AUDITED FINANCIAL STATEMENTS

Contents
Consolidated Financial Statements ............................................ 38
Consolidated Balance Sheets ................................................. 38
Consolidated Statements of Income ...................................... 40
Consolidated Statements of Comprehensive Income.............. 40
Consolidated Statements of Changes in Equity ...................... 41
Consolidated Statements of Cash Flows ............................... 42
Notes to Consolidated Financial Statements........................... 43
Independent Auditors’ Report .................................................... 69

SECOM Annual Report 201537

Consolidated Financial Statements
Consolidated Balance Sheets
SECOM CO., LTD. and Subsidiaries
March 31, 2015 and 2014

In millions of yen

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

March 31

March 31

2014

2015

Current assets:
Cash and Cash equivalents (Notes 5 and 22) .............................................................. ¥ 248,627 ¥ 230,752
Time deposits (Note 13)..............................................................................................
9,550
9,524
Cash deposits (Note 6) ...............................................................................................
50,39558,597
Short-term investments (Notes 7 and 22)....................................................................
25,002
10,032
Notes and accounts receivable, trade..........................................................................
127,992
128,000
Due from subscribers..................................................................................................
37,927
38,618Inventories (Note 8) ....................................................................................................
60,621
51,865
Short-term receivables (Notes 9, 13, 20 and 21) .........................................................
25,461
21,333
Allowance for doubtful accounts (Note 9) ..................................................................
(1,867)(1,885)
Deferred insurance acquisition costs (Note 14)............................................................
5,953
5,015
Deferred income taxes (Note 17) ................................................................................
12,92914,021Other current assets ...................................................................................................
13,451
12,207$2,071,892
79,583419,958
208,350
1,066,600
316,058
505,175
212,175(15,558)
49,608
107,742
112,092

ASSETS

Total current assets .............................................................................................

616,041

578,079

5,133,675

Investments and long-term receivables:
Investment securities (Notes 2 (7), 7, 13 and 22).........................................................
Investments in affiliated companies (Note 10) .............................................................
Long-term receivables (Notes 9, 13, 20 and 21) ..........................................................
Lease deposits ............................................................................................................
Other investments ......................................................................................................
Allowance for doubtful accounts (Note 9) ..................................................................

230,728
56,20948,954
14,06914,822(7,201)

204,604
49,762
49,718
13,831
12,775(5,987)

1,922,733
468,408
407,950
117,242
123,517(60,008)

357,581324,7032,979,842

Property, plant and equipment (Notes 11, 13, 19 and 20):
Land...........................................................................................................................
Buildings and improvements.......................................................................................
Security equipment and control stations .....................................................................
Machinery, equipment and automobiles .....................................................................
Construction in progress ............................................................................................

117,952
300,769
302,659
113,114
3,827

113,159
297,349
292,114
107,820
7,840

982,933
2,506,408
2,522,158
942,617
31,892

Accumulated depreciation ..........................................................................................

838,321(441,652)

818,282(423,895)

6,986,008(3,680,433)

396,669

394,387

3,305,575

43,64831,70140,17535,011
5,037

42,53932,87239,01022,054
7,061

363,733
264,175
334,792
291,758
41,975

155,572

143,536

1,296,433

Total assets ......................................................................................................... ¥1,525,863 ¥1,440,705$12,715,525

Other assets:
Deferred charges (Note 2 (12)) ...................................................................................
Goodwill (Note 12) .....................................................................................................
Other intangible assets (Notes 12, 13, 19 and 20) ......................................................
Prepaid pension and severance costs (Note 15) ...........................................................
Deferred income taxes (Note 17) ................................................................................

See accompanying notes to consolidated financial statements.

38

2015

SECOM Annual Report 2015

LIABILITIES AND EQUITYCurrent liabilities:
Bank loans (Notes 6 and 13) ....................................................................................... ¥Current portion of long-term debt (Notes 13, 19 and 21) ...........................................
Notes and accounts payable, trade .............................................................................
Other payables ...........................................................................................................
Deposits received (Note 6) ..........................................................................................
Deferred revenue .......................................................................................................
Accrued income taxes ................................................................................................
Accrued payroll ..........................................................................................................
Other current liabilities (Note 17) ................................................................................

In millions of yen

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

March 31

March 31

2014

2015

2015

43,924 ¥13,36844,30034,95820,92939,737
21,102
29,05839,18052,542
15,39849,96132,22822,41639,487
28,10628,96426,016$

366,033
111,400
369,167
291,317
174,408
331,142
175,850
242,150
326,499

Total current liabilities .........................................................................................

286,556

295,118

2,387,966

Long-term liabilities:
Long-term debt (Notes 13, 19 and 21) .......................................................................
Guarantee deposits received ......................................................................................
Accrued pension and severance costs (Note 15)..........................................................
Deferred revenue .......................................................................................................
Unearned premiums and other insurance liabilities (Note 14) ......................................
Investment deposits by policyholders (Notes 14 and 21) .............................................
Deferred income taxes (Note 17) ................................................................................
Other long-term liabilities (Notes 21, 22 and 23) ........................................................

53,80334,64225,648
16,591
99,58430,272
28,402
11,19847,85034,65728,27916,83598,71929,531
19,13910,221

448,358
288,683
213,733
138,258
829,867
252,267
236,683
93,317

Total long-term liabilities .....................................................................................

300,140

285,2312,501,166

Total liabilities .....................................................................................................

586,696580,349

4,889,132

66,37873,442
10,401
716,487

66,37873,781
10,316
674,585

553,150
612,017
86,6755,970,725

25,564
5(2,140)
9,533

12,5609(8,954)(1,894)

213,03342(17,833)
79,44232,962

1,721

274,684

Commitments and contingent liabilities (Note 24)
Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
Authorized—900,000,000 sharesissued 233,288,717 shares in 2015 and 2014 .......................................................
Additional paid-in capital............................................................................................
Legal reserve ..............................................................................................................
Retained earnings.......................................................................................................
Accumulated other comprehensive income (loss):
Unrealized gains on securities (Note 7) ....................................................................
Unrealized gains on derivative instruments (Note 23) ..............................................
Pension liability adjustments (Note 15) ....................................................................
Foreign currency translation adjustments ................................................................
Common stock in treasury, at cost:(73,701)(73,682)(614,175)

Total SECOM CO., LTD. shareholders’ equity .......................................................

825,969

753,099

6,883,076

Noncontrolling interests .................................................................................................

113,198

107,257

943,317

Total equity .........................................................................................................

939,167

860,356

7,826,393

Total liabilities and equity .................................................................................... ¥1,525,863 ¥1,440,705$12,715,525

Financial Section

15,024,812 shares in 2015 and 15,022,012 shares in 2014 .....................................

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201539

Consolidated Statements of Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2015

Net sales and operating revenue (Notes 14 ,18 and 22)
Costs and expenses:
Cost of sales (Note 8) .........................................................................................................
Selling, general and administrative expenses (Notes 2 (17), 2 (18), 2 (19) and 4).................
Impairment loss on long-lived assets (Note 11) ...................................................................
Impairment loss on goodwill (Note 12) ...............................................................................
Loss on sales and disposal of fixed assets, net ....................................................................
Operating income..................................................................................................
Other income:Interest and dividends ........................................................................................................
Gain on sales of securities, net (Notes 7 and 18) ................................................................
Gain on private equity investments (Note 22) .....................................................................
Other (Notes 16, 18 and 23) ..............................................................................................
Other expenses:
Interest .............................................................................................................................
Loss on other-than-temporary impairment of investment securities (Notes 18 and 22) ........
Other (Note 23) .................................................................................................................
Income before income taxes and equity in net income of affliated companies ........
Income taxes (Note 17):
Current .............................................................................................................................
Deferred ............................................................................................................................
Income from continuing operations before equity in net income ofaffiliated companies.............................................................................................
Equity in net income of affliated companies (Note 18) ...................................................
Income from continuing operations .......................................................................
Income (loss) from discontinued operations, net of tax (Note 25) .................................
Net income............................................................................................................
Less: Net income attributable to noncontrolling interests .............................................
Net income attributable to SECOM CO., LTD. .......................................................

Per share data (Note 2 (21)):
Income from continuing operations attributable to SECOM CO., LTD. ...............................
Income (loss) from discontinued operations attributable to SECOM CO., LTD. ...................
Net income attributable to SECOM CO., LTD. ....................................................................
Cash dividends per share (Note 18) ...................................................................................

In millions of yen

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

Years ended March 31

Year ended March 31

2015

2014

2013

2015

¥945,238¥921,146¥858,406$7,876,983

644,196
168,563
6,591
1,314
2,567
823,231122,007628,916
166,018
2,789
151
3,194
801,068
120,078

580,154
161,085
381
1,052
2,185
744,857
113,549

5,368,299
1,404,692
54,925
10,95021,3926,860,258
1,016,725

1,412
56
4,062
3,763
9,293

1,310
935
5,564
3,849
11,658

903
150
5,095
3,800
9,948

11,767467
33,85031,35877,442

1,394
154
1,895
3,443
127,857

1,433
78
1,484
2,995
128,741

1,533
48
1,563
3,144
120,353

11,617
1,283
15,792
28,692
1,065,475

46,837(865)
45,97247,5442,151
49,69545,1401,557
46,697

390,308(7,208)383,100

81,88579,04673,656
5,759
4,017
3,895
87,644
83,06377,551
814
(132)
(908)
88,45882,931
76,643(8,274)(8,952)(6,063)¥ 80,184 ¥ 73,979 ¥ 70,580

682,375
47,992
730,367
6,783
737,150(68,950)$ 668,200

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

Years ended March 31

Year ended March 31

2015

2014

2013

2015

¥363.643.73
367.37¥175.00¥339.55(0.61)
338.94¥105.00¥327.02(3.66)
323.36¥ 90.00

$3.03
0.03
3.06
$1.46

In millions of yen

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

Years ended March 31

Year ended March 31

Consolidated Statements of Comprehensive Income
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2015

Comprehensive income:Net income ........................................................................................................................
Other comprehensive income (loss), net of tax:
Unrealized gains on securities ........................................................................................
Unrealized gains on derivative instruments .....................................................................
Pension liability adjustments ..........................................................................................
Foreign currency translation adjustments .......................................................................
Total comprehensive income ..............................................................................................
Less: Comprehensive income attributable to noncontrolling interests ..........................
Comprehensive income attributable to SECOM CO., LTD. ......................................................
See accompanying notes to consolidated financial statements.

40

SECOM Annual Report 2015

2015

2014

2013

2015

¥ 88,458¥ 82,931¥76,643$ 737,150

13,588
1,120
(8)
2
7,194
5,543
12,17918,092
121,411
107,688(9,986)(10,802)¥111,425 ¥ 96,886

7,384
15
(708)
10,10593,439(7,113)¥86,326

113,234(66)
59,950101,492
1,011,760(83,218)$ 928,542

Consolidated Statements of Changes in Equity
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2015

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Balance, March 31, 2012 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Notes 4 and 18) ...................................................................
—
Losses on disposal of treasury stock ........................................
—Net changes in treasury stock..................................................
—¥66,378¥74,561¥10,175¥572,730(¥37,329)———

70,580——70,5806,063

76,643

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

6,914
8
(522)
9,346

—
—
—
—

—
—
—

—
—
—

—
—
66

(19,645)
—
(66)

—
—
—

—
—
—

6,914
8
(522)
9,346
86,326(19,645)
—
—

470
7
(186)
759
7,113
—
(1,460)
—

7,384
15
(708)
10,10593,439(19,645)(1,460)
—

—
—
—

(752)
(0)
—

—
—
—

—
—
—

397
—
—

—
—
(5)

(355)
(0)
(5)

30,008——29,653(0)(5)

Balance, March 31, 2013 ..................................................... 233,288,717
Comprehensive income:Net income ........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other(Note 18) ..............................................................................
—
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—

66,37873,80910,241

623,599(21,186)(73,665)

679,176

100,439

779,615———

73,979——73,9798,952

82,931

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

1,000
1
5,090
16,816

—
—
—
—

—
—
—

—
—
—

—
—
75

(22,918)
—
(75)

—
—
—

—
—
—

1,000
1
5,090
16,81696,886(22,918)
—
—

120
1
453
1,276
10,802—(4,175)
—

1,120
2
5,543
18,092
107,688(22,918)(4,175)
—

—
—
—

(28)
0
—

—
—
—

—
—
—

—
—
—

—
—
(17)

(28)
0
(17)

191
—
—

163
0
(17)

Balance, March 31, 2014 ..................................................... 233,288,717
Comprehensive income:—Net income ........................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities .......................................
—
Unrealized gains on derivative instruments ....................
—
Pension liability adjustments .........................................
—
Foreign currency translation adjustments ......................
—
Total comprehensive income ..............................................
Cash dividends paid to SECOM CO., LTD. shareholders ...........
—Cash dividends paid to noncontrolling interests .......................
—
Transfer to legal reserve ..........................................................
—
Equity transactions with noncontrolling interests and other—(Note 18) ..............................................................................
Gains on disposal of treasury stock .........................................
—Net changes in treasury stock..................................................
—

66,37873,781

10,316

674,585

1,721(73,682)753,099

107,257

860,356———

80,184——80,1848,274

88,458

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

13,004(4)
6,814
11,427

—
—
—
—

—
—
—

—
—
—

—
—
85

(38,197)
—
(85)

—
—
—

—
—
—

13,004(4)
6,814
11,427
111,425(38,197)
—
—

584
(4)
380
752
9,986
—
(3,763)—

13,588(8)
7,194
12,179121,411(38,197)(3,763)
—

—
—
—

(339)
0
—

—
—
—

—
—
—

—
—
—

—
—
(19)

(339)
0
(19)

(282)
—
—

(621)
0
(19)

Balance, March 31, 2015 ..................................................... 233,288,717¥66,378¥73,442¥10,401¥716,487¥32,962(¥73,701)¥825,969¥113,198¥939,167

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock intreasury,
at costNumber ofsharesissuedCommonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests(¥73,660)¥612,855¥ 64,778¥677,633

Total

Translation into thousands of U.S. dollars (Note 3)

Commonstock

Additional
paid-in
capitalLegalreserve$85,967 $5,621,542

Balance, March 31, 2015 ......................................................................... $553,150 $612,017$86,675 $5,970,725$ 14,342 $(614,017)

Total$6,275,826$893,808$7,169,634—

668,200——

668,200

68,950737,150

—
—
—
—

—
—
—
—

108,367(33)
56,783
95,225

—
—
—
—

—
—
708

(318,309)
—
(708)

—
—
—

—
—
—

108,367(33)
56,783
95,225928,542(318,309)
—
—

4,867
(33)
3,167
6,267
83,218—(31,358)—

113,234(66)
59,950101,492
1,011,760(318,309)(31,358)
—

—
—
—

—
—
—

—
—
—

—
—
(158)

(2,825)0(158)(2,351)——(5,176)0(158)$274,684 $(614,175)$6,883,076$943,317$7,826,393

Financial Section

Balance, March 31, 2014
$553,150 $614,842
Comprehensive income:——Net income .............................................................................................
Other comprehensive income (loss), net of tax (Note 18):——
Unrealized gains on securities ............................................................
Unrealized gains on derivative instruments .........................................
——
Pension liability adjustments ..............................................................
——
Foreign currency translation adjustments ...........................................
——
Total comprehensive income ...................................................................
Cash dividends paid to SECOM CO., LTD. shareholders ................................
——Cash dividends paid to noncontrolling interests ............................................
——
Transfer to legal reserve ...............................................................................
——
Equity transactions with noncontrolling interests and other—(2,825)(Notes 18) ..................................................................................................
Gains on disposal of treasury stock ..............................................................
—
0
Net changes in treasury stock.......................................................................
—
—

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterests

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201541

Consolidated Statements of Cash Flows
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2015

2015

In millions of yen

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

Years ended March 31

Year ended March 31

2014

2013

Cash flows from operating activities:
Net income .......................................................................................................................... ¥ 88,458 ¥ 82,931 ¥ 76,643
Adjustments to reconcile net income to net cash provided by operating activities—
Depreciation and amortization, including amortization of deferred charges
68,864
66,66160,674(Notes 2 (11), 2 (12) and 12) ...........................................................................................
Accrual for pension and severance costs, less payments ....................................................
(4,495)(2,907)(1,471)
Deferred income taxes, including discontinued operations ................................................
2,505
1,832
1,538
Loss on sales and disposal of fixed assets, net, including discontinued operations .............
958
3,182
2,166
Impairment loss on long-lived assets, including discontinued operations (Note 11) ............
6,591
2,821
579
Write-down on real estate inventories (Note 8) .................................................................
1,565
1,122
1,792
Gain on private equity investments (Note 22) ....................................................................
(4,062)(5,564)(5,095)
Impairment loss on goodwill (Note 12)..............................................................................
1,314
151
1,052
Gain on sales of securities, net (Notes 7 and 14) ...............................................................
(243)(2,177)(899)
Loss on other-than-temporary impairment of investment securities (Notes 14 and 22) .......
172
100
73
Equity in net income of affiliated companies .....................................................................
(5,759)(4,017)(3,895)
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits ..............................................................................
8,202(2,508)(2,038)(Increase) decrease in receivables and due from subscribers, net of allowances..............
1,731(10,188)(5,838)(Increase) decrease in inventories .................................................................................. (11,120)
10,367
20,720
Increase in deferred charges ......................................................................................... (17,248) (16,375) (15,515)
Increase (decrease) in notes and accounts payable ........................................................
(3,900)
3,306
6,831
Increase (decrease) in deposits received .........................................................................
(1,601)(7,752)
2,328
Decrease in deferred revenue ........................................................................................
(251)
(595)
(1,558)
Increase (decrease) in accrued income taxes ..................................................................
(6,862)(3,028)13,470
Increase (decrease) in guarantee deposits received ........................................................
(147)
275
65
Increase in unearned premiums and other insurance liabilities .......................................
865
8,277
6,445
Increase (decrease) in accrued consumption tax ............................................................
8,891
(206)
515
Other, net .....................................................................................................................
479(2,498)(1,136)
Net cash provided by operating activities .................................................................. 134,907 123,210 157,446
Cash flows from investing activities:(Increase) decrease in time deposits.......................................................................................
538
(164)
3,500
Proceeds from sales of property, plant and equipment ..........................................................
3,580
1,114
2,603
Payments for purchases of property, plant and equipment .................................................... (56,303) (56,274) (64,321)
Payments for purchases of intangible assets ..........................................................................
(8,409)(7,113)(5,444)
Proceeds from sales and redemptions of investment securities (Note 7) .................................
38,23743,78237,443
Payments for purchases of investment securities ................................................................... (51,573) (76,342) (31,345)(Increase) decrease in short-term investments ........................................................................
2,039(1,611)
4,152
Acquisitions, net of cash acquired (Note 4)............................................................................
(58)(1,249) (63,701)(Increase) decrease in short-term receivables ,net ..................................................................
20
56
(39)
Payments for long-term receivables .......................................................................................
(1,076)(2,921)(1,057)
Proceeds from long-term receivables .....................................................................................
3,164
3,314
1,590
Other, net .............................................................................................................................
553
2,114
(1,976)
Net cash used in investing activities .......................................................................... (69,288) (95,294) (118,595)
Cash flows from financing activities:
Proceeds from long-term debt ..............................................................................................
17,47010,595
17,483
Repayments of long-term debt.............................................................................................. (16,029) (18,419) (22,341)
Increase (decrease) in bank loans, net ...................................................................................
(8,636)
13,483(3,630)
Increase (decrease) in investment deposits by policyholders ...................................................
740
48(1,272)
Dividends paid to SECOM CO., LTD. shareholders ................................................................. (38,197) (22,918) (19,645)
Dividends paid to noncontrolling interests .............................................................................
(3,763)(4,175)(1,460)
Payments for acquisition of shares of consolidated subsidiaries from noncontrolling
(735)
(618)
(252)
interest holders ...................................................................................................................
Proceeds from sales of shares of consolidated subsidiaries to noncontrolling interest holders ...
——651
Increase in treasury stock, net ...............................................................................................
(19)
(18)
(5)
Other, net .............................................................................................................................
24
131
86
Net cash used in financing activities .......................................................................... (49,145) (21,891) (30,385)
Effect of exchange rate changes on cash and cash equivalents .......................................
1,401
2,031
1,190
Net increase in cash and cash equivalents ..........................................................................
17,875
8,056
9,656
Cash and cash equivalents at beginning of year ................................................................ 230,752 222,696 213,040
Cash and cash equivalents at end of year .......................................................................... ¥248,627 ¥230,752 ¥222,696
See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20152015

$ 737,150
573,867(37,458)
20,875
7,983
54,925
13,042(33,850)
10,950(2,025)
1,433(47,992)
68,35014,425(92,667)(143,733)(32,500)(13,342)(2,092)(57,183)(1,225)
7,208
74,092
3,992
1,124,225
4,483
29,833(469,192)(70,075)
318,642(429,775)
16,992(483)
167(8,967)26,367
4,608(577,400)
145,583(133,575)(71,967)
6,167(318,308)(31,358)(6,125)—(158)
199(409,542)
11,676
148,959
1,922,933$2,071,892

Notes to Consolidated Financial Statements
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2015

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the businesses of security services,
fire protection services, medical services, insurance services,
geographic information services, information and communication
related services, and real estate and other services. With these
services combined, the Company is focusing on the establishmentof a Social System Industry, a network of integrated services andsystems, 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; non-life insurance services; geographic information services
using geographic information system (GIS) and surveying andmeasuring technology; information and communication related
services, which center on data center services and also include
business continuity plan support, information security services andcloud-based services; real estate and other services, including thedevelopment and sale of condominiums equipped with security andcontingency planning features, lease of real estate, construction
and installation services and other 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 been
eliminated 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.

(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.
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 services. 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 recognizedwhen 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.

SECOM Annual Report 2015

Financial Section(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variableinterest entities (“VIEs”) of which the Company is the primary
beneficiary.
The Accounting Standards Codification (“ASC”) 810,
“Consolidation,” issued by the Financial Accounting Standards
Board (“FASB”) 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.
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 ¥70,658 million ($588,817 thousand)and ¥77,868 million ($648,900 thousand), respectively, at March
31, 2015, and ¥68,024 million and ¥73,248 million, respectively, atMarch 31, 2014. The creditors of VIEs do not have recourse to theCompany’s general credit with the exception of debts guaranteedby the Company. Total assets and liabilities held by VIEs of which
the Company holds significant variable interests but is not the primary beneficiary were ¥31,328 million ($261,067 thousand) and¥31,021 million ($258,508 thousand), respectively, at March 31,
2015, and ¥31,991 million and ¥32,039 million, respectively, atMarch 31, 2014. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2015 and 2014 were ¥5,154 million ($42,950
thousand) and ¥4,840 million, respectively.

43

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 title 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.
(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 accumulated other comprehensive income (loss),
net of tax. Debt securities classified as “held-to-maturity” arereported at amortized cost.
A decline in the fair value of any available-for-sale securities
below cost that is deemed to be other-than-temporary results in a
reduction in the 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-thantemporary, 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, except for private
equity investments, are recorded at cost as fair value is not readily
determinable. The Company periodically evaluates the values of

44

SECOM Annual Report 2015

other investments in non-public companies for possible impairment
by taking into consideration the financial and operating conditionsof the issuer, the general market conditions in the issuer’s industry
and the period of the decline in the estimated fair value and otherrelevant factors. If the impairment is determined to be other-thantemporary, 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 ¥25,682
million ($214,017 thousand) and ¥33,083 million at March 31,
2015 and 2014, 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 other related products,
are stated at the lower of cost or market. Cost is determined, inthe case of real estate, based on the specific identification method
and, in the case of other inventories, primarily using the movingaverage 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 obligations, 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 recoverability 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 contracts
issued to applicable unearned premiums throughout the period of
the contract.
(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant leasehold
improvements, are carried at cost 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 using the declining-balance method. Assets leased
to others under operating leases are depreciated using the straightline method over the estimated useful lives. Depreciation expense
was ¥47,582 million ($396,517 thousand), ¥45,523 million and¥40,187 million for the years ended March 31, 2015, 2014 and2013, respectively. Maintenance, repairs and renewals are charged
to income as incurred.
The estimated useful lives of depreciable assets are as follows:
Buildings
22 to 50 years
Security equipment and control stations
5 to 8 years
Machinery, equipment and automobiles
2 to 20 years
The Company recognizes asset retirement obligations if the fairvalue of the obligations 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.
Performance of a contractual asset retirement obligation isrequired for the building leased by a certain subsidiary when thelease matures and the Company returns the leased building to its
owner. However, the Company plans not to relocate from the building and to continue to use it until it will be demolished without restoration. As such, the execution of such obligation is not expected.
The Company evaluated all the available evidence as of the fiscal
year ended March 31, 2015 and performed efforts to establish thebest estimate. However, the scope and the probability of executionof the obligation cannot be reasonably estimated. Therefore, anasset retirement obligation for that building lease is not recognized.
(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 ¥14,759 million ($122,992 thousand), ¥14,397 million and¥14,492 million for the years ended March 31, 2015, 2014 and2013, respectively.

(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.
(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 has greater than
50 percent likelihood 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. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2015, 2014 and 2013 were ¥7,354 million ($61,283 thousand),¥6,950 million and ¥6,479 million, respectively.
(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,
2015, 2014 and 2013 were ¥3,550 million ($29,583 thousand),¥3,823 million and ¥4,230 million, respectively.

Financial Section(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 indicate 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.

SECOM Annual Report 201545

(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2015, 2014
and 2013 were ¥1,223 million ($10,192 thousand), ¥1,160 millionand ¥1,296 million, respectively.
(20) 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 accumulated 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 theportion 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 theextent it is effective as a hedge, are recorded in accumulated othercomprehensive income (loss), net of tax. Changes in the fair valueof derivative financial instruments not qualifying as a hedge arereported 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
used in hedging activities are highly effective in offsetting changes
in fair values or cash flows of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Changes in fair value of
discontinued hedges are recognized in income.
(21) 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, 2015, 2014 and 2013 was 218,265
thousand shares, 218,268 thousand shares and 218,271 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2015, 2014 or 2013.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.
(22) 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 andliabilities, the disclosures of contingent assets and liabilities at thedate of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Actual results
could differ from those estimates. Significant items subject to such
estimates and assumptions include the carrying amounts of inventories, deferred insurance acquisition costs, investment securities,
other investments, property, plant and equipment, goodwill, otherintangible assets, unearned premiums and other insurance liabilities, valuation of receivables, valuation allowances for deferredincome taxes, valuation of derivative instruments, assets and46

SECOM Annual Report 2015

obligations related to employee benefits, asset retirement
obligations, income tax uncertainties, and other contingencies.
(23) Recent Pronouncements
In March 2013, the FASB issued ASU No. 2013-05, “Parent’s
Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Assets within
a Foreign Entity or of an Investment in a Foreign Entity.” Thisaccounting standard resolves diversity in practice and clarifies theapplicable guidance for the release of the cumulative translation
adjustment when the parent company sells a part or all of its
investment in a foreign entity, ceases to have a controlling financial interest in a subsidiary or group of assets that is a businesswithin a foreign entity, or obtains control in a business combinationachieved in stages involving an equity method investment that is aforeign entity. This accounting standard is effective for fiscal years
beginning after December 15, 2013 and was adopted by theCompany in the fiscal year beginning April 1, 2014. The adoption
did not have a material impact on the Company’s consolidated
results of operations or financial position.
In June 2013, the FASB issued ASU No. 2013-08, “Amendments
for the Scope, Measurement, and Disclosure Requirements.” Thisaccounting standard changes the approach to the investmentcompany assessment in ASC 946, clarifies the characteristics ofan investment company, and provides comprehensive guidance
for assessing whether an entity is an investment company. Thisaccounting standard also amends the measurement criteria fornoncontrolling ownership interests in other investment companies
and provides additional disclosure requirements. This accounting
standard is effective for interim and annual periods in fiscal years
beginning after December 15, 2013 and was adopted by theCompany in the fiscal year beginning April 1, 2014. The adoption
did not have a material impact on the Company’s consolidated
results of operations or financial position.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting
Discontinued Operations and Disclosures of Disposals of
Components of an Entity.” This accounting standard changes thecriteria for reporting discontinued operations in ASC205-20. A
disposal of a component of an entity or a group of components
of an entity is required to be reported in discontinued operations
if the disposal represents a strategic shift that has (or will have) a
major effect on an entity’s operations and financial results. Thisaccounting standard is effective for fiscal years beginning after
December 15, 2014, and will be adopted by the Company in thefiscal year beginning April 1, 2015. As this accounting standard
is a provision for presentation only, the adoption will not have an
impact on the Company’s consolidated results of operations or
financial position.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue fromContracts with Customers.” This accounting standard requires
an entity to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods orservices. This accounting standard also requires an entity to disclose
sufficient information to enable users of financial statements tounderstand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from contracts with customers. Both qualitative and quantitative information is required. This accounting standard is effective for fiscal years beginning after December 15, 2016,
including interim periods within that reporting period. In April 2015,
the FASB proposed an ASU that would defer for one year the revenue recognition standard’s effective date. The Company is currently

evaluating the effect of adopting this accounting standard on its
consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02“Amendments to the Consolidation Analysis.” This accounting
standard modifies the evaluation of whether reporting entities
should consolidate limited partnerships and similar legal entities,
fees paid to a decision maker or service provider are variable interests in a VIE, and variable interests in a VIE held by related partiesof the reporting entity require the reporting entity to consolidate
the VIE. A reporting entity may choose a modified retrospective
approach or a full retrospective approach to applying the amendments. This accounting standard is effective for fiscal years beginning after December 15, 2015, including interim periods within thatreporting periods and will be adopted by the Company in the fiscal
year beginning April 1, 2016. The Company is currently evaluating
the effect of adopting this accounting standard on its consolidated
financial statements.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying
the Presentation of Debt Issuance Costs.” This accounting standard requires that debt issuance costs related to a recognized debt
liability be presented in the balance sheets as a direct deduction
from the carrying amount of that debt liability, consistent withdebt discounts. This accounting standard is effective for fiscal years
beginning after December 15, 2015, including interim periods
within those reporting periods and will be adopted by the Company
in the fiscal year beginning April 1, 2016. The Company is currently
evaluating the effect of adopting this accounting standard on its
consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-09 “Disclosuresabout Short-Duration Contracts.” This accounting standard requires
an entity to disclose the liability for unpaid claims, claim adjustment
expenses, significant changes in methodologies and assumptions
used to calculate the liability for unpaid claims and claim adjustment expenses, including reasons for the change and the effects on
the financial statements. This accounting standard is effective forfiscal years beginning after December 15, 2015, including interim
periods within those reporting periods and will be adopted by theCompany in the fiscal year beginning April 1, 2016. The Company iscurrently evaluating the effect of adopting this accounting standard
on its consolidated financial statements.
(24) Discontinued Operations
ASC 205-20, “Discontinued Operations,” requires the operating
results of any component of an entity with its own identifiable
operations and cash flows which is disposed of or is classified asheld for sale, and with which the Company will not have significant
continuing involvement to be reported in discontinued operations.
The results of operations related to certain businesses classified
as discontinued operations in the years ended March 31, 2015,2014 and 2013 were reclassified in the accompanying consolidated
financial statements.

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 ¥120=US$1,

4. Acquisitions
Acquisition of Nittan Co., Ltd.
On April 1, 2012, the Company acquired 100% of commonshares outstanding of LIXIL NITTAN Co., Ltd. for ¥12,713 million in
cash and changed its name to Nittan Co., Ltd. The purpose of thisacquisition is (i) to enhance fire protection services, including flexible responses to environmental changes, such as increased awareness of disaster prevention due to the Great East Japan Earthquake(domestic) and increasing disaster prevention in emerging countries(overseas), and (ii) research and development of next-generation
systems for disaster prevention.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.
In millions of yen

Cash and cash equivalents ................................................
Other current assets ..........................................................
Investments and long-term receivables ..............................
Property, plant and equipment ..........................................
Intangible assets, including goodwill .................................
Other assets ......................................................................
Total assets acquired .....................................................
Current liabilities ...............................................................
Long-term liabilities...........................................................
Total liabilities assumed .................................................
Noncontrolling interests ................................................
Net assets acquired .......................................................

¥ 2,937
17,954
1,650
6,014
2,080
1,018
31,653
13,446
5,359
18,805
135¥12,713

The goodwill of ¥1,872 million represents expected excess earning power based on future business operations. It is not deductible
for tax purposes and has been assigned to the fire protection
services segment.
Acquisition of At Tokyo Corporation
On October 31, 2012, the Company acquired 50.882% ofcommon shares outstanding of At Tokyo Corporation for ¥33,328
million in cash. The purpose of this acquisition is to accelerate thedata center business and realize a variety of business synergies byfurther improving data center service quality and new information
security services.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.
In millions of yen

Cash and cash equivalents ................................................
Other current assets ..........................................................
Investments and long-term receivables ..............................
Property, plant and equipment ..........................................
Intangible assets, including goodwill .................................
Other assets ......................................................................
Total assets acquired .....................................................
Current liabilities ...............................................................
Long-term liabilities...........................................................
Total liabilities assumed .................................................
Noncontrolling interests ................................................
Net assets acquired .......................................................

¥

3,922
6,145
262
54,91733,5401,308
100,094
6,770
38,25845,02821,738¥ 33,328

SECOM Annual Report 2015

Financial Section(25) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2014 and 2013 havebeen reclassified to conform to the presentation used for the year
ended March 31, 2015.

the approximate rate prevailing on the Tokyo Foreign Exchange
Market on March 31, 2015. These translations should not be
construed as representing that the yen amounts actually constitute,or have been or could be converted into U.S. dollars at that rate.

47

Intangible assets of ¥15,230 million subject to amortization
include customer relationships of ¥12,158 million with a 20-year
useful life and trademarks of ¥3,072 million with a 15-year usefullife. The goodwill of ¥17,468 million represents expected excess
earning power based on future business operations. It is not deductible for tax purposes and has been assigned to the Information andcommunication related services segment.
The Company recorded the acquisition cost of ¥212 million related
to these acquisitions in selling, general and administrative expenses
for the year ended March 31, 2013.
The fair value of noncontrolling interests is measured at theprice based on the acquisition price with an adjustment for control
premium.
The following unaudited pro forma information shows theCompany’s consolidated results of operations for the year ended
March 31, 2013 as if the newly consolidated subsidiaries acquired in
the year ended March 31, 2013, were consolidated on April 1, 2011.

restricted as to use by the Company. 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 ¥29,417 million ($245,142 thousand) and ¥16,946 million($141,217 thousand), respectively, at March 31, 2015, and ¥36,704
million and ¥17,765 million, respectively, at March 31, 2014. As
part of its fee arrangement, the Company is reimbursed for theinterest cost of the related 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 andcosts pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2015 and 2014 are as follows:
In millions of yen
March 31, 2015
Gross unrealized

In millions of yen
Year ended March 31

Cost

2013

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 24,433¥ 24,433

Unaudited

Pro forma net sales and operating revenue...............
Pro forma net income attributable to
SECOM CO., LTD. .................................................

¥884,803
71,764
In yenYear ended March 31

Unaudited2013

Pro forma net income attributable to
SECOM CO., LTD. per share ...................................

¥328.79

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually
have been reported if the transactions in fact had occurred on
April 1, 2011, and is not necessarily representative of the Company’s
consolidated results of operations for any future period.
5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2015 and 2014 comprisethe following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

¥178,594 ¥170,032
51,01837,296
15,50020,5003,515
2,924¥248,627 ¥230,752$1,488,283
425,150
129,167
29,292$2,071,892

2015

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

¥
¥

Gains

Losses

570
570

¥
¥

Fair value¥ 25,002¥ 25,002¥29,154
9,725

¥ 59
69

¥ 62,965
120,706

1,165¥40,044—¥128

13,457¥197,128

Investment securities:
Available-for-sale:
Equity securities ........... ¥ 33,870
Debt securities ............. 111,050
Held-to-maturity:
Debt securities ............. 12,292¥157,212

1
1

In millions of yen
March 31, 2014
Gross unrealized
Cost

Short-term investments:
Available-for-sale:
Debt securities ............. ¥ 10,011¥ 10,011
Investment securities:
Available-for-sale:
Equity securities ........... ¥ 31,829
Debt securities ............. 99,182
Held-to-maturity:
Debt securities ............. 12,309¥143,320

Gains

¥
¥

Losses21
21¥¥

Fair value00¥ 10,032¥ 10,032¥15,141
4,831

¥338
72

¥ 46,632
103,941507¥20,47910¥420

12,806¥163,379

In thousands of U.S. dollars
March 31, 2015

48

Investment securities include negotiable certificates of deposit
and money management funds. These agreements mature within
three months and their carrying values approximate fair value. The
Company has not experienced any losses through default of thefinancial institutions and does not anticipate default of any
outstanding agreements.

Short-term investments:
Available-for-sale:
Debt securities ......... $ 203,608 $$ 203,608 $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 collection
services for entities other than financial institutions. Cash deposit
balances are segregated from cash and cash equivalents and are

Investment securities:
Available-for-sale:
Equity securities ....... $ 282,250 $242,950 $ 492
Debt securities .........
925,417
81,041575
Held-to-maturity:
102,433
9,709—
Debt securities .........
$1,310,100 $333,700 $1,067

SECOM Annual Report 2015

Gross unrealized
Cost

Gains

4,750 $
4,750 $

LossesFair value

88$ 208,350$ 208,350$ 524,708
1,005,883
112,142$1,642,733

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by investment
category and the length of time that individual securities have been
in a continuous unrealized loss position at March 31, 2015 are as
follows:
In millions of yen
March 31, 2015
12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses¥ 1,392
30,531¥31,923

¥ 55
69
¥124

¥—
¥—
¥—

¥—
¥—
¥—

¥

¥ —

¥—

¥—

Available-for-sale:
Equity securities...........
Debt securities.............

Less than 12 months

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

—In thousands of U.S. dollars
March 31, 2015

Available-for-sale:
Equity securities...........
Debt securities.............
Held-to-maturity:
Debt securities.............

Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses$ 11,600
254,425$266,025

$ 458
$ 575
$1,033

$—
$—
$—

$—
$—
$—

$

$

$—

$—

—

—

Based on the Company’s ability and intent to hold the investments
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, 2015.
At March 31, 2015, 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-tomaturity” debt securities by contractual maturity at March 31, 2015
are as follows:
In millions of yen

In thousands of U.S. dollars
March 31, 2015
Available-for-sale
Cost

Held-to-maturity

Fair value

Due within 1 year ..... $ 203,608 $ 208,350
Due after 1 year
through 5 years ......
647,658
703,908
Due after 5 years
through 10 years ....
194,142
209,950
Due after 10 years ...
83,61792,025$1,129,025 $1,214,233

Cost

$

—

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

Cost

Fair value¥ 24,433¥ 25,002

Held-to-maturity
Cost

¥

—

25,142

12,58364,733$102,433

13,29273,708$112,142

During the years ended March 31, 2015, 2014 and 2013, the net
unrealized gains and losses on “available-for-sale” securities
included as part of accumulated other comprehensive income (loss),
net of tax, increased by ¥13,004 million ($108,367 thousand),¥1,000 million and ¥6,914 million, respectively.
Proceeds from the sale of “available-for-sale” securities for theyears ended March 31, 2015, 2014 and 2013 were ¥13,800 million($115,000 thousand), ¥14,475 million and ¥20,479 million, respectively. On those sales, the gross realized gains and gross realized
losses, using a moving-average cost basis, for the years ended
March 31, 2015, 2014 and 2013 are as follows:

Gross realized gains ...........
Gross realized losses ..........

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2013

2015

¥269
1

¥1,694212¥1,051144$2,242
8

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 ¥9,083 million ($75,692
thousand) and ¥8,639 million at March 31, 2015 and 2014,
respectively. The corresponding fair value at that date was notcomputed as such estimation was not practicable and no significant
events or changes that might have affected the fair value ofinvestments were observed.
8. Inventories
Inventories at March 31, 2015 and 2014 comprise the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Fair value¥—

84,469

3,014

3,017

23,297
10,034¥135,483

25,194
11,043¥145,708

1,510
7,768
¥ 12,292

1,595
8,845
¥ 13,457

2015

2014

2015

Security-related products................... ¥ 8,489 ¥ 9,718
Fire protection-related products ........ 19,769
16,763
Real estate ........................................ 24,122
15,429Other-related products ...................... 8,241
9,955¥60,621 ¥51,865$ 70,742
164,742
201,017
68,674$505,175

SECOM Annual Report 2015

Financial Section

77,719—25,117

March 31, 2015
Available-for-sale

Fair value$

49

Work in process for real estate inventories at March 31, 2015 and2014, amounting to ¥21,059 million ($175,492 thousand) and¥15,396 million, respectively, are included in real estate.
Costs on uncompleted construction contracts at March 31, 2015
and 2014, amounting to ¥9,793 million ($81,608 thousand) and¥8,414 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, 2015, 2014 and 2013
were ¥1,565 million ($13,042 thousand), ¥1,122 million and¥1,792 million, respectively.
9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories: “lease receivables,” “loans receivable resulting frommedical services,” “loans receivable resulting from insurance services,” “other loans receivable” and “other.” Financing receivables
classified as “lease receivables” result from lease transactions of
security equipment and real estate for offices and medical institutions.
The Company continuously monitors overdue financing receivables which, the Company considers, have a risk of uncollectability.
For financing receivables with specific customer collection issues,
the Company individually evaluates their collectability in order todetermine the amount of allowance for doubtful accounts. For
other financing receivables, the Company categorizes these receivables into groups by their nature and characteristics. The Company
collectively evaluates the collectability of each group, using its historical experience of write-offs and determines the amount ofallowance for doubtful accounts.
Financing receivables and allowance for doubtful accounts at
March 31, 2015 and 2014 are as follows:
In millions of yen
Year ended March 31, 2015

Lease
receivables

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
medical insurance
loans
services
services receivable

Allowance for
doubtful accounts:
Balance at
beginning of year....... ¥ 417 ¥ 1,721
Provision (Reversal) ..
110
483
Charge off...............
(104)—
Other* ....................
——
Balance at endof year .......................
Individually
evaluated ..............
Collectively
evaluated .............. ¥

¥ 75
(10)
(65)
—

Other

Total

¥3,074 ¥ 841 ¥ 6,128
11
731
1,325
—
(28)
(197)
17
74
91

423

2,204

0

3,102

1,618

7,347

71

2,204

—

3,102

1,618

6,995

—

¥ 0

352

¥

¥

— ¥

— ¥

352

Financing receivables:
Individually
88
evaluated .............. ¥Collectively
evaluated .............. 48,698¥10,008
998

159

1,728

¥48,786¥11,006¥159¥4,999 ¥5,120 ¥70,070

SECOM Annual Report 2015

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
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 .............. ¥

Other

Total

406 ¥ 2,351 ¥ 121 ¥2,883 ¥ 820 ¥ 6,581
76
0
(46)
196
33
259
(65)
(630)
—
(22)
(20)
(737)
—
—
—
17
8
25
417

1,721

75

3,074

841

6,128

84

1,721

72

3,074

841

5,792

333 ¥

— ¥

3 ¥

— ¥

— ¥

336

Financing receivables:
Individually
evaluated .............. ¥ 102 ¥12,964 ¥ 74 ¥3,283 ¥ 869 ¥17,292
Collectively
evaluated .............. 42,422
510 2,223 2,450
157 47,762¥42,524 ¥13,474 ¥2,297 ¥5,733 ¥1,026 ¥65,054* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.
In thousands of U.S. dollars
Year ended March 31, 2015
Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

Other

Total

Allowance for
doubtful accounts:
Balance at
beginning of year....... $ 3,475 $14,342 $ 625 $25,617 $ 7,008 $ 51,067
Provision (Reversal) ..
917
4,025
(83)
92 6,091 11,042
Charge off...............
(867)
—
(542)
—
(233) (1,642)
Other* ....................
—
—
—
141
617
758
Balance at endof year .......................
3,525 18,367
Individually
evaluated ..............
592 18,367
Collectively
evaluated .............. $ 2,933 $— $Financing receivables:
Individually
733 $83,400
evaluated .............. $Collectively
evaluated .............. 405,817
8,317

0

25,850 13,483

61,225—25,850 13,483

58,292

0 $

$

— $

— $ 2,933— $27,258 $41,401 $152,792

1,325

14,4001,266 431,125$406,550 $91,717 $1,325 $41,658 $42,667 $583,917¥ —¥3,271 ¥4,968 ¥18,335
152

51,735* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

50

In millions of yen
Year ended March 31, 2014

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

The Company considers receivables that are past due and thefinancial position of the debtor to be credit quality indicators andclassifies financing receivables into Overdue and Current. Financing
receivables determined to have no prospects for collecting contractual interest on the basis of being past due and other factors areplaced on nonaccrual status.

In millions of yen

The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2015 and2014 are as follows:

March 31, 2014
Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable

Other

¥102

¥12,964¥74¥3,283¥869 ¥17,292

84

1,721

72

3,074

841

In millions of yen
March 31, 2015

Lease
receivables

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
medical insurance
loans
services
services receivable

Other

Total

Current ......................... ¥48,698 ¥10,966
Overdue........................
88
40¥159 ¥1,807 ¥2,417 ¥64,047— 3,192 2,703
6,023

Total:
Financing receivables .. ¥48,786 ¥11,006¥159 ¥4,999 ¥5,120 ¥70,070

Financing receivables
on nonaccrual status ... ¥¥ — ¥3,271— ¥ 3,719

¥

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
medical insurance
loans
services
services receivable

Other

Total

Current ......................... ¥42,422 ¥13,434 ¥2,223 ¥2,551 ¥ 626 ¥61,256
Overdue........................
102
40
74 3,182
400
3,798
Total:
Financing receivables .. ¥42,524 ¥13,474 ¥2,297 ¥5,733 ¥1,026 ¥65,054— ¥ 3,719 ¥74 ¥3,282 ¥— ¥ 7,075

Leasereceivables

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

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Other
loans
receivable

Loans
Loans
receivable receivable
resulting resulting
from
from
Other
Lease
medical insurance
loans
receivables
services
services receivable

Total

Current ......................... $405,817 $91,383 $1,325 $15,058 $20,142 $533,725
Overdue........................
733
334— 26,600 22,525 50,192
Total:
Financing receivables .. $406,550 $91,717 $1,325 $41,658 $42,667 $583,917— $27,258 $— $ 58,250

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2015 and 2014 are as follows:
In millions of yen
March 31, 2015—

18,36725,850 13,483

Other
loans
receivable¥88¥10,008¥—¥3,271 ¥4,968 ¥18,335

71

2,204

—

3,102

Lease
receivables

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

Other

1,618

Total

6,995

58,292

The average amounts of impaired receivables for the year ended
March 31, 2015 are as follows:
In millions of yen

Leasereceivables

Average amounts of
impaired receivables ....

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services¥95 ¥11,486

Other
loans
receivable

¥37

Other

Total

¥3,277 ¥2,919 ¥17,814
In thousands of U.S. dollars

Average amounts of
impaired receivables ....

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services$792 $95,717

Other
loans
receivable

Other

Total

$308 $27,308 $24,325 $148,450

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, a28.8 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.4 percent owned affiliate, which islisted on the Second Section of the Tokyo Securities Exchange.
Combined financial information for the affiliated companies
accounted for under the equity method is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2014

2015

Current assets ................................ ¥105,832 ¥114,922
Noncurrent assets .......................... 205,514 140,185$ 881,933
1,712,617

Total assets................................. ¥311,346 ¥255,107$2,594,550

Current liabilities ............................ ¥ 92,416 ¥ 59,268
Long-term liabilities........................
38,831
37,565Equity ............................................ 180,099 158,274$ 770,133
323,592
1,500,825

Total liabilities and equity ........... ¥311,346 ¥255,107$2,594,550

SECOM Annual Report 2015

Financial Section

Loans
Loans
receivable receivable
resulting resulting
from
from
medical insurance
services
services

Total

592

Lease
receivables
Other

Other

$— $27,258 $41,401 $152,792

March 31, 2015

— $30,992 $

5,792$733 $83,400

In thousands of U.S. dollars

Financing receivables
on nonaccrual status ... $Total

In thousands of U.S. dollars— ¥ 6,990
March 31, 2014

Financing receivables
on nonaccrual status ... ¥Impaired receivables ......
Related allowance for
doubtful accounts .......

March 31, 2015

In millions of yen

Leasereceivables

Lease
receivables

51

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2015

Net sales ....................... ¥262,726 ¥198,890 ¥162,379$2,189,383

Gross profit ................... ¥ 82,753 ¥ 65,492 ¥ 52,691$ 689,608

Net income
attributable toaffiliated companies .... ¥ 17,825 ¥ 14,305 ¥ 15,056$ 148,542

2015

2014

Dividends received from affiliated companies for the years ended
March 31, 2015, 2014 and 2013 were ¥3,160 million ($26,333
thousand), ¥2,652 million and ¥2,403 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥47,409 million($395,075 thousand) and ¥41,903 million at March 31, 2015 and2014, respectively, had a quoted market value of ¥133,559 million($1,112,992 thousand) and ¥119,638 million at March 31, 2015
and 2014, respectively.
The amounts of goodwill included in the carrying amount ofinvestments in affiliated companies were ¥4,768 million ($39,733
thousand) and ¥4,589 million at March 31, 2015 and 2014,
respectively.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2013

2015

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

¥1,774¥1,549¥1,924$14,783

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

¥4,417¥5,982¥6,573$36,808

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2014

2015

Notes and accounts
receivable, trade ............................. ¥ 544¥ 426$ 4,533

Loans receivable................................ ¥ 557¥ 563$ 4,642

Notes and accounts payable.............. ¥2,224¥2,494$18,533

Guarantees for bank loans ................ ¥1,039¥ 665$ 8,658

The Company's equity in undistributed income of affiliates at
March 31, 2015 and 2014 included in retained earnings was¥27,872 million ($232,267 thousand) and ¥25,668 million,
respectively.

52

SECOM Annual Report 2015

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 oncertain business assets of the information and communication
related services segment for the year ended March 31, 2015, andon certain real estate of the medical services segment for the year
ended March 31, 2014, respectively. The fair value was determinedbased on the estimated present value of future cash flows orappraisal value.
Impairment losses on long-lived assets by business segment for
the years ended March 31, 2015, 2014 and 2013 are as follows:2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Security services ....................
Fire protection services ..........
Medical services ....................
Insurance services .................
Geographic information
services ...............................
Information andcommunication related
services ...............................
Real estate andother services ......................
Corporate items ....................

¥ 111 ¥ 296—
21— 1,871
—
—

¥ —
34
—
—

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

2015

$

925
—
—
—

154

164

297

1,283

4,796

40

50

39,967

132
1,398

—
397

—
—

1,100
11,650¥6,591 ¥2,789¥381$54,925

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2015 and 2014 are as follows:
In millions of yen
March 31, 2015
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥46,045
Other ............................................ 20,610¥66,655(¥25,539)(5,007)(¥30,546)¥20,506
15,603¥36,109

Unamortized intangible assets........... ¥ 4,066¥¥ 4,066—

In millions of yen
March 31, 2014
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software ....................................... ¥43,907
Other ............................................ 21,415¥65,322(¥25,795)(4,515)(¥30,310)¥18,112
16,900¥35,012

Unamortized intangible assets........... ¥ 3,998¥¥ 3,998—

In thousands of U.S. dollars

In thousands of U.S. dollars

March 31, 2015
Gross
carrying
amountNet
carrying
amountAccumulated
amortization

Amortized intangible assets:
Software ....................................... $383,708
Other ............................................ 171,750$555,458($212,825) $170,883(41,725) 130,025($254,550) $300,908

Unamortized intangible assets........... $ 33,884$— $ 33,884

Aggregate amortization expense for the years ended March 31,
2015, 2014 and 2013 was ¥6,522 million ($54,350 thousand),¥6,741 million and ¥5,995 million, respectively. Amortized intangible assets are amortized using the straight-line method over theirestimated 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

In thousands of
U.S. dollars¥7,349
6,218
5,264
4,204
2,972

$61,242
51,81743,86735,03324,7672016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................

The changes in the carrying amount of goodwill by businesssegment for the years ended March 31, 2015 and 2014 are as
follows:
In millions of yen

Security
services

Fire
protection
services

Information
Geographic
andMedical information communication
services
services related services

Total¥17,643¥1,962 ¥39,642(175)
17,468

(135)
1,827

(6,906)32,736

—

—

(151)

—
17,643

—
1,962

287
39,679(175)
17,468

(135)
1,827

(6,807)32,872

—
—

—
—

37
(11)

—

—

(1,314)—
17,643

—
1,962

117
39,822Fire
protection
services

Real estateand otherservices

Total

Goodwill ............... $34,933 $16,275 $78,325 $37,750 $147,025 $16,350 $330,658
Accumulated
impairment
losses .................. (14,358)— (33,633) (6,150)(1,458) (1,125) (56,724)
March 31, 2014 .... 20,575 16,275 44,692 31,600 145,567 15,225 273,934
Goodwill acquired
—
—
—
308
—
—
308
during the year ...
Disposal ................
—
(92)
—
—
—
—
(92)
Impairment
losses ..................
—— (10,950)——— (10,950)
Translation
adjustment .........
867
—
—
108
—
—
975
Goodwill ............... 35,800 16,183 78,325 38,166 147,025 16,350 331,849
Accumulated
impairment
losses .................. (14,358)— (44,583) (6,150)(1,458) (1,125) (67,674)
March 31, 2015 ... $21,442 $16,183 $33,742 $32,016 $145,567 $15,225 $264,175

Impairment losses on goodwill recognized in the above table aremainly due to decreases in the estimated fair value of reporting
units in each segment mainly caused by decreases in projected cash
flows. The fair value is determined based on the estimated present
value of future cash flows.
13. Bank Loans and Long-Term Debt
Bank loans of ¥43,924 million ($366,033 thousand) and ¥52,542
million at March 31, 2015 and 2014, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 1.09 percent and 1.17 percent at March 31, 2015 and2014, 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 such
additional security.
At March 31, 2015, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($33,333 thousand). The line ofcredit expires in March 2016. Under the agreement, Nohmi Bosai
Ltd. is required to pay commitment fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2015, the Company had overdraft agreements with 33 banks andits unused lines of credit amounted to ¥31,835 million ($265,292
thousand). The Company incurs no fee on the unused portion ofthese overdraft agreements. The overdraft agreements expire in
the period from April 2015 to March 2016. The Company has theability and intent to extend these overdraft agreements undersimilar terms and conditions.

Financial Section

Goodwill ............... ¥4,018 ¥1,953 ¥9,399 ¥4,667
Accumulated
impairment
losses .................. (1,667)— (4,036)(893)
March 31, 2013 .... 2,351
1,953 5,363
3,774
Impairment
losses ..................
(151)
—
—
—
Translation
adjustment .........
269
—
—
18
Goodwill ............... 4,192
1,953 9,399
4,530
Accumulated
impairment
losses .................. (1,723)— (4,036)(738)
March 31, 2014 .... 2,469
1,953 5,363
3,792
Goodwill acquired———37
during the year ...
Disposal ................
—
(11)
—
—
Impairment
losses ..................
—— (1,314)—
Translation
adjustment .........
104
—
—
13
Goodwill ............... 4,296
1,942 9,399
4,580
Accumulated
impairment
losses .................. (1,723)— (5,350)(738)
March 31, 2015 ... ¥2,573 ¥1,942 ¥4,049 ¥3,842

Real estateand otherservices

Security
services

Information
Geographic
andMedical information communication
services
services related services(175)(135) (8,121)¥17,468 ¥1,827 ¥31,701
SECOM Annual Report 201553

Long-term debt at March 31, 2015 and 2014 comprises thefollowing:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

2015

Loans, principally from banks due
2014–2033 with interest rates
ranging from 0.21% to 7.07%:
Secured............................................ ¥24,212 ¥20,834
Unsecured........................................ 20,431 16,949
1.13% unsecured bonds due 2014 ......
—
1,384
0.5% unsecured bonds due 2015 ........
100
100
0.81% unsecured bonds due 2016 ......
100
100
0.52% unsecured bonds due 2016 ......
104
168
0.43% unsecured bonds due 2018 ......
100—
Unsecured bonds due 2014–2025
with floating interest rates basedon 6-month Japanese yen TIBOR ........ 9,424 10,685
Obligations under capital leases,
due 2014–2043 (Note 19).................. 12,700 13,028................................................ 67,171 63,248
Less: Portion due within one year ......... (13,368) (15,398)................................................ ¥53,803 ¥47,850$201,767
170,258
—
833
833
867
833
78,534
105,833
559,758(111,400)$448,358

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2015 and 2014 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2014

2015

Time deposits ....................................... ¥ 2,081 ¥ 2,315
Short-term and long-term receivables ... 5,636 5,591
Investment securities ............................. 1,133 1,525
Property, plant and equipment .............. 51,734 52,574
Other intangible assets.......................... ¥ 818 ¥ 818$ 17,342
46,9669,442
431,117$ 6,817

The aggregate annual maturities on long-term debt at March 31,
2015 are as follows:
Years ending March 31

2016.....................................................
2017.....................................................
2018.....................................................
2019.....................................................
2020.....................................................
Thereafter .............................................
............................................................

In millions of yen

In thousands of
U.S. dollars¥13,368
11,372
11,295
9,467
10,76910,900¥67,171$111,400
94,766
94,12578,892
89,742
90,833$559,758

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a
subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with 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 the54

SECOM Annual Report 2015

premium-paying period of the insurance policies, (b) that liabilities
related to incurred but not reported claims are computed based onrelated regulations in Japan whereas under U.S. GAAP, those liabilities are computed based on past experience for unreported losses,and (c) that unearned premiums are calculated based on the documents authorized by the Supervisory Authorities in Japan whereas
under U.S. GAAP, unearned premiums are reflected based on thelapse and surrender over the contract period.
In addition, under certain property and casualty insurance contracts with a refund clause and long-term insurance policies thatprovide refunds at maturity, such as personal accident and fire, thepolicyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the policy) has
occurred. The Company has provided for such refundable amounts
by classifying a portion of the net premiums written, together withinterest thereon, as investment deposits by policyholders. Contract
and policy terms are principally five years.
For purposes of preparing the consolidated financial statements,
appropriate adjustments have been made to reflect such items inaccordance with U.S. GAAP.
The net equity of Secom Insurance at March 31, 2015 and 2014was ¥67,633 million ($563,608 thousand) and ¥52,761 million,
respectively.
Net sales and operating revenue of Secom Insurance include net
realized investment gains and losses, including gains and losses onsales of securities, losses on other-than-temporary impairment ofinvestment securities and impairment losses on long-lived assets.
Net realized investment gains and losses, including losses on otherthan-temporary impairments, for the years ended March 31, 2015,2014 and 2013 were gains of ¥194 million ($1,617 thousand),¥1,221 million and ¥724 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2015, 2014 and 2013 were ¥18 million ($150 thousand),¥22 million and ¥25 million, respectively.
15. Pension and Severance Costs
Employees of the parent company and its domestic subsidiaries
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 arecalculated as a certain percentage of employees’ annual income
over their period of service, plus interest calculated as the 3-year
average yield for 10-year government bonds. The defined contribution pension plan was established in April 2003, by transferring a
portion equivalent to 20 percent of the cash balance pension plan,
including portions funded in prior periods. A specified percentageof employees’ annual income is contributed to the defined
contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accordingly, the 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.

Net periodic pension and severance costs for the years ended
March 31, 2015, 2014 and 2013 are as follows:2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Net periodic pension andseverance costs:
Service cost ......................... ¥5,357 ¥6,181 ¥8,269
Interest cost ........................
936 1,297 1,533
Expected return onplan assets ........................ (2,533) (2,299) (2,241)
Amortization of priorservice benefit ................... (1,584) (1,601) (1,600)
Recognized actuarial loss.....
989 1,581 1,407
Net periodic pension
and severance costs....... ¥3,165 ¥5,159 ¥7,368

2015$44,642
7,800(21,109)

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2015

2015

$819,883
44,642
7,800
8,942(38,259)—
843,008

768,008
127,850
51,783(26,608)—
921,033$ 78,025

Amounts recognized in the consolidated balance sheets at March
31, 2015 and 2014 consist of:(¥11,736)
(989)
1,584
(¥11,141)

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2014

2015

¥35,011¥22,054$291,758(25,648) (28,279)¥ 9,363 (¥ 6,225)(213,733)$ 78,025($97,800)(8,242)
13,200($92,842)

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2015 and 2014 consist of:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

Actuarial loss .....................................
Prior service benefit............................
Net amount recognized ..........

2014

2015

¥7,799 ¥20,524(2,549) (4,133)¥5,250 ¥16,391$64,992(21,242)$43,750

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 ¥1,505 million ($12,542 thousand) and¥788 million ($6,567 thousand), respectively.
The accumulated benefit obligation for the pension plan was¥100,995 million ($841,625 thousand) and ¥90,316 million atMarch 31, 2015 and 2014, 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 ¥42,389 million($353,242 thousand), ¥42,158 million ($351,317 thousand) and¥28,838 million ($240,317 thousand), respectively, at March 31,
2015, and ¥42,682 million, ¥38,220 million and ¥14,987 million,
respectively, at March 31, 2014.
The Company uses March 31 as the measurement date for thedomestic pension plan.
Weighted-average assumptions used to determine the benefit
obligation at March 31, 2015 and 2014 are as follows:
March 31

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

2015

2014

0.8%
1.6%

1.1%
2.7%

Weighted-average assumptions used to determine net pension
and severance costs for the years ended March 31, 2015, 2014 and2013 are as follows:
Years ended March 31

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

2015

2014

2013

1.1%
3.0%
2.7%

1.4%
3.0%
2.7%

1.8%
3.0%
2.6%

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.

SECOM Annual Report 2015

Financial Section

Prepaid pension andseverance costs ............................
Accrued pension andseverance costs ............................
Net amount recognized ......

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

2015$26,375

In thousands of
U.S. dollars

In millions of yen(13,200)
8,242

The changes in benefit obligation, plan assets and funded status
are as follows:

Change in benefit obligation:
Benefit obligation
at beginning of year ............... ¥ 98,386 ¥101,151
Service cost ..............................
5,357
6,181
Interest cost .............................
936
1,297
Actuarial (gain) loss ..................
1,073(4,933)
Benefits paid ............................
(4,591)(5,582)Acquisition ...............................
—
272
Benefit obligation
at end of year ........................ 101,161
98,386
Change in plan assets:
Fair value of plan assets
at beginning of year ...............
92,161
83,371
Actual return on plan assets .....
15,342
5,976
Employer contribution ..............
6,214
6,325
Benefits paid ............................
(3,193)(3,787)
Acquisition ...............................
—
276
Fair value of plan assets
at end of year ........................ 110,524
92,161
Funded status
at the end of year ...................... ¥ 9,363 (¥ 6,225)

Other changes in plan assets and benefit obligations recognizedin other comprehensive income (loss) for the year ended March 31,
2015 are summarized as follows:

55

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, 2015 and 2014. The three levels of
inputs used to measure fair value are more fully described in Note 22.
In millions of yen
March 31, 2015
Level 1

Cash and cash
equivalents ...............
Equity securities
Japanesecompanies ............
Debt securities
Government
bonds ...................
Non-government
bonds ...................
Pooled funds...............
Call loans ....................
Insurance contracts .....
Other ..........................

¥ 1,990

Level 2¥—

Level 3

¥

—

Total

¥

1,990

19,501——

19,501

4,742

681

—

5,423

—
141
—
—
—
¥26,374—
34,331
10,83010,856
240¥56,938

613
26,276——323¥27,212613
60,748
10,83010,856563¥110,524* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds include 100% 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, 40% in debt
securities and 10% 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, 2015
Level 1

Level 1

Cash and cash
equivalents ...............
Equity securities
Japanesecompanies ............
Debt securities
Government
bonds ...................
Non-government
bonds ...................
Pooled funds...............
Call loans ....................
Insurance contracts .....
Other ..........................

¥ 1,750

Level 2¥—¥

Level 3

Total—

¥ 1,750

13,900——13,900

5,221

154

—

5,375

242
28
—
—
—
¥21,141

2,099
31,201
7,225
9,855
112
¥50,646729
18,885——760¥20,374

3,070
50,114
7,225
9,855
872
¥92,161* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥11 million at March 31, 2014.
* The plan’s government bonds include approximately 20% Japanese bonds and
80% foreign bonds. The non-goverment bonds include approximately 10%
Japanese bonds and 90% 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 and 50% in debt
securities. The unquoted beneficial certificate of security investment trust
included in the plan’s pooled funds is classified as Level 3.

56

SECOM Annual Report 2015

Level 3

Total

Cash and cash
equivalents ............... $ 16,583 $— $—Equity securities
Japanesecompanies ............ 162,508——
Debt securities
Government
bonds ...................
39,517
5,675—
Non-government
bonds ...................
—
—
5,108
Pooled funds...............
1,175
286,091 218,967
Call loans ....................
—
90,250—Insurance contracts .....
—
90,467—
Other ..........................
—
2,000
2,692
$219,783 $474,483 $226,767$ 16,583
162,508
45,192
5,108506,233
90,25090,467
4,692$921,033* The plan’s government bonds include approximately 5% Japanese bonds and
95% foreign bonds. The non-goverment bonds include 100% 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, 40% in debt
securities and 10% 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, 2015 and 2014.
Level 3 investments, mainly in the unquoted beneficial certificate
of security investment trust in the plan’s pooled funds, are at thediscretion of the administrator of the fund. Their fair values are estimated based on unobservable inputs provided by the administratorof the fund.
In millions of yen
Year ended March 31, 2015
Debt securities

In millions of yen
March 31, 2014

Level 2

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer to Level 3, net .........
Balance at end of year .........

Nongovernment
bonds

Pooled
funds

Other

Total

¥729

¥18,885¥760¥20,374

—

71

38

109

(116)

3,188

12

3,084

—
—
¥613

4,023
109
¥26,276

(487)
3,536
—
109
¥323 ¥27,212

In millions of yen
Year ended March 31, 2014
Debt securities
Nongovernment
bonds

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer from Level 3, net.....
Balance at end of year .........

¥911

Pooledfunds¥20,807

Other

¥768

Total

¥22,486

—

606

34

640

(182)

1,344

(8)

1,154

—
—
¥729

(3,559)(313)¥18,885(34)(3,593)—(313)¥760 ¥20,374

In thousands of U.S. dollars
Year ended March 31, 2015
Debt securities
Nongovernment
bonds

Balance at
beginning of year...............
Actual return on plan assets:
Relating to assets soldduring the year ..............
Relating to assets heldat end of year ................
Purchases, sales andsettlements, net .................
Transfer to Level 3, net .........
Balance at end of year .........

Pooled
funds

Other

Total

$6,075 $157,375 $6,333 $169,783
—

592

317

909

(967)

26,567100

25,700—33,525 (4,058) 29,467
—
908
—
908
$5,108 $218,967 $2,692 $226,767

The Company expects to contribute ¥5,399 million ($44,992
thousand) to its domestic defined benefit plans in the year ending
March 31, 2016.
The following benefit payments, which reflect future services, as
appropriate, are expected to be paid.
Years ending March 31

2016.....................................................
2017.....................................................
2018.....................................................
2019.....................................................
2020.....................................................
2021–2025 ...........................................

17. Income Taxes
Total income taxes for the years ended March 31, 2015, 2014
and 2013 are allocated as follows:

In millions of yen

In thousands of
U.S. dollars¥ 4,819
4,645
5,177
5,545
5,245
28,046$ 40,158
38,70843,142
46,20843,708
233,717

The parent company and certain subsidiaries have defined contribution pension plans. The contributions to the defined contribution
pension plans for the years ended March 31, 2015, 2014 and 2013
were ¥1,772 million ($14,767 thousand), ¥1,679 million and¥1,645 million, respectively.

2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Consolidated income taxes
from continuing
operations .......................... ¥45,972 ¥49,695 ¥46,697
Consolidated income taxes
from discontinued
operations ..........................
651
(169)
152
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities .................... 6,240
440 3,511
Unrealized gains
on derivative
instruments .....................
(5)
(0)
10
Pension liability
adjustments .................... 3,771
3,183
(184)
Foreign currencytranslation
adjustments .................... 1,020
121—..................................... ¥57,649 ¥53,270 ¥50,186

2015$383,100
5,425

51,999(42)
31,4258,500$480,407

The parent company and its domestic subsidiaries were subject toa corporate tax of 25.5 percent for the year ended March 31, 2015
and 28.05 percent for the years ended March 31, 2014 and 2013,
an inhabitant’s 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 in Japan of approximately 35.4
percent for the year ended March 31, 2015 and 37.8 percent for
the years ended March 31, 2014 and 2013.
Due to the promulgation on March 31, 2014 of the “Act for
Partial Amendment of the Income Tax Act, etc.,” the statutory
tax rate used to calculate the deferred tax assets and liabilities at
March 31, 2014 changed mainly from 37.8 percent to 35.4 percent
for those items scheduled for reversal during the period from
April 1, 2014 to March 31, 2015. As a result, income taxes for theyear ended March 31, 2014 increased by ¥1,119 million.
Due to the promulgation on March 31, 2015 of the “Act for
Partial Amendment of the Income Tax Act, etc.” and “Partial
Amendment of the Local Tax Act, etc.,” the statutory tax rate used
to calculate the deferred tax assets and liabilities at March 31, 2015changed mainly from 35.4 percent to 32.9 percent for those items
scheduled for reversal during the period from April 1, 2015 toMarch 31, 2016, and to 32.1 percent for those items scheduled
for reversal on or after April 1, 2016. As a result, income taxes
for the year ended March 31, 2015 decreased by ¥648 million($5,400 thousand).
Financial Section

16. Exchange Gains and Losses
Other income for the years ended March 31, 2015, 2014 and2013 includes net exchange gains of ¥574 million ($4,783
thousand), ¥408 million and ¥276 million, respectively.

SECOM Annual Report 201557

Reconciliations of the differences between income taxes computed
at statutory tax rates and consolidated income taxes from continuing
operations are as follows:2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Income taxes computed
at statutory tax rate ............ ¥45,261 ¥48,665 ¥45,494
Increase (decrease)resulting from:
Provision of valuation
allowance ....................... 1,152
832
477
Reversal of valuation
allowance .......................
(927) (1,234)(518)
Per capita tax ....................
863
857
850
Net effect of changes incorporate tax rates ..........
(648) 1,119—
Other, net .........................
271
(544)
394
Consolidated income
taxes from continuing
operations ................... ¥45,972 ¥49,695 ¥46,697

2015$377,175

9,600(7,725)
7,192(5,400)2,258$383,100

The valuation allowance principally relates to deferred tax assetsof 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, 2015, 2014 and2013 was a decrease of ¥3,410 million ($28,417 thousand) and¥255 million and an increase of ¥299 million, respectively.
In assessing the realizability of deferred tax assets, the Company’s
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’s management considered the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies inmaking 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’s
management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of theexisting valuation allowance at March 31, 2015 and 2014.
Net deferred tax assets at March 31, 2015 and 2014 are reflectedin the accompanying consolidated balance sheets under thefollowing captions:

The significant components of deferred tax assets and liabilities at
March 31, 2015 and 2014 are as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

2015

Deferred tax assets:
Loss carryforwards .......................... ¥ 8,715 ¥11,277$ 72,625
Accrued pension andseverance costs .............................
8,180
9,753
68,167
Deferred revenue ............................
8,152
8,958
67,933Adjustment of book value atthe date of acquisition—
Land and buildings ......................
6,871
7,869
57,258Other assets ................................
263
265
2,192
Property, plant and equipment ........
6,230
8,913
51,916
Accrued bonus ................................
5,709
6,014
47,575
Vacation accrual ..............................
3,186
3,495
26,550Allowance for doubtful accounts.....
2,889
2,635
24,075
Write-down on real estate
inventories ....................................
1,714
2,781
14,283
Intangible assets..............................
1,674
1,641
13,950Investment securities .......................
1,268
49
10,567
Other ..............................................
9,749
9,328
81,243Gross deferred tax assets ............. 64,600 72,978538,334
Less: Valuation allowance ............ (26,562) (29,972)(221,350)
Total deferred tax assets .............. 38,038 43,006
316,984
Deferred tax liabilities:
Unrealized gains on securities.......... (11,588) (6,133)(96,567)
Prepaid pension andseverance costs ............................. (11,128) (7,862)(92,733)
Adjustment of book value atthe date of acquisition—(38,467)
Land and buildings ...................... (4,616) (5,201)
Intangible assets .......................... (4,421) (5,160)(36,842)
Other assets ................................ (1,157) (1,332)(9,642)
Investments in affiliated companies .. (6,608) (5,506)(55,067)
Deferred installation costs ............... (5,710) (6,464)(47,583)
Other .............................................. (4,352) (3,749)(36,266)
Gross deferred tax liabilities ......... (49,580) (41,407)(413,167)
Net deferred tax assets ........... (¥11,542) ¥ 1,599 ($ 96,183)

58

SECOM Annual Report 2015

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

2015

Deferred income taxes(Current assets) ............................... ¥12,929 ¥14,021
Deferred income taxes(Other assets) ..................................
5,037
7,061
Other current liabilities(Current liabilities) ...........................
(1,106)(344)
Deferred income taxes(Long-term liabilities)....................... (28,402) (19,139)
Net deferred tax assets ............. (¥11,542) ¥ 1,599$107,742
41,975(9,217)(236,683)($ 96,183)

The Company has not recognized deferred tax liabilities of ¥674
million ($5,617 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥23,288 million ($194,067 thousand)at March 31, 2015 as they are not expected to be remitted in theforeseeable future.
At March 31, 2015, the operating loss carryforwards of domestic
subsidiaries amounted to ¥21,216 million ($176,800 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:
Expires in the years ending March 31

2016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
2023......................................................
2024......................................................
..............................................................

In millions of yen

¥

—
—
2,829
6,588
1,730
1,220
3,337
2,048
3,464
¥21,216

In thousands of
U.S. dollars$——
23,57554,90014,417
10,16727,80817,06728,866$176,800

The operating loss carryforwards of overseas subsidiaries at
March 31, 2015 amounted to ¥6,638 million ($55,317 thousand), apart of which will begin to expire in the year ending March 31, 2016.

The total amount of unrecognized tax benefits for the years
ended March 31, 2015, 2014 and 2013 was insignificant. Also,
there were no significant movements in the gross amounts of unrealized tax benefits and the amounts of interest and penalties recognized due to the unrecognized tax benefits during the years ended
March 31, 2015, 2014 and 2013.
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 infuture periods. Based on the information available as of March 31,
2015, the Company does not expect significant changes to theunrecognized tax benefits within the next twelve months.
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 2014, with some 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,
2015, 2014 and 2013 are as follows:2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Net income attributable
to SECOM CO., LTD. ............. ¥80,184 ¥73,979 ¥70,580
Net transfers from (to)noncontrolling interests ......
(339)
(28)
(752)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests ........ ¥79,845 ¥73,951 ¥69,828

2015$668,200(2,825)$665,375(2) Retained Earnings
The Japanese Companies Act provides that an amount equal to
10 percent of surplus distributed by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25 percent of the common stock account.
The amount available for dividends under the JapaneseCompanies Act is based on the amount recorded in the parent
company’s nonconsolidated statutory financial statements in accordance with Japanese GAAP. Such amount was ¥485,321 million($4,044,342 thousand) at March 31, 2015.

Subsequent to March 31, 2015, the parent company’s Board of
Directors declared a year-end cash dividend of ¥65 ($0.54) per
share, totaling ¥14,187 million ($118,225 thousand), to shareholders of record on March 31, 2015. The dividend declared wasapproved at the general shareholders’ meeting held on June 25,
2015. Dividends are recorded in the year they are declared.
The Company has made it a basic rule to distribute a dividend
twice a year, the interim dividend whose record date is
September 30 each year and commenced from the year ended
March 31, 2015, and the year-end dividend whose record date is
March 31 each year. The interim dividend is determined by the
Board of Directors and the year-end dividend is determined by theGeneral Meeting of Shareholders.
Cash dividends per share are computed based on dividends paid
for the year. Cash dividends per share for the year ended March 31,
2015 include the year-end dividend of ¥115 whose record date is
March 31, 2014 and the interim dividend of ¥60 whose record dateis September 30, 2015.
(3) Common Stock in Treasury
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act. There are certain restrictions on payment of dividends in connection with the treasury stock
repurchased.
(4) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the years
ended March 31, 2015, 2014 and 2013 are as follows:
In millions of yen
Pre-tax
amountTax(expense)or benefit

Net-of-tax
amountSECOM Annual Report 2015

Financial Section

For the year ended March 31, 2015:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. ¥20,020 (¥ 6,295) ¥13,725
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(192)
55
(137)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
12(3)
9
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(25)
8
(17)
Pension liability adjustments—
Unrealized gains or losses(3,620)7,841
arising during the period ............. 11,461
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
(496)
(151)
(647)
Foreign currencytranslation adjustments ................... 13,199(1,020) 12,179
Other comprehensive
income (loss) ........................... ¥43,979 (¥11,026) ¥32,95359

In millions of yen
Pre-tax
amount

For the year ended March 31, 2014:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. ¥ 3,229
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(1,669)Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
19
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(17)
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
8,471
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
255
Foreign currencytranslation adjustments ................... 18,213
Other comprehensive
income (loss) ........................... ¥28,501
For the year ended March 31, 2013:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. ¥11,607
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(713)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
arising during the year.................
10
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
15
Pension liability adjustments—
Unrealized gains or losses
arising during the period .............
(897)
Less: Reclassification
adjustment for gains
or losses realized
in net income ......................
5
Foreign currencytranslation adjustments ................... 10,105
Other comprehensive
income (loss) ........................... ¥20,132

Tax(expense)or benefit

Net-of-tax
amount(¥ 974) ¥ 2,255

534(1,135)

(6)

13

6

(11)

(3,153)

5,318

(30)

225

(121)

18,092(¥3,744) ¥24,757(¥3,740) ¥ 7,867

229

(4)

In thousands of U.S. dollars
Pre-tax
amount

(6)

9

117

(780)

67

72

—

10,105Net-of-tax
amount

For the year ended March 31, 2015:
Unrealized gains on securities—
Unrealized gains or losses
arising during the period ............. $166,833 ($52,457) $114,376
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income.......................... (1,600)
458(1,142)
Unrealized gains on derivative
instruments—
Unrealized gains or losses
100
(25)
75
arising during the year.................
Less: Reclassification
Less: adjustment for gains
Less: or losses realized in
Less: net income..........................
(208)
67
(141)
Pension liability adjustments—
Unrealized gains or losses
arising during the period ............. 95,509 (30,167) 65,342
Less: Reclassification
adjustment for gains
or losses realized
in net income ...................... (4,134)(1,258)(5,392)Foreign currencytranslation adjustments ................... 109,992(8,500) 101,492
Other comprehensive
income (loss) ........................... $366,492 ($91,882) $274,610

Reclassification adjustments for gains or losses realized in net
income (pre-tax amount) included in the consolidated statements
of income for the years ended March 31, 2015 and 2014 are
as follows:

(484)

6

Tax
(expense)or benefit

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2015

(¥306) (¥1,221)
(33)
(483)

($2,550)
(275)

2015

Unrealized gains on securities—
Net sales and operating revenue .......
Gain on sales of securities, net ..........
Loss on other-than-temporary
impairment of investment
securities .........................................
Unrealized gains onderivative instruments—
Other income ....................................
Pension liability adjustments—
Net periodic pension andseverance costs (Note 15) ................
Equity in net income of affiliatedcompanies ..........................................

147

35

1,225

(25)

(17)

(208)

(595)

(20)

(4,958)

¥ 99

¥ 275

$ 824

(¥3,337) ¥16,795

19. Lessee
The Company leases certain office space, employee residential
facilities, and computer and transportation equipment. Some leased
buildings, and computer and transportation equipment are held
under capital leases. Other leases are classified as operating leases.

60

SECOM Annual Report 2015

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 adjoining
land and buildings. The lease term is also 30 years beginning July
15, 2010. For financial reporting purposes, the portion of theselease arrangements relating to the building has been classified asa capital lease; accordingly, an asset of approximately ¥7,209 million ($60,075 thousand) has been recorded in the buildings andimprovements account. The portion of the lease relating to the landhas been classified as an operating lease. The future minimum lease
payment for the site at March 31, 2015 was ¥5,453 million($45,442 thousand).
A summary of leased assets under capital leases at March 31,
2015 and 2014 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

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

2014

2015

¥ 8,348 ¥ 8,908$69,567

10,234 11,107
46
95(9,185) (9,776)¥ 9,443 ¥10,334

85,283
383(76,542)$78,691

The future minimum lease payments required under operatingleases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2015 are as follows:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 9,725
8,906
8,565
8,422
8,398
29,794$ 81,042
74,217
71,37570,18369,983
248,283¥73,810$615,083

2016........................................................
2017........................................................
2018........................................................
2019........................................................
2020........................................................
Thereafter ................................................
Total future minimum lease
payments ...........................................

20. Lessor
The Company’s leasing operations consist principally of leasingof security merchandise, security systems and real estate for offices
and medical institutions. Most of the security merchandise andsecurity systems on lease are classified as sales-type leases or directfinancing leases. Other leases are classified as operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2015 and 2014 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

¥58,045 ¥51,037(5,035) (3,869)(4,224) (4,644)
48,786 42,524(14,823) (12,769)¥33,963 ¥29,755$483,708(41,958)(35,200)
406,550(123,525)$283,025

2015

Depreciation and amortization expenses for assets under capitalleases for the years ended March 31, 2015, 2014 and 2013 were
¥2,746 million ($22,883 thousand), ¥2,668 million and ¥2,688
million, respectively.
The following is a schedule by year of future minimum lease
payments under capital leases and the present value of the net
minimum lease payments at March 31, 2015:
Years ending March 31

2016........................................................
2017........................................................
2018........................................................
2019........................................................
2020........................................................
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 .........................................

In millions of yen

In thousands of
U.S. dollars¥ 2,535
2,020
1,601
1,324
1,100
11,793
20,373(7,673)$ 21,125
16,833
13,342
11,033
9,167
98,275
169,775(63,942)

12,700(2,033)

105,833(16,942)¥10,667$ 88,891

The following is a schedule by year of future minimum lease
payments to be received under sales-type leases and directfinancing leases at March 31, 2015:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥17,043
14,28911,864
8,768
4,760
1,321

$142,025
119,075
98,86773,067
39,667
11,007¥58,045$483,708

2016........................................................
2017........................................................
2018........................................................
2019........................................................
2020........................................................
Thereafter ................................................
Total future minimum lease
payments to be received ....................

A summary of investment in property under operating leases andproperty held for lease at March 31, 2015 and 2014 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 312015

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

2014

2015

¥34,892 ¥32,944
32,150 31,659
662
662(10,882) (10,441)¥56,822 ¥54,824$290,767
267,917
5,517(90,684)$473,517

SECOM Annual Report 2015

Financial Section

Rental expenses under operating leases for the years ended
March 31, 2015, 2014 and 2013 were ¥22,898 million ($190,817
thousand), ¥21,774 million and ¥18,264 million, respectively. A
significant 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 financial
reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, the annual lease payment for thesite is approximately ¥1,299 million ($10,825 thousand) over a
20-year period.

Total minimum lease payments
to be received .................................
Estimated executory cost...................
Unearned income .............................
Lease receivables, net........................
Less: Current portion ........................
Long-term lease receivables, net....

61

The future minimum rentals under noncancelable operatingleases at March 31, 2015 are as follows:
Years ending March 31

2016........................................................
2017........................................................
2018........................................................
2019........................................................
2020........................................................
Thereafter ................................................
Total future minimum rentals ...............

In millions of yen

In thousands of
U.S. dollars¥1,945
162
162
162
162
3,234
¥5,827$16,208
1,350
1,350
1,350
1,350
26,950$48,558

21. 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. The three levels of inputs used to measure fair value
are more fully described in Note 22.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits;
Notes and Accounts Receivable, Trade; Due from Subscribers;
Short-Term Receivables; Bank Loans; Notes and Accounts
Payable, Trade; Other Payables; Deposits Received; Accrued
Income Taxes; and Accrued Payroll
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 investment
securities are principally based on quoted market prices.
(3) Long-Term Receivables Including Current PortionLong-term receivables, including the current portion, areclassified as Level 2 and fair value is estimated based on the present
value of future cash flows through estimated maturity, discounted
using estimated market discount rates.
(4) Long-Term Debt Including Current PortionLong-term debt, including the current portion, is classified as
Level 2 and fair value is estimated based on the present valueof future cash flows of each instrument discounted using theCompany’s current incremental borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders areclassified as Level 3 and estimated based on the present value of
future cash flows, discounted using the interest rates currently
being offered for similar contracts.
(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from financial institutions.

62

SECOM Annual Report 2015

The carrying amounts and estimated fair values of financial instruments, excluding, debt and equity securities, which are disclosed in
Notes 2 (7) and 7, at March 31, 2015 and 2014 are as follows:
In millions of yen
March 31
2015
Carrying
amountNon-derivatives:
Assets—Long-term receivables
including current
portion (Less allowancefor doubtful accounts) .... ¥58,743
Liabilities—
Long-term debt
including current
portion ........................... 67,171
Investment deposits
by policyholders ............. 30,272
Derivatives:
Liabilities—
Interest rate swaps(Other long-term
liabilities) ........................
118

Estimated
fair value

2014
Carrying
amountEstimated
fair value¥59,061 ¥58,235¥58,457

67,191

63,24863,29731,70929,53130,710

118

165

165

In thousands of U.S. dollars
March 31, 2015
Carrying
amountNon-derivatives:
Assets—Long-term receivables including current
portion (Less allowance for doubtful
accounts) ...............................................
Liabilities—
Long-term debt including current
portion ...................................................
Investment deposits
by policyholders .....................................
Derivatives:
Liabilities—
Interest rate swaps (Other long-term
liabilities) ................................................

Estimated
fair value$489,525 $492,175
559,758 559,925
252,267 262,242

983

983

Limitation:
Fair value estimates are made at a specific point in time based on
relevant market information and information about financial
instruments. These estimates are subjective 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.

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines fairvalue as the price that would be received to sell an asset or paid totransfer 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. This accounting 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 market
participants 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, 2015 and 2014. Transfers between levels are recognizedat the end of the respective reporting periods.
In millions of yen
March 31, 2015
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents ..... ¥844
Short-term
investments andinvestment
securities ...............
171,162
Total assets ................. ¥172,006¥ 2,671¥

35,853¥38,524

27,340¥ 27,340

234,355¥237,870

Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥

¥
¥

¥
¥

¥
¥

—
—

118
118

—

—
—

¥

3,515

118
118

In millions of yen

In thousands of U.S. dollars
March 31, 2015
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents ..... $7,034 $ 22,258 $— $ 29,292
Short-term
investments andinvestment
securities ............... 1,426,350 298,775 227,833
1,952,958
Total assets ................. $1,433,384 $321,033 $227,833 $1,982,250
Liabilities:
Derivatives(Other long-term
liabilities) ............... $Total liabilities ............. $

— $
— $

983 $
983 $

— $
— $

983
983

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 prices in active markets
with sufficient volume and frequency of transactions.
Level 2 assets comprise principally debt securities, which arevalued using quoted prices for similar assets in active markets,or quoted prices 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. The fair value is determined byusing a valuation technique, such as the discounted cash flow
model, which best reflects the nature, characteristics and risks ofeach asset. These significant unobservable inputs contain discountrates, exit timing and an EBITDA multiple. An increase (decrease) inthe discount rates, the later (earlier) exit and a decrease (increase)in the EBITDA multiple would result in a decrease (increase) in thefair value of non-marketable securities.
The Company’s Level 3 investment securities that are measured
at fair value on a recurring basis at March 31, 2015 and 2014,
amounting to ¥27,340 million ($227,833 thousand) and ¥34,980
million, respectively, are primarily private equity investments.
The valuation technique and significant unobservable inputs
are as follows:

March 31, 2014
Level 1

Liabilities:
Derivatives(Other long-term
liabilities) ............... ¥Total liabilities ............. ¥——Level 3

¥ 2,671¥

24,600¥27,271

34,980¥34,980

¥
¥

165
165

¥
¥

—

—
—

March 31, 2015

Total

¥

2,924

193,688¥196,612

¥
¥

165
165

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%
2016–2019
4.5x–10.7x

Valuation techniqueSignificant unobservable inputs

Range

Discounted cash flows

Discount rate
Exit timing
EBITDA multiple

20%–30%2014–2019
3.7x–8.5x

March 31, 2014

For the year ended March 31, 2014, ¥1,401 million of debt
securities were transferred from Level 1 to Level 2 because theobservable markets in which these instruments were tradedbecame inactive.

SECOM Annual Report 2015

Financial Section

Assets:Cash equivalents ..... ¥253
Short-term
investments andinvestment
securities ...............
134,108
Total assets ................. ¥134,361

Level 263

Derivative Financial Investments
Derivative financial instruments comprise forward exchange
contracts, interest rate swaps and others. These derivative instruments are valued using observable market data and classified as
Level 2 liabilities.
The following table represents the changes in Level 3 assets
measured on a recurring basis for the years ended March 31, 2015
and 2014.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2015

Balance at beginning of year .............. ¥34,980 ¥39,588
Total gains or losses(realized and unrealized):
Included in earnings ...................
4,920 7,102
Included in othercomprehensive income .............
(38)
89
Purchases .......................................
3,619 2,132
Sales .............................................. (19,099) (19,977)
Redemptions ..................................
(327)
(367)
Foreign currency translation
adjustments .................................
3,285 6,413
Balance at end of year ....................... ¥27,340 ¥34,980

2015$291,500

Changes in unrealized gains
or losses relating to instruments
still held at end of year:
Included in earnings ................... ¥ 1,065 ¥ 6,388

41,000(317)
30,158(159,158)(2,725)27,375$227,833$

8,875

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¥9,104 million ($75,867 thousand) were written down to their fairvalue of ¥9,083 million ($75,692 thousand), resulting in an otherthan-temporary impairment charge of ¥21 million ($175 thousand),
which was included in earnings for the year ended March 31, 2015.
For the year ended March 31, 2014, non-marketable equity
securities with a carrying amount of ¥8,684 million were written
down to their fair value of ¥8,639 million, resulting in an otherthan-temporary impairment charge of ¥45 million, which was
included in earnings. All impaired non-marketable equity securities
were classified as Level 3 assets as the Company uses unobservable
inputs such as future cash flows 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 unobservable inputs to value these assets. These
Level 3 assets are not significant.

64

SECOM Annual Report 201523. 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.
(2) Risk Management
The Company has exposure to the market risk of changes ininterest rates which relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements tomanage fluctuations in cash flows resulting from changes in interest
rates. Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate proceeds and makes fixed interest rate payments,
thereby effectively creating fixed-rate debt.
(3) Cash Flow Hedges
The Company designates interest rate swap agreements as cash
flow hedges for variability of cash flows originating from floating
rate borrowings. The interest rate swap agreements mature atvarious dates through 2015. The effective portion of changes in fairvalues 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 hedge ineffectivenessand net gains or losses excluded from the assessment of hedge
effectiveness is not material for the years ended March 31, 2015,2014 and 2013 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
Approximately ¥5 million ($42 thousand) of net derivative income
included in accumulated other comprehensive income, net of tax at
March 31, 2015, will be reclassified into current income within 12
months from that date. At March 31, 2015 and 2014, the notional
principal amounts of interest rate swap agreements designated as
cash flow hedges were ¥726 million ($6,050 thousand) and ¥2,153
million, respectively.
(4) Derivative Instruments Not Designated as Hedges
The Company enters into interest rate swap agreements to reduce
exposure to fluctuations in interest rates relating primarily to debt
obligations and other agreements. Changes in fair value of thesederivative financial instruments, which are not designated ashedges, are reported in current income.

Fair values of derivative instruments reflected in the consolidatedbalance sheets as of March 31, 2015 and 2014 are as follows:
Derivatives designated as hedging instruments

Location

Liabilities:
Interest rate swaps

Other current
liabilities
Other long-term
liabilities

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2015

2014

2015

¥ 5

¥—

$42

¥—

¥28

$—

In millions of yen

In thousands of
U.S. dollars

Derivatives not designated as hedging instruments

Liabilities:
Interest rate swaps

March 31

March 31

Location

2015

2014

2015

Other long-term
liabilities

¥113

¥137

$941

Effects of derivative instruments on the consolidated statements
of income for the years ended March 31, 2015, 2014 and 2013 are
as follows:

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 guarantee provided, the Company would have to perform under theguarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
maximum amount of undiscounted payments the Company would
have to make in the event of default amounts to ¥4,582 million($38,183 thousand) at March 31, 2015. The carrying amounts of
the liabilities recognized as the Company’s obligations under theseguarantees at March 31, 2015 and 2014 were deemed insignificant.
It is not anticipated that damages, if any, resulting from legal
actions will have a material impact on the Company’s consolidated
financial statements.
25. Discontinued Operations
The Company accounted for the sale of certain businesses inaccordance with ASC 205-20, “Discontinued Operations.”
The Company sold certain businesses included in the real estateand other services segment, during the years ended March 31, 2015
and 2013, respectively. The Company reported the operating results
related to these operations as discontinued operations. Prior period
figures have been restated.
Discontinued operations for the years ended March 31, 2015,2014 and 2013 are as follows:

Derivatives designated as cash flow hedging instruments
Gains recognized in accumulated other comprehensive income (loss)(effective portion)

Interest rate swaps

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2013

2015

¥6

¥10

¥5

$50

Gains (losses) reclassified from accumulated other comprehensive
income (loss) into income (effective portion)

Location

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2013

2015

Interest rate swaps Other income¥25
Other expenses ¥—

¥17
¥—

¥—
(¥15)

$208
$ —

Derivatives not designated as hedging instruments

Location

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2015

¥—
¥33
¥—

¥59
¥—
(¥13)

$ —
$192
$ —

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2015
for the purchase of property, plant and equipment of approximately¥3,759 million ($31,325 thousand).

Attributable tononcontrolling interests ....
Attributable to
SECOM CO., LTD ..............

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

2015

¥ 598 ¥3,272 ¥3,479$ 4,983

(149)

(301)

(771)

(1,242)

1,614
(651)

—
169

15
(152)

13,450(5,425)¥ 814 (¥ 132) (¥ 908)

$ 6,783¥$— ¥— (¥ 110)¥ 814 (¥ 132) (¥ 798)—

$ 6,783

Income (loss) from discontinued operations, net of tax, by business segment for the years ended March 31, 2015, 2014 and 2013is as follows:

Real estate andother services ....................
Income (loss) fromdiscontinued operations,net of taxes.......................

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2015

2014

2013

2015

¥814

(¥132)(¥908)$6,783¥814(¥132)(¥908)$6,783

SECOM Annual Report 2015

Financial Section

2015

Equity swaps
Other income¥—
Interest rate swaps Other income¥23
Other expenses ¥—2015

Net sales andoperating revenue.............
Income (loss) fromdiscontinued operations
before income taxes..........
Gain on sales of
discontinued operations ....
Income taxes.......................
Income (loss) fromdiscontinued operations,net of taxes.......................

In millions of yen

6526. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2014

2013

Cash paid during theyear for:
Interest ............................ ¥ 1,403 ¥ 1,459 ¥ 1,568
Income taxes ................... 50,673 50,676 31,761
Non-cash investing andfinancing activities:
Additions to obligations
under capital leases .......
2,318
4,503
2,381
Increase in land, buildings
and improvements byoffsetting long-term
receivables ....................
3,179
—
—
Significant acquisitions(Note 4)—
Assets acquired .............
—— 131,747
Liabilities assumed ........
—— (63,833)
Noncontrollinginterests ......................
—— (21,873)
Considerations forequity .........................
—— 46,041
Repayment of—— 27,000
long-term debt ...........
Cash and cash
equivalents on hand ...
——(6,859)Total considerations ...... ¥— ¥— ¥ 66,182

2015$ 11,692
422,275

19,317

26,492
—
—
—
—
—

$

—
—

27. 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 management 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, information and communication
related services, and real estate and other services.
The Company recognizes that the significance of information andcommunication related services is increasing, resulting from theacquisition of At Tokyo Corporation, a subsidiary newly consolidated
from October 2012. Therefore, during the year ended March 31,
2014, the Company decided to separately disclose the informationand communication related services segment, formerly included in
the information and communication related and other services

66

SECOM Annual Report 2015

segment, to disclose business activities more adequately andimprove the effectiveness of segment information. Since thesignificance of the real estate development and sales segment as
a reportable segment has decreased, it was reclassified to the otherservices segment and its name was changed to the real estate andother services segment. In addition, during the year ended March
31, 2014, due to the increase in significance, construction andinstallation services, formerly included in the security services segment, was reclassified to the real estate and other services segment
to disclose business activities more adequately and improve theeffectiveness of segment information. Accordingly, segment information of all prior periods has been restated to conform to thepresentation used for the year ended March 31, 2014.
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-based
nursing care services, medical data transmission services by utilizing
the Company’s network and leasing of real estate for medical institutions. In addition, the VIE, of which the Company is the primary
beneficiary manage hospitals and health care-related institutions.
The insurance services segment includes the non-life insurancerelated underwriting business in the Japanese market. The geographic information services segment includes surveying andmeasuring services and GIS services. The information and communication related services segment includes data center services,business continuity plan support, information security services andcloud services. The real estate and other services segment includes
development and sales of condominiums equipped with security
and contingency planning features, leasing of real estate,
construction and installation services and other services.
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, equipment and automobiles.

Information by business and geographic segments for the years
ended and as of March 31, 2015, 2014 and 2013 is as follows:

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2015

(1) Business Segment Information

2015

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2015

2014

Net sales andoperating revenue:
Security services—
External customers ....... ¥487,063 ¥472,449 ¥443,231
Intersegment ................
2,963
2,811
2,343
................................. 490,026
475,260
445,574
Fire protection services—
External customers ....... 121,189
122,046
114,130
Intersegment ................
5,127
5,111
4,308
................................. 126,316
127,157
118,438
Medical services—
External customers ....... 155,884
150,535
140,957
Intersegment ................
153
150
165
................................. 156,037
150,685
141,122
Insurance services—
External customers ....... 38,259
37,01135,864
Intersegment ................
3,226
2,936
2,816
................................. 41,485
39,947
38,680Geographic information
services—
External customers ....... 52,760
54,697
51,194
Intersegment ................
177
72
128
................................. 52,937
54,76951,322
Information andcommunication related
services—
External customers ....... 47,412
46,99229,541
Intersegment ................
6,527
6,381
5,286
................................. 53,939
53,37334,827
Real estate andother services—
External customers ....... 42,671
37,41643,489Intersegment ................
2,245
2,249
5,904
................................. 44,916
39,66549,393
Total................................ 965,656
940,856879,356
Eliminations .................... (20,418)(19,710)(20,950)
Total net sales andoperating revenue ...... ¥945,238 ¥921,146 ¥858,406$4,058,858
24,692
4,083,550
1,009,908
42,725
1,052,633
1,299,033
1,275
1,300,308
318,825
26,883345,708

439,667
1,475
441,142

395,100
54,392449,492

355,592
18,708374,300
8,047,133(170,150)$7,876,983

2015

2014

Operating income:Security services ............ ¥107,073 ¥104,089 ¥102,377
Fire protection
services .......................
12,51010,467
5,981
Medical services ............
1,521
2,707
5,458
Insurance services..........
8,042
2,007
2,712
Geographic information
2,442
3,723
2,302
services .......................
Information andcommunication
related services............
894
6,373
3,914
Real estate and
5,080
4,678
4,618
other services ..............
Total.............................. 137,562
134,044
127,362
Corporate expenses
and eliminations..........
(15,555)(13,966)(13,813)
Operating income ......... ¥122,007 ¥120,078 ¥113,549
Other income ................
9,293
11,658
9,948
Other expenses .............
(3,443)(2,995)(3,144)
Income before income
taxes and equity in net
income of affiliatedcompanies ............... ¥127,857 ¥128,741 ¥120,353

104,250
12,67567,017
20,3507,450
42,333
1,146,350(129,625)$1,016,725
77,442(28,692)$1,065,475

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

¥ 477,138 ¥ 471,949$ 3,976,150

2015

Assets:Security services ............
Fire protection
services .......................
Medical services ............
Insurance services..........
Geographic information
services .......................
Information andcommunication related
services .......................
Real estate andother services ..............
Total..............................
Corporate items ............
Investments inaffiliated companies ....
Total assets....................

$ 892,275

135,381
178,721215,278

127,911
171,288
190,005

1,128,175
1,489,342
1,793,983

69,54470,952579,533

120,038

127,174

1,000,317

128,503
116,539
1,324,603 1,275,818
145,051
115,125

1,070,859
11,038,359
1,208,758

56,20949,762¥1,525,863 ¥1,440,705

468,408$12,715,525

Financial Section

SECOM Annual Report 2015

67

2015

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

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2015

2014

¥47,425¥45,679¥44,715$395,208

1,694
7,209
1,140

1,667
6,658
1,280

1,739
5,953
895

14,11760,075
9,500

3,022

2,511

2,293

25,183

6,746

7,373

3,824

56,217992
68,228636

1,004
66,172489

957
60,376
298

8,267
568,567
5,300¥68,864¥66,661¥60,674$573,867¥35,632¥35,641¥36,003$296,933

3,449
20,895
3

1,364
9,899
30

1,306
13,83436

28,742
174,125
25

1,377

2,723

1,328

2,924

5,127

204
64,484375¥64,859

The following table is a breakdown of security services revenue toexternal customers by service category. The security services business is managed as a single operating segment by the Company’s
management.
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2015

¥326,300 ¥318,116 ¥307,477$2,719,167

2015

Electronic security
services .......................
Other security services:
Static guard
services ...................
Armored car
services ...................
Merchandise andother .........................
Total security
services ..................

2014

53,78851,68147,877448,233

21,01020,767

20,532

175,083

85,96581,88567,345716,375¥487,063 ¥472,449 ¥443,231$4,058,858(2) Geographic Segment Information
Net sales and operating revenue attributed to countries basedon the geographical location of customers for the years ended
2015, 2014 and 2013 and long-lived assets as of March 31, 2015
and 2014 were as follows:
In millions of yen

In thousands of
U.S. dollars

11,475

Years ended
March 31

Year ended
March 31

2013

2015

10,01424,367427
55,211806

648
63,169181

1,700
537,367
3,125

Net sales andoperating revenue:
Japan ........................ ¥901,079 ¥881,782 ¥825,356
Other ........................
44,15939,36433,050Total ...................... ¥945,238 ¥921,146 ¥858,406$7,508,991
367,992$7,876,983¥56,017¥63,350$540,492

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2014

2015

¥523,504 ¥519,038
7,559
6,650
¥531,063 ¥525,688$4,362,533
62,992$4,425,525

2015

The capital expenditures in the above table represent theadditions to property, plant and equipment of each segment.
The Company has no single customer that accounts for morethan 10 percent of total revenues.

2014

2015

Long-lived assets:
Japan .......................
Other .......................
Total .....................

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
28. Subsequent Events
The Company has evaluated subsequent events through July 30,
2015, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

68

SECOM Annual Report 2015

Independent Auditors’ Report

The Board of Directors and Shareholders
SECOM CO., LTD.:

We have audited the accompanying consolidated financial statements of SECOM CO., LTD. and its subsidiaries, which comprise theconsolidated balance sheets as of March 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income,changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2013, and the related notes to theconsolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and its subsidiaries as of March 31, 2015 and 2014, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2013, in accordance with U.S. generally accepted accounting principles.
Convenience Translations
The accompanying consolidated financial statements as of and for the year ended March 31, 2015 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated
financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 to theconsolidated financial statements.

Financial Section

Tokyo, Japan
July 30, 2015

SECOM Annual Report 2015

69

OTHER FINANCIAL DATA

Contents
Summary of Selected Financial Data ........................................... 71
Common Stock Data.................................................................. 73

70

SECOM Annual Report 2015

Summary of Selected Financial Data
SECOM CO., LTD. and Subsidiaries
Years ended/as of March 31

In millions of yen
2015

2014

2013

2012

2011

2010

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue ........................................................ ¥945,238 ¥921,146 ¥858,406 ¥769,609 ¥748,847 ¥667,302
Security services: ............................................................................ 487,063
472,449443,231425,427
417,350
415,794
As a percentage of net sales and operating revenue ...........
51.5%
51.3%
51.6%
55.3%
55.7%
62.3%
Electronic security services .......................................................... 326,300
318,116
307,477
300,208
299,783
300,063
As a percentage of net sales and operating revenue ...........
34.5
34.5
35.8
39.0
40.0
45.0
Other Security services—
Static guard services ............................................................... 53,788
51,68147,877
46,68946,372
46,213As a percentage of net sales and operating revenue ...........
5.7
5.6
5.6
6.1
6.2
6.9
Armored car services............................................................... 21,010
20,767
20,532
20,61020,12919,823As a percentage of net sales and operating revenue ...........
2.2
2.3
2.4
2.7
2.7
3.0
Subtotal .......................................................................... 74,798
72,44868,40967,29966,501
66,036Merchandise and other .............................................................. 85,965
81,88567,34557,92051,066
49,695
As a percentage of net sales and operating revenue ...........
9.1
8.9
7.8
7.5
6.8
7.4
Fire protection services ................................................................... 121,189
122,046
114,130
80,67875,17680,132
As a percentage of net sales and operating revenue ...........
12.8
13.3
13.3
10.5
10.1
12.0
Medical services ............................................................................. 155,884
150,535
140,957
134,550
125,020
56,309As a percentage of net sales and operating revenue ...........
16.5
16.3
16.4
17.4
16.7
8.4
Insurance services........................................................................... 38,259
37,01135,86433,55833,13329,142
As a percentage of net sales and operating revenue ...........
4.1
4.0
4.2
4.4
4.4
4.4
Geographic information services .................................................... 52,760
54,697
51,19450,17343,53941,918As a percentage of net sales and operating revenue ...........
5.6
5.9
6.0
6.5
5.8
6.3
Information and communication related services ............................ 47,412
46,99229,541
17,735
16,662
16,211
As a percentage of net sales and operating revenue ...........
5.0
5.1
3.4
2.3
2.2
2.4
Real estate and other services ........................................................ 42,671
37,41643,48927,48837,967
27,796
As a percentage of net sales and operating revenue ...........
4.5
4.1
5.1
3.6
5.1
4.2
Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD ..................................... ¥ 80,184
Cash dividends paid (2) ........................................................................ 38,197
SECOM CO., LTD. shareholders’ equity .............................................. 825,969
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 ..................................................................

¥ 70,580
19,645679,176¥ 41,237
19,623612,855¥ 62,665
18,533
593,495¥ 46,989
18,533569,799

4.7
1.4
0.9
4.9
11.9
88.1
100.0

6.0
1.8
0.9
4.6
13.3
86.7
100.0

5.0
2.2
1.1
5.1
13.4
86.6
100.0

5.7
3.1
1.4
3.8
14.0
86.0
100.0

6.8
1.7
2.0
5.5
16.0
84.0
100.0

6.5
1.6
2.6
3.6
14.3
85.7
100.0

5.3
9.7

5.1
9.8

5.3
10.4

3.5
6.7

5.4
10.6

4.1
8.2

7.3
2.4

7.2
2.4

7.0
2.1

7.5
2.1

7.6
2.2

8.2
2.1

61.6
2.38
93.8

60.8
2.34
90.4

60.0
2.24
78.8

63.4
2.49
51.8

62.5
2.49
65.1

64.9
2.55
53.5

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

SECOM Annual Report 2015

Financial Section

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)...............................................

¥ 73,979
22,918753,099

71

2015

2013

2012

2011

2010

Number of shares outstanding
Issued ....................................................................
Owned by the Company ........................................

233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
15,024,812 15,022,012 15,018,951 15,017,691 15,258,553 15,254,334

Balance ..................................................................

218,263,905 218,266,705 218,269,766 218,271,026 218,030,164 218,034,383

Per share information
Net income attributable to SECOM CO., LTD.
per share (in yen) (1) ..............................................
Cash dividends paid per share (in yen) (2) .................
SECOM CO., LTD. shareholders’ equity
per share (in yen) (3) ..............................................
Cash flow per share (in yen) (1) (e) ..............................
Price/Book value ratio.............................................
Price/Earnings ratio ................................................
Price/Cash flow ratio ..............................................
Stock price at year-end (in yen) ..............................

¥ 367.37
175.00¥ 338.94
105.00¥ 323.36
90.00¥ 188.97
90.00¥ 287.41
85.00¥ 215.51
85.00

3,784.27
557.88
2.12
21.84
14.38
8,025

3,450.36
529.35
1.72
17.54
11.23
5,946

3,111.64
496.34
1.56
15.00
9.77
4,850

2,807.77
365.28
1.44
21.43
11.09
4,050

2,722.08
458.62
1.42
13.45
8.43
3,865

2,613.34
383.36
1.57
18.98
10.67
4,090

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

2014

SECOM Annual Report 2015

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2015, cash dividends of ¥14,187 million (¥65
per share) were approved at the general shareholders' meeting on June 25,2015 (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, less treasury stock.

Common Stock Data
SECOM 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 ..................................................................

2015

2014

2013

2012

2011

2010

24,852

27,054

27,62829,11830,33831,488

—%
29.89
3.43
3.16
44.95
12.13
6.44
100.00%

—%
31.28
4.88
2.56
42.32
12.52
6.44
100.00%

—%
30.86
5.58
3.63
41.33
12.16
6.44
100.00%

—%
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%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
2013

2014

2015

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

¥5,770
6,310
6,430
6,300
6,502
6,640
7,247
8,318

¥4,620
5,320
5,700
5,370
5,554
6,130
5,764
6,530

¥15,627.26
14,808.50
16,291.31
16,121.45
15,376.24
16,374.14
17,935.64
19,754.36¥12,003.43
13,338.46
13,853.32
14,008.47
13,910.16
14,778.37
14,532.51
16,795.96

Financial Section

SECOM Annual Report 201573

COMMON STOCK ISSUES

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.

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

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

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, 2015, 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 2015