥

0
27

¥

—
2

¥

10
6,393

Investment securities:
Available-for-sale:		Equity securities............ ¥ 29,930
		Debt securities..............
71,170
Held-to-maturity:
		Debt securities..............
7,473
		
¥108,573¥4,4602,289¥2,059660¥ 32,331
72,79920¥6,76949¥2,7687,444¥112,574

In thousands of U.S. dollars
March 31, 2012
Gross unrealized
Cost

Gains

Short-term investments:
Available-for-sale:		Debt securities............. $ 210,305 $		$ 210,305 $

634
634

Investment securities:
Available-for-sale:		Equity securities........... $ 348,853 $73,354
		Debt securities.............
736,659 21,329
Held-to-maturity:
		Debt securities.............
90,988671
		
$1,176,500 $95,354

Losses$$Fair value

37 $ 210,902
37 $ 210,902$1,061 $ 421,146
500
757,48849
91,610$1,610 $1,270,244

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by invest­ment­category and the length of time that individual securities have been
in a continuous unrealized loss position, at March 31, 2012 wereas follows:		

In millions of yen

		March 31, 2012
Less than 12 months

12 months or longer

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

¥ 729
18,220¥18,949

¥ 87
44
¥131

¥—
—
¥—

¥—
—
¥—

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

¥

¥

¥—

¥—

49

4

In thousands of U.S. dollars
March 31, 2012
Less than 12 months

12 months or longer

		 Gross		Gross		 unrealized		unrealized
Fair value
lossesFair value
lossesProceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2012, 2011 and 2010 were ¥72,223 million($880,768 thousand), ¥17,187 million and ¥31,328 million, respectively. On those sales, the gross r­ ealized gains and gross realized
losses, using moving-­average cost basis, for the years ended March
31, 2012, 2011 and 2010 were as follows:

Available-for-sale:
Equity securities............ $ 8,890
Debt securities.............. 222,195		
$231,085$1,061537$1,598

$—
—
$—

$—
—
$—

		
In thousands of

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

$

$—

$—

2012

2011

2010

2012

Gross realized gains............ ¥1,950
Gross realized losses...........
662¥2,916752¥1,499383$23,780
8,073

598

49

Based on the Company’s ability and intent to hold the investment
for a reasonable period of time sufficient for a recovery of fairvalue, the credit condition of the issuers and other relevant factors,
the Company does not consider these investments to be otherthan-temporarily impaired at March 31, 2012.
At March 31, 2012, debt securities principally consisted of shortterm investments in monetary trusts, Japanese ­govern­ment bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-to-­maturity” debt securities by contractual maturity at March 31, 2012
are as follows:

Available-for-sale
Cost

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

		In thousands ofFair value¥17,294

23,941

24,686——27,896
8,569¥77,651

28,446
8,982¥79,408

1,499
5,962
¥7,461

1,511
6,001¥7,512—¥—In thousands of U.S. dollars
March 31, 2012
Available-for-sale
Fair value

Due within 1 year............ $210,305
Due after 1 year
through 5 years............. 291,964
Due after 5 years
through 10 years........... 340,195
Due after 10 years .......... 104,500
		.................................. $946,964$210,902
301,049
346,902109,537$968,390

Held-to-maturity
Cost$

The Company maintains long-term investment securities, issued
by a number of ­non-­public companies, included as investment securities in the consolidated balance sheets. The aggregate carrying
amount of the investments in non-public companies, at cost net ofother-than-temporary impairment, was ¥9,756 million ($118,976
thousand) and ¥10,407 million at March 31, 2012 and 2011,
respectively. The corresponding fair value at that date was not­computed as such estimation was not practical.

March 31, 2012¥17,245

Cost

Year ended
March 31

In millions of yen

Cost

¥

U.S. dollars

Years ended
March 31

8. Inventories
Inventories at March 31, 2012 and 2011 were comprised of the­following:

Held-to-maturity

Fair value

In millions of yen

Fair value

— $

—

—

—

18,280 18,427
72,708 73,183$90,988 $91,610

In millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

Security-related products................... ¥ 7,473 ¥ 5,596
Fire protection-related products......... 11,942 10,518
Real estate......................................... 42,359 59,913
Information and other-related
products..........................................
5,320
5,742
			 .............................................. ¥67,094 ¥81,769$ 91,134
145,634
516,573
64,879$818,220

Work in process for real estate inventories at March 31, 2012 and2011, amounting to ¥33,277 million ($405,817 thousand) and¥48,432 million, respectively, are included in real estate.
Costs on uncompleted construction contracts at March 31, 2012
and 2011, amounting to ¥5,872 million ($71,610 thousand) and¥4,468 million, respectively, are included in fire protection-related
products.
The amount of write-down on real estate inventories included incost of sales for the years ended March 31, 2012, 2011 and 2010
were ¥20,723 million ($252,720 thousand), ¥1,482 million and¥1,285 million, respectively.

During the years ended March 31, 2012, 2011 and 2010, the net­ nrealized gains and losses on “available-for-sale” securitiesu
included as part of other comprehensive income (loss), net of tax,
increased by ¥2,515 million ($30,672 thousand), decreased by¥3,472 million and increased by ¥9,200 million, respectively.

SECOM Annual Report 201249

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories; “lease receivable,” “loans receivable resulting frommedical services,” “loans receivable resulting from insurance services,” “other loans receivable” and “other.” Financing receivables
classified as “lease receivable” are resulting from lease transactions of
security equipment and real estate for office and medical institutions.
The Company continuously monitors overdue financing receivables, which the Company considers as uncollectible risk receivables. For financing receivables with specific customer collection
issues, the Company individually evaluates their collectability inorder to determine the amount of allowance for doubtful accounts.
For other financing receivables, the Company categorizes thesereceivables into groups by their nature and characteristics. The
Company collectively evaluates the collectability by each group,
using its historical experience of write-off and determines theamount of allowance for doubtful accounts.
Financing receivables and allowance for doubtful accounts at
March 31, 2012 and 2011 are as follows:

Other

Total

41

¥2,629 ¥ 874 ¥2,957 ¥1,180 ¥ 7,681

386
427

—
149
70
—
605
¥2,629 ¥1,023 ¥3,027 ¥1,180 ¥ 8,286

Financing receivables:
Individually
evaluated............... ¥44 ¥12,326 ¥1,417 ¥3,128 ¥1,218 ¥18,133
Collectively
evaluated............... 25,551
413 6,659 3,165
196 35,984¥25,595 ¥12,739 ¥8,076 ¥6,293 ¥1,414 ¥54,117
In thousands of U.S. dollars
Year ended March 31, 2012

Other

Total

384

2,512

671

3,165

893

7,625

62

2,512

626

3,165

893

7,258

—

¥ 367

— ¥

Allowance for
doubtful accounts:
Individually
evaluated............... ¥Collectively
evaluated...............
¥In millions of yen¥ 427 ¥ 2,629 ¥1,023 ¥3,027 ¥1,180 ¥ 8,286
112
(117)
(41)
(71)
80
(37)
(169)
—
(311)
(50)
(125)
(655)
14
—
—
259
(242)
31

¥ 322 ¥March 31, 2011		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivableYear ended March 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Allowance for
doubtful accounts:
Balance at
beginning of year........
Provision (Reversal)...
Charge off...............
Other*.....................
Balance at endof year...................
Individually
evaluated...............
Collectively
evaluated...............

In millions of yen

45 ¥

—

¥

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Allowance for
doubtful accounts:
Balance at
beginning of year........ $ 5,207 $ 32,061 $12,476 $36,915 $14,390 $101,049
Provision (Reversal)...
1,366 (1,427)
(500)
(866)
976
(451)
Charge off............... (2,061)— (3,793)(610) (1,524) (7,988)
Other*.....................
171—— 3,159 (2,952)
378
Balance at endof year........................
4,683 30,634 8,183 38,598 10,890 92,988
Individually
evaluated...............
756 30,634 7,634 38,598 10,890 88,512
Collectively
evaluated............... $ 3,927 $— $ 549 $— $— $ 4,476

26,251
507 3,912 4,160
180 35,010¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685

Financing receivables:
Individually
evaluated...............
$817 $163,890 $10,817 $41,000 $11,220 $227,744
Collectively
evaluated............... 320,134
6,183 47,707 50,732 2,195 426,951$320,951 $170,073 $58,524 $91,732 $13,415 $654,695* “Other” principally includes the effect of changes in foreign currency exchange rates.

* “Other” principally includes the effect of changes in foreign currency exchange rates.

Financing receivables:
Individually
evaluated...............
Collectively
evaluated...............

67

13,439

887

3,362

920

18,675The Company ascribes the fact of past due and the financial position of the debtor to credit quality indicators and classifies financing
receivables into Overdue and Current. Financing receivables determined to have no prospects for collecting contractual interest on
the basis of past due date and other factors are no longer recorded
as accruing interest.

50

SECOM Annual Report 2012

Analysis of the age of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2012 and2011 are as follows:

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2012 and 2011 are as follows:

In millions of yen

In millions of yen

March 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Current.......................... ¥26,251 ¥13,642 ¥3,912 ¥4,308 ¥ 679 ¥48,792
Overdue.........................
67304
887 3,214
421
4,893
Total:
  Financing receivables... ¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685
Financing receivables
on nonaccrual status.... ¥— ¥ 4,318 ¥ 887 ¥3,362 ¥— ¥ 8,567
In millions of yen
March 31, 2011		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Current.......................... ¥25,551 ¥12,436 ¥6,659 ¥3,165 ¥ 899 ¥48,710
Overdue.........................
44
303 1,417 3,128
515
5,407
Total:
  Financing receivables... ¥25,595 ¥12,739 ¥8,076 ¥6,293 ¥1,414 ¥54,117
Financing receivables
on nonaccrual status.... ¥— ¥ 4,614 ¥1,417 ¥3,128 ¥— ¥ 9,159

In thousands of U.S. dollars
March 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable— $ 52,659 $10,817 $41,000 $Impaired receivables.......
Related allowance for
doubtful accounts........

Other

Total

¥67 ¥13,439¥887 ¥3,362¥920 ¥18,675

62

626

893

2,512

3,165

7,258

In millions of yen
March 31, 2011		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Impaired receivables.......
Related allowance for
doubtful accounts........

Other

Total

¥44 ¥12,326 ¥1,417 ¥3,128 ¥1,218 ¥18,133
41

2,629

874

2,957

1,180

7,681

In thousands of U.S. dollars
March 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Impaired receivables.......
Related allowance for
doubtful accounts........

Other

Total

$817 $163,890 $10,817 $41,000 $11,220 $227,744
756

30,634

7,634 38,598 10,890

88,512

The average amounts of impaired receivables for the year ended
March 31, 2012 are as follows:
Other

In millions of yen

Total

Current.......................... $320,134 $166,366 $47,707 $52,537 $ 8,280 $595,024
Overdue.........................
817
3,707 10,817 39,195 5,135 59,671
Total:
  Financing receivables... $320,951 $170,073 $58,524 $91,732 $13,415 $654,695
Financing receivables
on nonaccrual status.... $March 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable— $104,476

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Average amounts of
impaired receivables.....

Other

Total

¥56 ¥12,883 ¥1,152 ¥3,245 ¥1,068 ¥18,404
In thousands of U.S. dollars

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Average amounts of
impaired receivables.....

Other

Total

$683 $157,110 $14,049 $39,573 $13,024 $224,439

SECOM Annual Report 2012

51

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a27.8 percent owned affiliate, which is listed on the Korea Exchange;
Toyo Tech Co., Ltd., a 27.8 percent owned affiliate, which is listedon the Second Section of the Osaka Securities Exchange.
Combined financial information regarding the affiliated­companies accounted for under the equity method was as ­follows:

A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2010

2012

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

¥2,113¥1,669¥1,597$25,768

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

¥6,125¥5,128¥6,504$74,695

		In thousands of		In thousands ofIn millions of yen

U.S. dollars

In millions of yen

U.S. dollars

March 31

March 31

March 31

March 31

		
2012
2011
2012

		
2012
2011
2012

Current assets................................. ¥ 91,723 ¥ 72,049
Noncurrent assets........................... 102,770 111,349$1,118,573
1,253,293

Notes and accounts
receivable, trade.............................. ¥ 457¥ 460$ 5,573

Total assets................................. ¥194,493 ¥183,398$2,371,866

Loans receivable................................. ¥ 375¥

81$ 4,573

Current liabilities............................. ¥ 39,545 ¥ 34,272
Noncurrent liabilities.......................
34,50632,458Equity............................................. 120,442 116,668$ 482,256
420,805
1,468,805

Notes and accounts payable............... ¥2,884¥2,261$35,171

Guarantees for bank loans................. ¥ 127¥ 150$ 1,549

Total liabilities and equity............ ¥194,493 ¥183,398 $2,371,866
The Company's equity in undistributed income of affiliates at
March 31, 2012 and 2011 included in retained earnings was		In thousands of¥30,112 million ($367,220 thousand) and ¥26,319 million,
In millions of yen
U.S. dollars
respectively.
Years ended
Year ended
March 31

March 31

2010

2012

Net sales........................ ¥144,730 ¥129,551 ¥153,990$1,765,000

Gross profit.................... ¥ 48,439 ¥ 46,156 ¥ 44,395$ 590,720

Net income
attributable toaffiliated companies..... ¥ 16,683 ¥ 16,933 ¥ 14,105$ 203,451

2012

2011

Dividends received from affiliated companies for the years ended
March 31, 2012, 2011 and 2010 were ¥2,324 million ($28,341
thousand), ¥2,175 million and ¥2,295 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥27,738 million($338,268 thousand) and ¥27,555 ­million at March 31, 2012 and2011, respectively, had a quoted market value of ¥60,164 million($733,707 thousand) and ¥61,259 ­million at March 31, 2012 and2011, respectively.
The amounts of goodwill were ¥2,931 million ($35,744 thousand) and ¥3,254 million at March 31, 2012 and 2011, respectively.
In June 2010, the parent company sold the outstanding share ofTokyo Biso Kogyo Corporation, a 36.6 percent owned affiliate, to
TB Holdings Corporation for ¥5,055 million. The sale resulted in aloss of ¥513 million.

52

SECOM Annual Report 2012

11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses on realestate of the other services for the year ended March 31, 2012. The
fair value was determined by the estimated present value of future
cash flows or appraisal value.
Impairment loss on long-lived assets by ­business segment for theyears ended March 31, 2012, 2011 and 2010 was as follows:		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2010

—
48
—
—

¥—
—
1
—

¥ 83
15
—
—

18

2

149

220

—

—

—

—

8,067
—

—
—

45
—

98,378—¥8,133¥ 3¥292$99,183

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

¥

		

2012

$

—
585
—
—

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding goodwill
at March 31, 2012 and 2011 were as ­follows:

The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2012 and 2011 were as
follows:

In millions of yen
March 31, 2012
Gross		Netcarrying Accumulated
carrying
amountamortization
amountAmortized intangible assets:
Software........................................ ¥40,480
Other.............................................
4,091
		
¥44,571(¥24,229)(2,165)(¥26,394)¥16,251
1,926¥18,177

Unamortized intangible assets............ ¥ 4,128¥¥ 4,128—

In millions of yen
March 31, 2011
Gross		Netcarrying Accumulated
carrying
amountamortization
amountAmortized intangible assets:
Software........................................ ¥38,234
Other.............................................
5,104
		
¥43,338(¥21,933)(2,965)(¥24,898)¥16,301
2,139¥18,440

Unamortized intangible assets............ ¥ 4,153¥¥ 4,153—

In thousands of U.S. dollars
March 31, 2012
Gross		Netcarrying Accumulated
carrying
amountamortization
amountAmortized intangible assets:
Software........................................ $493,659
Other............................................. 49,890
		$543,549($295,476) $198,183(26,402)23,488($321,878) $221,671

Unamortized intangible assets............ $ 50,341$

In millions of yen							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Goodwill................ ¥2,322
Accumulated
impairment
losses...................
(406)
March 31, 2010..... 1,916
Goodwill acquired
during the year....
675
Disposal.................
—
Impairment
losses...................
—
Translation
adjustment..........
(99)
Goodwill................ 2,898
Accumulated
impairment
losses...................
(406)
March 31, 2011..... 2,492
Goodwill acquired
during the year.... 1,021
Disposal.................
—
Impairment
losses...................
(793)
Translation
adjustment..........
(99)
Goodwill................ 3,820
Accumulated
impairment
losses................... (1,199)
March 31, 2012.... ¥2,621

Total

¥—

¥9,970¥4,269¥135¥2,002 ¥18,698——(4,338)
5,632

(492)
3,777

(135)
—

(175)
1,827

(5,546)
13,152

81
—

—
—

711
—

—
—

—
—

1,467
—

—

—

—

—

—

—

—
81

—
9,970

(70)
4,910

—
135

—
2,002

(169)
19,996—81(4,338)
5,632

(492)
4,418

(135)
—

(175)
1,827

(5,546)
14,450

—
—

—
—

102
—

—
—

—
—

1,123
—

—

(269)

(156)

—

—

(1,218)

—
81

—
9,970

(21)
4,991

—
135

—
2,002

(120)
20,999(4,607)(648)¥5,363 ¥4,343

(135)
¥ —

(175) (6,764)¥1,827 ¥14,235—¥ 81

In thousands of U.S. dollars— $ 50,341

Aggregate amortization expense for the years ended March 31,
2012, 2011 and 2010 was ¥6,120 million ($74,634 thousand),¥6,236 million and ¥5,785 million, respectively. Amortized intangible assets are amortized using the straight-line method over theestimated useful lives. The weighted average amortization period
for internal use software is approximately five years.
The estimated aggregate amortization expense for ­intangible
assets for the next five years is as follows:		Years ending March 31
In millions of yen

2013......................................................
2014......................................................
2015......................................................
2016......................................................
2017......................................................

¥5,167
4,741
3,563
2,361
1,430

In thousands of
U.S. dollars$63,01257,81743,451
28,793
17,439							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Goodwill................ $35,341
Accumulated
impairment
losses................... (4,951)
March 31, 2011..... 30,390
Goodwill acquired
during the year.... 12,451
Disposal.................
—
Impairment
losses................... (9,671)
Translation
adjustment.......... (1,206)
Goodwill................ 46,586
Accumulated
impairment
losses................... (14,622)
March 31, 2012.... $31,964

Total$988 $121,585 $59,878$1,646$24,414 $243,852—
988(1,646)—(2,134) (67,633)
22,280 176,219(52,902) (6,000)
68,683 53,878

—
—

—
—

1,244
—

—
—

—
—

13,695——(3,281)(1,902)——(14,854)——988 121,585(256)
60,866—
1,646—(1,462)
24,414 256,085— (56,183) (7,902) (1,646)$988 $ 65,402 $52,964 $ —(2,134) (82,487)$22,280 $173,598

SECOM Annual Report 201253

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

The Company recognized impairment losses primarily related togoodwill allocated to reporting units in the security services segment of ¥793 million ($9,671 thousand) for the year ended March
31, 2012, due to decreases in the estimated fair value of thesereporting units mainly caused by decreases of projected cash flows.
In addition, the Company recognized impairment losses of ¥269
million ($3,281 thousand) and ¥156 million ($1,902 thousand) inthe medical services segment and the geographic information­services segment, respectively.
The fair value is deter­mined by the estimated present value of
future cash flows.
13. Bank Loans and Long-Term Debt
Bank loans of ¥40,762 million ($497,098 thousand) and ¥47,698
million at March 31, 2012 and 2011, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 1.24 percent and 1.19 percent at March 31, 2012 and2011, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebted­ness to suchbanks. The Company has not been requested to submit such­additional security.
At March 31, 2012, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($48,780 thousand). The line ofcredit expires in March 2013. Under the agreement, Nohmi Bosai
Ltd. is required to pay committed fees at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2012, the Company had overdraft agreements with 18 banks andits unused lines of credit amounted to ¥16,905 million ($206,159
thousand). The Company incurs no fee on the unused portion of
the lines of credit. The overdraft agreements expire in the period
from April 2012 to March 2013. The Company has the ability andintent to extend these overdraft agreements under similar terms
and conditions.
Long-term debt at March 31, 2012 and 2011 comprisedthe ­following:

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2012 and 2011 were as follows:		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

Time deposits........................................ ¥ 2,210 ¥ 1,993
Short-term and long-term receivables.... 5,472 5,334
Investment securities..............................
695
606
Property, plant and equipment............... 55,101 55,755
Other intangible assets...........................
818
818$ 26,951
66,7328,476
671,963
9,976

The aggregate annual maturities on long-term debt at March 31,
2012 are as follows:		Years ending March 31
In millions of yen

2013.....................................................
2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
Thereafter..............................................
............................................................

¥22,053
11,216
8,621
3,199
3,416
10,571¥59,076

In thousands of
U.S. dollars$268,939
136,780
105,134
39,012
41,659128,915$720,439

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a­subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with Japanese GAAP, which vary incertain respects from U.S. GAAP. Those differences are principally,(a) that insurance acqui­sition costs are charged to expense whenincurred under Japanese GAAP whereas under U.S. GAAP, thosecosts are deferred and amortized generally over the premium-­
paying period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas under U.S. GAAP, those liabilities arecomputed based on past experience for unreported losses, and(c) that unearned premiums are calculated based on the documents
authorized by the Supervisory Authorities in Japan whereas under
U.S. GAAP, unearned premiums are reflected based on the lapseand ­surrender over the contract period.
In addition, under certain property and casualty insurance con		
In thousands oftracts with a refund clause and long-term insurance policies that
In millions of yen
U.S. dollars­provide refunds at maturity, such as personal accident and fire, theMarch 31
March 31
policyholder receives a refund if premiums have been fully paid
		
2012
2011
2012
unless a substantial settlement (as defined in the ­policy) has
Loans, principally from banks
occurred. The Company has provided for such refundable amounts
due 2011–2033 with interestby classifying a portion of the net pre­mi­ums written, together with
rates ranging from 0.60% tointerest thereon, as investment deposits by policyholders. Contract
10.05% in 2012 and 2011:and policy terms are ­principally five years.
Secured............................................. ¥22,619 ¥25,205$275,841
For purposes of preparing the consolidated financial ­state­ments,
Unsecured......................................... 9,174 10,160
111,878
appropriate adjustments have been made to reflect such items in
1.14% unsecured bonds due 2013....... 3,060
3,570
37,317
accordance with U.S. GAAP.
1.13% unsecured bonds due 2014....... 1,557
1,644
18,988
Unsecured bonds due 2011–2017
The net equity of Secom Insurance at March 31, 2012 and 2011
with floating interest rates basedwas ¥44,541 million ($543,183 thousand) and ¥45,838 million,on 6-month TIBOR plus
respectively.

0.00%–0.20%.................................... 10,992 11,793
Obligations under capital leases,
due 2011–2040 (Note 20)................... 11,674 12,566
			................................................. 59,076 64,938
Less: Portion due within one year.......... (22,053) (11,918)
			 ................................................. ¥37,023 ¥53,020

54

SECOM Annual Report 2012

134,049

142,366
720,439(268,939)$451,500

Net sales and operating revenue of Secom Insurance include
net realized investment gains and losses, including the results onsales of securities, loss on other-than-temporary impairment ofinvestment securities and impairment loss on long-lived assets.
Net realized investment gains and losses, including loss on otherthan-temporary impairment, for the years ended March 31, 2012,2011 and 2010 were gains of ¥328 million ($4,000 thousand) and¥838 million, and losses of ¥3,309 million, respectively. Loss onother-than-temporary impairment of investment securities for theyears ended March 31, 2012, 2011 and 2010 were ¥883 ­million($10,768 thousand), ¥681 million and ¥4,558 ­million, respectively.
15. Pension and Severance Costs
Employees of the parent company and its domestic s­ ubsidiaries
whose services are terminated are, under most ­circumstances,­eligible for lump-sum benefits and/or ­eligible for pension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefits under the cash balance pension plan are calculated by the amount equal to a certain percentage of employee’s
annual income over their period of service, plus interest calculatedby the 3-year average yield for 10-year government bonds. The
defined contribution pension plan was established in April 2003, bytransferring a portion equivalent to 20 percent of the cash balance
pension plan, including portions funded in prior periods. Specified
percentage of employees’ annual income is contributed to thedefined contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accord­ingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.
In July 2011, Secom General Insurance Co., Ltd., a subsidiary of
the parent company, settled and transferred a portion of the taxqualified non-­contributory pension plan to the defined contribution
pension plan. In accordance with ASC 715, “Compensation—
Retirement Benefits,” the Company accounted for these transfers as
a partial settlement of benefit obligation. The amount of s­ ettlement
loss was immaterial for the year ended March 31, 2012.
Net periodic pension and severance costs for the years ended
March 31, 2012, 2011 and 2010 were as follows:

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

U.S. dollars

Years ended
March 31

Year ended
March 31

		
2012
2011
2012

Change in benefit obligation:
Benefit obligation
at beginning of year.................. ¥82,500 ¥72,524 $1,006,098
Effect of adopting
ASU No. 2009-17.....................
—
4,244
—
Service cost.................................
5,560
6,313
67,805Interest cost................................
1,572
1,610
19,171
Actuarial loss..............................
1,487
2,173
18,134
Prior service benefit.....................
(25)
(263)
(305)
Benefits paid...............................
(4,957)(4,941)(60,451)
Acquisition..................................
—
840—
Settlement..................................
(352)—(4,293)
Benefit obligation
at end of year...........................
85,78582,5001,046,159
Change in plan assets:
Fair value of plan assets
at beginning of year..................
67,831
60,763
827,207
Effect of adopting
ASU No. 2009-17.....................
—
2,200
—
Actual return on plan assets........
1,831
1,975
22,329
Employer contribution.................
6,439
5,829
78,525
Benefits paid...............................
(3,537)(3,342)(43,134)
Acquisition..................................
—
406—
Settlement..................................
(354)—(4,317)
Fair value of plan assets
at end of year...........................
72,21067,831880,610
Funded status
at the end of year......................... (¥13,575) (¥14,669) ($ 165,549)

Amounts recognized in the consolidated balance sheet at March
31, 2012 and 2011 consist of:		
In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

Prepaid pension andseverance costs............................. ¥ 7,846 ¥ 6,500
Accrued pension and		
In thousands ofseverance costs............................. (21,421) (21,169)
In millions of yen
U.S. dollars
			Net amount recognized....... (¥13,575) (¥14,669)
Years ended
Year ended
2012

2011

March 31

March 31

2010

2012

Net periodic pension andseverance costs:
Service cost.......................... ¥5,560 ¥6,313 ¥4,424
Interest cost......................... 1,572 1,610 1,476
Expected return onplan assets......................... (2,130) (2,065) (1,997)
Amortization of priorservice benefit.................... (1,649) (1,687) (1,682)
Recognized actuarial loss...... 1,222
924
901
		 Net periodic pension
		 and severance costs....... ¥4,575 ¥5,095 ¥3,122$ 95,683(261,232)($165,549)$67,805
19,171(25,976)(20,110)
14,903$55,793

SECOM Annual Report 2012

55

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

Other changes in plan assets and benefit obligations ­recognizedin other comprehensive income (loss) for the year ended March 31,
2012 were summarized as follows:

Weighted-average assumptions used to determine the benefit
obligation at March 31, 2012 and 2011 were as follows:		 March 31

		In thousands ofIn millions of yen

Current year actuarial loss........................
Amortization of actuarial loss...................
Settlement of actuarial loss......................
Current year prior service benefit.............
Amortization of prior service benefit........
			¥1,786(1,222)
59
(25)
1,649
¥2,247

U.S. dollars$21,781(14,903)
720(305)
20,110$27,403

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

2012

2011

1.8%
2.6%

2.1%
2.6%

Weighted-average assumptions used to determine net ­pension
and severance costs for the years ended March 31, 2012, 2011 and2010 were as follows:
Years ended March 31

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2012 and 2011 consist of:

2012

2011

2010

2.1%
3.0%
2.6%

2.2%
3.0%
2.6%

2.1%
3.0%
2.7%

Discount rate..............................................
Expected return on plan assets....................
		In thousands ofRate of compensation increase....................
In millions of yen
U.S. dollars
March 31

March 31

The Company determines the expected long-term rate of return
based on the expected long-term return of the various asset categories in which it invests. The Company considers the current
expectations for future returns and the actual ­historical returns ofeach plan asset category.
The Company’s investment policy is designed to ensure that sufficient plan assets are available to provide future ­payments 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 in equity and debt securities, and pooled
funds with the objective to minimize risk and achieve the expected
rate of return. The investment results are periodically checked andasset allocation is adjusted as necessary.
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2012 and 2011. The three levels of
input used to measure fair value are more fully described in Note 23.

		
2012
2011
2012

Actuarial loss...................................... ¥32,652 ¥32,029
Prior service benefit............................. (7,806) (9,430)
			Net amount recognized........... ¥24,846 ¥22,599$398,195(95,195)$303,000

The estimated prior service benefit and actuarial loss for thedefined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit
cost over the next year are ¥1,627 million ($19,841 thousand) and¥1,407 million ($17,159 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥78,805 million ($961,037 thousand) and ¥75,894 million at March
31, 2012 and 2011, respectively.
The projected benefit obligation, accumulated benefit ­obligationand fair value of plan assets for the pension plans with ­accumulated
benefit obligation in excess of plan assets were ¥35,768 million($436,195 thousand), ¥32,102 million ($391,488 thousand) and¥14,555 million ($177,500 thousand), respectively, at March 31,
2012, and ¥34,647 million, ¥31,206 million and ¥13,644 million,
respectively, at March 31, 2011.
The Company uses March 31 as the measurement date for thedomestic pension plan.

		In millions of yen
March 31, 2012

Level 1

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

¥ 1,720

Level 2¥—¥

Level 3

Total—

¥ 1,720

9,420

—

—

9,420

5,772

66

1

5,839

—
794
23,15016,669
6,630
—
6,349
—
(341)
450
¥35,854 ¥17,914

2,324
39,819
6,630
6,349
109
¥72,210

1,530
—
—
—
—
¥18,442* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥182 million at March 31, 2012.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The nongoverment bonds invest approximately 65% inJapanese bonds and 35% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified as level 2, and invests approximately 40% in equity securities, 55% in debt
securities and 5% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as level 3.

56

SECOM Annual Report 2012		In millions of yen
March 31, 2011

Level 1

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

¥ 1,053
6,963

Level 2

¥

—
50

¥

Level 3

Total—

¥ 1,053

—

7,013

5,978

938

6

6,922

2,333
741
—
—
—
¥17,068—
20,607
6,646
5,652
100
¥33,993651
16,113———¥16,770

2,984
37,461
6,646
5,652
100
¥67,831* The plan’s equity securities include common stock of the the parent company inthe amount of ¥40 million at March 31, 2011.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The nongoverment bonds invest approximately 80% inJapanese bonds and 20% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified as level 2, and invests approximately 50% in equity securities, 45% in debt
securities and 5% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as level 3.
In thousands of U.S. dollars
March 31, 2012
Level 1

Level 2

Level 3

Cash and cash
equivalents................ $ 20,976 $— $—Equity securities
Japanesecompanies............. 114,878——
Debt securities
Government
bonds....................
70,390805
12Nongovernment
bonds....................
18,658—
9,683
Pooled fund.................
—
282,317 203,281
Call loans.....................
—
80,854—
Insurance contracts......
—
77,427—
Other...........................
—(4,159)5,488$224,902 $437,244 $218,464

Total$ 20,976
114,878
71,20728,341
485,598
80,85477,4271,329$880,610* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of $2,220 million at March 31, 2012.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The nongoverment bonds invest approximately 65% inJapanese bonds and 35% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified as level 2, and invests approximately 40% in equity securities, 55% in debt
securities and 5% in other investments. The unquoted beneficial certificate of
security investment trust included in the plan’s pooled funds is classified as level 3.

The following table represents the changes in level 3 investments
for the years ended March 31, 2012 and 2011.

In millions of yen

Year ended March 31, 2012
		Debt		securities					Non		 Government government
Pooled		bonds
bonds
funds

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

Other

Total

¥ 6

¥651

¥16,113¥ —¥16,770

—

273

298

—

571

(3)

143

179

—

319

(2)
—
¥ 1

(273)
79
—
—
¥794 ¥16,669

450
—
¥450

254
—
¥17,914

In millions of yen
Year ended March 31, 2011
Equitysecurities

Debt
securities

			NonJapanese Government government
companies
bonds
bonds

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

Pooled
funds

Other

Total

¥ 7

¥61

¥702

¥ 9,790¥ 8¥10,568

—

—

48

198

—

246

—

—

896

(214)

—

682

(7)
—
¥—

(55)
—
¥ 6

(995)
4,563
—
1,776
¥651 ¥16,113

(8)
3,498
—
1,776
¥— ¥16,770

In thousands of U.S. dollars
Year ended March 31, 2012
		Debt		securities					Non		 Government government
Pooled		bonds
bonds
funds

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

Other

Total

$73

$7,939 $196,500 $— $204,512

—

3,329

3,634

—

6,963

(37)

1,744

2,183

—

3,890

(24)
—
$12

(3,329)964 5,488
3,099
—
—
—
—
$9,683 $203,281 $5,488 $218,464

SECOM Annual Report 201257

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

The Company expects to contribute ¥5,784 million ($70,537
thousand) to its domestic defined benefit plans in the year ­ending
March 31, 2013.
The following benefit payments, which reflect future s­ ervices, as
appropriate, are expected to be paid.
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2013.....................................................
2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
2018–2022............................................

¥ 4,572
4,830
3,974
4,731
4,466
26,195$ 55,756
58,902
48,46357,69554,463
319,451

The parent company and certain subsidiaries have defined contribution pension plans. The contributions to the defined contributionpen­sion plans for the years ended March 31, 2012, 2011 and 2010
were ¥1,613 million ($19,671 thousand), ¥1,596 million and¥1,468 million, respectively.
16. Exchange Gains and Losses
Other expenses for the years ended March 31, 2012 and 2011
include net exchange losses of ¥145 million ($1,768 thousand) and¥635 million, respectively. Other income for the year ended March
31, 2010 includes net exchange gains of ¥552 million.
17. Income Taxes
Total income taxes for the years ended March 31, 2012, 2011
and 2010 were allocated as follows:

The parent company and its domestic subsidiaries were ­subject toa corporate tax of 30 percent, an inhabitants tax of approximately
20.3 percent, and a deductible enterprise tax of approximately 7.4
percent, which, in the aggregate, results in a statutory tax rate inJapan of approximately 40.5 ­percent for the years ended March 31,
2012, 2011 and 2010.
Due to the promulgation on December 2, 2011 of the Act for
Partial Amendment of the Income Tax Act, etc. for the Purpose of
Creating a Taxation System Responding to Changes in Economic
and Social Structures and the Act on Special Measures for Securing
Financial Resources Necessary to Implement Measures for Reconstruction Following the Great East Japan Earthquake, the statutory
tax rate used to calculate the deferred tax assets and liabilities forthe year ended March 31, 2012 changed mainly from 40.5 percent
to 37.8 percent for those scheduled for collection or payment­during the period from April 1, 2012 to March 31, 2015, and to
35.4 percent for those scheduled for collection or payment on orafter April 1, 2015. As a result, income taxes for the year ended
March 31, 2012 increased by ¥2,464 million ($30,049 thousand).
Reconciliations of the differences between income taxes­computed at statutory tax rates and income taxes from continuing
operations were as follows:		In thousands of2012

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2010

Income taxes computed
at statutory tax rate of
40.5%................................. ¥32,853 ¥43,677 ¥38,344
		In thousands ofIn millions of yen
U.S. dollars
Increase (decrease)resulting from:Years ended
Year ended
March 31
March 31
Unrecognized tax
benefits from
2012
2011
2010
2012
subsidiaries in loss
Income frompositions.......................... 7,905
97
7,280
continuing operations.......... ¥38,202 ¥43,277 ¥45,631$465,878
Reversal of valuation
Income fromallowance due todiscontinued operations.......
—
—
(317)
—
utilization of operating
Shareholders’ equity—
loss carryforwards............ (6,000)
(736)
(955)
accumulated otherNet effect of changes incomprehensive
the corporate tax rates..... 2,464——
income (loss):
Per capita tax.....................
806
831
817
Unrealized holding gains
Other, net..........................
174
(592)
145
(losses) on securities......... 1,236 (1,946) 5,401
15,072
		Income
taxes
Unrealized gains
		 from continuing
on derivative		 operations.................... ¥38,202 ¥43,277 ¥45,631
instruments......................
—
—
107
—
Pension liability
adjustments.....................
(763)
(654)
857
(9,304)Foreign currencytranslation
adjustments.....................
—— 1,020—
Equity transactions with
noncontrolling interest
and other ............................
—
(154)
—
—
		...................................... ¥38,675 ¥40,523 ¥52,699$471,646

58

SECOM Annual Report 20122012

$400,646

96,403(73,171)
30,0499,829
2,122$465,878

The significant components of deferred tax assets and liabilities
at­March 31, 2012 and 2011 were as follows:

making this assessment. Based upon the level of historical taxable
income and projec­tions for future taxable income over the periods
in which the deferred tax assets are deductible, the Company man		
In thousands ofagement believes it is more likely than not that the Company will
In millions of yen
U.S. dollars
realize the benefits of these deductible differences, net of the
March 31
March 31
­existing valuation allowance at March 31, 2012 and 2011.
		
2012
2011
2012
Net deferred tax assets at March 31, 2012 and 2011 are reflected
Deferred tax assets:in the accompanying consolidated balance sheets under the
Loss carryforwards.......................... ¥11,137 ¥19,372$135,817­following captions:Deferred revenue............................ 10,015 11,580
Property, plant andequipment...................................
7,454
5,528
Accrued pension andseverance costs.............................
7,357
8,164
Adjustment of book value atthe date of acquisition—
		 Land and buildings......................
7,033
7,546
		Other assets................................
285
361
Accrued bonus................................
5,770
5,704
Write-down on real estate
inventories....................................
5,371
1,823
Vacation accrual..............................
3,545
3,806
Allowance for doubtful
accounts.......................................
2,825
3,611
Investment securities.......................
1,941
1,902
Intangible assets.............................
1,594
1,969
Other..............................................
7,241
9,394
		 Gross deferred tax assets............. 71,568 80,760
		 Less: Valuation allowance............ (29,928) (33,699)
		 Total deferred tax assets.............. 41,640 47,061
Deferred tax liabilities:
Deferred installation costs............... (7,920) (9,494)
Adjustment of book value atthe date of acquisition—
		 Land and buildings...................... (5,143) (5,544)
		Other assets................................ (1,357) (1,614)
Investments in affiliatedcompanies.................................... (5,057) (5,111)
Prepaid pension andseverance costs............................. (2,710) (2,543)
Unrealized holding gains on
securities....................................... (2,236) (1,042)
Unearned premiums andother insurance liabilities...............
—(774)
Other.............................................. (4,468) (5,362)
		 Gross deferred tax liabilities......... (28,891) (31,484)
			 Net deferred tax assets ........... ¥12,749 ¥15,577

122,134
90,90289,72085,7683,476
70,36665,50043,232

34,451
23,671
19,43988,305
872,781(364,976)
507,805(96,585)(62,720)(16,549)(61,671)(33,049)(27,268)—(54,488)(352,330)$155,475

The valuation allowance principally relates to deferred tax assetsof the subsidiaries with operating loss carryforwards, for tax purposes, that are not expected to be realized. The net change in the
total valuation allowance for the years ended March 31, 2012,2011 and 2010 was a decrease of ¥3,771 million ($45,988­thousand), an increase of ¥1,604 million and ¥5,232 million,
respectively.
In assessing the realizability of deferred tax assets, the Company
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon 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		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

Deferred income taxes(Current assets)................................ ¥12,853 ¥15,438
Deferred income taxes(Other assets)................................... 10,185 11,824
Other current liabilities.......................
(1,174) (1,858)
Deferred income taxes(Liabilities)........................................
(9,115) (9,827)
		 Net deferred tax assets .............. ¥12,749 ¥15,577$156,744
124,207(14,317)(111,159)$155,475

The Company has not recognized deferred tax liabilities of ¥704
million ($8,585 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥16,212 million ($197,707 thousand)at March 31, 2012 as they are not expected to be remitted in theforeseeable future.
At March 31, 2012, the operating loss carryforwards of domestic
subsidiaries amounted to ¥27,859 million ($339,744 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:		 In thousands ofExpires in the years ending March 31
In millions of yen
U.S. dollars

2013......................................................
2014......................................................
2015......................................................
2016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
..............................................................

¥ 1,339
3,504
2,938
—
—
9,151
7,135
2,244
1,548
¥27,859$ 16,329
42,73235,829——111,598
87,01227,366
18,878$339,744

The operating loss carryforwards of overseas subsidiaries at
March 31, 2012 amounted to ¥3,887 million ($47,402 thousand), apart of which will begin to expire in the year ending March 31, 2013.
The total amount of unrecognized tax benefits for the years
ended March 31, 2012, 2011 and 2010 were insignificant. Also
there were no movements of the gross amounts in unrealized tax
benefits and the amounts of interest and penalties recognized dueto the unrecognized tax benefits during the years ended March 31,
2012, 2011 and 2010.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation
could affect the total amount of unrecognized tax benefits in the
future periods. Based on the information available as of March 31,
2012, the Company does not expect significant changes to theunrecognized tax ­benefits within the next twelve months.

SECOM Annual Report 201259

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regularincome tax examinations by the tax authorities for years before
2009. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2011 with few exceptions.
18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect ofchanges in the Company’s ownership interest in its consolidated
subsidiaries.
The net income attributable to SECOM CO., LTD. and transfersfrom (to) noncontrolling interests for the years ended March 31,
2012, 2011 and 2010 were as follows:

The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act.
(4) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) for the years
ended March 31, 2012, 2011 and 2010 are as follows:
In millions of yen
Pre-tax
amount

For the year ended March 31, 2012:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥3,230
		Less: Reclassification
		Less: adjustment for gains
		In thousands ofIn millions of yen
U.S. dollars
		Less: or losses included in		Less: net income..........................
521
Years ended
Year ended
March 31
March 31
Unrealized gains on derivative
instruments—
		
2012
2011
2010
2012
		 Unrealized gains or losses
Net income attributable		 arising during the year.................
—
to SECOM CO., LTD............... ¥41,237 ¥62,665 ¥46,989$502,890
		Less: Reclassification
Transfers from (to)		Less: adjustment for gains
noncontrolling interests:
		Less: or losses included in		 Decrease in additional
		Less: net income..........................
6		 paid-in capital related toPension liability adjustments—
		 the acquisition of Secom		 Unrealized gains or losses
		 Techno Service Co., Ltd.’s		 arising during the period.............. (1,867)
		 ownership interests..........
(476) (5,692)—(5,805)
		Less: Reclassification
		Other, net...........................
(166)
151 1,101(2,024)		adjustment for gains
		or losses realized
Net transfers from (to)		in net income.......................
(509)
noncontrolling interests.......
(642) (5,541) 1,101(7,829)Foreign currency
Change from net income
translation adjustments.................... (3,432)
attributable to SECOM CO.,			Othercomprehensive
LTD. and transfers from (to)			 income (loss)............................ (¥2,051)
noncontrolling interests......... ¥40,595 ¥57,124 ¥48,090$495,061
For the year ended March 31, 2011:(2) Retained Earnings
Unrealized holding losses on
securities—
The Japanese Companies Act provides that an amount equal to		 Unrealized holding gains or losses
10 percent of surplus distributed by the parent company and its
		 arising during the period.............. (¥ 4,760)
Japanese subsidiaries be appropriated as a legal reserve until the		Less: Reclassification
aggregate amount of additional paid-in capital and legal reserve
		Less: adjustment for gains
equals 25 percent of the ­common stock account.
		Less: or losses included in
The amount available for dividends under the Japanese		Less: net income..........................
(658)
Companies Act ­is based on the amount recorded in the p­ arent
Unrealized gains on derivative
instruments—
company’s nonconsolidated statutory financial statements in accor		 Unrealized gains or losses
dance with Japanese GAAP. Such amount was ¥408,267 million
		 arising during the year.................
3($4,978,866 thousand) at March 31, 2012.
		Less: Reclassification
Subsequent to March 31, 2012, the parent company’s Board of
		Less: adjustment for gains
Directors declared an annual cash dividend of ¥90.00 ($1.10) per		Less: or losses included inshare, totaling ¥19,644 million ($239,561 thousand), to sharehold		Less: net income..........................
9ers of record on March 31, 2012. The dividend declared was
Pension liability adjustments—
		 Unrealized gains or losses
approved at the general shareholders’ meeting held on June 26,
		 arising during the period..............
(1,052)
2012. Dividends are recorded in the year they are declared.
		Less: Reclassification
The Japanese Companies Act provides that a company can make		
adjustment for gains
dividends of surplus anytime with resolution of the shareholders.
		or losses realized		in net income.......................
(574)(3) Common Stock in Treasury
Foreign currency
For the year ended March 31, 2012, common stock in treasurytranslation adjustments....................
(6,399)decreased by ¥1,264 million ($15,415 thousand), primarily due to			Other comprehensive
allotment with respect to the absorption-type merger of Secom			 income (loss)............................ (¥13,431)

Techno Service Co., Ltd.

60

SECOM Annual Report 2012

Tax
(expense)or benefit

Net-of-tax
amount(¥1,009)¥2,221

(227)

294

—

—

—

6

489

(1,378)

274

(235)

—

(3,432)(¥ 473) (¥2,524)¥1,719 (¥ 3,041)

227

(431)

—

3

—

9

424

(628)

230

(344)

—

(6,399)¥2,600 (¥10,831)

In millions of yen
Tax(expense)or benefit

Pre-tax
amount

For the year ended March 31, 2010:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥11,598
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
3,003
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
(5)
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
281
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
2,724
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
(700)
Foreign currencytranslation adjustments....................
2,016
			Other comprehensive
			 income (loss)............................ ¥18,917

Net-of-tax
amount(¥4,382) ¥ 7,216(1,019)

1,984

—

(5)

(107)

174

(1,140)

1,584

283

(417)

(1,020)996

20. Lessee
The Company leases certain office space, employee residen­tial
facilities, computer and transportation equipment. Some leased
buildings, computer and transportation equipment are held undercapital leases. Other leases are classified as o
­ perating leases.
On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The lease term
is 30 years beginning May 1, 1996. On July 15, 2010, the Company
also entered into a long-term lease agreement for the building andland adjoining. The lease term is also 30 years beginning July 15,
2010. For ­financial reporting purposes, the portion of these leasearrangements relating to the building has been classified as a­capital lease; accordingly, an asset of approximately ¥7,209 million($87,915 thousand) has been recorded in the building and improvements 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, 2012 were ¥6,652 ­million($81,122 thousand).
A summary of leased assets under capital leases at March 31,
2012 and 2011 is as follows:		In thousands of(¥7,385) ¥11,532

In thousands of U.S. dollars
Pre-tax
amount19. Research and Development Expenses
Research and development expenses included in selling, generaland administrative expenses for the years ended March 31, 2012,2011 and 2010 were ¥6,083 million ($74,183 thousand), ¥6,755
million and ¥5,952 million, respectively.

Tax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2012:
Unrealized holding gains on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period.................................... $39,390 ($12,304) $27,086
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
6,354(2,768)
3,586
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
———
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
73—
73
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period.............. (22,768)
5,963 (16,805)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income....................... (6,207)
3,341(2,866)
Foreign currencytranslation adjustments.................... (41,854)— (41,854)
			Other comprehensive
			 income (loss)............................ ($25,012) ($ 5,768) ($30,780)

In millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

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

¥ 8,235 ¥ 8,209$100,427

10,349 14,072
127
306(8,215) (10,996)¥10,496 ¥11,591

126,207
1,549(100,183)$128,000

Depreciation expenses for assets under capital leases for the years
ended March 31, 2012, 2011 and 2010 were ¥2,630 million($32,073 thousand), ¥3,368 million and ¥3,402 million,­respectively.
The following is a schedule by year of future minimum lease­payments under capital leases and the present value of the net­minimum lease payments at March 31, 2012:
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2013........................................................
2014........................................................
2015........................................................
2016........................................................
2017........................................................
Thereafter.................................................
Total minimum lease payments.................
Less: Amount representing interest...........
Present value of net minimum
lease payments (Note 13)........................
Less: Current portion................................
Long-term capital leaseobligations..........................................

¥ 2,664
2,078
1,674
1,098
793
8,755
17,062(5,388)$ 32,488
25,341
20,415
13,3909,671
106,768
208,073(65,707)

11,674(2,253)

142,366(27,476)¥ 9,421$114,890

SECOM Annual Report 2012

61

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

Rental expenses under operating leases for the years ended
March 31, 2012, 2011 and 2010 were ¥16,419 million ($200,232
thousand), ¥16,504 million and ¥14,290 million, respectively. A­significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon ­expiration.
On December 8, 2000, the Company entered into a lease­agreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial­reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, annual lease payments for the site
are approximately ¥1,299 million ($15,841 thousand) over a
20-year period.
The future minimum lease payments required under operat­ing
leases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2012 are as follows:

The following is a schedule by year of future minimum lease­ ayments to be received under sales-type leases and direct-­pfinancing leases at March 31, 2012:

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

		In thousands of2013........................................................
2014........................................................
2015........................................................
2016........................................................
2017........................................................
Thereafter.................................................
Total future minimum lease
payments............................................

¥ 2,312
2,259
2,228
2,207
2,205
13,444$ 28,195
27,54927,171
26,91526,890163,951¥24,655$300,671

21. Lessor
The Company’s leasing operations consist principally of leasingof security merchandise and real estate for office and medical
institutions. Most of the security merchandise and certain realestate for medical institutions on lease are classified as sales-typeleases or direct-financing leases. Other leases are ­classified as­operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2012 and 2011 is as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2013........................................................
2014........................................................
2015........................................................
2016........................................................
2017........................................................
Thereafter.................................................
Total future minimum lease
payments to be received.....................

March 31

March 31

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.....

¥34,950 ¥34,327(2,982) (2,980)$426,220(36,366)

1,261 1,261(6,911) (7,013)
26,318 25,595(7,882) (7,748)¥18,436 ¥17,847

15,378(84,281)
320,951(96,122)$224,829$109,916
86,70765,634
44,58520,92798,451¥34,950$426,220

A summary of investment in property under operating leases andproperty held for lease at March 31, 2012 and 2011 is as follows:
In millions of yen

U.S. dollars

March 31

March 31

		
2012
2011
2012

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

¥36,950 ¥29,820
29,426 26,255
662
662(9,190) (8,519)¥57,848 ¥48,218$450,610
358,854
8,073(112,074)$705,463

The future minimum rentals under noncancelable operatingleases at March 31, 2012 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2013........................................................
2014........................................................
2015........................................................
2016........................................................
2017........................................................
Thereafter.................................................
		In thousands ofTotal future minimum rentals................
In millions of yen
U.S. dollars
		
2012
2011
2012

¥ 9,013
7,110
5,382
3,656
1,716
8,073

¥2,295
597
425
297
297
5,745
¥9,656$ 27,988
7,280
5,183
3,622
3,622
70,061$117,756

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

62

SECOM Annual Report 2012

(4) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current p­ ortion
was estimated based on the discounted amounts of future cash
flows of each instrument at the Company’s current incremental­borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are­estimated by discounting future cash flows using the interest rates
currently being offered for similar contracts.
(6) Derivatives
The fair values of interest rate swaps are estimated using
current market pricing models by obtaining quotes from ­financial
institutions.
The carrying amounts and estimated fair values of finan­cial instruments, excluding debt and equity securities, which are d­ isclosed in
Notes 2 (7) and 7 at March 31, 2012 and 2011 are as follows:		

In millions of yen

		March 31

2012
Carrying
amountNon-derivatives:
Liabilities—
		Long-term debt
		 including current		 portion............................ ¥59,076
		Investment deposits
		 by policyholders.............. 30,755
Derivatives:
Liabilities—
		 Forward exchange contract		 (Other current liabilities)...
—		 Interest rate swaps
		 (Other liabilities)..............
160

Estimated
fair value

2011
Carrying
amountEstimated
fair value¥59,205 ¥64,938¥65,078

31,171

41,643

41,671

—

286

286

160

160

160

In thousands of U.S. dollars
March 31, 2012
Carrying
amountNon-derivatives:
Liabilities—
		 Long-term debt including current		 portion....................................................
		Investment deposits
		 by policyholders......................................
Derivatives:
Liabilities—
		 Interest rate swaps (Other liabilities)..........

Estimated
fair value

23. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines
fair value as the price that would be received to sell an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or ­liability in an orderly transaction
between market participants at the measurement date. Thisaccounting standard establishes a three-level fair value hierarchy
that prioritizes the inputs used to measure fair value as follows:
Level 1— Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, andinputs that are derived principally from or corroborated
by observable market data by correlation or othermeans.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’s own
assumptions about the assumptions that market­participants would use in establishing a price.
The following table represents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2012 and 2011.
		

In millions of yen
March 31, 2012

Assets:Cash equivalents......
Short-term
investments andinvestment
securities................
Total assets..................
Liabilities:
Derivatives(Other liabilities).....
Total liabilities..............

Level 1

Level 233

¥ 2,609¥

96,716¥96,749

16,007¥18,616

27,368¥27,368

140,091¥142,733

¥
¥

¥
¥

¥
¥

¥
¥

¥

—
—

160
160

Level 3—

1,951

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

2,642

160
160

In millions of yen
March 31, 2011

$720,439 $722,012

1,951

¥

—
—

		

375,061 380,134

Total

Assets:Cash equivalents......
Short-term
investments andinvestment
securities................
Total assets..................
Liabilities:
Derivatives(Other current
liabilities)................
Derivatives(Other liabilities).....
Total liabilities..............

Level 1

Level 235

¥ 2,609¥

88,643¥88,678

21,419¥24,028

27,431¥27,431

137,493¥140,137

¥

—

¥

286

¥

—

¥

286

¥

—
—

¥

160
446

¥

—
—

¥

160
446

¥

Level 3

—

Total

¥

2,644

SECOM Annual Report 2012

63

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

In thousands of U.S. dollars
March 31, 2012
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents...... $403 $ 31,817 $— $ 32,220
Short-term
investments andinvestment
securities................ 1,179,463 195,207 333,756
1,708,426
Total assets.................. $1,179,866 $227,024 $333,756 $1,740,646
Liabilities:
Derivatives(Other liabilities)..... $Total liabilities.............. $

— $
— $

1,951 $
1,951 $

— $
— $

1,951
1,951

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are not active.
Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market price in active markets with
sufficient volume and frequency of transactions.
Level 2 assets are comprised principally of debt securities, which
are valued using quoted prices for similar assets in active markets,or quoted price for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date.
Derivative Financial Investments
Derivative financial instruments are comprised of forward exchange
contracts and interest rate swaps. These derivative instruments arevalued using observable market data and classified as Level 2
liabilities.

Total gains or losses (realized or unrealized) related to short-term
investments and investment securities are primarily included in
net sales and operating revenue or gain/loss on private equity
investments, in the consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of ¥9,801
million ($119,525 thousand) were written down to their fair valueof ¥9,756 million ($118,976 thousand), resulting in an other-thantemporary impairment charge of ¥45 million ($549 thousand),
which was included in earnings for the year ended March 31, 2012.
For the year ended March 31, 2011, non-marketable equity­securities with a carrying amount of ¥10,687 million were written
down to their fair value of ¥10,407 million, resulting in an otherthan-­temporary impairment charge of ¥280 million, which was
included in earnings. All impaired non-marketable equity securities
were classified as Level 3 assets as the Company uses unobservable
inputs to value these investments.
Long-lived assets (Note 11) and goodwill (Note 12) are also­measured at fair value on a nonrecurring basis. All impaired longlived assets and goodwill were classified as Level 3 assets as theCompany uses u­ nobservable inputs to value these assets.
24. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rates. The Company assesses interest rate risk by con­tinuallymonitoring changes in the exposure and by evaluating hedging
opportunities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company is also
exposed to credit-related losses in the event of non-­perfomance bycounterparties to derivative financial instru­ments, but it is notexpected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognizedfinancial institutions and contracts are diversified amongst a­number of major financial institutions.

The following table represents the changes in Level 3 assets(2) Risk Management­ easured on a recurring basis for the years ended March 31, 2012m
The Company has exposure to the market risk of changes inand 2011.
interest rates which relates ­primarily to its debt obligations. The
		In thousands ofCompany principally enters into interest rate swap agreements to
In millions of yen
U.S. dollars
manage fluctuations in cash flows resulting from changes in interest
Years ended
Year ended
rates. Interest rate swaps are used to change floating rates on debt
March 31
March 31
obligations to fixed rates by entering into receive-floating, pay-fixed
		
2012
2011
2012
interest rate swaps under which the Company receives floating
Balance at beginning of year............... ¥27,431 ¥29,155$334,524
interest rate ­proceeds and makes fixed interest rate payments,
Total gains or losses
thereby ­effectively creating fixed-rate debt.

64(realized or unrealized):		 Included in earnings....................
3,998 5,242
		 Included in other		 comprehensive income..............
19
975
Purchases........................................
4,055 1,941
Sales...............................................
(6,662) (5,385)
Redemptions...................................
(235) (1,311)
Foreign currency translation
adjustments..................................
(1,238) (3,186)
Balance at end of year........................ ¥27,368 ¥27,431(15,097)$333,756

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
		 Included in earnings.................... ¥ 1,736 ¥ 5,806$ 21,171

SECOM Annual Report 2012

48,756232
49,451(81,244)(2,866)(3) Cash Flow Hedge
The Company ­designates interest rate swap agreements as cash
flow hedges for variability of cash flows originated from floating
rate borrowings. All of the interest rate swap ­agreements havematured by March 31, 2012. The ­effective portion of changes infair values of derivative ­instruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The

ineffective portion of changes in fair values are reported in income
immediately. The sum of the amount of the hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the years ended March 31, 2012,2011 and 2010 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
At March 31, 2012 and 2011, the notional principal amount ofinterest rate swap agreements designated as cash flow hedges wasnil and ¥1,000 million, respectively.

Derivatives not designated as hedging instruments
		In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2010

2012

Forward exchange Other expenses
contract		¥ — (¥286)
Interest rate swaps Other expenses ¥ 9 (¥ 31)

¥—
(¥81)

$ —
$110

Location

2012

In millions of yen(4) Derivative Instruments Not Designated as Hedges
The Company enters into forward exchange contracts to reduce
exposure to fluctuations in currency rates relating to time deposits,
and interest rate swap agreements to reduce exposure to fluctuations in interest rates relating primarily to debt obligations. Changes
in fair value of the above noted derivative financial instruments,
which are not d­ esignated as hedges, are reported in current income.

25. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2012
for the ­purchase of property, plant and equipment of approximately¥6,227 million ($75,939 thousand).
The Company provides guarantees to third parties mainly withrespect to bank loans extended to its affiliated companies and otherentities. Such guarantees are provided to enhance the credit standing of the affiliated companies and other entities. For each guaranFair values of derivative instruments reflected in the consolidated
tee provided, the Company would have to per­form under thebalance sheet as of March 31, 2012 and 2011 are as follows:
guarantee, if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
Derivatives designated as hedging instruments
maximum amount of undiscounted pay­ments the Company would
Liabilities:
have to make in the event of default amounts to ¥1,686 million		In thousands of($20,561 thousand) at March 31, 2012. The carrying amounts ofIn millions of yen
U.S. dollars
the liabilities recognized for the Company’s obligations under these
March 31
March 31
­guarantees at March 31, 2012 and 2011 were deemed insignificant.
Location
2012
2011
2012
Loss related to spectrum reallocation is for disposal and replaceInterest rate swaps
Other liabilities¥—¥8$—
ment of equipment, since the allotted spectrum currently used in
COCO-SECOM will no longer be available after July 2012 as a result
Derivatives not designated as hedging instrumentsof spectrum reallocation by the government.
Liabilities:
Pasco Corporation, a subsidiary of the parent company, filed a		In thousands oflawsuit against Sumitomo Mitsui Banking Corporation asking for
In millions of yen
U.S. dollars
a confirmatory judgment to the effect that it does not owe an
March 31
March 31
obligation in the amount of ¥2,010 million to Sumitomo Mitsui
Location
2012
2011
2012
Banking Corporation with the Tokyo District Court on October
Forward exchange
Other current
31, 2005. Sumitomo Mitsui Banking Corporation alleged that it
contract
liabilities
¥ —
¥286
$ —
made a loan to a third party and acquired from the third party its
Interest rate swaps
Other liabilities
¥160
¥152
$1,951claim against Pasco Corporation for an alleged sale of equipment
to Pasco Corporation, as collateral for the loan, and demanded
Effects of derivative instruments on the consolidated statements
Pasco Corporation to pay such claim to Sumitomo Mitsui Banking
of income for the years ended March 31, 2012, 2011 and 2010 are
Corporation. On December 5, 2005, Sumitomo Mitsui Banking
as follows:
Corporation brought a cross action against Pasco Corporationin ­relation to a demand for payment of a transferred receivable.
Derivatives designated as cash flow hedging instruments
Subsequently, both actions were consolidated according to a court
Gains (losses) recognized in other comprehensive income
procedure. The oral argument was concluded on October 31, 2008,(effective portion)and on March 27, 2009 Tokyo District Court rendered the following		In thousands ofjudgement:
In millions of yen
U.S. dollars
Years ended
March 31

Year ended
March 31

Years ended
March 31

Year ended
March 31

1.		Pasco Corporation must pay money to Sumitomo Mitsui Banking
Corporation in an amount of ¥2,010 million as well as interest at
		
2012
2011
2010
2012
the rate of 6 percent per annum on ¥600 million, fromInterest rate swaps
¥—
¥4
(¥6)
$—
November 1, 2005, and on ¥1,410 million, from December 1,
2005, up to the full payment of the respective amounts;
Gains (losses) reclassified from accumulated other comprehensive
2.		Pasco Corporation incurs the cost of lawsuits including the costincome into income (effective portion)
caused by supplementary participation; and		In thousands of
3.		The judgement can be provisionally executed.
In millions of yen
U.S. dollars

LocationInterest rate swaps Other expenses

2012

2010

2012

(¥8) (¥12) (¥358)

($98)

2011

Pasco Corporation appealed the case to the Tokyo High Court on
April 6, 2009.
Following the decision, Pasco Corporation provided a reserve for
litigation loss of ¥2,415 million for the year ended March 31, 2009.

SECOM Annual Report 2012

65

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements

On May 10, 2010, Pasco Corporation and Sumitomo Mitsui
Banking Corporation reached a settlement under which Pasco
Corporation will pay to Sumitomo Mitsui Banking Corporation an
amount of ¥1,750 million, after several oral proceedings and­settlement negotiations at the Tokyo High Court.
Pursuant to the settlement, Pasco Corporation accounted for¥781 million as a reversal of reserve for litigation loss in the year
ended March 31, 2010, and provided for ¥1,770 million, a sum of
the above settlement amount and related litigation expenses, in the
consolidated balance sheet as of March 31, 2010. These amounts
were paid in the year ended March 31, 2011.
In the year ended March 31, 2012, Pasco Corporation recognizedand paid ¥799 million ($9,744 thousand) for legal settlement
related to software.
Other than those above, it is not anticipated that damages, if any,
resulting from other legal actions will have a material impact on the
Company’s consolidated financial statements.
26. Discontinued Operations
The Company accounted for the sale of certain businesses inaccordance with ASC 205-20, “Discontinued Operations.” The
Company sold all of the shares of Japan Image Communications
Co., Ltd., and Asia Pacific Business Link Ltd., included in the information and communication related and other services segment, inAugust and December 2009, respectively. The Company reported
the operating results related to these ­operations as discontinued
operations.
Discontinued operations for the year ended March 31, 2010 wereas follows:
In millions of yen

Net sales and operating revenue........................................
Income from discontinued operations
before income taxes.........................................................
Gain on sales of discontinued operations...........................
Income taxes......................................................................
Income from discontinued operations, net of tax...............

¥2,135Attributable to noncontrolling interests..............................
Attributable to SECOM CO., LTD. ......................................

(¥ 23)¥1,331260
777
317¥1,354

Income from discontinued operations, net of tax, by businesssegment for the year ended March 31, 2010 were as follows:
In millions of yen

Security services.................................................................
Medical services.................................................................
Information and communication related
and other services............................................................
Income from discontinued operations, net of tax...............

66

SECOM Annual Report 2012

¥ 110
1
1,243
¥1,354

27. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:		In thousands of2012

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2012

2010

Cash paid during theyear for:
Interest................................ ¥ 1,601 ¥ 1,689 ¥ 1,830
Income taxes....................... 38,538 39,719 36,719
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases........... 2,604 4,240 3,963
Acquisitions (Note 4)—
		 Fair value of		 assets acquired...............
—— 15,160
		 Fair value of		 liabilities assumed...........
—— 10,427
		Total considerations.......... ¥—¥— ¥ 4,733$ 19,524
469,976

31,756—$——

28. Segment Information
The Company discloses financial and descriptive ­information
about the Company’s reportable operating segments. The ­operating
segments reported below are the segments of the Company forwhich separate financial information is available and for which operating profit/loss amounts are evaluated regu­larly by m
­ anagement indeciding how to allocate resources and assess performance.
The Company has seven reportable business segments: security
services, fire protection services, medical services, insurance services,
geographic information services, real estate development and sales,
and information and communication related and other services.
The security services segment provides various types of secu­rity
services by utilizing the Company’s unique security systems andmanufacturing and selling security merchandise. The fire protection
services segment provides various types of fire protection equipment, such as automatic fire alarm and fire extinguishing and otherfire protection systems for office buildings, plants, tunnels, ships,
residences and cultural monuments. The medical ser­vices segmentprovides intravenous solutions to patients at home, home-based­nursing care services, medical data trans­mission services by utilizing
the Company’s network and leas­ing of real estate for medical institutions. In addition, the VIEs of which the Company is primary beneficiary manage hospitals and health ­care-related institutions. The
insurance services s­ egment represents non-life insurance-related
underwriting business in the Japanese market. The geographic
information services segment represents surveying and measuringservices and GIS services. The real estate development and sales­segment represents development and sales of condominiums thatreinforce security. The information and communication related andother services ­segment represents the Company’s network business,leasing of real estate and ­management of hotel business.
Corporate expenses consist principally of general and administrative expenses of the planning, personnel and admin­istrative departments of the parent company and administrative departments ofthe foreign holding company.
Intersegment sales are priced on a basis intended to ­approximate
amounts charged to unaffiliated customers.

Identifiable assets are those assets used exclusively in the operations of each segment or which are allocated when used jointly.
Corporate assets, which are held by the parent company and theforeign holding company for general and administra­tive facilities,­consist principally of cash and cash equivalents, short­-term investments, investment securities, land, buildings and improvements,
machinery and equipment.
Information by business and geographic segments for the years
ended March 31, 2012, 2011 and 2010 is as follows:		In thousands of2012

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2010

2012

2011

Operating income (loss):
Security services............. ¥101,416 ¥ 99,855 ¥101,623$1,236,780
Fire protection
services........................
4,443
3,158
4,193
54,183
Medical services.............
7,884
1,771
2,254
96,146
Insurance services..........
(80)
(180)
(1,503)(975)(1) Business Segment Information
Geographic information
services........................
3,449
3,393
2,177
42,061		In thousands ofReal estate development
In millions of yen
U.S. dollars
and sales......................
(21,598)525(3,702)(263,390)
Years ended
Year ended
Information andMarch 31
March 31
communication related
2012
2011
2010
2012
and other services........
(4,037)3,239
3,850(49,232)
Net sales andTotal..............................
91,477111,761
108,892
1,115,573
operating revenue:
Corporate expenses
Security services—and eliminations..........
(12,651)(11,329)(11,714)(154,280)
		Customers.................... ¥434,667 ¥424,706 ¥424,385$5,300,817
Operatingincome..........
¥
78,826¥100,432¥
97,178$961,293
		Intersegment.................
1,791
2,095
1,975
21,841Other income.................
7,527
11,8705,352
91,793
			.................................. 436,458
426,801
426,360
5,322,658
Other expenses..............
(5,233)(4,458)(7,854)(63,818)
Fire protection services—		 Income from continuing		Customers.................... 80,678
75,17680,132
983,877		 operations before
		Intersegment.................
4,093
4,887
4,297
49,915		 income taxes
			.................................. 84,771
80,06384,4291,033,792
		 and equity in net
Medical services—		 income of affiliated		Customers.................... 134,550
125,020
56,3091,640,854
		 companies................ ¥ 81,120 ¥107,844 ¥ 94,676$ 989,268
		Intersegment.................
148
151
123
1,805
		
In thousands of			.................................. 134,698
125,171
56,432
1,642,659
In millions of yen
U.S. dollars
Insurance services—
March 31
March 31
		Customers.................... 33,558
33,13329,142409,244
2012
2011
2010
2012
		Intersegment.................
2,750
2,635
2,982
33,536
Assets:			.................................. 36,308
35,76832,124
442,780
Security services............. ¥ 418,333 ¥ 400,428 ¥ 398,333 $ 5,101,622
Geographic information
Fire protection
services—
services........................
85,78680,346
79,761
1,046,171
		Customers.................... 50,173
43,53941,918611,866
Medical services............. 167,644
161,877
131,061
2,044,439
		Intersegment.................
216
167
140
2,634
Insurance services.......... 167,436
177,571
190,329
2,041,902
			.................................. 50,389
43,70642,058614,500
Geographic
information services.....
65,96858,69758,092804,488
Real estate development
Real estateand sales—development
		Customers.................... 11,724
24,817
13,268142,976and sales......................
42,92760,431
77,948523,500
		Intersegment.................
526
95
188
6,415
Information and			.................................. 12,250
24,912
13,456
149,391
communication relatedInformation andand other services........
94,851
88,881
89,911
1,156,720
communication related
Total..............................
1,042,945
1,028,231
1,025,435
12,718,842
and other services—
Corporate items.............
97,140103,943
70,0991,184,634
		Customers.................... 27,132
25,47725,490330,878
Investments in		Intersegment.................
6,800
6,541
8,044
82,927
affiliated companies.....
39,73938,97842,613484,622
			.................................. 33,932
32,01833,534
413,805
		Total assets.................. ¥1,179,824 ¥1,171,152 ¥1,138,147 $14,388,098
Total................................ 788,806
768,439
688,3939,619,585
Eliminations..................... (16,324)(16,571)(17,749)(199,073)
		 Total net sales and		 operating revenue....... ¥772,482 ¥751,868 ¥670,644$9,420,512

SECOM Annual Report 2012

67

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Consolidated Financial Statements(2) Geographic Segment Information		In thousands ofIn millions of yen
U.S. dollars
Net sales and operating revenue attributed to countries based onYears ended
Year ended
location of customers and long-lived assets for the years ended
March 31
March 31
March 31, 2012, 2011 and 2010 were as follows:2012

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

2011

2010

2012

¥43,806¥44,604¥45,694$534,220

1,836
6,167
1,601

1,490
5,137
1,200

1,428
2,253
1,017

22,39075,207
19,524

1,812

1,666

1,857

22,098

42

48

46

512

		
In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2010

2012

Net sales andoperating revenue:
Japan......................... ¥743,727 ¥726,381 ¥649,523
Other.........................
28,75525,487
21,121
		Total....................... ¥772,482 ¥751,868 ¥670,644$9,069,841
350,671$9,420,512

2012

2011

		
In thousands of
2,580
57,844273

2,587
56,732219

2,577
54,872258

31,464705,415
3,329¥58,117¥56,951¥55,130$708,744¥33,853¥27,643¥27,154$412,841

670
5,573
26

3,602
5,563
14

1,804
4,069
275

8,171
67,963
317

2,162

2,166

883

26,366

20,60920,12919,823

251,329

62,961

55,67654,890767,817¥434,667 ¥424,706 ¥424,385$5,300,817

In millions of yen

U.S. dollars

March 31

March 31

2010

2012

Long-lived assets:
Japan........................ ¥399,901 ¥395,884 ¥352,028
Other........................
5,857
5,161
3,834
		Total...................... ¥405,758 ¥401,045 ¥355,862$4,876,841
71,427$4,948,268

2012

2011

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.

29. Subsequent Events
On January 10, 2012, the parent company entered into ashare transfer agreement with JS Group Corporation and LIXIL
17
19
2
207
Corporation, its consolidated subsidiary, to acquire 100% ofcommon shares outstanding (14,328,000 shares) of LIXIL NITTAN
Co., Ltd., held by LIXIL Corporation, on April 1, 2012. The parent
12,586
3,157
4,477
153,488
company purchased all of the shares for ¥12,700 million ($154,878
54,88742,164
38,664
669,353
thousand), financed with available cash. LIXIL NITTAN Co., Ltd.
107
34
55
1,305
changed its name to Nittan Co., Ltd. (“Nittan”) on April 1, 2012.
The Company, primarily through its consolidated subsidiary¥54,994¥42,198¥38,719$670,658
Nohmi Bosai Ltd., provides automatic fire alarm systems, fire
extinguishing systems and other fire protection systems. Nittan
The capital expenditures in the above table represent themainly provides installation, sales, maintenance and checks of vari­additions to property, plant and equipment of each segment.
ous fire alarms and extinguishers. As a result of this acquisition, the
The Company has no single customer that accounts for more
Company expects to enhance its fire protection services by utilizing
than 10 percent of total revenues.
marketing channels and the ability to develop new products, which
The following table is a breakdown of security services revenue toboth companies have developed. The acquisition also will enable
external customers by service category. The security services busithe Company to pursue research and development of future disasness is managed as a single operating segment by the ­Company’s
ter prevention systems to meet the change in awareness of disastermanagement.
prevention resulting from the Great East Japan Earthquake and		In thousands oflarge typhoon. Moreover, the acquisition supports the Company’s
In millions of yen
U.S. dollars
strategic plan to accelerate the expansion of the Company’s global
Years ended
Year ended
businesses.
March 31
March 31
Estimated fair values of certain assets acquired and liabilities
2012
2011
2010
2012
assumed at the date of acquisition have not been finalized.
Electronic security
Goodwill that may arise will be included in the fire protection
services........................ ¥304,408 ¥302,529 ¥303,459$3,712,293
services segment and will not be deductible for tax purposes.
Other security services:
The Company has evaluated subsequent events through July 30,
Static guard
2012, the date at which the financial statements were available toservices....................
46,68946,372
46,213569,378
be issued, and determined there are no other items to disclose.
Armored car
services....................
Merchandise andother ..........................
Total security
services....................

68

SECOM Annual Report 2012

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

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

We have audited the accompanying consolidated balance sheets of SECOM CO., LTD. and subsidiaries (the “Company”) as of March 31,
2012 and 2011, and the related consolidated statements of income, changes in equity and cash flows for each of the years in the three-year
period ended March 31, 2012, all expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s­management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material­misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, e­ vidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by­management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and subsidiaries as of March 31, 2012 and 2011, and the results of their operations and their cash flows for each of theyears in the three-year period ended March 31, 2012, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company adopted Accounting Standards Update No. 2009-17,
Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, in the year ended March 31, 2011.
The accompanying consolidated financial statements as of and for the year ended March 31, 2012 have been translated into UnitedStates dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial­statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 to the consolidated
financial statements.

Tokyo, Japan
July 30, 2012

SECOM Annual Report 2012

69

OTHER FINANCIAL DATACONTENTSSUMMARY OF SELECTED FINANCIAL DATA................................................................. 71
COMMON STOCK DATA............................................................................................. 73

70

SECOM Annual Report 2012

SUMMARY OF SELECTED FINANCIAL DATASECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2012

2011

2010

2009

2008

2007

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue......................................................... ¥772,482 ¥751,868 ¥670,644 ¥684,016 ¥701,836 ¥631,945
424,706
424,385436,918
435,306
415,410
Security services:............................................................................. 434,667
56.5%
63.3%
63.9%
56.3%
62.0%
65.7%
				 As a percentage of net sales and operating revenue............
302,529
303,459
308,279
304,408
301,521291,393
		 Electronic security services—
40.2
45.2
45.1
39.4
43.0
46.1
				 As a percentage of net sales and operating revenue............
		 Other security services—
46,372
46,21347,99946,64842,144
			Static guard services................................................................ 46,689
6.2
6.9
7.0
6.0
6.6
6.7
				 As a percentage of net sales and operating revenue............
20,12919,823
20,31019,547
20,308
			Armored car services................................................................ 20,609
2.7
3.0
3.0
2.7
2.8
3.2
				 As a percentage of net sales and operating revenue............
66,501
66,03668,30966,19562,452					Subtotal........................................................................... 67,298
55,67654,89060,33067,59061,565
		 Merchandise and other............................................................... 62,961
7.4
8.2
8.8
8.2
9.6
9.7
				 As a percentage of net sales and operating revenue............
75,17680,132
84,17582,57227,448Fire protection services.................................................................... 80,678
10.0
11.9
12.3
10.4
11.8
4.3
				 As a percentage of net sales and operating revenue............
125,020
56,30952,22050,74145,852
Medical services.............................................................................. 134,550
16.6
8.4
7.6
17.4
7.2
7.3
				 As a percentage of net sales and operating revenue............
33,13329,142
21,53033,22931,978Insurance services........................................................................... 33,558
4.4
4.3
3.2
4.4
4.7
5.1
				 As a percentage of net sales and operating revenue............
43,53941,91840,20739,37636,438Geographic information services..................................................... 50,173
5.8
6.3
5.9
6.5
5.6
5.8
				 As a percentage of net sales and operating revenue............
24,817
13,26822,07229,92845,431
Real estate development and sales.................................................. 11,724
3.3
2.0
3.2
1.5
4.3
7.2
				 As a percentage of net sales and operating revenue............
Information and communication related
25,47725,49026,89430,68429,388and other services......................................................................... 27,132
3.4
3.8
3.9
3.5
4.4
4.6
				 As a percentage of net sales and operating revenue............
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD...................................... ¥ 41,237
Cash dividends (paid)(2)........................................................................ 19,623
SECOM CO., LTD. shareholders’ equity............................................... 612,855
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt
		Bank loans..................................................................................
		 Current portion of long-term debt...............................................
		Straight bonds.............................................................................
		 Other long-term debt..................................................................
			Total debt................................................................................
SECOM CO., LTD. shareholders’ equity...........................................
			Total capitalization...................................................................
Return on total assets (percentage) (a)...................................................
Return on equity (percentage) (b)..........................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization........................................................
Rental expense under operating leases............................................
Ratio of accumulated depreciation to depreciable
assets (percentage)...........................................................................
Net property turnover (times) (c)...........................................................
Before-tax interest coverage (times) (c)(d)................................................

¥ 62,665
18,533
593,495¥ 46,989
18,533569,799¥ 30,560
19,122528,721¥ 61,756
17,998574,554¥ 55,889
13,499551,732

5.7
3.1
1.4
3.8
14.0
86.0
100.0
3.5
6.7

6.8
1.7
2.0
5.5
16.0
84.0
100.0
5.4
10.6

6.5
1.6
2.6
3.6
14.3
85.7
100.0
4.1
8.2

11.9
2.4
1.9
3.6
19.8
80.2
100.0
2.7
5.8

17.5
1.2
1.8
4.0
24.5
75.5
100.0
4.9
10.7

17.4
1.4
1.9
3.6
24.3
75.7
100.0
4.5
10.1

7.5
2.1

7.6
2.2

8.2
2.1

7.9
2.2

8.2
2.3

9.1
2.5

63.4
2.49
51.8

62.5
2.49
65.1

64.9
2.55
53.5

64.4
2.66
32.4

63.8
2.81
53.7

62.3
2.54
53.5

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

SECOM Annual Report 2012

71

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Summary of Selected Financial Data

2012

2011

2010

2009

2008

2007

Number of shares outstanding
233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
Issued8,323,599
8,318,900
Owned by the Company........................................... 15,017,691 15,258,553 15,254,334 15,251,520
Balance..................................................................... 218,271,026 218,030,164 218,034,383 218,037,197 224,965,118 224,969,817
Per share information
Net income attributable to SECOM CO., LTD.
¥ 287.41¥ 215.51¥ 137.42¥ 274.51¥ 248.42¥ 188.97
per share (in yen) (1) .................................................
85.00
85.00
85.00
80.00
60.00
90.00
Cash dividends paid per share (in yen) (2) ...................
SECOM CO., LTD. shareholders’ equity
2,722.08
2,613.34
2,424.91
2,553.97
2,452.47
2,807.77
per share (in yen) (3) .................................................
458.62383.36299.72448.19427.34365.28Cash flow per share (in yen) (1) (e) ................................
1.42
1.57
1.50
1.90
2.23
1.44
Price/Book value ratio................................................
13.45
18.98
26.41
17.63
22.02
21.43
Price/Earnings ratio...................................................
8.43
10.67
12.11
10.80
12.80
11.09
Price/Cash flow ratio.................................................
3,865
4,090
3,630
4,840
5,470
4,050
Stock price at year-end (in yen).................................
Notes: (a) Net income attributable to SECOM CO., LTD. / Total assets(b) Net income attributable to SECOM CO., LTD. / SECOM CO., LTD.
shareholders’ equity(c) Including discontinued operations(d)		(Income before income taxes and equity in net income of affiliatedcompanies + Interest expense)/Interest expense(e) (Net income attributable to SECOM CO., LTD. + Depreciation andamortization - Dividends approved) / Average number of shares outstanding
during each period

72

SECOM Annual Report 2012

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2012, cash dividends of ¥19,644 million (¥90.00
per share) were approved at the general shareholders’ meeting on June 26,
2012 (see Note 18 of the accompanying notes to consolidated financial
statements).
(3) Per share amounts are based on the number of shares outstanding at theend of each period, minus treasury stock.

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

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

2012

2011

2010

2009

2008

2007

29,11830,33831,48830,85928,51230,683

—%
29.88
6.08
3.68
41.25
12.67
6.44
100.00%

0.08%
30.76
4.75
3.71
41.27
12.89
6.54
100.00%

0.08%
31.34
4.28
3.73
40.77
13.26
6.54
100.00%

0.00%
35.67
2.55
3.76
38.17
13.31
6.54
100.00%

—%
33.84
3.86
3.81
41.71
13.21
3.57
100.00%

—%
32.21
3.68
3.86
42.43
14.26
3.56
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2010
2011

2012

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

¥4,165
4,225
3,920
4,230
4,145
3,975
3,830
4,190

¥3,785
3,635
3,620
3,425
3,660
3,435
3,390
3,390

¥11,339.30
9,795.24
10,370.53
10,857.53
10,004.20
10,137.73
9,050.47
10,255.15¥9,382.64
8,824.06
9,154.72
8,605.15
9,351.40
8,374.13
8,160.01
8,378.36

SECOM Annual Report 201273

The Management

Strategic Highlights

Special Feature

SECOM Today

Financial Review

Financial Section

Common Stock Data

COMMON STOCK ISSUES
			Shares
		
		
Date

June
Dec.
May
May
Dec.
May
June
Dec.
Nov.
Dec.
Dec.
June
Dec.
Jan.
Nov.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Nov.
Mar.
Mar.
Mar.
Mar.
Mar.

15, 1974
21, 1974
21, 1975
21, 1975
1, 1975
31, 1976
1, 1976
1, 197630, 1977
1, 1977
1, 1978
1, 1981
1, 198120, 1983
30, 1983
30, 1984
30, 1985
20, 1986
30, 1986
30, 1987
20, 1988
30, 1988
30, 1989
19, 1990
31, 1990
31, 1991
31, 1992
31, 1993
31, 1994
31, 1995
31, 1996
31, 1997
31, 1998
31, 1999
19, 1999
31, 2000
31, 2001
31, 2002
31, 2003
31, 2005

Additional
shares issued(In thousands)

outstanding
after issue(In thousands)

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

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, 2012, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

74

SECOM Annual Report 2012