Directors, Audit and Supervisory Board Members andExecutive Officers

Directors

SECOM CO., LTD.

Makoto Iida

Juichi Toda

Founder

Co-Founder

ANNUAL REPORT 2013

SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Shuji Maeda

Koichi Sato

Yasuo Nakayama

Hiroshi Ito

Kazuaki Anzai

Tokyo 150-0001, Japan

President andRepresentative Director

Executive Vice President

Executive Director

Executive Director

Executive Director

http://www.secom.co.jp/

Yasuyuki Yoshida

Junzo Nakayama

Tatsuro Fuse

Kenichi Furukawa

Takaharu Hirose

Takashi Sawada

Director

Director

Director

Director

Outside Director

Outside Director

ANNUAL REPORT 2013
Year ended March 31, 2013

Audit andSupervisory
Board Members
Seiji Sakamoto
Katsuhisa Kuwahara
Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya*

Executive Officers
Shuji Maeda

Shunji Ogahara

Yasuyuki Yoshida

Takayuki Ito

Keitaro Arai

President andRepresentative Director

Managing Executive Officer

Director

Executive Officer

Executive Officer

Naohide Nakamura

Junzo Nakayama

Minoru Takaoka

Hiromichi Sonoda

Managing Executive Officer

Director

Executive Officer

Executive Officer

Toshiyuki Mukai

Tatsuro Fuse

Hideo Morishita

Hiroshi Ishikawa

Managing Executive Officer

Director

Executive Officer

Executive Officer—the Social System Industry —Masahiro Takeda

Kenichi Furukawa

Tsuneo Komatsuzaki

Yoichi Sugimotoby providing comprehensive,

Managing Executive Officer

Director

Executive Officer

Executive Officer

integrated services and systems

Teruhisa Yoshimura

Ryohei Komatsu

Tatsuya Izumida

Managing Executive Officer

Executive Officer

Executive Officer

that make life more secure,

Koichi SatoIn response to changing customer
needs, SECOM is working to

Executive Vice President

Yasuo Nakayama

realize its vision for the future

Executive Director

Hiroshi Ito
Executive Director

Kazuaki Anzaiconvenient and comfortable.

Executive Director*Outside(As of July 31, 2013)

Printed in Japan

89

SECOM Annual Report 2013

Profile

Since its establishment in 1962,

SECOM CO., LTD., a pioneer in Japan’s security services industry,has sought to develop and encourage broad acceptance of its innovative, integrated services and systems
that contribute to security and peace of mind, in line with its belief in the importance of contributing to society
through its business activities. Such efforts have enabled SECOM to achieve steady growth.

Beginning with Japan’s first on-line security system for commercial use, SECOM has developed a wide
range of pioneering services and systems over the years. These include an on-line home security system
and COCO-SECOM, a mobile personal security system for outdoor use.
Today, the overarching mission of SECOM—comprising the parent company and its subsidiaries andaffiliated companies—is to provide safety and security for people whenever and wherever necessary.
Accordingly, SECOM is pressing ahead with efforts to realize its vision for the future, the Social System
Industry, which describes a framework of distinctive, integrated services and systems that make life
more secure, convenient and comfortable. To this end, SECOM is leveraging its extensive businessportfolio—which has expanded to include security services, fire protection services, medical services,
insurance services, geographic information services, real estate development and sales, and informationand communication related and other services—to create a solid foundation for future growth, andworking not only to enhance individual businesses but also to integrate services and systems, thereby
yielding considerable synergies to drive future growth.
With the aim of maximizing Group synergies to expand the scope of its operations, SECOM­continues to promote the “ALL SECOM” concept, which focuses on rallying Group strengths to create
uniquely SECOM systems and services that enhance convenience and comfort and deliver security
and peace of mind, thereby ensuring that SECOM remains an ever-present and trusted part of life forcustomers everywhere.
SECOM has expanded into 19 countries and territories outside of Japan, providing security
services, fire protection services, medical services and geographic information services customized
to reflect local needs and sensibilities. SECOM continues working to further strengthen and growits overseas operations.

Contents
2 SECOM’s Vision
4 Financial Highlights
6 A Message to Shareholders
10 Strategic Highlights
12 Special Feature—ALL SECOM: Driving Future Growth
16 SECOM Today
32 CSR
33 Financial Review
37 Audited Financial Statements
70 Other Financial Data
75 Consolidated Financial Data (Based on Japanese GAAP) [Reference]
79 Nonconsolidated Financial Data (Based on Japanese GAAP) [Reference]
83 Corporate Information
87 SECOM’s Basic Business Areas
89 Directors, Audit and Supervisory Board Members and Executive Officers

SECOM Annual Report 2013

1

SECOM’s Vision
The Management

ystem Indu
S
l
str
ia
c
y
So

Medicalservices

To promote broad acceptance of our many services acrosssociety, in 2010 we introduced the ALL SECOM concept.
Under the ALL SECOM banner, we are encouraging employees
everywhere to actively share information, ideas and objectives
with the aim of strengthening our comprehensive capabilities,
thereby positioning us for the next stage of growth.

Real estatedevelopment
and sales
Geographic
information
services

Insuranceservices

As we work to win ever-broader acceptance of our services,
society’s expectations of us will continue to rise, as will thoseof our customers. By advancing the ALL SECOM concept,
we will continue working to accurately identify and interpretthe needs of customers and to provide services that enhance
convenience and comfort and deliver security and peace ofmind, thus ensuring our standing as a company that makes
an important contribution to society.

SECOM Today

Fire protection
services

Security
services

We have sought since our establishment to contribute to
the resolution of social issues through our business activities.
The efforts of every SECOM employee working toward therealization of our Social System Industry vision are guided
by this objective, and by our corporate philosophy, whichemphasizes a refusal to be content with the status quo and acommitment to doing what is appropriate. The former meansseeking constantly to provide innovative services and systems
by challenging accepted norms, while the latter means judging
the legitimacy of our actions by examining whether they are
just, fair and beneficial, not only to SECOM but to society as awhole. This philosophy continues to be a major driving force
behind our growth and evolution.

Special Feature

Information andcommunication
related andother services

Our Social System Industry vision describes a framework ofinnovative, integrated systems and services that make life
more secure, convenient and comfortable. We have worked
steadily to make this vision a reality by building a broadbusiness portfolio that today encompasses seven segments.
We combine the services and systems in these segments into
distinctive packages, in line with our overarching mission,
which is to provide security and peace of mind wherever andwhenever necessary. This approach encourages people to see
SECOM as an ever-present and trusted part of their lives.

Applying Our Corporate Philosophy andAdvancing the ALL SECOM Concept

Strategic Highlights

Realizing the Social System Industry

Financial Review
Financial Section

2

SECOM Annual Report 2013

SECOM Annual Report 20133

Financial Highlights
The Management

Pursuant to the applicable Japanese law, SECOM is required to publish results in line with accounting principles ­generally accepted in Japan(Japanese GAAP). Key financial highlights calculated using Japanese GAAP are shown below for reference.

U.S. GAAP

Japanese GAAP
In millions of yen

In thousands of U.S. dollars

SECOM CO., LTD. and Subsidiaries

In millions of yen

In thousands of U.S. dollars

Three years ended March 31, 2013

Years ended March 31

Year ended March 31

Three years ended March 31, 2013

Years ended March 31

Year ended March 31

2011

2013

663,887$ 8,145,053

2012

2011

2013

¥ 861,885¥ 772,482¥ 751,868$ 9,168,989

Operating income

112,768

78,826

100,432

1,199,660

Operating profit

108,370

81,07899,141

1,152,872

Net income attributable to SECOM CO., LTD.

70,58041,23762,665

750,851

Ordinary profit

113,618

87,839109,674

1,208,702

1,340,350

1,179,824

1,171,152

14,259,043

Net income

63,65835,48960,846677,213679,176

612,855

593,495

7,225,277

Total assets

1,249,110

1,101,884

1,094,400

13,288,404

764,139

671,517654,055

8,129,138

In yenIn U.S. dollars
In yenIn U.S. dollars

279.07$ 3.10Net sales and operating revenue

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

2013

¥

Revenue

765,635

Total net assets

2012

¥

679,173¥

Per share of common stock:
Net income attributable to SECOM CO., LTD.

¥ 323.36¥ 188.97¥ 287.41$ 3.44

90.00

90.00

85.00

0.96

Net income

3,111.64

2,807.77

2,722.08

33.10

Cash dividends

Cash dividends
SECOM CO., LTD. shareholders’ equity

Net income attributable to
SECOM CO., LTD. (U.S. GAAP)¥Net assets¥

162.63

¥

90.00

90.00

85.00

0.96

3,065.13

2,785.56

2,716.35

32.61

Note: Cash dividends per share of common stock shown are based on dividends approved and paid in each period. Subsequent to March 31, 2013, ­cash­dividends of ¥105.00 per share were approved at the general shareholders’ meeting held on June 25, 2013.

Net Income (Japanese GAAP)(In billions of yen)

(In billions of yen)

80

80

70.6

61.5

60

63.7

60.8

60
47.0

Financial Review

62.7

61.8

291.65

SECOM Today

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of ¥94=US$1, the rate prevailing on theTokyo ­Foreign Exchange Market on March 31, 2013.
2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares ­outstanding during each period,
less treasury stock.
3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares ­outstanding at the end of each period, less­treasury stock.
4. Cash dividends per share of common stock shown are based on dividends approved and paid in each period. Subsequent to March 31, 2013, cash
dividends of ¥105.00 per share were approved at the general shareholders’ ­meeting held on June 25, 2013 (see Note 18 of the accompanying
Notes to Consolidated Financial Statements).

Per share of common stock:

Special Feature

2013

Strategic Highlights

SECOM CO., LTD. and Subsidiaries

47.6
41.2

40

40

35.5

30.6
21.5
20

2008

2009

2010

2011

2012

2013

0

2008

2009

2010

2011

2012

Financial Section

0

20

2013

Note: Net income attributable to SECOM CO., LTD., in the year ended March 31, 2013, climbed ¥29.3 billion, to ¥70.6 billion. This result was due
primarily to the contributions of two newly acquired subsidiaries in Japan—Nittan Co., Ltd., a major domestic provider of fire protection­services, and At Tokyo Corporation, a leading data center services firm, which were consolidated during the period, as well as to declines
in write-down on real estate inventories and impairment loss on long-lived assets.
		 Net income attributable to SECOM CO., LTD. in the year ended March 31, 2012, fell ¥21.4 billion, to ¥41.2 billion, as the Company wrote
down real estate inventories in light of dwindling demand in the condominium market, which prompted a dramatic reorganization of its
related business, while flagging economic conditions resulted in the recognition of an impairment loss on long-lived assets, principallyreal estate.
		 Net income attributable to SECOM CO., LTD. in the year ended March 31, 2011, rose ¥15.7 billion, to ¥62.7 billion. This result ­primarilyreflected operating income in the real estate development and sales segment, compared with an operating loss in the ­previous period,
and a gain on private equity investments, ­compared with a loss in the previous period.

4

SECOM Annual Report 2013

SECOM Annual Report 2013

5

A Message to Shareholders

Founder

Increasingly diverse and sophisticated needs for security and peace of mind are expected to continue driving growth in the security services market. Another factor influencing the market is the6

SECOM Annual Report 2013

President and Representative Director

Financial Section

Understanding and Responding to Change

Shuji Maeda

Financial Review

Recognizing the provision of a fair return to shareholders as a crucial management task, wedetermine our consolidated dividend payout ratio based on an overall assessment of trends inour consolidated operating performance, in line with our policy of ensuring a consistent, stable
distribution of profits. At the Ordinary General Meeting of Shareholders, held on June 25, 2013,
management proposed and shareholders approved the payment of annual cash dividends of¥105.00 per share for the year ended March 31, 2013, up ¥15.00 from the previous fiscal year.

and to respond by developing new and modifying existing service systems, thus maximizing ourability to contribute to society by delivering security and peace of mind.
In the security services business, we continued to cultivate new subscribers and to reinforce
our finely tailored services to current subscribers, thus enabling us to accurately interpret needs
and propose the most appropriate systems from our extensive lineup. In the area of commercial
security services, we expanded sales of SECOM AX, a remote imaging on-line security system forcommercial facilities that features advanced image recognition technologies. We also enhanced
high-value-added on-line security systems such as SECOM LX, which features an access control
function that helps to improve business efficiency and reduce labor and other costs, and SECOM
FX, a facility control system that reduces consumption of electric power, both of which coincidewith subscriber needs. In home security systems, we sought to bolster sales of SECOM Home
Security G-Custom, a residential on-line security system launched in fiscal 2011, by adding functions, including My Page, a customized information page that introduces services from selected­collaborating ­companies, to further increase convenience.
Overseas, we continued working to encourage broad acceptance of SECOM-style security
services, focusing on the rapidly growing economies of the People’s Republic of China (PRC) andSoutheast Asia. “SECOM-style security services” is a term used to describe comprehensive security services that encompass the installation of security equipment at the subscriber’s premises,around-the-clock monitoring from a SECOM control center and the prompt dispatch of highly
trained emergency response personnel should an irregularity be detected.
Guided by our Social System Industry vision, we also implemented a number of strategic
measures in businesses other than security services. Our fire protection services business currently
centers on subsidiary Nohmi Bosai Ltd., Japan’s leading provider of such services. In April 2012,
we acquired Nittan, Japan’s third-largest fire protection services provider. During the period,
the two companies leveraged their respective business foundations and product development
capabilities to provide high-grade automatic fire alarm systems, fire extinguishing equipment
and other fire protection systems, as well as to secure orders for, among others, fire protection
systems for large-scale building renovation projects and tunnels.
In the medical services business, we pushed ahead with efforts to expand our various services,which focus on Home Medical Services—comprising home nursing and pharmaceutical dispensing services—and also include the operation of residences for seniors, a remote image diagnosis
support service, sales of medical equipment, nursing care services and support for associated­hospitals. We are enhancing our services for seniors to accommodate the changing needs ofJapan’s super-aged society. In the period under review, we established a rental-based assisted

SECOM TodayDistribution of Dividends

broader acceptance of convenient, easy-to-use services that are in tune with customer lifestyles.
We continue to focus on providing service systems that reflect evolving social imperatives,changing patterns of criminal behavior and technical innovation. Drawing on our proprietary
technological capabilities and know-how in system operation, we endeavor to swiftly identify needs

Special Feature

Makoto Iida

Despite a brief pause due to the persistent strength of the yen and the impact of deflation,
Japan’s economic recovery rallied in the second half of the year ended March 31, 2013, as adownward yen correction and expectations of an improvement in the business environment
pushed up share prices and consumer spending remained firm.
In this environment, we continued working toward the realization of our vision for the
future—the Social System Industry—by responding to the needs of customers through the provision of high-grade services and systems in our security services segment, as well as in our othersegments: fire protection services, medical services, insurance services, geographic information
services, real estate development and sales, and information and communication related andother services. We also pressed forward with efforts to apply the ALL SECOM concept, whichemphasizes cooperation among our various independent businesses to strengthen the Group
as a whole, with a view to hastening our advance to a new stage of growth.
Consolidated net sales and operating revenue rose 11.6%, or ¥89.4 billion, to ¥861.9 billion.
This result was due primarily to contributions of two newly aquired subsidiaries in Japan—Nittan
Co., Ltd., a major domestic provider of fire protection services, and At Tokyo Corporation, aleading data center services firm, which were consolidated April 1, 2012, and October 31, 2012,
respectively. This result also reflected higher net sales and operating revenue in the security services segment, a consequence of increases in revenue from subscriptions for our core electronic
security services and in sales of merchandise. Other factors included increases in net sales andoperating revenue in the real estate development and sales segment. Operating income grew
43.1%, or ¥33.9 billion, to ¥112.8 billion, as the advance in net sales and operating revenue
exceeded increases in cost of sales and selling, general and administrative expenses and writedown on real estate inventories and impairment loss on long-lived assets declined. Net income
attributable to SECOM CO., LTD. climbed 71.2%, or ¥29.3 billion, to ¥70.6 billion, owing mainly
to the operating income gain.

Strategic Highlights

Consolidated Operating Results

The Management

By keeping abreast of evolving social imperatives in Japan, we willcontinue working to respond promptly to the increasingly diverse
needs of our customers by creating distinctively SECOM services
and systems that deliver security and peace of mind.

SECOM Annual Report 20137

A Message to Shareholders

The Management
Financial Section

SECOM Annual Report 2013

Financial Review

8

SECOM Today

By keeping abreast of evolving social imperatives, we will continue working to respond promptly
to the increasingly diverse needs of our customers by creating distinctively SECOM services andsystems that deliver security and peace of mind.
Given the ever more cunning and brutal nature of crimes today, as well as the increasing
speed with which they are committed, demand for high-grade security services is on the rise. We
will work tirelessly to expand our services. At the same time, we will promote ongoing efforts toaccumulate further operational expertise, thereby ensuring our ability to continue providing security services of the highest quality and to effectively accommodate the needs of all our customers.
In line with our ultimate goal of helping to free society of crime, we will also pursue R&D aimed
at realizing pioneering systems and services for the near future. One example of such a systemthat is close to commercialization is a small flying surveillance robot for private-sector use.
Japan’s super-aged society will be another important theme guiding our domestic businessdevelopment efforts in the years ahead. One result of current demographic trends is an increase
in seniors living alone or with spouses who are similar in age. Another is concern about access to
medical and nursing care in old age. In response to needs engendered by these trends, we arecapitalizing on our solid base of experience in operating residences for seniors; extending home
medical and preventative health care services; assisting associated hospitals; offering lifestyle support services and providing insurance. In addition to expanding business ties with major nursing­developing services that anticipate and respond to the needs of a graying society.
The lessons of the Great East Japan Earthquake, which struck northeastern Japan on March 11,
2011, have fundamentally altered the Japanese people’s attitude toward disasters, heightening
awareness of the importance of disaster preparedness. With the goal of expanding the scope of
our fire protection services business to encompass protection against all types of major disasters,
we will advance collaboration between subsidiaries Nohmi Bosai and Nittan—the leading andthird-largest fire protection services firms in Japan—to facilitate the creation of ­next-generation
disaster protection systems.
With the sustainability of our planet an issue of grave concern at all levels of society, awareness is growing of the responsibility both companies and individuals bear in helping to preserve
the environment. With this in mind, we recently introduced a home energy management system(HEMS) as an option available to subscribers of SECOM Home Security G-Custom, helping homes
to better monitor power use.
Our data center capabilities, which enable us to collect and manage all types of service data,
are essential to our ability to successfully market new systems and services. The acquisition of
At Tokyo was a crucial step, but the new services and systems we intend to offer will necessitate
securing significantly greater data center capacity. Accordingly, we plan to open two new Secure
Data Center facilities boasting the highest level of data center security available in Japan, as wellas robust construction. The first, in Osaka, will begin operating in July 2013, while the second,in Tokyo, is scheduled to start up in November 2013. This will transform our data center facilities
into comprehensive “service centers” that not only respond to the needs of corporate customers
for server housing and data backup services that guarantee security even in the event of amajor disaster, but also serve as a foundation for the provision of a broad array of distinctively
SECOM services.
By providing services that make life more convenient and comfortable and deliver security andpeace of mind, we have traditionally sought to encourage people to turn to SECOM with theconfidence that doing so would help them resolve security and other concerns. Going forward,
our focus will be on making SECOM an ever-present and trusted part of our customers’ lives. As
always, we must earn the trust of our customers by providing indispensable services that respondto their expectations. In the words of our corporate message —“Providing reliable peace of mind”—
we pledge to work as one to realize our Social System Industry vision and advance to the next stageof growth. In all of our endeavors, we look forward to the continued support of our shareholders.

Special Feature

Accelerating Growthcare services providers, in April 2013 we launched an emergency medical alert system for seniors,
SECOM My Doctor Plus. Other services designed to protect the well-being of seniors include
the Keeping in Touch call and Keeping in Touch visiting services, both of which are offeredas options to SECOM Home Security subscribers. We will continue to place a high priority on

Strategic Highlights

living facility for seniors, as well as opened Alive Setagaya Daita, a nursing home that incorporates
the concept of community disaster preparedness.
Efforts in our insurance services business yielded firm sales of our distinctive non-life insurance
policies. These include the Security Discount Fire Policy, a fire insurance policy for commercial
premises, and SECOM Anshin My Home, a comprehensive fire insurance policy for homes,
both of which offer discounts for subscribers with on-line security systems, recognizing therisk-mitigating nature of such systems. We also expanded marketing of SECOM Anshin My Car,a comprehensive automobile insurance policy that includes access to on-site support services
provided by our emergency response personnel, and MEDCOM, an unrestricted cancer treatment
policy that extends coverage to all treatment costs.
In the area of geographic information services, we reported steady sales related to geospatial
information services, which make use of high-precision measuring devices and technologies, tocustomers in the public and private sectors in Japan and in overseas markets. We also promoted
solutions in such diverse areas as map preparation, environmental monitoring, disaster preparedness and national resilience, collecting and processing high-resolution data from satellites andother sources, which we then combined with other critical information.
Our real estate development and sales business continued to emphasize the development andsale of condominiums with sophisticated security and contingency planning features.
In the information and communication related and other services business, we continued toprovide a variety of uniquely SECOM services, focusing on data center services as well as business
continuity support services, information security services and cloud-based services. In October
2012, we acquired a majority interest in At Tokyo, one of Japan’s leading data center services
firms in terms of stability of power supply and security level, among others, thereby strengthening
the foundation of our information and ­communication related services business.

June 25, 2013

Makoto Iida
Founder

Shuji Maeda
President and Representative Director

SECOM Annual Report 20139

Strategic Highlights

June 2012
Operation of hospital gets under way in India
We announced a joint venture with a Japanese trading­company and a local firm, which will operate Sakra World
Hospital in Bangalore. A building for the hospital is currently
under construction and will
open in the fall of 2013,leveraging our expertise in
medical services to ensure
quality of care and efficiencyof administration.

November 2012
Alive Setagaya Daita opens

Capitalizing on our advanced image processing, image
analysis, tracking, sensing and robot technologies, wedeveloped a prototype of a small autonomous flying­surveillance robot that works in tandem with our on-line
security system. In the event an intrusion is detected, therobot autonomously approaches unauthorized individuals
or vehicles and shoots
sharp, clear images,
which it transmits to
a SECOM control
center.

April 2012
Major domestic fire protection services
company Nittan joins the SECOM Group

April

December

June

SECOM Annual Report 2013

November 2012
Secom Industries completes new
headquarters plant
Subsidiary Secom Industries Co., Ltd., which designs
and manufactures security equipment, c­ ompleted
construction of a new headquarters plant, thereby
expanding its production area. The new plant boasts
advanced testing areas, crucial
to enhancing the quality of
security systems, thus reinforcing Secom Industries’ role as ourprincipal m­ anufacturing base.

December 2012
New Tokyo Hospital opens new
hospital building with 368 beds
and 20 departments
Associated hospital New Tokyo Hospitalin Matsudo, Chiba Prefecture, which isrecognized for excellence in the treatment of cardiovascular and circulatory
disorders, opened a new hospital building boasting facilities for emergency,
inpatient and outpatient care, forpatients with acute illnesses, aswell as outstanding surgical,­testing and other capabilities.

2013
February 2013
SECOM Emergency Call Out service is launched
We launched a new cloud-based comprehensive initial response support
service. Based in our Secure Data Center cloud, this service assists subscribers to optimize the allocation of employees and facilitate the prompt restartof subscribers’ operations in the event of a disaster.

Financial Section

10

NovemberFinancial Review

2012

October

February

SECOM Today

We reinforced our fire protection services business—
led by domestic industry leader Nohmi Bosai—byacquiring Nittan. Under the ALL SECOM banner,
we will work with the two companies to develop
next-generation disaster protection systems.

April

An emergency medical alert system for seniors, SECOMMy Doctor Plus enables users to transmit emergency
alerts at any time and from anywhere. In the event ofa fall or sudden illness, we dispatch specially trained
emergency response personnel tothe user’s location. If requested by
the user, who will have provided
us with key information, including
physicians’ names and medical
history, in advance, we can alsotransmit information to an­emergency care facility.

Special Feature

Equipped to function as a temporary ­evacuation shelterin the event of a disaster, Alive Setagaya Daita is anursing home for seniors that incorporates the concept
of community disaster preparedness.

April 2013
SECOM My Doctor Plus debuts

Strategic Highlights

With investment in business continuity planning (BCP)
increasing, the acquisition of At Tokyo, one of Japan’s
leading data center services firms, positions us well tooffer advanced data storage services and serve as a foundation for the provision of a broad array of distinctively
SECOM services, in line with our goal of transforming ourdata center facilities into ­comprehensive service centers.

December 2012
Autonomous flying surveillance robot
developed

The Management

October 2012
At Tokyo becomes a subsidiary

SECOM Annual Report 201311

ALL SECOM: Driving Future Growth

Addressing challenges in three areas under the ALL SECOM banner
Realizingl System Ind
a
i
oc
us
S
try
e
th
Insurance
Healthcare

Sup

Shortage of doctors
and nurses

SECOM
ALL

Need for nursing
and other care services

Security, peace of mind,
comfort and convenience

Lifestyle support

er-

age
d so
ciety
Facility
management

Typhoons

Earthquakes

Fires

TsunamiEnergyconservation

Energyshortages

P/
BC n
/
s
s
o
e
redn
ati
Disaster prepa preservlEnvironmenta

Livingenvironments

Population
declineInformation leaks

Sudden illness

Missing children
Theft

Burglaries

Security services

Guided by the ALL SECOM concept, we are working to make life more comfortable andconvenient and to deliver security and peace of mind by responding to social imperatives andhelping to resolve everyday concerns.

In response to the changing face of Japanese society, we are leveraging
our expertise in providing security services and rallying Group strengths
under the ALL SECOM banner to develop innovative services in line with
two additional key themes: super-aged society and disaster preparedness/business continuity planning (BCP)/environmental preservation.
Ø Providing comprehensive on-line security systems
Our competitive advantage in the security services businessderives from our commitment to providing comprehensive
on-line security systems, whereby we take responsibility for all
aspects, from R&D to the production and assembly, marketing,security planning, installation, around-the-clock monitoring,
emergency response services and maintenance.
We have built a unique R&D organization that enables us topromptly and accurately incorporate feedback from customers
into the development process. To facilitate around-the-clockmonitoring and emergency response services, we design systems that combine the speed and precision of security equipment—a result of, among others, the accuracy of our sensors
in detecting intrusions, fires and other irregularities—with the12

SECOM Annual Report 2013

SECOM On-Line Security Systems

R&D
Emergency
response services

Intelligent Systems Laboratory
Development Center

Emergency response
personnel

Production andassembly of systems
Secom Industries Co., Ltd.

Providing reliable peace of mind

Around-the-clockmonitoring

Marketing

SECOM control center

Security planning teamInstallation
Technicians

The Management
Strategic Highlights
Special Feature
SECOM Today

SECOM control centersecurity systems in 11 countries and territories. Looking ahead,
we will step up efforts to promote recognition and broader
acceptance of our distinctive approach in markets aroundthe world.

Ø Responding to the needs of Japan’s
super-aged society

SECOM Annual Report 2013

Financial Section

The United Nations classifies a super-aged society as one inwhich more than 21% of the population is accounted for bypeople over the age of 65. In 2007, Japan became the first
country in the world to qualify for this classification.
We continue to maximize our accrued expertise to create
services that respond to needs engendered by the aging ofJapan’s population and enhance convenience and comfort anddeliver security and peace of mind. We are capitalizing on oursolid base of experience in the operation of a variety of facilities for seniors. These include residences for seniors, which canaccommodate individuals who are capable of living on theirown and those who require nursing care; nursing homes forseniors who need care from the time they move in; and dayservice centers.

Financial Review

analytical skills and prompt decision-making capabilities ofpeople. To provide swift, quality emergency response services,
we maximize the excellent judgment and accumulated knowhow of SECOM control center staff and skills of our trained
emergency response personnel, as well as our nationwide
network of more than 2,800 emergency depots, which is thelargest of any security services company in Japan. Employee
education designed to foster the capabilities of SECOM security professionals is crucial to our ability to provide high-grade
services, as is the effective management of human resources.
Our rental format is another key factor behind the competitiveness of our on-line security systems. Because we retain
ownership of security equipment, which we rent out, we areable to minimize initial costs for subscribers. The rental format
also means that we are in charge of maintenance and upkeep,
thus enabling us to guarantee the quality of our services.
Accordingly, our innovative comprehensive approach enjoys
the trust of customers across a wide range of industries.
“SECOM-style security services” is a phrase often used todescribe on-line security systems that encompass emergency
response services. We currently offer SECOM-style on-line

13ALL SECOM: Driving Future Growth

Test of low-expansion foam fire extinguishing system (Nohmi Bosai)

New offerings developed to respond to unmet needs inJapan’s super-aged society include SECOM My Doctor Plus,an emergency medical alert system for seniors that brings
together our accumulated know-how in security services andmedical services and expertise secured through a businessalliance with major nursing care services providers. SECOMMy Doctor Plus enables users to transmit emergency alerts at
any time and from anywhere, providing security and peace ofmind. As options available to SECOM Home Security subscribers, we also offer the Keeping in Touch call and Keeping inTouch visiting services for seniors, made possible by combining
our on-line security systems, medical services and SECOM
Home Service lifestyle support services to ensure peace ofmind both for seniors receiving support and for loved ones
living far away.
In the years ahead, we see significant potential in customizing our service model, developed specifically for Japan’s
super-aged society, to reflect the needs of other countries
attempting to cope with the challenges of an aging population. Guided by the ALL SECOM concept, we will continue
working to respond to evolving social imperatives by developing and providing services that make life more convenient andcomfortable and deliver security and peace of mind. Throughsuch efforts, we aim to be a company that truly makes a­difference in society.

14

SECOM Annual Report 2013

Ø Enhancing disaster preparedness/BCP/
environmental preservation
The lessons of the Great East Japan Earthquake and of recent
major typhoons have clarified the importance of expanding
the scope of our fire protection services business beyond systems aimed at minimizing the impact of fire on structures toencompass broad-based protection against all types of disasters. Going forward, we will rally the respective technologies
and expertise of subsidiaries Nohmi Bosai and Nittan. We will
also advance collaboration with the two companies with theaim of creating next-generation disaster protection systems.
In the security services business, our experiences in thewake of the Great East Japan Earthquake motivated us to augment our popular SECOM Home Security G-Custom service byadding a feature that enables subscribers to entrust important
personal information to us for storage at Secure Data Center
facilities. In the wake of the quake, geographic information
services subsidiary Pasco Corporation analyzed image datafrom TerraSAR-X, a synthetic-aperture radar (SAR) satellite, tocreate mapping data that helped to pinpoint areas devastatedby the disaster, helping to ensure a swift, accurate assessmentof the situation on the ground and to assist initial response
efforts, thus demonstrating the value of data from commercial
satellites in disaster situations in obtaining critical information.
In addition to large-scale disasters, the globalization of­supply chains and rising concerns regarding cyber attacks
aimed at illegally obtaining confidential information from­servers have underscored the increasing diversity of risks facedby companies today. This has amplified the importance ofeffective BCP for companies of all sizes.

The Management
Strategic HighlightsØ Advancing the ALL SECOM concept to make life
more convenient and comfortable and deliver
security and peace of mind
We see enhancing our data center capabilities as crucial to
our ability to successfully market new systems and services.
The acquisition of At Tokyo—one of Japan’s leading data
center services firms—was a crucial step, but the new services
and systems we intend to offer will necessitate securing­significantly greater data center capacity and increasing ourdata collection and management efficiency. Through such
efforts, we aim to transform our data centers into comprehensive “service centers” that not only offer safe data storage but
also serve as a foundation for the provision of a broad array of
distinctively SECOM services.
Going forward, we will continue leveraging our expertisein security services and rallying Group strengths under the
ALL SECOM banner to develop innovative services in line with
two key themes—Japan’s super-aged society and disaster preparedness, BCP and environmental preservation—that makelife more convenient and comfortable and deliver ­security andpeace of mind.

SECOM Annual Report 2013

Financial Sectionused in reforestation and in calculating waste CO2 prevented
from entering the atmosphere thanks to carbon captureand storage (CCS), thus helping to advance environmental­protection efforts.

Financial Review

We provide an extensive range of services that protect
companies’ valuable information and systems, facilitating theswift restart of operations in the event of a major disaster.
One of our principal BCP support services is SECOM Safety
Confirmation Service, which helps confirm the safety of
employees, assess the extent of damage to facilities andassist initial response efforts should disaster strike. This service
incorporates our accumulated experience and know-how in
the area of security services and is the largest service of its
type currently available in Japan.
A recent addition to our service portfolio is Total Support
Service of Emergency Management, which draws on thediverse strengths of our security services, fire protection
services, geographic information services, and informationand communication related and other services, to provide
all-inclusive support for BCP.
Acknowledging heightened awareness of environmental
issues, we are rallying the comprehensive technologicalcapabilities, under the ALL SECOM banner, to develop
environment-friendly systems and services.
In the security services business, we offer a number ofenvironment-friendly services. These include SECOM FX, anenergy- and labor-saving security and facility control systemdesigned for offices and shops. We also offer the SECOM Eco
Data System, which calculates and displays electric power, gas
and other energy consumed. By making energy use visible, thesystem assists the efforts of companies to reduce their energy
consumption. Dry Mist, a Nohmi Bosai system that uses sprinkler technology to lower ambient temperature, helps reduce
urban heat islands, one cause of global warming. Data fromsatellite images and aerial photography provided by Pasco is

SECOM Today

Dry Mist system

Special Feature

Secure Data Center

15

Commercial Security Services

16

SECOM Annual Report 2013

The Management
Strategic Highlights
Special Feature

SECOM control center

Promoting broader acceptance ofour value-added SECOM LX andSECOM FX security systems

SECOM Annual Report 2013

Financial Section

Since the enforcement of Japan’s
Act on the Protection of Personal
Information in 2005, the number ofcompanies installing systems to preventthe unauthorized disclosure of information has increased. In response to thegrowing need for such systems, weoffer SECOM LX, an on-line security system designed for offices and small andmedium-sized shops that also includes
an access control feature. In addition toaround-the-clock monitoring for intruders and fires, SECOM LX helps facilitate
the effective management of humanresources and important data and toprevent information leaks.
SECOM FX is a security and facility
control system that combines

Financial Review

We offer an extensive selection of
on-line security systems that respond to
the needs of a broad range of subscribers. In the area of commercial security
services, we are working to enhance
our services by offering systems that
respond to the diverse security level andcontrol requirements of different types
of facilities, from large-scale commercial
buildings to offices and shops.
SECOM AX is a remote imaging
on-line security system for commercial
facilities that features advanced image
recognition technologies. Should anirregularity be detected, SECOM AX

alerts SECOM control center staff bytransmitting images and audio of thesubscriber’s premises to a SECOM
control center, enabling control center
staff to accurately assess the situation
and respond swiftly and appropriately.
Able to distinguish instantly betweenchanges in image feed caused by intruders and those resulting from light andshadow, or from small animals, SECOM
AX identifies only human intrusions as
irregularities. We continue to promote
R&D aimed at further enhancing thecapabilities of SECOM AX by improving
these and other performance features.
At the same time, we continue toencourage broader acceptance of thisadvanced system.

SECOM Today

We are working to enhance our services by offering systems that respond to thediverse security level and control requirements of different types of facilities.

17Commercial Security Services

Contracts forCentralized Security Systems(As of March 31, 2013)

Home

SECOM’s autonomous
flying surveillance robotthat capitalizes on
numerous proprietary
technologies

Commercial

Service industries
10.8%
Retailing/wholesaling 6.3%
Financial services
6.3%
Manufacturing
5.4%
Government agencies 4.7%
Other
23.9%
Home
42.6%

The robot takes off autonomously and flies toward intruders

monitoring for intruders and fires witheffective facility control functions,
including automatic opening and closing of shutters and turning on and offof lights and air conditioners, thereby
assisting efforts to reduce power
consumption. Installed in a small office,for example, SECOM FX can be set toautomatically turn lights and air conditioners on and off in accordance with
employees’ schedules, so not only when
they arrive and leave for the day, butalso when they step out of the office forlunch or other reasons, which helps tominimize heating and lighting costs.
Looking ahead, we will continue
working to promote broader acceptanceof SECOM LX and SECOM FX as valueadded systems that not only provide
excellent security, but also assist
customers’ efforts to manage costs by
reducing energy consumption.

18

SECOM Annual Report 2013

Small flying surveillance robot
opens a new chapter in privatesector crime prevention
We continue to promote the development of service robots. The firstoutcome of these efforts is SECOM
Robot X, an outdoor surveillance robot.
Recently, we completed development of
our second robot, a small autonomous
flying surveillance robot that is thefirst such robot designed specifically toprevent crime in the private sector.
Our new small autonomous flying
surveillance robot capitalizes on ouradvanced image processing and image
analysis technologies, used in SECOM
AX and other security systems; oursensing technologies, given full play
in SECOM Robot X, which surveys its
surroundings as it travels along, as wellas in Laser Sensor, an external monitoring system that uses lasers; and our

tracking technologies, which make itpossible to locate people, vehicles andproperty on the move. In the event an
intrusion is detected, the robot—whichworks in tandem with an on-line security
system—autonomously takes off andflies toward unauthorized individuals or
vehicles, choosing the optimal angles
from which to shoot sharp, clear images,
which it transmits to a SECOM control
center in real time, thus shortening
response time. Because it approaches
and tracks intruders inside the monitoredarea, the robot can also capture imagesof individuals and/or vehicles in areas
where surveillance cameras have notbeen installed.
In the years ahead, we willcontinue to build on our proprietary­technologies—notably our physicalsecurity, data center and information
security technologies and the geospatial

SECOM sticker

Flashing light

Subscribers display the
SECOM security
sticker, the signof well-protected
premises.

Light flashes if the system
detects an abnormality to warn
people in the vicinity and to
guide SECOM emergency
response personnel
dispatched to thecustomer’s
premises.

Subscriber

Secom Industries’ new headquarters plant

Fire
Dept.

using
1 Alerttelephone circuits

SECOM
3 Dispatch
emergency response

Gas
Companyof high-grade environment-friendly
products that respond to the needsof customers, has earned certification under ISO9001 and ISO14001,
the International Organization forStandardization’s benchmarks for,respectively, quality management andenvironmental management.
Secom Industries’ headquarters plantin Shiroishi, Miyagi Prefecture, sufferedextensive damage in the Great East
Japan Earthquake, which struck on
March 11, 2011. Having temporarily
divided production up among its otherfacilities and promptly commencedsite restoration, in November 2012 thecompany completed construction of a
new headquarters facility. In keepingwith the design concept used—“anadvanced production facility in harmony
with nature”—the new plant was
built around three central themes:“Environment,” meaning that it incorporates a wealth of environment-friendly
features; “Quality,” evidenced by highly
efficient high-performance production
capabilities; and “Safety,” underscoring
the strong emphasis placed on ability towithstand natural disasters.
The new plant’s expanded production
and testing areas and the latest equipment have positioned Secom Industries
to further enhance the quality of the
security systems it manufactures. As ourprincipal manufacturing base, Secom
Industries will continue to focus on providing systems that deliver ever-higher
levels of quality and reliability, thereby
playing a crucial role in our ongoing
effort to improve customer satisfaction.

SECOM Annual Report 2013

Financial Section

Manufacturing subsidiary Secom
Industries is responsible for the production of security equipment devised by
our R&D department, illustrating our
integrated approach to security services,whereby we take responsibility for all
aspects of our on-line security systems.
Secom Industries, which employs aproprietary manufacturing system thatallows production of multiple items,
enabling it to provide a broad range

response personnel

Financial Review

Secom Industries completes
construction of new
headquarters plant

SECOM
2 Alertemergency

SECOM
Emergency
Depot

SECOM Today

information processing and analysis
technologies of subsidiary Pasco—to
prepare this exciting new robot forlaunch. Going forward, we will continue
working to develop and market distinctive services and systems that reflect thechanging needs of customers.

SECOM
Control Center

Special Feature

Alert
emergency
services asnecessary

personnel

Strategic Highlights

PoliceDept.

The Management

Centralized (On-Line) Security Systems

19

Home Security Services

To provide greater security, peace of mind, comfort and convenience for homeowners andrenters, we continue to offer a variety of residential security services and systems, centering
on SECOM Home Security G-Custom, that reflect the changing structure of households.
Expanding sales of the improved
SECOM Home Security G-Custom
SECOM Home Security comprises
sensors and other security equipment,
which are installed in and around subscribers’ homes to provide monitoringfor intruders, fires and gas leaks andsend out alerts and emergency signals
around the clock. If an irregularity isdetected, the system alerts a SECOM
control center, where staff monitor
and assess the situation, dispatch
emergency response personnel and, if
necessary, notify the police and/or thefire department.

20

SECOM Annual Report 2013

Our home security services lineup
also includes SECOM Home Security
G-Custom, which combines SECOM
Home Security with a variety of featuresdesigned to further enhance convenience and peace of mind. One suchfeature, which draws on lessons takenfrom the Great East Japan Earthquake,is a data storage service that enables
subscribers to entrust important
personal documents, including driver’s
licenses, passports, insurance cards,
medical prescriptions and other items
that provide proof of identity, to us
for storage at a Secure Data Center.
Other features include on-line accessto convenient SECOM lifestyle support

services and products; a messaging
function that enables SECOM Home
Security G-Custom subscribers to share­messages; and an exclusive memo
service.
A recent addition to SECOM Home
Security G-Custom is My Page, a customized information page that allows
subscribers to access information froma broad range of selected collaboratingcompanies on services, as well as tomake purchases on-line, underscoring
SECOM Home Security G-Custom’s
steady expansion as a practical toolthat plays a central role in the everyday
life of subscribers.

The Management

SECOM My Doctor Plus emergency
medical alert system for seniors

Special Feature

SECOM Home Security G-Custom:
Evolving as an easy-to-use, practical tool thatdelivers security and peace of mind

SECOM Annual Report 2013

Financial Section

an ambulance. Emergency information,
including medical history, the namesof physicians currently treating theindividual and contact information forfamily members, is provided in advanceby the subscriber. In an emergency
situation, this information is also sent tothe subscriber’s portable device, thereby
ensuring such information is immediately available to ambulance attendants
and hospital staff.
Other services offered with SECOMMy Doctor Plus include consultation by
telephone with staff at a SECOM nurse
center at any time of the day or night.
Individuals requiring specialized nursing
care who have contracted care froma nursing care provider can request
SECOM to arrange the dispatch ofa home-care helper.

Financial Review

The rapid aging of Japan’s populationand the rising number of seniors living
alone continue to fuel unease about
access to medical and nursing care.
SECOM My Doctor Plus, an emergency
medical alert system for seniors, wasdeveloped with the aim of alleviatingsuch concerns by bringing security
and peace of mind to subscribers andmaking their lives more pleasant andconvenient.
SECOM My Doctor Plus features
an exclusive portable device thatincorporates cellular phone, global
positioning system (GPS) locator andemergency medical alert functions.
Regardless of location or time, thedevice, when activated, sends anemergency signal indicating that medical assistance is required. If requested,

SECOM dispatches specially trained
emergency response personnel. SECOMMy Doctor Plus combines a wealth ofexpertise accumulated through theprovision of SECOM My Doctor—anemergency medical alert system offered
to SECOM Home Security subscribersthat enables them to send an emergency signal in the event of a sudden
illness or other emergency simply bypushing a button—­with our extensive
positioning technologies, used in the
COCO-SECOM mobile security system,
as well as our geographic information
know-how. Our highly experienced
emergency response personnel are
specially trained in assisting people whohave fallen, and are thus able to provide
the appropriate help to individuals who
have fallen from a bed or wheelchair. Ifthen deemed necessary, staff will also
contact emergency services and request

SECOM Today

SECOM My Doctor Plus:
Now available nationwide

Strategic Highlights

SECOM Home Security G-Custom’s
touch screen ensures easy operation

21

Home Security Services

Subscribers of SECOM Home Security can seek the advice of SECOM nurses
on health-related matters

SECOM emergency response personnel
are dispatched promptly in the event of
an irregularity

Protecting the well-beingof seniors

recently added the SECOM MS-4 series
to our portfolio. Among the systems
in the series is SECOM MS-4S, which
includes easy-to-use intercoms featuringbase units mounted with large touch
screens that flash and provide audio
guidance. SECOM MS-4M, which is­compatible with multistructure condominium complexes and with existing
wiring, is attracting orders as an optimal
solution for condominium owners seeking to upgrade their security systems.
Looking ahead, we aim to expand sales
for installation in new buildings as wellas in buildings undergoing renovation by
actively marketing systems in the SECOM
MS-4 series not only to real estate developers, but also to residents’ associations
and property management firms.

In response to the evolving needs ofJapan’s super-aged society, we offer
a variety of helpful support services to
SECOM Home Security subscribers.
SECOM Remote Monitoring for
Seniors combines security services withSECOM Home Service, which provides
assistance with basic housework, andmedical services. By providing support
to seniors who live alone and/or requireassistance or nursing care, SECOM
Remote Monitoring for Seniors ensurespeace of mind both for seniors receiving
support and for their families.
With the Keeping in Touch call
­service for seniors, an option available
to SECOM Home Security subscribers,
SECOM staff call regularly to ask seniors
about their health and see how they
are doing. With the Keeping in Touch

22

SECOM Annual Report 2013

visiting service, our staff or staff fromone of our carefully selected collaborating companies visits regularly in person
to check on seniors’ health and generalliving situation. If requested, visiting
staff also do light housework. In bothcases, staff subsequently report backto the subscriber at a specified email
address to ensure the family is kept
informed. These two services help
ensure peace of mind both for seniors
receiving support and for loved ones
living far away.

Newly launched SECOM MS-4
seriesIn response to expanding market needs,
we have developed and launched a variety of on-line security systems for apartment and condominium complexes.
Spurred by the increasing number oflarge-scale and high-rise complexes, weOther Security Services
COCO-SECOM
The Management

COCO-SECOM Mobile Security System(Location and Emergency Response)

GPS satellite
Positioning
information

COCO-SECOM
Operations
CenterNotification of police(if warranted)

Cellular phonebase station

SECOM AED Package Service

Request forsearch(telephone/Internet)
COCO-SECOM Transmitter
Device (vehicle-mounted)

Subscriber

COCO-SECOM
Transmitter
Device (portable)

Strategic Highlights

SECOM
Emergency
Depot

Policedepartment,
emergency
services

Dispatchemergency
response
personnel(if requested)

Sales of SECOM AED Package
Service remain robust

The COCO-SECOM mobile security system uses signals from GPS satellites andcellular phone base stations to pinpoint
the location of portable transmitter
devices with superb precision. Simply
by pushing the alert button on thetransmitter, a subscriber can notify the
COCO-SECOM operations center, which
is on call around the clock.

The Great East Japan Earthquake served
as a reminder of the importance of being
prepared for major disasters. Recently,
we released the Stay Warm Emergency
Sleeping Set, an offering designed particularly for use by individuals stranded
due to transportation system failures
resulting from a major disaster. Each
Stay Warm Emergency Sleeping Set
contains a compactly packed emergency
blanket, a simple inflatable air mattressand emergency rations for approximately
10 meals. We are actively marketing
the Stay Warm Emergency Sleeping Set
to a broad range of customers as an­important part of disaster preparedness.

SECOM Annual Report 2013

Financial Section

Developed initially as a way to locate
seniors who have wandered off, foilchild abductions and avert the theft ofcars and motorcycles, COCO-SECOM
is now sought for an increasingly
wide range of applications, including
preventing the theft of construction
equipment and removal of automatedteller machines (ATMs) and safes, as well
as for managing taxi and bus fleets.

Debut of Stay Warm Emergency
Sleeping Set for individuals
stranded away from homewhen disaster strikes

Financial Review

With the installation of automatedexternal defibrillators (AEDs) on the rise,
active marketing efforts continue tosupport robust sales of the SECOM AED
Package Service, our full-service AED
rental package. Principal benefits of thisservice include the fact that we take full
responsibility for providing batteries andother expendables, as well as replacement units in the event of malfunctionor theft, thereby ensuring AEDs arealways in operating order. We also offer
the SECOM On-Line AED Management
Service, which monitors the operational
status of SECOM AEDs around the clock.
We are committed to actively marketingthese and other AED services with theaim of helping to save more lives.

Expanding marketing of
COCO-SECOM for increasingly
diverse security needs

We also offer mamorino 3 cellular
phones for children, which come with
COCO-SECOM as a standard service
and a security feature that limits accessto email and websites and a map-based
tracking function that enables parents
and guardians to keep an eye on theirchild’s movements.

SECOM Today

We are committed to actively marketing the SECOM AED
Package Service with the aim of helping to save more lives
and responding to growing demand for the COCO-SECOM
mobile security system.

Special Feature

Stay Warm Emergency Sleeping Set—an ­important part of advanced disaster­preparedness23

Overseas Security Services

Taiwan Secom

In overseas markets, we offer SECOM-style on-line s­ ecurity
systems, which include emergency response services,­c ustomized to reflect local needs and sensibilities.

24

Demand for on-line security­services rises

Celebrating 35 years in Taiwan
with consistently strong results

Our overseas security services currently
encompass operations in 11 countries
and territories: Taiwan, the Republicof Korea (ROK), the PRC, Thailand,
Malaysia, Singapore, Indonesia, Vietnam,
the United Kingdom, Australia and
New Zealand.
The distinguishing feature of ouroverseas security services is that we offer
SECOM-style on-line security systems,
which include emergency response services, customized to reflect local needs
and sensibilities. Moreover, we take full
responsibility for operations, positioning
us to respond to steadily expanding
demand with high-grade services thatleverage the extensive know-how wehave accumulated in Japan.

We made our debut in Taiwan, our firstoverseas market, in 1978. In the 35
years since, joint venture Taiwan SecomCo., Ltd., has grown into the leading
security services firm in Taiwan, boastinga broad range of security services,­focusing on on-line security systems,
and a network of offices that spans
the territory.
Going forward, Taiwan Secom—
which celebrates its 35th anniversary in
2013—will continue working to grow its
operations and to respond to evolving
needs in Taiwan for security and peaceof mind, as well as for greater comfort
and convenience.

SECOM Annual Report 2013

Operations in Indonesia seeing
rapid expansion
Subsidiary PT. Secom Indonesia, whichprimarily serves the city of Jakarta andits environs, provides an extensive rangeof services, including on-line security
systems for commercial premises and its
own proprietary security management,
static guard and other services, all ofwhich enjoy a solid reputation in thismarket.
Demand is increasing among companies in Indonesia for solutions to prevent
insider crimes. In response, Secom
Indonesia provides consulting aimed at
averting improprieties and criminal acts,
as well as highly sophisticated security
services. This has led to the rapid­expansion of the company’s operations.

The Management
Strategic Highlights

Specialist team of
installation and maintenance engineers(security services forfinancial institutions)(Secom plc,
United Kingdom)

Security staff (Indonesia)

Secom plc provides security for
the London Olympics

SECOM Annual Report 2013

Financial Section

We initially began offering services in
the PRC in 1992, establishing Secom(China) Co., Ltd., and becoming thefirst Japanese firm to have a holding
company in the country. Since then,we have formed joint ventures withlocal firms through which we provide

In the ROK, joint venture S1 Corporationis that country’s leading security services
provider. Thanks to its solid performancerecord and the power of the SECOM
brand, S1 continues to see steady
growth in its subscriber base.
In Malaysia, we are expanding ourbusiness by supplying on-line security
systems, as well as customized security
systems combining static guard services and on-line security systems. In
Singapore, we have achieved growth
not only by offering on-line security
systems that leverage our innovative

Financial Review

Service network in the PRC­continues to grow

High-grade SECOM services
well-established in key overseas
marketsplanning capabilities and fire protection
systems but also by putting together aunique menu of services that includes,
among others, leasing of safety deposit
boxes. Demand for security services
continues to rise in Vietnam, bolsteredby the increasing number of Japanesecompanies setting up local operations.
Since winning the contract to provide
static guard and security patrol services
for a building owned by a leading asset
management firm, SECOM Australia Pty.
Ltd. has earned positive reviews from a
broad range of subscribers in Australia,
including major corporations andgovernment agencies. In New Zealand,
Secom Guardall NZ Ltd. continues tofoster new demand by maximizing
its expertise in providing security for­financial institutions.
Looking ahead, we will continue
to expand our operations in countries
and regions where we have establisheda presence. We will also continue tocultivate promising new markets for
SECOM-style services.

SECOM Today

In the United Kingdom, subsidiary
Secom plc is widely acknowledged forthe quality of its security services, as aresult of which it has risen to the number three position in the U.K. security
services market. In 2012, Secom plc wasselected to provide security for venuesof the London 2012 Summer Olympic
Games and the London 2012 Paralympic
Games. SECOM plc has also won key
contracts to provide security services for
major financial institutions, testament
to the high marks given the company
as a provider of specialized security
services with sophisticated technologicalcapabilities.

proprietary on-line security systems.
Today, our security services network
encompasses 18 cities nationwide, withjoint ventures in 10 and branch offices
in eight of these cities. Looking ahead,
we will continue to target growth in the
PRC by capitalizing on our accumulated
know-how to provide quality services
that respond to heightened security
needs.

Control center (S1 Corporation, ROK)

Special Feature

Emergency response personnel(Shanghai Secom Security Co., Ltd., PRC)

25

Fire Protection Services
By building on our technological capabilities and know-how in the provision of fire protection
systems, we are striving to contribute further to security and peace of mind for customers.

Water spray system installed in road tunnel(Nohmi Bosai)R&D (Technology and Production Division, Nittan)

Working to capitalize on risingdemand in the renovations market

Technological capabilities andknow-how assist efforts to­cultivate new markets

Subsidiary Nohmi Bosai is a comprehensive fire protection specialist, with abroad product lineup that includes automatic fire alarm and fire extinguishingsystems. An integrated services provider,
Nohmi Bosai takes responsibility for
R&D, planning, design, production,
installation and maintenance of highgrade systems for a wide range ofapplications, including office buildings,
plants, tunnels, structures designatedas cultural properties, ships and homes.
In recent years, the deterioration ofolder office buildings has stimulated
demand for renovations to update automatic fire alarms and other equipment.
Responding to such demand, Nohmi
Bosai is drawing on its achievements,and on the solid trust of its customers,
to expand orders from this sector. In
the period under review, the company
launched Advanced P III, a conventionalfire alarm system with an automatic
testing function suitable for commercial
facilities with multiple rooms, such as
hotels and hospitals, and for condominiums, positioning itself to secure
further orders.

26

SECOM Annual Report 2013

Nohmi Bosai has succeeded in cultivating
new markets by developing innovative
systems that reflect a firm understandingof its customers’ needs. Since installingthe first fire protection system in a roadtunnel in Japan in 1958, the company
has maintained a leading share in this
sector. Building on its accumulated
technological capabilities and know-how,in the period under review Nohmi Bosai
completed development of and launched
the Image Processing-based Smoke
Detection System designed for applications such as large-scale warehouses
and factories with high ceilings that
contributes further to security andpeace of mind for customers operatingsuch facilities.

Expanding beyond renovations
to offer comprehensive services,
including maintenance andinspection
Nittan, a major fire protection services
provider acquired in April 2012, has
an integrated services configurationencompassing everything from thedevelopment of new fire protection
systems through to maintenance andinspection, allowing it to provide
systems that are optimally suited to­customers’ requirements. In the promising market for fire protection systems

for buildings under renovation, Nittan
is actively marketing follow-up services
to customers who have already installed
our systems. Nittan is also working tobolster income in this area by ensuring
a solid grasp of customer needs and isdeveloping and extending proposals forcomprehensive services that go beyond
installation to include maintenance andinspection, thereby preventing problems
from occurring.

Aqua Force: Environment-friendly
fire extinguishing system
The standard choice for use in indoor
parking lots, foam fire extinguishers
come with a downside, which is thatthey spread foam over a wide area,
necessitating a substantial cleanup.
Aqua Force, a closed-end mist spray fire
extinguishing system developed andmarketed by Nittan, facilitates focused
spraying of extinguishing agent on thesource of the fire, optimizing efforts to
get fires under control while also reducing the impact of such activities on theenvironment.
Committed to ensuring its businesses
are environmentally sound and contribute to society, Nittan also sells fire extinguishing agents with a global warming
potential of zero and an ozone depletion
potential of lower than one, as well as
fire alarm control panels built on principles of ­universal design, enhancing
usability for people with visual disabilities.
Guided by the ALL SECOM concept,
we will continue to work with Nohmi
Bosai and Nittan, and to leverage theextensive technological prowess andexpertise of both companies, withthe goal of creating next-generation
solutions to the disaster preparedness
needs of our customers.

Medical Services

Medical Care
Institution

Prescription

Physician’s guidelines

The Management

Artist’s conception of Sakra World Hospital,scheduled to open this year in Bangalore, India

Home Medical Services

Nurse’s report

Coordination(SECOM Visiting
Nurse Station)(SECOM Pharmacy)

Consultation

Alive Setagaya Daita, a nursing home with­nursing care services

Prescription
Nurse visit

Pharmaceutical delivery

Patient

Outpatient care

We currently provide support to 18 associated hospitals in Japan, enabling us tocontribute to better medical care. One ofthese is New Tokyo Hospital, in Matsudo,
Chiba Prefecture, which enjoys a solid

Improving the number and quality ofhealth care facilities and the system foreducating health care professionals aremajor challenges in India today. In a joint
venture with a Japanese trading company and a local firm, in the autumn of2013 we plan to open Sakra World­Hospital in Bangalore, leveraging our
expertise to ensure quality care and­efficienct administration. Going forward,
we will actively seek opportunities toexpand our medical services business inoverseas markets.
SECOM Annual Report 2013

Financial Section

New Tokyo Hospital opens
new hospital building

Joint venture in India to open
new hospital

Financial Review

Capitalizing on our know-how in theoperation of such facilities, we recently
opened Alive Setagaya Daita, a nursing
home that incorporates the concepts ofcommunity involvement and disaster preparedness. When Alive Setagaya Daita isfull, priority access is given to applicantsfrom the community. The facility has also
concluded a disaster support agreementwith local authorities whereby it will takein local residents requiring nursing care
who have been evacuated to shelters.
Additionally, in the event of a prolonged
power outage, Alive Setagaya Daita,
which has vehicle-mounted generators,
will do its best to provide hot meals toboth Alive Setagaya Daita residents andlocal citizens.

reputation for its advanced emergency,
inpatient and outpatient care for patientswith acute illnesses, as well as for its­outstanding surgical, testing and othercapabilities. The hospital is also highly
regarded for its cutting-edge facilities
and its ranking as one of Japan’s top
hospitals for the treatment of cardiovascular disease. In December 2012, New
Tokyo Hospital opened a new ­hospitalbuilding, further reinforcing its standing
as a principal provider of advanced medical care and underscoring its ongoingcommitment to setting new standardsof excellence in health care.

SECOM Today

Believing that protecting the health andlives of people is a natural extension of
our commitment to providing security
and peace of mind, in 1991 we launched
our Home Medical Services business,becoming the first private-­sector firm inJapan to offer such services. Today, thisbusiness encompasses medical care, personal care and ­preventative care services.
Our Home Medical Services businessincludes home nursing services, which we
extend through a nationwide network of
32 visiting nurse stations. Home nursing
involves regular visits by highly skilled
nurses to patients’ homes to ­provide
expert nursing services as directed by thepatient’s physician. We also offer pharmaceutical dispensing services, which include
filling prescriptions, delivering medications to patients at home and ­providing­instruction on ­dosage and administration.

A nursing home that incorporates­community ­involvement and­disaster preparedness

New Tokyo Hospital, a principal provider ofadvanced medical care in Matsudo, Chiba Prefecture

Special Feature

Believing that protecting the health and lives of people is anatural extension of our commitment to providing security
and peace of mind, we offer distinctive Home Medical
Services and provide support to associated hospitals.
Home Medical Services:A growing business

Strategic Highlights

Home Nursing
Services

Pharmaceutical
Dispensing andHome Delivery Service

27

Insurance Services

Support center

SECOM Anshin My Car

Head office of Secom General Insurance Co., Ltd.

We offer an extensive lineup of distinctive non-life
insurance policies that take full advantage ofthe collective strengths of the SECOM Group.
Expanding sales of SECOM Anshin
My Home policy is testament tosubstantial merits to subscribers
Our diversification into non-life insurance came about as a result of our­conviction that augmenting security services, which are preventative by nature,with insurance, which looks after people
in the event of misfortune, was a way
to reinforce subscribers’ security andpeace of mind. By taking full advantageof the collective strengths of the SECOM
Group, we have developed an extensive
lineup of highly rated, ­distinctive policies.
SECOM Anshin My Home is a policy
for residential customers that offers
a discount on regular premiums to
subscribers who have installed on-line
security systems, taking into account therisk-mitigating nature of such systems.
The policy also offers a discount forhouses with exclusively electrical appliances and houses built with fire-resistantmaterials, acknowledging a lower riskof fire. Customers can choose a basic
plan from among three alternatives and28

SECOM Annual Report 2013

are also free to select special options,enabling them to tailor policies to theirown specific needs. Contract volume for
SECOM Anshin My Home, a mainstay of
our non-life insurance lineup, continues
to increase steadily. A similar product,
Security Discount Fire Policy, for commercial customers, offers a discount on
regular premiums to companies thathave installed on-line security systems.

MEDCOM unrestricted cancer
treatment indemnity insurance
policyMEDCOM is an unrestricted cancer
treatment policy that provides full coverage for all hospitalization and medical
treatment costs, both those covered
under Japan’s National Health Insurance(NHI) scheme and those not, the burdenof which is traditionally borne entirelyby the patient. MEDCOM also extends
to outpatient treatment, providing
coverage for up to ¥10 million per
five-year period, and a one-time lumpsum payment of ¥1 million if cancer

is diagnosed. Subscribers additionallyhave access to MEDCOM Nurse Call, atelephone-based support service thatgives referrals to associated hospitals
across the country, helps arrange second
opinions and offers consultations onavailable treatment options. Looking
ahead, we will continue to actively­market MEDCOM with the aim ofmaking this beneficial policy available
to more people.

Support from SECOM emergency
response personnel
SECOM Anshin My Car is a distinctive automotive insurance policy that
includes around-the-clock, nationwide
access to on-site support by SECOM
emergency response personnel in theevent of an accident. This service plays
a significant role in giving vehicle­owners greater peace of mind.

Geographic Information Services
The Management

Aerial photograph of Onagawa, Miyagi Prefecture, after the Great East Japan Earthquake

Geospatial information services
support efforts to prevent/mitigate damage caused by disasters

The deterioration of Japan’s social
infrastructure, much of which wasbuilt during Japan’s postwar economic
boom, is raising concerns as it becomes

To facilitate an accurate grasp of thedeterioration of its roads, as well as theformulation of plans for the expansion,
maintenance and administration of

SECOM Annual Report 2013

Financial Section

Helping to manage road assets
in Vietnam

The importance of geospatial information in strategic planning, managementand disaster preparedness is wellunderstood today by both the public
and the private sectors. Pasco has createda geographic information system (GIS)
cloud service that enables subscribers
to access a wide range of data. GIS
cloud data is stored in our robust andhighly reliable data center facilities, thus
helping to facilitate the prompt restartof subscribers’ operations in the eventof a disaster. Going forward, Pasco willcontinue to capitalize on its geospatial
information services and the capabilitiesof our data center facilities to support
the operation and maintenance ofenterprise systems for its public- andprivate-sector customers.
On another front, Pasco is promoting applications for big data, including
vehicle navigation system travel history
information, cellular phone positioning
information and aerial, vehicle/groundand satellite image-derived geospatial
information.

Financial Review

Leveraging advanced measuring
technologies to improve the safetyof Japan’s roads

Pasco creates GIS cloud service

SECOM Today

Subsidiary Pasco collects geographic datafrom aerial photography, vehicle/groundsurveying and satellite images, which
it integrates, processes and analyzes toprovide geospatial information services
to customers worldwide.
In the region devastated by the Great
East Japan Earthquake, Pasco not only
surveyed land boundaries, but also
provided research and design services
necessary for land readjustment. Pasco
continues to capitalize on its geospatial
information capabilities to support
regional revitalization.
Companies and local authorities are
stepping up efforts to prevent/mitigate
potential damage from major disasters.
In addition to assisting post-disasterrecovery and reconstruction, Pasco is
supporting such efforts by assisting withtsunami damage forecasting and theimplementation of tsunami counter­measures across Japan.

apparent that corrective maintenance is
no longer sufficient to ensure the safetyof the country’s roads. Pasco promotes
various initiatives aimed at improving
road safety and reliability.
In the wake of the Great East Japan
Earthquake, Pasco compared data frompre- and post-quake satellite images to
identify disaster-induced topographic
changes, demonstrating the feasibility of swiftly pinpointing affectedareas. Recognizing the importance ofaccumulating such data before disasterstrikes, Pasco is currently archiving 3D
data for all of Japan’s major roads andhas already essentially completed thisprocess for roads maintained by thenational government. This high-precisionarchived 3D data is used primarily by the
public sector in the creation of detailed
maps for the maintenance and management of roads and ongoing inspections.
Pasco is also proposing the applicationof this data to, for example, simulate
the flooding of roads due to tsunami or
overflowing rivers and identify sectionsof tunnels or roads that have degraded.

Special Feature

Capitalizing on our geospatial information and data center­capabilities, we are supporting the operation and maintenanceof ­enterprise systems for public- and private-sector customers.

its road infrastructure going forward,
Vietnam is currently considering the
introduction of guidelines for the management of road assets based on thosein place in Japan. Pasco is maximizing
the technological capabilities it has
accumulated in Japan to assist Vietnam
in managing its road assets. The
company is also reinforcing its ability tosupport social infrastructure creation,
maintenance and management in other
Association of Southeast Asian Nations(ASEAN) member states.

Strategic Highlights

Simulation of flooding

29

Real Estate Development and Sales
We are stepping up efforts to develop high-grade
condominiums that are safe, secure and offer advanced
disaster mitigation features.
Providing high-grade­condominiums that are safe,
secure and distinctively SECOM
In line with our goal of providing living
spaces that ensure safety, peace of mind
and comfort, we develop and sell distinctively SECOM condominiums under the
Glorio brand, which are equipped withadvanced SECOM security systems. In
the period under review, we completed
Glorio Kiyosumi Shirakawa, in Tokyo,
which features around-the-clock access
control and an on-line security systemcreated specially for condominiums, aswell as the SECOM IX remote imaging
security system and surveillance cameras,

among others, thus offering high-grade
homes that are also safe and secure.
Glorio Kiyosumi Shirakawa boasts
earthquake resistance that is 1.25 times
greater than is required under Japan’s
Building Standard Law,
which mandates building towithstand earthquakes of
up to 7.0 on Japan’s seismic
intensity scale, earning
it seismic grade 2. Other
advanced features include
an emergency supplies
storage room and AED
units. Since the Great East
Japan Earthquake, demandhas risen for homes that are designed
to keep residents safe in the eventof a disaster. Looking ahead, we willcontinue responding to such demand bypromoting the development of quality
condominiums with advanced disastermitigation features, further enabling us
to deliver safety and peace of mind.

Glorio Kiyosumi Shirakawa

Information and Communication Related and Other Services
Our distinctive portfolio focuses on data center services and also includes BCP support,
information security services and a variety of cloud-based services.
Reinforcing our information
services capabilities by transforming
our data center facilities into ­service centers
Since the establishment of our Secure
Data Center in 2000, we have provided
data security services, protected byrobust facility construction, rated among
the best in Japan. In October 2012, weacquired a majority interest in At Tokyo,
thereby becoming one of Japan’s top
data center services firms.
In light of increased demand since
the Great East Japan Earthquake, we will
open two new Secure Data Center facilities, in Osaka and in Tokyo in July andNovember 2013, respectively.
The competitive advantage of ourdata center facilities derives from robust

30

SECOM Annual Report 2013

facility construction and security features, as well as from a proven ability tooperate without interruption regardlessof circumstances, thus providing seamless security and peace of mind. We
also offer subscribers a wide range of
support services through these facilities.
To create a solid foundation forgrowth in the years ahead, we willcontinue working to transform our data
centers into “service centers,” enabling
us to provide a more extensive range ofadvanced information-related services.

Cultivating demand for BCP­support services
One of our best-known initial response
support services for disaster situations
is SECOM Safety Confirmation Service,

one of Japan’s leading risk management
services, which help subscribers confirm
the safety of employees in the event ofa major disaster, as well as to promptly
gather and share information on theextent of damage to facilities in affectedareas. We continue to enhance the
SECOM Safety Confirmation Service ­inresponse to subscriber feedback by adding, for example, a service whereby wecontact and confirm the safety of thefamilies of subscribers’ employees by
email. These efforts are helping to­bolster our customer base.
In the period under review, we beganoffering the SECOM Emergency Call
Out service, a comprehensive initial
response support service designed
to facilitate the optimal deployment

The Management

Capitalizing on the capabilities of ourdata center facilities, among Japan’slargest in terms of capacity, we provide
a wide range of cloud-based services
designed to provide security andpeace of mind and enhance comfort
and convenience for subscribers. One­example is SECOM Anshin Eco Document Digitization Service, which assistsin the digitization of key documents,
thereby improving customers’ businessprocesses. This service, plus ­others—
including a personnel management
service that uses information fromaccess control systems, storage
services for valuable data and the Initial
Response Operations Service, a major
incident response service—maximize
our extensive experience in information
security and our solid ­network services
foundation to help enhance the

SECOM Home Service continues
to draw customers
SECOM Home Service is a suite oflifestyle support services developed toprovide security, peace of mind andenhance comfort and convenience for
SECOM Home Security subscribers.
The SECOM Home Service features anextensive menu of services designed toencourage people to turn to SECOM.
These include Housework Support
Service, which provides help withhousekeeping and small jobs around thehouse; Troubleshooting Support Service,
which includes assistance in resolving
unforeseen problems such as lost keys;
and Anshin Support Service, whereby
SECOM staff assist subscribers in resolving concerns that arise in everyday
life by, for example, patrolling aroundsubscribers’ homes when occupants
are out. We also offer Seikatsu Tasuke,a similar service for customers who are
not SECOM Home Security subscribers.
With the rapid aging of Japan’s population expected to further drive demand
for lifestyle support, we will continue toexpand the range of services we offer.

SECOM Annual Report 201331

Financial Section

Capitalizing on our technologicalcapabilities, adaptability and expertise,
we provide services designed to protect
subscribers’ confidential information
against cyber attacks and other dangers.
In addition to prompt expert response
services, including diagnosing and ana­lyzing system and network problems,monitoring for network viruses anddetecting irregularities, our lineup ranges
from emergency on-site response services
and everyday oversight to outsourcing.
Testament to our solid performancerecord in this area, we recently signed ajoint agreement with Tokyo’s Metro­
politan Police Department to promotecollaborative efforts to prevent cyber

Enhancing SECOM cloud services

competitiveness and ­corporate valueof subscribers.

Financial Review

Protecting confidential­information from cyber attacks

attacks and cyber crime. With damage
caused by cyber crime expected toincrease in the years ahead, we will stepup efforts to provide comprehensive anddistinctively SECOM services encompassing the development and implementation of security, monitoring, response
and normalization measures.

SECOM Todayof ­personnel in the aftermath of adisaster—­based on considerations suchas individual qualifications, capabilities,
home address, commutation route andcurrent ­location—and the prompt restartof operations. Our comprehensive BCP
support services also include support
for, among others, the preparation of
emergency procedure manuals, as well
as data storage, disaster information andemergency earthquake warning services.

Special Feature

Monitoring room at Secure Data Center facility

Strategic Highlights

SECOM Home Service

CSRn Social and Environmental Initiatives Guided by the ALL SECOM Concept

We have set forth 10 fundamental business policies, which
we apply to all areas of our operations. Of particular note,
we actively seek to contribute to society through our business activities and recognize that we have a responsibility toidentify and continuously cultivate businesses that contributeto society.
The SECOM Group Code of Employee Conduct delineatesproper practices for employees, as well as outlines our philosophy and standards for compliance, which underpin all aspectsof our operations, and provides specific standards of conductthat govern relationships with society, customers, suppliers
and other stakeholders and which all employees are required
to observe.

Acknowledging the importance of management,e­ nvironmental and social initiatives in ensuring sustainability
for ourselves and for society, we have sought since ourestablishment to contribute to the resolution of environmental
and social issues through our business activities. This includes
promoting efforts that are in line with ISO26000, the international standard for social responsibility. Taking into consideration the seven key areas of focus outlined in ISO26000,*
we will continue to build on the reputation for integrity andcompliance that we enjoy as Japan’s first provider of security
services, guided by the ALL SECOM concept, to contribute to
the resolution of social and environmental issues.
*Organizational governance, human rights, labor practices, the­environment, fair operating practices, consumer issues, and­community involvement and development

ALL SECOM-themed MIRAI Showroom opens
In a move designed to accelerate efforts to further cultivate existing markets, as well as to attract new customers, in July
2013 we opened the MIRAI (“future”) Showroom, an ALL SECOM-themed display area, at our Tokyo headquarters. It is
designed to facilitate a better understanding of what we do, as well as to offer an exciting look at the SECOM of tomorrow and reinforce awareness of SECOM as an important partner for the future. Rather than product exhibits, the MIRAIShowroom uses advanced imaging technologies to convey our comprehensive capabilities, evoked in the ALL SECOM c­ oncept,
highlighting forward-looking, distinctively SECOM solutions to security concerns and other causes of apprehension.

ALL SECOM-themed MIRAI Showroom introduces our comprehensive capabilities
Conference room of the future

32

SECOM Annual Report 2013

Financial Review
Operating Results

Net Income Attributable to
Noncontrolling Interests
Net income attributable to noncontrollinginterests amounted to ¥6.1 billion, down
¥498 million.
Net Income Attributable to SECOM
CO., LTD.
Net income attributable to SECOM CO.,LTD. climbed 71.2%, or ¥29.3 billion, to¥70.6 billion, equivalent to 8.2% of net
sales and operating revenue, comparedwith 5.3% in the previous period. Net
income attributable to SECOM CO., LTD.
per share was ¥323.36, up from ¥188.97.
Subsequent to the fiscal year ended
March 31, 2013, a proposal to pay cash
dividends of ¥105.00 per share, anincrease of ¥15.00 per share from theprevious period, was approved at thegeneral shareholders’ meeting held on
June 25, 2013.

SECOM Today
Financial Review

Other Income and Expenses
Other income increased ¥2.5 billion, to¥10.0 billion, while other expenses fell
¥2.1 billion, to ¥3.2 billion, resulting
in net other income of ¥6.8 billion, up¥4.5 billion from the previous fiscal year.
Principal factors behind this result includeda ¥1.6 billion increase in gain on private
equity investments, to ¥5.1 billion, and adecrease in loss on other-than-temporary
impairment of investment securities.

Equity in Net Income of AffiliatedCompanies
Equity in net income of affiliated companies slipped ¥1.0 billion, to ¥3.9 billion,
owing primarily to a decline in equity inthe net income of an overseas affiliatedcompany.

Special Feature

Income before Income Taxes andEquity in Net Income of AffiliatedCompanies
Income before income taxes and equity in
net income of affiliated companies rose
47.4%, or ¥38.5 billion, to ¥119.6 billion,
reflecting gains in operating income andnet other income.

Financial Section

Costs and Expenses
Total costs and expenses increased 8.0%,
or ¥55.5 billion, to ¥749.1 billion. Costof sales, at ¥583.1 billion, was up 8.7%,
or ¥46.8 billion, and was equivalent to67.7% of net sales and operating revenue,
an improvement from 69.4% in the preceding period due primarily to the impact
in the previous fiscal year of a ¥20.7 billion
write-down on real estate inventories,
which arose from a dramatic reorganization of the Company’s real estate businessin response to dwindling demand in thecondominium market.

Operating Income
Operating income advanced 43.1%, or¥33.9 billion, to ¥112.8 billion, equivalent
to 13.1% of net sales and operating
revenue, up from 10.2% in the previous
period. This result was due largely tohigher net sales and operating revenue
and decreases in write-down on real estate
inventories and impairment loss on longlived assets, which countered the negative
impact of increases in cost of sales andSG&A expenses. The Company’s segments,
in order of size of contribution, are security
services, fire protection services, information and communication related andother services, medical services, insurance
services, geographic information services
and real estate development and sales.
(For further details, please see Segment
Information below.)components of net deferred tax assets inthe previous fiscal year, a consequence ofchanges to Japanese tax regulations in theprevious period.

Strategic Highlights

Net Sales and Operating Revenue
Consolidated net sales and operating
revenue rose 11.6%, or ¥89.4 billion, to¥861.9 billion, bolstered by increases in all
segments. (For further details, please see
Segment Information below.)

Selling, general and administrative(SG&A) expenses increased 10.6%, or¥15.6 billion, to ¥162.2 billion. SG&A
expenses were equivalent to 18.8% of
net sales and operating revenue, an
improvement from 19.0% in the previous
fiscal year. In the preceding period, theCompany recognized an impairment
loss on long-lived assets, principally realestate, of ¥8.1 billion, in light of flagging
economic conditions.

The Management

Overview
In the year ended March 31, 2013,
SECOM CO., LTD. and its subsidiaries­(collectively, “the Company”) sought toprovide high-quality products and services
that respond to the needs of customers
in the core security services segment,
as well as in the fire protection services,­medical services, insurance services, geographic information services, real estatedevelopment and sales, and informationand ­communication related and other­services segments.
Consolidated net sales and operating
revenue rose 11.6%, or ¥89.4 billion,to ¥861.9 billion. This result was due
primarily to contributions of two newly
acquired subsidiaries in Japan—Nittan,
a major domestic provider of fire protection services, and At Tokyo, a leading
data center services firm, which wereconsolidated April 1, 2012, and October
31, 2012, respectively. This result also
reflected higher net sales and operating
revenue in the Company’s core electronic
security services business and in sales ofmerchandise, and the delivery of newly
completed large-scale condominium
complexes, beginning in the second
quarter of the period. Operating income
grew 43.1%, or ¥33.9 billion, to ¥112.8
billion, as the advance in net sales andoperating revenue exceeded increases
in cost of sales and selling, general andadministrative expenses and write-down
on real estate inventories and impairment
loss on long-lived assets declined. Net
income attributable to SECOM CO., LTD.
climbed 71.2%, or ¥29.3 billion, to ¥70.6
billion, owing mainly to the operating
income gain.

Income Taxes
Income taxes rose ¥8.6 billion, to ¥46.8
billion, equivalent to 39.2% of income
before income taxes and equity in net
income of affiliated companies, comparedwith 47.1% in the preceding period.
This result was due mainly to a decline
in the statutory tax rate in Japan and acorresponding write-down of certain

SECOM Annual Report 201333

Financial Review
Segment Information (For further information, please see Note 26 of the accompanying Notes to the Consolidated Financial Statements.)
Security Services
The security services segment comprises
electronic security services, other security
services, and merchandise and other. In the
period under review, net sales and operating revenue in this segment increased
4.2%, or ¥18.4 billion, to ¥454.9 billion.
Excluding intersegment transactions,net sales and operating revenue in thissegment amounted to ¥452.4 billion,
representing 52.5% of overall net sales
and operating revenue, down from 56.3%
in the previous fiscal year.
Electronic security services include
on-line commercial and home security
systems (centralized systems) and largescale proprietary security systems, whichcenter on surveillance services at thesubscriber’s premises. On-line commercial
and home security systems, the core of theCompany’s electronic security services, use
sensors, controllers and other equipment
installed at the subscriber’s premises todetect events, including intrusions, fires
and equipment malfunctions. Equipment
is linked to a SECOM control center via
telecommunications circuits to facilitate
around-the-clock remote monitoring.
Should an irregularity be detected, relevant
information is relayed to the control center,
where staff dispatch emergency response
personnel to take appropriate measures.
Control center employees also notify thepolice or fire department, if necessary. The
Company has established an integrated
approach, whereby it takes full responsibility for all aspects of its on-line commercial
and home security systems, from R&D
through to equipment manufacturing,sales, security planning, installation,around-the-clock monitoring, emergency
response services and equipment maintenance. Net sales and operating revenue
from electronic security services rose 2.4%,
or ¥7.2 billion, to ¥311.6 billion, a consequence mainly of the expansion of theCompany’s lineup of value-added services
that respond to diverse security needs.
Other security services include static
guard services and armored car services.
Static guard services, which are provided byhighly trained professional security guards
for situations requiring human judgment
and flexible responsiveness, generated
net sales and operating revenue of ¥47.9
billon, up 2.5%, or ¥1.2 billion, owing
principally to the addition of the net sales
and operating revenue of a subsidiary
newly consolidated in the fourth quarter.
Armored car services, which involve thesafe transport of cash, securities and othervaluables using specially fitted armoredcars and security professionals, reported
net sales and operating revenue of ¥20.5
billion, down 0.4%, or ¥77 million.
The merchandise and other category
encompasses sales of a wide range of
security products, including access control
systems, CCTV surveillance systems,

34

SECOM Annual Report 2013

automated fire extinguishing systems andexternal monitoring systems, which can be
freestanding or linked to on-line security
systems. Net sales and operating revenue
in this category increased 15.0%, or ¥9.4
billion, to ¥72.4 billion, reflecting ongoing
efforts to expand sales of security systems
for rental apartments and an increase insales of CCTV surveillance systems.
Operating income in the security services segment rose 1.4%, or ¥1.4 billion,to ¥102.9 billion, owing to higher segment
net sales and operating revenue. The
operating margin edged down to 22.6%,
from 23.2% in the preceding period, as
the percentage increase in net sales andoperating revenue for merchandise andstatic guard services exceeded that for
on-line security systems, which have acomparatively higher operating margin.
Fire Protection Services
This segment focuses on tailored automatic
fire alarm systems, fire extinguishingsystems and other fire protection systems
for a wide range of applications, including
office buildings, plants, tunnels, culturalproperties, ships and residences. On April
1, 2012, the Company enhanced thissegment, which centers on the operationsof fire protection services subsidiary Nohmi
Bosai, by acquiring Nittan, a major domestic fire protection services provider. During
the period, the two companies leveraged
their respective business foundations andproduct development capabilities to secureorders for an extensive range of high-grade
fire protection systems.
Net sales and operating revenue fromthe fire protection services segment
advanced 39.7%, or ¥33.7 billion, to¥118.4 billion, reflecting contributions
from Nittan and active efforts to market
systems that respond to market needs.
Operating income was ¥6.0 billion, an
increase of 34.6%, or ¥1.5 billion, fromthe previous fiscal year.
Medical Services
The medical services segment encompasses
home medical services, which centeron home nursing and pharmaceuticaldispensing services, as well as the operation of residences for seniors, electronic
medical report systems, sales of medical
equipment, nursing care services, theleasing of real estate for hospitals andhealth care-related institutions and others.
The segment also includes the operationsof variable interest entities of which theCompany is the primary beneficiary, which
manage hospitals and health care-related
institutions.
Segment net sales and operating
revenue rose 4.8%, or ¥6.4 billion, to¥141.1 billion. The principal factors behind
this result were the inclusion of a full yearof net sales and operating revenue from a
hospital, the operation of which was takenover by one of the aforementioned variableinterest entities in October 2011. Operating
income declined 30.8%, or ¥2.4 billion,to ¥5.5 billion. This was due principally tostart-up costs related to the opening of
new hospitals by variable interest entities.
Insurance Services
The Company continues to market a broad
range of distinctive non-life insurance
policies, including Security DiscountFire Policy, a commercial fire insurance
policy, and SECOM Anshin My Home, acomprehensive fire insurance policy forhomes—both of which offer discounts onpremiums to customers who have installed
on-line security systems, recognizing thisas a risk-mitigating factor. Other offerings
include SECOM Anshin My Car, a comprehensive automobile insurance policy thatoffers on-site support services—provided
by emergency response personnel—should
the subscriber be involved in an accident,
and MEDCOM, an unrestricted cancer
treatment policy that covers the entire costof medical treatment for cancer.
Net sales and operating revenue in thissegment increased 6.5%, or ¥2.4 billion, to¥38.7 billion, primarily reflecting firm salesof fire insurance policies and the MEDCOM
unrestricted cancer treatment policy, whichstrengthened revenue from net premiums
written, and to a decrease in loss on otherthan-temporary impairment of investment
securities. The segment reported operating
income of ¥2.7 billion, compared with
an operating loss of ¥80 million in thepreceding period, bolstered by a decline inloss on other than temporary impairmentof investment securities, which pushed
up net sales and operating revenue,
and by a decline in selling, general and­administrative expenses.
Geographic Information Services
The geographic information services segment includes the use of highly advanced
measuring equipment and surveying
technologies to provide a variety of GIS
services to public service entities, including
national and local governments, as well as
to private-sector customers in Japan. The
Company also provides geospatial information services to government agencies inforeign countries, including emerging
economies and developing countries. In
the period under review, the Company
procured high-resolution satellite data and,leveraging its processing technologies,
provided geographic information services
that responded to a wide variety ofcustomer needs in areas ranging from map
production to environmental monitoring
and fire and disaster preparedness.
Segment net sales and operating
revenue edged up 1.9%, or ¥933 million,to ¥51.3 billion, owing to firm sales topublic- and private-sector customers inJapan, as well as to customers in overseas

Special Feature

Information and Communication
Related and Other Services
This segment consists mainly of information and communication related services
and real estate leasing. In the informationand communication related services, theCompany continued to provide a varietyof uniquely SECOM services, focusing ondata center services as well as business
continuity support services, information
security services and cloud-based services.
Highlights included the acquisition on
October 31, 2012, of At Tokyo, one ofJapan’s leading providers of data center
services in terms of stability of power supply and security level, thereby strengthening the foundation of our information andcommunication related services business.

Segment net sales and operating
revenue rose 40.0%, or ¥13.6 billion,to ¥47.5 billion, shored up by the acquisition of At Tokyo and by an increase insubscriptions for Secure Data Center
services, which bolstered results in theinformation and communication related
services business. The segment reported
operating income of ¥5.8 billion, comparedwith an operating loss of ¥4.0 billion in
the previous fiscal year. This improvement
was attributable largely to an ¥8.1 billion
impairment loss on long-lived assets,principally real estate—the result of areassessment of the potential profitabilityof certain businesses in light of flagging
economic conditions—in the preceding
period and to the inclusion of At Tokyoin consolidated results, which boosted
operating income in the information andcommunication related services business inthe period under review.

Strategic Highlights

Real Estate Development and Sales
The real estate development and sales segment comprises the development and salesof condominiums equipped with advanced
security and contingency planning systems.
Amidst sluggish conditions in the condominium market, the Company continued topromote the careful selection of properties
for development and sales. Bolstered by
the delivery of newly completed large-scalecondominium complexes, beginning in thesecond quarter, net sales and operating
revenue in this segment soared 150.3%, or¥18.4 billion, to ¥30.7 billion. The segment
reported operating income of ¥1.6 billion,
compared with operating loss of ¥21.6

billion in the previous period. This improvement was due primarily to a ¥20.7 billion
write-down on real estate inventories in
the preceding period, which arose from a
dramatic reorganization of the Company’s
real estate business in response to dwindlingdemand in the condominium market.

The Management

markets. Operating income fell 33.3%, or¥1.1 billion, to ¥2.3 billion. The segment’s
operating margin declined to 4.5%, from
6.8% in the previous fiscal year, reflecting
increases in impairment loss on goodwill
and impairment loss on long-lived assets,
both due to the deterioration of results
at overseas subsidiaries, a consequence
mainly of the Eurozone crisis.

Financial Position
Investments and long-term receivablesrose ¥22.0 billion, to ¥257.7 billion, or
19.2% of total assets. Investment securities
increased ¥15.1 billion, to ¥155.1 billion,
mainly because of higher unrealized holding gains on securities—underscored by abuoyant stock market—and an increase in
the fair value of private equity investments.
Property, plant and equipment, lessaccumulated depreciation, advanced¥74.4 billion, to ¥385.3 billion, equivalent
to 28.7% of total assets. Buildings andimprovements, including depreciation, rose
¥92.4 billion, to ¥285.6 billion, while land
increased ¥11.4 billion, to ¥114.5 billion,a result of the acquisition of At Tokyo.

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets(Year ended March 31, 2013)(In yen)(In billions of yen)

3,500

1,500

2,800

1,200

2,100

900

1,400

600

700

300

3.1%

4.7%

5.9%
4.2%

16.4%

Financial Section

Percentage of Consolidated
Net Sales and Operating Revenue*

Financial Review

at ¥58.0 billion, were down ¥9.1 billion,
reflecting a decline in real estate for sale,a consequence of the delivery of newly
completed condominiums, which waspartially offset by an increase in inventories
related to fire protection services resulting
from the acquisition of Nittan. Short-term
receivables amounted to ¥21.5 billion,up ¥6.8 billion, largely as a result of anincrease in lease receivables related tosecurity equipment belonging to another
newly acquired consolidated subsidiary.
With both current assets and current
liabilities up, the current ratio was
2.0 times, compared with 2.1 times
a year earlier.

SECOM Today

Total assets as of March 31, 2013,
amounted to ¥1,340.4 billion, ¥160.5
billion higher than at the end of theprevious fiscal year. Total current assets,
at ¥565.9 billion, advanced ¥30.3 billion,
and accounted for 42.2% of total assets.
Cash and cash equivalents totaled ¥222.7
billion, an increase of ¥9.7 billion, owing
to the fact that net cash provided byoperating activities exceeded net cashused in investing and financing activities.
(For further details, please see Cash Flows,which follows this section.) Notes andaccounts receivable, trade, rose ¥20.2 billion, to ¥119.9 billion, pushed up primarily
by the acquisition of Nittan. Inventories,

52.5%

13.2%
Security Services
Medical Services
Geographic Information Services
Information and Communication
Related and Other Services

Fire Protection Services
Insurance Services
Real Estate Development
and Sales00

09 10 11 12 13

09 10 11 12 13* Pie chart shows percentage of consolidated net sales andoperating revenue (excluding intersegment transactions)

SECOM Annual Report 201335

Financial Review

Other assets were up ¥33.7 billion, to¥131.4 billion, and accounted for 9.8% of
total assets. Goodwill rose ¥18.5 billion, to¥32.7 billion and other intangible assets
increased ¥16.1 billion, to ¥38.4 billion,
both owing principally to the acquisition of
At Tokyo, which yielded goodwill of ¥17.5
billion and identifiable intangible assets of¥15.2 billion.
Total liabilities increased ¥58.5 billion,to ¥560.7 billion, equivalent to 41.8%
of total liabilities and equity. Total current
liabilities rose ¥31.3 billion, to ¥287.5
billion, and accounted for 21.5% of total
liabilities and equity. Notes and accounts
payable, trade, at ¥45.0 billion, wereup ¥11.8 billion, owing primarily to theacquisition of Nittan. Accrued income taxes
climbed ¥15.5 billion, to ¥31.0 billion,
owing to a debt-for-equity swap undertaken at the end of the previous fiscal year

as part of a refinancing package aimed at
restructuring the Company’s real estatedevelopment and sales subsidiary, which
resulted in a decline in accrued income
taxes in the preceding period.
Long-term debt, at ¥48.8 billion, wasup ¥11.7 billion. Accrued pension andseverance costs totaled ¥29.3 billion,
an increase of ¥7.9 billion, reflecting an
increase in the scope of consolidation.
Higher sales of fire insurance polices led
to an increase in the reserve for unearned
premiums, pushing unearned premiums
and other insurance liabilities up ¥6.4
billion, to ¥90.4 billion.
Interest-bearing debt, comprising bankloans, long-term debt and the current
portion of long-term debt, advanced¥5.2 billion, to ¥105.1 billion. This result
was due largely to the acquisition of new
subsidiaries, including Nittan and At Tokyoand was despite efforts to reduce interestbearing debt through the effective use ofavailable funds.
Total SECOM CO., LTD. shareholders’equity rose ¥66.3 billion, to ¥679.2 billion,
and was equivalent to 50.7% of total
liabilities and equity. This was attributable
to a ¥50.9 billion increase in retained
earnings, to ¥623.6 billion, owing mainly
to net income attributable to SECOM CO.,LTD. and to the payment of cash dividends.
Accumulated other comprehensive loss,
at ¥21.2 billion, was down ¥16.1 billion.
The loss resulting from foreign currencytranslation adjustments declined ¥9.7
billion, to ¥18.7 billion, a consequence ofthe yen correction that began in late 2012.
As a result, the equity ratio decreased to50.7%, from 51.9% at the end of theprevious fiscal year.

Net cash used in investing activities
came to ¥118.6 billion. Principal items
behind this result were acquisitions, net ofcash acquired, of ¥63.7 billion, that is, payments for the acquisition of new subsidiaries, including Nittan and At Tokyo, andpayments for purchases of property, plantand equipment of ¥64.3 billion—namely,
the purchase of security equipment andcontrol stations, dictated by a greater number of security services subscribers, and ofbuildings and improvements, as well as
equipment, for new hospitals managed byvariable interest entities. Owing to a review
of investment assets in the insurance
services segment, and to gains attributableto private equity investments in the UnitedStates, net proceeds from the sales andredemption of short-term investments andinvestment securities rose ¥10.3 billion.
Net cash used in investing activities was up¥73.6 billion from the previous fiscal year,

attributable to the greater application of
cash to acquisitions, net of cash acquired,
and to purchases of property, plant andequipment.
Net cash used in financing activities
amounted to ¥30.4 billion. This included
dividends paid to SECOM CO., LTD.
shareholders of ¥19.6 billion, net repayments of long-term debt of ¥4.9 billion
and a decrease in bank loans, net, of ¥3.6
billion. Net cash used in financing activities
was down ¥17.3 billion from the previous
period, owing to decreases in investment
deposits by policyholders, bank loans, net
and net repayments of long-term debt.
The Company’s operating, investing
and financing activities in the period
under review resulted in net cash and cash
equivalents at end of year of ¥222.7 billion,up ¥9.7 billion from net cash and cash
equivalents at beginning of year, whichwere ¥213.0 billion.

Cash Flows
The Company is committed to maintaining
sufficient liquidity to allow flexibility in its
operations and ensure a solid financial
foundation. To the best of its ability, theCompany is also firmly committed tofinancing strategic investments with cash
generated by its operating activities.
In the period under review, net cash
provided by operating activities amounted
to ¥157.4 billion. Significant factors­contributing to this result included net
income of ¥76.6 billion and non-cash
items, notably depreciation andamortization—­including amortizationof deferred charges—of ¥60.7 billion
and a decrease in inventories of ¥20.7
billion. Net cash provided by operating
activities was ¥45.2 billion higher thanin the previous period, reflecting higher
net income and an increase in accrued
income taxes, compared with a decreasein the ­preceding period.

Cash Flows

Depreciation andAmortization

Capital Expenditures(In billions of yen)

(In billions of yen)

(In billions of yen)

75

75

200

60

60

45

45

30

30

15

15

150
100
50
0
–50

0

09 10 11 12 13

0

–100

09 10 11 12 13

–150

11

12

13

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

36

SECOM Annual Report 2013

AUDITED FINANCIAL STATEMENTSCONTENTSCONSOLIDATED 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 2013

37

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2013 and 2012
		In millions of yen

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

March 31

March 31

2012

2013

Current assets:
Cash and Cash equivalents (Notes 5 and 22)............................................................... ¥ 222,696 ¥ 213,040
Time deposits (Note 13)...............................................................................................
8,021
7,731
Cash deposits (Note 6)................................................................................................
56,09054,011
Short-term investments (Notes 7 and 22).....................................................................
12,07917,294
Notes and accounts receivable, trade...........................................................................
119,914
99,738Due from subscribers...................................................................................................
34,856
34,416Inventories (Note 8).....................................................................................................
58,021
67,094
Short-term receivables (Notes 9, 13, 20 and 21)..........................................................
21,466
14,655
Allowance for doubtful accounts (Note 9)...................................................................
(2,176)(1,335)
Deferred insurance acquisition costs (Note 14).............................................................
5,650
5,132
Deferred income taxes (Note 17).................................................................................
15,387
12,853
Other current assets (Notes 21, 22 and 23)..................................................................
13,937
10,971$ 2,369,106
85,330596,702
128,500
1,275,681
370,809617,245
228,362(23,149)
60,106
163,691
148,266ASSETS			Total current assets..............................................................................................

565,941535,600

6,020,649

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

155,138
39,13747,321
13,6568,824(6,366)140,014
39,73941,831
13,281
8,262(7,449)1,650,404
416,351
503,415
145,277
93,872(67,723)

257,710

235,678

2,741,596

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

114,528
285,609282,533
99,758
3,688

103,127
193,245
273,645
87,1905,054

1,218,383
3,038,394
3,005,670
1,061,255
39,234

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

786,116(400,854)

662,261(351,413)

8,362,936(4,264,404)

385,262

310,848

4,098,532

41,99532,736
38,418
11,5386,750

43,127
14,23522,305
7,846
10,185446,755
348,255
408,702
122,745
71,809131,437

97,698

1,398,266

			Total assets.......................................................................................................... ¥1,340,350 ¥1,179,824$14,259,043

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

See accompanying notes to consolidated financial statements.

38

2013

SECOM Annual Report 2013

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

March 31

March 31

2012

2013

LIABILITIES AND EQUITY

2013

40,762
22,05333,16329,121
26,87740,271
15,46826,272
22,274

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

287,516

256,261

3,058,680

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 liabilities (Notes 21, 22, and 23)............................................................................

48,762
34,22729,318
16,82490,442
29,483
14,135
10,02837,02336,337
21,421
17,32583,99830,755
9,115
9,956

518,745364,117
311,894
178,979
962,149
313,649
150,372
106,681			Total liabilities......................................................................................................

560,735

502,191

5,965,266

66,37873,80910,241
623,599

66,37874,561
10,175
572,730

706,149785,202108,947
6,634,032

11,5608(14,044)(18,710)

4,646—(13,522)(28,453)

122,979
85(149,404)(199,043)(21,186)(37,329)(225,383)$

415,234
183,840
478,819
349,415
320,106
422,096329,330
293,904
265,936

SECOM Today

Commitments and contingent liabilities (Note 24)

Financial Review

Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
		Authorized—900,000,000 shares		 issued 233,288,717 shares in 2013 and 2012........................................................
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.................................................................

Special Feature

39,032 ¥17,28145,00932,84530,09039,67730,957
27,627
24,998Strategic Highlights

Current 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 payrolls..........................................................................................................
Other current liabilities (Note 17).................................................................................

The Management		In millions of yen

Common stock in treasury, at cost:(73,665)(73,660)(783,670)

679,176

612,855

7,225,277

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

100,439

64,7781,068,500

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

779,615

677,633

8,293,777

			 Total liabilities and equity..................................................................................... ¥1,340,350 ¥1,179,824$14,259,043

Financial Section

15,018,951 shares in 2013 and 15,017,691 shares in 2012......................................
			 Total SECOM CO., LTD. shareholders’ equity........................................................

See accompanying notes to consolidated financial statements.

SECOM Annual Report 2013

39

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013
		In millions of yen

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

Years ended March 31

Year ended March 31

2013

2012

2011

2013

¥861,885¥772,482¥751,868$9,168,989

583,094
162,226
—
579
1,052
2,166
749,117
112,768

536,268
146,663
—
8,133
1,218
1,374
693,656
78,826498,957
147,667
3,212
3
—
1,597
651,436
100,432

6,203,127
1,725,808—
6,160
11,191
23,043
7,969,329
1,199,660

904
150
5,095
3,841
9,990

952
29
3,491
3,055
7,527

928
139
6,014
4,789
11,8709,617
1,596
54,20240,862
106,277

1,537
48
1,576
3,161
119,597

1,597
952
2,684
5,233
81,120

1,683
84
2,691
4,458
107,844

16,351
511
16,766
33,6281,272,309

45,31133,53838,765
1,538
4,664
4,512
46,84938,202
43,27772,74842,91864,567
3,895
4,880
5,028
76,64347,79869,595(6,063)(6,561)(6,930)¥ 70,580 ¥ 41,237 ¥ 62,665

482,032
16,362
498,394
773,915
41,436815,351(64,500)$ 750,851

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

Years ended March 31

Year ended March 31

Net sales and operating revenue (Notes 14 and 22)...........................................................
Costs and expenses:
Cost of sales (Note 8)..........................................................................................................
Selling, general and administrative expense (Notes 2 (17), 2 (18), 2 (19) and 4)...................
Loss on settlement of pre-existing relationship (Note 2 (2))..................................................
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 10).................................................................
Gain on private equity investments (Note 22)......................................................................
Other (Notes 16 and 23).....................................................................................................
Other expenses:
Interest ..............................................................................................................................
Loss on other-than-temporary impairment of investment securities (Note 22)......................
Other (Notes 16, 23 and 24)...............................................................................................
				 Income before income taxes and equity in net income of affliated companies.........
Income taxes (Note 17):
Current ..............................................................................................................................
Deferred.............................................................................................................................
				 Income before equity in net income of affiliated companies....................................
Equity in net income of affliated companies ....................................................................
				Net income.............................................................................................................
Less: Net income attributable to noncontrolling interests ..............................................
				 Net income attributable to SECOM CO., LTD. ........................................................

2013

2012

2011

2013

¥323.36¥ 90.00¥188.97¥ 90.00¥287.41¥ 85.00

$3.44
$0.96

SECOM
CO., LTD. and Subsidiaries
		In millions of yen
Three years ended March 31, 2013

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

Years ended March 31

Year ended March 31

Per share data (Note 2 (21)):
Net income attributable to SECOM CO., LTD. .....................................................................
Cash dividends per share ...................................................................................................

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Comprehensive income:Net income.........................................................................................................................
Other comprehensive income (loss), net of tax:
		 Unrealized gains (losses) 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 2013

2013

2012

2011

2013

¥76,643¥47,798¥69,595$815,351

7,384
15
(708)
10,10593,439(7,113)¥86,3262,486
8(1,953)(3,696)44,643(5,930)¥38,713(3,533)17(1,612)(6,780)57,687(5,853)¥51,834

78,553
159(7,532)
107,500
994,031(75,669)$918,362

SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retained­earnings

Accumulated
other com­prehensive
income (loss)

Balance, March 31, 2010 ...................................................... 233,288,717
Cumulative effect adjustments resulting from adoption ofa new accounting standard on variable interest entities,
net of tax (Note 2 (2))—
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding losses 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)...............................................................................
Losses on disposal of treasury stock.........................................
—Net changes in treasury stock...................................................
—¥66,378¥81,096¥10,053¥510,927(¥23,748)(¥74,907)———(3,821)——(3,821)—(3,821)———

62,665——62,665

6,930

69,595

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(3,472)
12(972)(6,399)

—
—
—
—

—
—
—

—
—
—

—
—
51

(18,533)
—
(51)

—
—
—

—
—
—

(3,472)
12(972)(6,399)51,834(18,533)
—
—

(61)
5
(640)
(381)
5,853
—
(1,822)—(3,533)17(1,612)(6,780)57,687(18,533)(1,822)————(5,541)
(0)
—

—
—
—

—
—
—

(226)
—
—

—
—
(17)

(5,767)(0)(17)(7,382)——(13,149)(0)(17)

Balance, March 31, 2011 ...................................................... 233,288,717
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding 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)...............................................................................
Losses on disposal of treasury stock.........................................
—Net changes in treasury stock (Note 18)...................................
—

66,37875,555

10,104551,187(34,805)(74,924)

593,495

61,314

654,809———

41,237——

41,237

6,561

47,798

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

2,515
6
(1,613)(3,432)

—
—
—
—

—
—
—

—
—
—

—
—
71

(19,623)
—
(71)

—
—
—

—
—
—

2,515
6
(1,613)(3,432)
38,713(19,623)
—
—

(29)
2
(340)
(264)
5,930
—
(1,851)—

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

—
—
—

(642)
(352)
—

—
—
—

—
—
—

—
—
—

—
—
1,264

(642)
(352)
1,264

(615)
—
—

(1,257)
(352)
1,264

Balance, March 31, 2012 ...................................................... 233,288,717
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding 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...................................................
—

66,37874,561

10,175

572,730(37,329)(73,660)

612,855

64,778

677,633———

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¥66,378¥73,809¥10,241¥623,599(¥21,186) (¥73,665)¥679,176¥100,439¥779,615

Number ofsharesissuedCommonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest¥569,799¥ 64,665

Total¥634,464

Retained­earnings($397,117) ($783,617)

Balance, March 31, 2013 .......................................................................... $706,149 $785,202$108,947 $6,634,032

Total$6,519,734$ 689,128$7,208,862——

750,851

64,500815,351

73,55385(5,553)99,426

—
—
—
—

—
—
—

—
—
—

73,55385(5,553)99,426918,362(208,989)
—
—

5,000
74
(1,979)8,074
75,669—(15,532)—

78,553
159(7,532)
107,500
994,031(208,989)(15,532)
—

4,223
—
—

—
—
(53)

(3,777)(0)(53)

319,235——

315,458(0)(53)($225,383) ($783,670)$7,225,277$1,068,500$8,293,777

Financial Section

Balance, March 31, 2012
$706,149 $793,202 $108,245 $6,092,872
Comprehensive income:Net income..............................................................................................
———
750,851
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities.................................................
————
		 Unrealized gains on derivative instruments..........................................
————
		 Pension liability adjustments...............................................................
————
		 Foreign currency translation adjustments............................................
————
Total comprehensive income....................................................................
———(208,989)
Cash dividends paid to SECOM CO., LTD. shareholders.................................
Cash dividends paid to noncontrolling interests.............................................
————
Transfer to legal reserve................................................................................
—
—
702
(702)
Equity transactions with noncontrolling interests and other—(8,000)——(Notes 4 and 18).........................................................................................
Losses on disposal of treasury stock..............................................................
—
(0)
—
—
Net changes in treasury stock........................................................................
—
—
—
—

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest

Financial Review

Legalreserve

SECOM Today

Additional
paid-in
capitalSpecial Feature

Commonstock

Commonstock intreasury,
at costStrategic Highlights

Translation into thousands of U.S. dollars (Note 3)
Accumulated
other com­prehensive
income (loss)

The Management

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201341

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013
		In millions of yen

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

Years ended March 31

Year ended March 31

2013

2012

2011

Cash flows from operating activities:
Net income ........................................................................................................................... ¥ 76,643 ¥ 47,798 ¥ 69,595
Adjustments to reconcile net income to net cash provided by operating activities—
		 Depreciation and amortization, including amortization of deferred charges
		 (Notes 2 (11), 2 (12) and 12)............................................................................................
60,674
58,11756,951
		 Accrual for pension and severance costs, less payments.....................................................
(1,471)(3,268)(2,687)
		 Deferred income taxes.......................................................................................................
1,538
4,664
4,512
		 Loss on sales and disposal of fixed assets, net....................................................................
2,166
1,374
1,597
		 Impairment loss on long-lived assets (Note 11)...................................................................
579
8,133
3
		 Write-down on real estate inventories (Note 8)..................................................................
1,792
20,723
1,482
		 Gain on private equity investments (Note 22).....................................................................
(5,095)(3,491)(6,014)
		 Impairment loss on goodwill (Note 12)...............................................................................
1,052
1,218
—
		 Gain on sales of securities, net (Notes 7, 10 and 14)..........................................................
(899)(1,240)(1,658)
		 Loss on other-than-temporary impairment of investment securities (Notes 14 and 22)........
73
1,835
765
		 Equity in net income of affiliated companies......................................................................
(3,895)(4,880)(5,028)
		 Loss on settlement of pre-existing relationship (Note 2 (2)).................................................
—
—
3,212
		 Payments for legal settlement (Note 24).............................................................................
—(799)(1,770)		 Changes in assets and liabilities, net of effects from acquisitions and disposals:			 (Increase) decrease in cash deposits...............................................................................
(2,038)2,535(7,685)
			 Increase in receivables and due from subscribers, net of allowances...............................
(5,838) (12,306)(6,861)
			 (Increase) decrease in inventories...................................................................................
20,720(3,940)14,564
			 Increase in deferred charges.......................................................................................... (15,515) (15,652) (15,097)
			 Increase (decrease) in notes and accounts payable.........................................................
6,831
10,030(182)
			 Increase (decrease) in deposits received..........................................................................
2,328
2,123
(4,236)
			 Decrease in deferred revenue.........................................................................................
(1,558)(1,332)(5,419)
			 Increase (decrease) in accrued income taxes...................................................................
13,470(4,880)(1,231)
			 Increase in guarantee deposits received.........................................................................
65
161
1,367
			 Increase in unearned premiums and other insurance liabilities........................................
6,445
383
9,148
			Other, net......................................................................................................................
(621)
4,906
7,297
				 Net cash provided by operating activities................................................................... 157,446 112,212 112,625
Cash flows from investing activities:(Increase) decrease in time deposits........................................................................................
3,500
9,230
(9,665)
Proceeds from sales of property, plant and equipment...........................................................
2,603
179
780
Payments for purchases of property, plant and equipment..................................................... (64,321) (53,496) (41,726)
Payments for purchases of intangible assets...........................................................................
(5,444)(5,887)(4,829)Proceeds from sales and redemptions of investment securities (Note 7)..................................
37,44373,69337,187
Payments for purchases of investment securities.................................................................... (31,345) (66,283) (32,163)(Increase) decrease in short-term investments.........................................................................
4,152(4,357)(1,854)
Acquisitions, net of cash acquired (Note 4)............................................................................. (63,701)(1,275)(1,809)Proceeds from sales of investments in affiliated companies (Note 10).....................................
—
—
5,055
(Increase) decrease in short-term receivables, net...................................................................
(39)(1,680)164
Payments for long-term receivables........................................................................................
(1,057)(1,741)(402)
Proceeds from long-term receivables......................................................................................
1,590
4,322
1,965
Other, net..............................................................................................................................
(1,976)2,319421				 Net cash used in investing activities........................................................................... (118,595) (44,976) (46,876)
Cash flows from financing activities:
Proceeds from long-term debt...............................................................................................
17,483
3,875
11,277
Repayments of long-term debt.............................................................................................. (22,341) (11,660) (11,597)
Decrease in bank loans, net...................................................................................................
(3,630)(6,935)(312)
Decrease in investment deposits by policyholders...................................................................
(1,272) (10,888) (20,583)
Dividends paid to SECOM CO., LTD. shareholders.................................................................. (19,645) (19,623) (18,533)
Dividends paid to noncontrolling interests..............................................................................
(1,460)(1,851)(1,822)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders.....................................................................................................................
(252)(466) (13,703)
Proceeds from sales of shares of consolidated subsidiaries to noncontrolling interest holders....
651——
Increase in treasury stock, net................................................................................................
(5)
(292)
(17)
Other, net..............................................................................................................................
86124—				 Net cash used in financing activities........................................................................... (30,385) (47,716) (55,290)
Cumulative effect adjustments resulting from adoption of a new accounting
—
—
3,905
standard on variable interest entities (Note 2 (2))...............................................................
1,190
(422)
(566)
Effect of exchange rate changes on cash and cash equivalents ........................................
9,656
19,098
13,798Net increase in cash and cash equivalents ...........................................................................
Cash and cash equivalents at beginning of year ................................................................. 213,040 193,942 180,144
Cash and cash equivalents at end of year ........................................................................... ¥222,696 ¥213,040 ¥193,942
See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20132013

$ 815,351
645,468(15,649)
16,362
23,043
6,160
19,064(54,202)
11,191(9,564)777(41,436)——(21,681)(62,106)
220,426(165,053)
72,67024,765(16,574)
143,297691
68,564(6,607)
1,674,957
37,234
27,691(684,266)(57,915)
398,330(333,457)
44,170(677,670)—(415)(11,245)
16,915(21,021)(1,261,649)
185,989(237,670)(38,617)(13,532)(208,989)(15,532)(2,681)
6,926
(53)
914
(323,245)—
12,660102,723
2,266,383$2,369,106

Financial Section

SECOM Annual Report 2013

Financial Review(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variable­interest entities (“VIEs”) of which the Company is the primary
beneficiary.
In December 2009, the Financial Accounting Standards Board(“FASB”) issued Accounting Standards Update (“ASU”) No. 200917, “Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities,” which amends the Accounting(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 the

SECOM Today(1) Basis of Consolidation and Investments in Affiliated­Companies
The consolidated financial statements include the accounts of theparent company and those of its majority-owned ­subsidiaries. All
significant intercompany transactions and balances have been­eliminated in consolidation.
Investments in companies in which the ability to exercise significant influence exists (generally 20 to 50 percent owned companies),
are accounted for under the equity method. Consolidated income
includes the Company’s current equity in the net income of­affiliated companies, after elimination of intercompany profits.
The excess of cost over underlying identifiable net assets at acquisition dates of investments in subsidiaries and affiliated ­companies
is recorded as goodwill.

Special Feature

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:

Standards Codification (“ASC”) 810, “Consolidation.” Thisaccounting standard requires the reporting entity to consolidate avariable interest entity (“VIE”) as its primary beneficiary when it isdeemed to have a controlling financial interest in a VIE, meeting
both of the following characteristics:• The power to direct activities of a VIE that most significantly
impact the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentiallybe significant to the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.
This accounting standard is effective for fiscal years beginning
after November 15, 2009 and was adopted by the Company inthe fiscal year ended March 31, 2011. Due to the adoption of thisaccounting standard, certain organizations managing hospitals andhealth care-related institutions that were not consolidated prior to
March 31, 2010 were included in the scope of consolidation as ofApril 1, 2010. As a result, assets of ¥22,907 million and liabilities of¥26,728 million, after elimination of intercompany balances, were
included in the consolidated balance sheet at April 1, 2010. The
cumulative effect adjustments resulting from the adoption of thisaccounting standard decreased the beginning retained earnings forthe year ended March 31, 2011 by ¥3,821 million, net of tax. In
addition, the Company recognized ¥3,212 million as a loss on settlement of pre-existing relationship in the medical services segment,
related to the settlement of a lease contract between the Company
and an entity newly included in the scope of c­ onsolidation according
to the adoption of this accounting standard.
The Company provides investments, loans and guarantees to­organizations managing hospitals and health care-related institutions, to a company holding real estate, and to a PFI (Private FinanceInitiative) organization which was established to build, maintain andoperate correctional facilities. Certain of these organizations are
considered VIEs under ASC 810.
Total assets and liabilities held by VIEs of which the Company is
the primary beneficiary were ¥68,093 million ($724,394 thousand)and ¥73,490 million ($781,809 thousand), respectively, at March
31, 2013, and ¥64,469 million and ¥71,268 million, respectively, atMarch 31, 2012. Total assets and liabilities held by VIEs of which
the Company holds ­significant variable interests but is not the primary beneficiary were ¥32,983 million ($350,883 thousand) and¥33,499 million ($356,372 thousand), respectively, at March 31,
2013, and ¥33,735 million and ¥34,908 million, respectively, atMarch 31, 2012. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2013 and 2012 were ¥4,653 million ($49,500
thousand) and ¥4,621 million, ­respectively.

Strategic Highlights

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the areas of security services, fire protection services, medical services, insurance services, geographic
information services, real estate development and sales, and information and communication related and other services. With these
services combined, the Company is focusing on the establishmentof a “Social System Industry,” a network of integrated systems andservices, targeted at the needs of people and business.
The Company’s principal business activities are security services,
including on-line security systems for commercial and residential
premises, static guard services, armored car services for cash collection and deposit and sales of security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services; insurance services, focusing on non-life insurance services;
geographic information services using geographic information system (“GIS”) and surveying and measuring technology; real estate­development and sales, focusing on the development and sale ofcondominiums equipped with security and contingency planningfeatures; information and communication related services, ­whichcenter on data center services and also include business continuity
plan support, information security services and cloud-based ­services;
lease of real estate; and other services.

The Management

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013

43

CONSOLIDATED FINANCIAL STATEMENTS

contractual 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.
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”

44

SECOM Annual Report 2013

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 carrying amount to fair value. The impairment ischarged to income and a new cost basis for the securities is established. To determine whether an impairment is other-than-­temporary, the Company considers the length of time and extent towhich the market value of the security has been less than its original cost, the financial condition, other specific factors affecting themarket value, deterioration of the credit condition of the issuers,
and whether or not the Company is able to retain the investment
for a period of time sufficient to allow for the ­anticipated recovery
in market value.
Other investments in non-public companies are recorded at cost
as fair value is not readily determinable. The Company periodicallyevaluates the values of other investments in ­non-public companies
for possible impairment by taking into consideration the financial
and operating conditions of the issuer, the general market conditions in the issuer’s industry and the period of the decline in theestimated fair value and other relevant factors. If the impairment isdetermined to be other-than-temporary, other investments in
non-public companies are written down to their impaired value
through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the ­investment has declined below thecarrying value.
The carrying value of private equity investments was ¥37,493
million ($398,862 thousand) and ¥26,149 million at March 31,
2013 and 2012, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire
­protection-related products, real estate and information and otherrelated products, are stated at the lower of cost or market. Cost isdetermined, in the case of real estate, based on the specific identification method and, in the case of other inventories, primarily using
the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and otherreceivables are not overstated due to uncollectibility. Allowance forSECOM Annual Report 2013

Financial Section(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(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 be

Financial Review

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, 2013 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.

(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.

SECOM TodayThe 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(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.

Special Feature(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 ¥40,187 million ($427,521 thousand), ¥37,120 mil­lion and¥35,634 million for the years ended March 31, 2013, 2012 and2011, respectively. Maintenance, repairs and renewals are charged
to income as incurred.

(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.

Strategic Highlights(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related ­insurance policies applying apercentage relationship of cost incurred to premiums from c­ ontracts
issued to applicable unearned ­premiums throughout the period of
the contract.

was ¥14,492 million ($154,170 thousand), ¥14,877 million and¥15,081 million for the years ended March 31, 2013, 2012 and2011, respectively.

The Management

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.

45

CONSOLIDATED FINANCIAL STATEMENTS

sustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that is greater than
50 percent likely of being realized upon settlement with the­appropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.
(17) Research and Development
Research and development costs are charged to income
as incurred. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2013, 2012 and 2011 were ¥6,479 million ($68,926 thousand),¥6,083 million and ¥6,755 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,
2013, 2012 and 2011 were ¥4,423 million ($47,053 thousand),¥3,541 million and ¥4,034 million, respectively.
(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2013, 2012
and 2011 were ¥1,296 million ($13,787 thousand), ¥927 millionand ¥930 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. Discontinued hedges arerecognized in income.

46

SECOM Annual Report 2013(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, 2013, 2012 and 2011 was 218,271
thousand shares, 218,217 thousand shares and 218,032 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2013, 2012 or 2011.
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 and obligations related to employee benefits, asset retirement obligations,income tax uncertainties, and other contingencies.
(23) Recent Pronouncements
In October 2010, the FASB issued ASU No. 2010-26, “Accounting
for Costs Associated with Acquiring or Renewing Insurance
Contracts, a Consensus of the FASB Emerging Issues Task Force.”
This accounting standard redefines the definition of acquisition
costs qualifying for deferral to be costs that are related directly tothe successful acquisition of new or renewal insurance contracts.
This accounting standard is effective for fiscal years beginning after
December 15, 2011, and was adopted by the Company in the fiscal
year ended March 31, 2013. The adoption of this accounting standard did not have a material impact on the Company’s consolidated
results of operations and financial position.
In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s
Determination of Whether a Restructuring Is a Troubled Debt
Restructuring.” This accounting standard provides the criteria
as to whether a loan modification constitutes a troubled debt
restructuring and requires additional disclosures about troubled
debt restructurings. This accounting standard is effective for fiscal
years beginning on or after June 15, 2011, and was adopted by theCompany in the fiscal year ended March 31, 2013. The adoptionof this accounting standard did not have a material impact on the
Company’s consolidated results of operations and financial position.
In May 2011, the FASB issued ASU No. 2011-04, “Amendments
to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.” This accounting standard
amends current U.S. GAAP to create more commonality with IFRSs
by changing the wording used to describe requirements in U.S.
GAAP for measuring fair value and for disclosing information about
fair value measurements. This accounting standard is effective forfiscal years beginning after December 15, 2011, and was adopted
by the Company in the fiscal year ended March 31, 2013. The
adoption of this accounting standard did not have a material
impact on the Company’s consolidated results of operations andfinancial position.

Financial Section

SECOM Annual Report 2013

Financial Review

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($135,245 thousand) in cash and changed its name to Nittan Co.,
Ltd. The purpose of this acquisition is (i) to enhance fire protection
services, including flexible response to environmental changes, suchas 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.

SECOM Today

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 ¥94=US$1, therate ­prevailing on the Tokyo Foreign Exchange Market on March 31,
2013. These ­translations should not be construed as representingthat the yen amounts actually represent, or have been or could be
converted into U.S. dollars at that rate.

Special Feature(24) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2012 and 2011 havebeen ­reclassified to conform to the presentation used for the year
ended March 31, 2013.

Strategic Highlights

standard is effective for fiscal years beginning after December 15,
2012, and will be adopted by the Company in the fiscal year
­beginning April 1, 2013. 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 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 Asserts within
a Foreign Entity or of an Investment in a Foreign Entity.” Thisaccounting standard resolved 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 business withina 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 will be adopted by theCompany in the fiscal year beginning April 1, 2014. The company iscurrently evaluating the effect of adopting this accounting standard
on its consolidated financial statements.
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 fiscal years beginning
after December 15, 2013 and will be adopted by the Company inthe fiscal year beginning April 1, 2014. The company is currently
evaluating the effect of adopting this accounting standard on its
consolidated financial statements.

The Management

In June 2011, the FASB issued ASU No. 2011-05, “Presentationof Comprehensive Income.” In presenting other comprehensive
income and its components in financial statements, this accounting
standard eliminates the current option to present the components
of other comprehensive income as part of the statement of changes
in equity. This accounting standard also requires reclassifications
between other comprehensive income and net income to bedisclosed on the face of financial statements. Furthermore, in
December 2011, the FASB issued ASU No. 2011-12, “Deferralof the Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive
Income in Accounting Standards Update No. 2011-05.” These
accounting standards are effective for fiscal years beginning after
December 15, 2011, and were adopted by the Company in thefiscal year ended March 31, 2013. As these accounting standards
are a provision for presentation only, the adoption did not havean impact on the Company’s consolidated results of operations or
financial position.
In September 2011, the FASB issued ASU No. 2011-08, “Testing
Goodwill for Impairment.” This accounting standard permits anentity to first assess qualitative factors to determine whether it ismore likely than not that the fair value of a reporting unit is lessthan its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test.
An entity is not required to calculate the fair value of a reporting
unit unless the entity determines that it is more likely than notthat its fair value is less than its carrying amount. This accounting
standard is effective for fiscal years beginning after December 15,
2011, and was adopted by the Company in the fiscal year ended
March 31, 2013. The adoption of this accounting standard did nothave a material impact on the Company’s consolidated results of­operations and financial position.
In July 2012, the FASB issued ASU No. 2012-02, “TestingIndefinite-Lived Intangible Assets for Impairment.” This accounting
standard allows an entity first to assess qualitative factors todetermine whether it is more likely than not that the indefinite-lived
intangible asset is impaired as a basis for determining whether it isnecessary to perform the impairment test. An entity is not required
to calculate the fair value of the indefinite-lived intangible assets
unless the entity determines that it is more likely than not thatthe indefinite-lived intangible asset is impaired. This accounting­standard is effective for annual and interim impairment tests
performed for fiscal years beginning after September 15, 2012, andwill be adopted by the Company in the fiscal year beginning April 1,
2013. It is not anticipated that the adoption will have a material
impact on the Company’s consolidated results of operations or
financial position.
In February 2013, the FASB issued ASU No. 2013-02, “Reportingof Amounts Reclassified Out of Accumulated Other Comprehensive
Income.” This accounting standard requires an entity to provide
information about the amounts reclassified out of accumulated
other comprehensive income by component. In addition, thisaccounting standard requires an entity to present, either on theface of the statement where net income is presented or in thenotes, significant amounts reclassified out of accumulated othercomprehensive income by the respective line items of net income
but only if the amount reclassified is required under U.S. GAAP tobe reclassified to net income in its entirety in the same reporting
period. For other amounts that are not required under U.S. GAAP
to be reclassified in their entirety to net income, an entity is required
to cross-reference to other disclosures required under U.S. GAAP
that provide additional detail about those amounts. This accounting

47

CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

The following unaudited pro forma information shows theCompany’s consolidated results of operations for the years ended
March 31, 2013 and 2012 as if the newly consolidated subsidiaries
		In thousands ofacquired were consolidated on April 1, 2011.
In millions of yen
U.S. dollars
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........................................
Other 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$ 31,245
191,000
17,553
63,97922,127
10,830336,734
143,042
57,011200,053
1,436$135,245

The goodwill of ¥1,872 million ($19,915 thousand) 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 ($354,553 thousand) in cash. The purpose of this acquisition
is to accelerate the data center business and realize a variety ofbusiness synergies by further 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
Years ended March 31
2013

Unaudited

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

2012¥888,282 ¥845,466
71,764

42,830In yenYears ended March 31
2013

Unaudited

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

2012¥328.79 ¥196.27

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually
have been reported if the transaction 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, 2013 and 2012 ­are­comprised of the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2012

2013

2013

Cash............................................. ¥152,779 ¥145,450$1,625,308
Time deposits..............................
20,772
36,948220,979		In thousands ofIn millions of yen
U.S. dollars
Call loan......................................
46,50028,000494,681
Investment securities....................
2,645
2,642
28,138Cash and cash equivalents.........................
¥ 3,922 $ 41,723
Other current assets...................................
6,145
65,372¥222,696 ¥213,040$2,369,106
Investments and long-term receivables.......
262
2,787
Property, plant and equipment...................
54,917584,224
Investment securities include negotiable certificates of deposit
Intangible assets, including goodwill..........
33,540356,809
and money management funds. These agreements mature within
Other assets...............................................
1,308
13,915three months and their carrying values approximate ­fair value. The
Total assets acquired..............................
100,094
1,064,830
Company has not experienced any losses through default of theCurrent liabilities........................................
6,770
72,021
financial institutions and does not ­anticipate default of any
Other liabilities...........................................
38,258407,000­outstanding agreements.
Total liabilities assumed..........................
45,028479,021
6. Cash Deposits
Noncontrolling interests.........................
21,738231,256
The Company operates cash collection and deposit services for
Net assets acquired................................
¥ 33,328 $ 354,553

Intangible assets of ¥15,230 million ($162,021 thousand) subject
to amortization include customer relationships of ¥12,158 million($129,340 thousand) with a 20-year useful life and trademarks of¥3,072 million ($32,681 thousand) with a 15-year useful life. The
goodwill of ¥17,468 million ($185,830 thousand) represents
expected excess earning power based on future business operations.
It is not deductible for tax purposes and has been assigned to the
Information and ­communication related and other services segment.
The Company recorded the acquisition cost of ¥212 million($2,255 thousand) related to these acquisitions in selling, generaland administrative expenses.
The fair value of noncontrolling interests is measured at theprice based on the acquisition price with an adjustment for control
premium.

48

SECOM Annual Report 2013

financial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection­services for entities other than financial institutions. Cash deposit
balances are segregated from cash and cash equivalents and are
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 ¥26,598 million ($282,957 thousand) and ¥24,863 million($264,500 thousand), respectively, at March 31, 2013, and ¥27,659
million and ¥21,921 million, respectively, at March 31, 2012. Aspart of its fee arrangement, the Company is reimbursed for theinterest cost of the related overdrafts.

		Less than 12 months

March 31, 2013
Gross unrealized
Cost

Short-term investments:
Available-for-sale:		Equity securities............ ¥ 222
		Debt securities.............. 11,434
		
¥11,656¥

LossesFair value

369
59
428

¥ —
5
¥ 5

¥

¥13,571
4,562

¥200
0

¥ 44,292
60,587318¥18,451

—
¥200

2,906
¥107,785¥

591
11,488¥ 12,079

12 months or longer

		 Gross		Gross		 unrealized		unrealized
Fair value
lossesFair value
lossesAvailable-for-sale:
Equity securities............
Debt securities..............
			¥2,405
2,278¥4,683

¥200
5
¥205

¥—
—
¥—

¥—
—
¥—

In thousands of U.S. dollars
March 31, 2013

In millions of yen
March 31, 2012

Less than 12 months

12 months or longer

		 Gross		Gross		 unrealized		unrealized
Fair value
lossesFair value
lossesAvailable-for-sale:
Equity securities............
Debt securities..............
		$25,585
24,234$49,819$2,12853$2,181

$—
—
$—

$—
—
$—

Special Feature

Investment securities:
Available-for-sale:		Equity securities............ ¥30,921
		Debt securities.............. 56,025
Held-to-maturity:
		Debt securities..............
2,588
		
¥89,534

Gains

In millions of yen

		March 31, 2013

Strategic Highlights

In millions of yen

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by invest­ment­category and the length of time that individual securities have been
in a continuous unrealized loss position at March 31, 2013 are as
follows:

The Management

7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcost pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2013 and 2012 are as ­follows:

Gross unrealized

Investment securities:
Available-for-sale:		Equity securities............ ¥28,606
		Debt securities.............. 60,406
Held-to-maturity:
		Debt securities..............
7,461
			
¥96,473¥6,015
1,749

¥ 87
41

¥ 34,534
62,11455¥7,819

4
¥132

7,512
¥104,160

In thousands of U.S. dollars

In millions of yen¥¥

Losses52
52¥¥

Fair value

March 31, 2013

March 31, 2013
Available-for-sale

Gross unrealized
Cost

Short-term investments:
Available-for-sale:		Equity securities........... $ 2,362 $		Debt securities............. 121,638
		$124,000 $Gains

3,925 $
628
4,553 $

LossesFair value

— $
6,287
53
122,21353 $ 128,500

Fair value

Cost¥11,434¥11,488

23,01225,193——23,533
9,480¥67,459

25,12910,265¥72,075

1,510
1,078
¥2,5881,596
1,310¥2,906¥—

Fair value¥—

SECOM Annual Report 2013

Financial Section

Investment securities:
Available-for-sale:		Equity securities........... $328,946 $144,372 $2,128 $ 471,190
		Debt securities............. 596,011
48,5320644,543
Held-to-maturity:
		Debt securities.............
27,532
3,383—
30,915
		$952,489 $196,287 $2,128 $1,146,648

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

Held-to-maturity

Cost

Financial Review¥ 17,294¥ 17,294

Gains

SECOM Today

3
3

Based on the Company’s ability and intent to hold the investment
for a reasonable period of time sufficient for a recovery of fairvalue, the credit condition of the issuers and other relevant factors,
the Company does not consider these investments to be otherthan-temporarily impaired at March 31, 2013.
At March 31, 2013, debt securities principally consisted of shortterm investments in monetary trusts, Japanese ­govern­ment bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-to-­maturity” debt securities by contractual maturity at March 31, 2013
are as follows:

Cost

Short-term investments:
Available-for-sale:		Debt securities.............. ¥17,245
			
¥17,245

49

CONSOLIDATED FINANCIAL STATEMENTS

In thousands of U.S. dollars
March 31, 2013
Available-for-sale
Cost

Fair value

Due within 1 year............ $121,638
Due after 1 year
through 5 years............. 244,809
Due after 5 years
through 10 years........... 250,352
Due after 10 years .......... 100,850
		.................................. $717,649$122,213

Gross realized gains............ ¥1,051
Gross realized losses...........
144¥1,950662

Held-to-maturity
Cost$

268,011
267,329
109,202$766,755

Fair value

— $

—

—

—

Costs on uncompleted construction contracts at March 31, 2013
and 2012, amounting to ¥7,983 million ($84,926 thousand) and¥5,872 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, 2013, 2012 and 2011were ¥1,792 million ($19,064 thousand), ¥20,723 million and¥1,482 million, respectively.

16,064 16,979
11,468 13,936$27,532 $30,915

9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories: “lease receivable,” “loans receivable resulting from
During the years ended March 31, 2013, 2012 and 2011, the net
medical services,” “loans receivable resulting from insurance ser­unrealized gains and losses on “available-for-sale” securities
vices,” “other loans receivable” and “other.” Financing receivables
included as part of accumulated other comprehensive income (loss),classified as “lease receivable” are resulting from lease transactions of
net of tax, increased by ¥6,914 million ($73,553 thousand) andsecurity equipment and real estate for office and medical institutions.
¥2,515 ­million, decreased by ¥3,472 million, respectively.
The Company continuously monitors overdue financing receivProceeds from the sale of “available-for-sale” securities for theables which, the Company considers, have a risk of uncollectability.
years ended March 31, 2013, 2012 and 2011 were ¥20,479 million
For financing receivables with specific customer collection issues,($217,862 thousand), ¥72,223 million and ¥17,187 million, respecthe Company individually evaluates their collectability in order totively. On those sales, the gross ­realized gains and gross realized
determine the amount of allowance for doubtful accounts. For
losses, using a moving-­average cost basis, for the years ended
other financing receivables, the Company categorizes these receivMarch 31, 2013, 2012 and 2011 are as follows:
ables into groups by their nature and characteristics. The Company
		In thousands ofcollectively evaluates the collectability of each group, using its hisIn millions of yen
U.S. dollars
torical experience of write-offs and ­determines the amount ofYears ended
Year ended
allowance for doubtful accounts.
March 31
March 31
Financing receivables and allowance for doubtful accounts at
2013
2012
2011
2013
March 31, 2013 and 2012 are as follows:¥2,916752$11,181
1,532

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 ¥10,178 million ($108,277
thousand) and ¥9,756 million at March 31, 2013 and 2012,­respectively. The corresponding fair value at that date was not­computed as such estimation was not practicable.

In millions of yen

Year ended March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Allowance for
doubtful accounts:
Balance at
beginning of year........ ¥ 384 ¥ 2,512 ¥ 671 ¥3,165 ¥ 893 ¥ 7,625
Provision (Reversal)...
79
482
30
16
(5)
602
Charge off...............
(57)
(643)
(580)
(323)
(121) (1,724)
Other*.....................
—
—
—
25
53
78
8. Inventories
Balance at end
Inventories at March 31, 2013 and 2012 are comprised of theof year...................
406
2,351
121 2,883
820
6,581­following:
Individually		
In thousands ofevaluated...............
822,351
77 2,883
820
6,213
In millions of yen
U.S. dollars
Collectively
March 31
March 31evaluated............... ¥ 324 ¥— ¥ 44 ¥ — ¥ — ¥ 368
		
2013
2012
2013

Security-related products................... ¥ 7,822 ¥ 7,473
Fire protection-related products......... 16,647 11,942
Real estate......................................... 26,293 42,359
Other-related products.......................
7,259
5,320
			 .............................................. ¥58,021 ¥67,094$ 83,213
177,096279,713
77,223$617,245

Work in process for real estate inventories at March 31, 2013 and2012, amounting to ¥13,348 million ($142,000 thousand) and¥33,277 million, respectively, are included in real estate.

50

SECOM Annual Report 2013

Financing receivables:
Individually
evaluated............... ¥ 104 ¥12,795 ¥ 83 ¥3,037 ¥ 849 ¥16,868
Collectively
evaluated............... 39,658
524 3,775 2,442
156 46,555¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

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

In millions of yen
March 31, 2013

Other

Total

* “Other” principally includes the effect of changes in foreign currency exchange rates.
In thousands of U.S. dollars

Total

Financing receivables
on nonaccrual status.... ¥— ¥ 4,359 ¥83 ¥3,037 ¥— ¥ 7,479
In millions of yen
March 31, 2012

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

Other

Total

Current.......................... ¥26,251 ¥13,642 ¥3,912 ¥4,308 ¥ 679 ¥48,792
Overdue.........................
67304
887 3,214
421
4,893
Total:
Financing receivables... ¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685
Financing receivables
on nonaccrual status.... ¥— ¥ 4,318 ¥ 887 ¥3,362 ¥— ¥ 8,567

In thousands of U.S. dollars
March 31, 2013
Other

Total

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

The Company considers the fact that receivables are past due andthe financial position of the debtor to be credit quality indicatorsand classifies 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 otherfactors are placed on nonaccrual status.

Total

Financing receivables
on nonaccrual status.... $— $ 46,372 $883 $32,309 $— $ 79,564

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2013 and 2012 are as follows:
In millions of yen
March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

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

6,213

Financial Section

Financing receivables:
Individually
evaluated............... $ 1,106 $136,117 $ 883 $32,309 $ 9,032 $179,447
Collectively
evaluated............... 421,894
5,574 40,160 25,978 1,660 495,266$423,000 $141,691 $41,043 $58,287 $10,692 $674,713

Other

Current.......................... $421,894 $141,265 $40,160 $27,309 $ 7,128 $637,756
Overdue.........................
1,106
426
883 30,978 3,564 36,957
Total:
Financing receivables... $423,000 $141,691 $41,043 $58,287 $10,692 $674,713

Financial Review

Allowance for
doubtful accounts:
Balance at
beginning of year........ $ 4,085 $ 26,723 $ 7,138 $33,670 $ 9,500 $ 81,116
Provision (Reversal)...
840
5,128
319
170
(53) 6,404
Charge off...............
(606) (6,840) (6,170) (3,436) (1,288) (18,340)
Other*.....................
—
—
—
266
564
830
Balance at endof year........................
4,319 25,011 1,287 30,670 8,723 70,010
Individually
evaluated...............
872 25,011
819 30,670 8,723 66,095
Collectively
evaluated............... $ 3,447 $— $ 468 $— $— $ 3,915

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

SECOM Today

Year ended March 31, 2013

Other

Current.......................... ¥39,658 ¥13,279 ¥3,775 ¥2,567 ¥ 670 ¥59,949
Overdue.........................
10440
83 2,912
335
3,474
Total:
Financing receivables... ¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423

Special Feature

Financing receivables:
Individually
evaluated............... ¥67 ¥13,439 ¥ 887 ¥3,362 ¥ 920 ¥18,675
Collectively
evaluated............... 26,251
507 3,912 4,160
180 35,010................................ ¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685

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

Strategic Highlights

Allowance for
doubtful accounts:
Balance at
beginning of year........ ¥ 427 ¥ 2,629 ¥1,023 ¥3,027 ¥1,180 ¥ 8,286
Provision (Reversal)...
112
(117)
(41)
(71)
80
(37)
Charge off...............
(169)
—
(311)
(50)
(125)
(655)
Other*.....................
14
—
—
259
(242)
31
Balance at endof year...................
384
2,512
671 3,165
893
7,625
Individually
evaluated...............
622,512
626 3,165
893
7,258
Collectively
evaluated............... ¥ 322 ¥— ¥ 45 ¥ — ¥ — ¥ 367

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

The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2013 and2012 are as follows:

The Management

In millions of yen
Year ended March 31, 2012

SECOM Annual Report 2013

51

Other
loans
receivable

Other

Total

¥104

¥12,795¥83¥3,037¥849 ¥16,868

82

2,351

77

2,883

820

CONSOLIDATED FINANCIAL STATEMENTS

In millions of yen		In thousands ofMarch 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

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

Other
loans
receivable

Other

2013
Total

¥67

¥13,439¥887¥3,362¥920 ¥18,675

62

2,512

626

3,165

893

7,258

In thousands of U.S. dollars

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

Net sales........................ ¥162,379 ¥159,802 ¥129,551$1,727,436

Gross profit.................... ¥ 52,691 ¥ 53,394 ¥ 46,156$ 560,543

Net income
attributable toaffiliated companies..... ¥ 15,056 ¥ 16,683 ¥ 16,933$ 160,170

2012

March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Impaired receivables....... $1,106 $136,117
Related allowance for
doubtful accounts........
872
25,011Otherloans
receivable

Other

Total

$883 $32,309 $9,032 $179,447
819

30,6708,723

66,095The average amounts of impaired receivables for the year ended
March 31, 2013 are as follows:

In millions of yen

		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Average amounts of
impaired receivables.....

¥86¥13,117

¥485

Other
loans
receivable

Other¥3,200¥884 ¥17,772

Total

In thousands of U.S. dollars
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Average amounts of
impaired receivables.....

Other
loans
receivable

Other

Dividends received from affiliated companies for the years ended
March 31, 2013, 2012 and 2011 were ¥2,403 million ($25,564
thousand), ¥2,324 million and ¥2,175 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥32,363 million($344,287 thousand) and ¥27,738 ­million at March 31, 2013 and2012, respectively, had a quoted market value of ¥79,750 million($848,404 thousand) and ¥60,164 ­million at March 31, 2013 and2012, respectively.
The amounts of goodwill were ¥3,051 million ($32,457 thousand) and ¥2,931 million at March 31, 2013 and 2012, respectively.
In June 2010, the parent company sold the outstanding share ofTokyo Biso Kogyo Corporation, a 36.6 percent owned affiliate, to
TB Holdings Corporation for ¥5,055 million. The sale resulted in aloss of ¥513 million.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:		In thousands of

Total$915 $139,543 $5,160 $34,043 $9,403 $189,064

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a27.7 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.8 percent owned affiliate, which islisted on the Second Section of the Osaka Securities Exchange.
Combined financial information for the affiliated ­companies
accounted for under the equity method is as ­follows:

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2011

2013

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

¥1,924¥2,113¥1,669$20,468

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

¥6,573¥6,125¥5,128$69,926

		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Notes and accounts
receivable, trade.............................. ¥ 490¥ 457$ 5,213Loans receivable................................. ¥ 469¥ 375$ 4,989

Notes and accounts payable............... ¥2,820¥2,884$30,000

Guarantees for bank loans................. ¥ 139¥ 127$ 1,479		In thousands ofIn millions of yen
U.S. dollars
The Company's equity in undistributed income of affiliates at
March 31
March 31
March 31, 2013 and 2012 included in retained earnings was¥24,696 million ($262,723 thousand) and ¥30,112 million,
		
2013
2012
2013
respectively.
Current assets................................. ¥101,060 ¥101,597 $1,075,106
98,7191,158,373

Total assets................................. ¥209,947 ¥200,316$2,233,479

Current liabilities............................. ¥ 46,082 ¥ 43,818
Noncurrent liabilities.......................
34,94435,127
Equity............................................. 128,921 121,371$ 490,234
371,745
1,371,500

Total liabilities and equity............ ¥209,947 ¥200,316$2,233,479

Noncurrent assets...........................

52

SECOM Annual Report 2013

108,887

11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses on realestate of the other services for the year ended March 31, 2012. The
fair value was determined based on the estimated present value of
future cash flows or appraisal value.

The Management

Impairment losses on long-lived assets by ­business segment for
the years ended March 31, 2013, 2012 and 2011 are as follows:

¥ — ¥
34
—
—

—
48
—
—

¥—
—
1
—

$

—
362
—
—

297

18

2

3,160

—

—

—

—

248
—

8,067
—

—
—

2,638
—

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

¥579 ¥8,133¥ 3$6,16012. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2013 and 2012 are as ­follows:
March 31, 2013
Gross		Netcarrying Accumulated
carrying
amountamortization
amount(¥26,818)(2,724)(¥29,542)¥17,078
17,082¥34,160

Unamortized intangible assets............ ¥ 4,258¥¥ 4,258—

In millions of yen
March 31, 2012
Gross		Netcarrying Accumulated
carrying
amountamortization
amount(¥24,229)(2,165)(¥26,394)¥16,251
1,926¥18,177

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

In thousands of U.S. dollars
March 31, 2013
Gross		Netcarrying Accumulated
carrying
amountamortization
amountAmortized intangible assets:
Software........................................ $466,979
Other............................................. 210,702
		$677,681($285,298) $181,681(28,979) 181,723($314,277) $363,404

Unamortized intangible assets............ $ 45,298$$71,80958,57444,98935,511
25,287The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2013 and 2012 are as
follows:
In millions of yen							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Goodwill................ ¥2,898¥81
Accumulated
impairment
losses...................
(406)—
March 31, 2011..... 2,49281
Goodwill acquired
during the year.... 1,021—
Disposal.................
——
Impairment
losses...................
(793)—
Translation
adjustment..........
(99)—
Goodwill................ 3,820
81
Accumulated
impairment
losses................... (1,199)—
March 31, 2012..... 2,621
81
Goodwill acquired
during the year....
— 1,872
Disposal.................
——
Impairment
losses...................
(468)—
Translation
adjustment..........
198—
Goodwill................ 4,018 1,953
Accumulated
impairment
losses................... (1,667)—
March 31, 2013.... ¥2,351 ¥1,953

Total¥9,970¥4,910¥135¥2,002 ¥19,996(4,338)
5,632

(492)
4,418

(135)
—

(175)
1,827

(5,546)
14,450

—
—

102
—

—
—

—
—

1,123
—

(269)

(156)

—

—

(1,218)

—
9,970

(21)
4,991

—
135

—
2,002

(120)
20,999(4,607)
5,363

(648)
4,343

(135)
—

(175)
1,827

(6,764)
14,235

—
—

—
—

—
—

17,468—19,340
—

—

(584)

—

—

(1,052)

—
9,399

15
4,667

—
135

—
19,470213
39,642(4,036)(893)¥5,363 ¥3,774

(135)
¥ —

(175) (6,906)¥19,295 ¥32,736

Financial Section

Amortized intangible assets:
Software........................................ ¥40,480
Other.............................................
4,091
		
¥44,571¥6,750
5,506
4,229
3,338
2,377

Financial Review

Amortized intangible assets:
Software........................................ ¥43,896
Other............................................. 19,806
		¥63,7022014......................................................
2015......................................................
2016......................................................
2017......................................................
2018......................................................

In thousands of
U.S. dollars

SECOM Today

In millions of yen

		Years ending March 31
In millions of yen

Special Feature

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

Strategic Highlights

Aggregate amortization expense for the years ended March 31,
2013, 2012 and 2011 was ¥5,995 million ($63,777 thousand),¥6,120 million and ¥6,236 million, respectively. Amortized intangi		
In thousands of
ble assets are amortized using the straight-line method over their
In millions of yen
U.S. dollars
estimated useful lives. The weighted average amortization period
Years ended
Year ended
March 31
March 31for internal use software is approximately five years.
The estimated aggregate amortization expense for ­intangible
2013
2012
2011
2013
assets for the next five years is as follows:— $ 45,298

SECOM Annual Report 2013

53

CONSOLIDATED FINANCIAL STATEMENTS

In thousands of U.S. dollars							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Total

Goodwill................ $40,638 $ 862 $106,064 $53,096 $1,436 $ 21,298 $223,394
Accumulated
impairment
losses................... (12,755)— (49,011) (6,894) (1,436)(1,862) (71,958)
March 31, 2012..... 27,883
862 57,053 46,202—
19,436 151,436
Goodwill acquired
during the year....
— 19,915——— 185,830 205,745
Disposal.................
—
—
—
—
—
—
—
Impairment
losses................... (4,978)—— (6,213)—— (11,191)
Translation
adjustment.......... 2,105
—
—
160
—
—
2,265
Goodwill................ 42,744 20,777 99,989 49,649
1,436 207,128 421,723
Accumulated
impairment
losses................... (17,734)— (42,936) (9,500) (1,436)(1,862) (73,468)
March 31, 2013.... $25,010 $20,777 $ 57,053 $40,149 $ — $205,266 $348,255

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 ¥39,032 million ($415,234 thousand) and ¥40,762
million at March 31, 2013 and 2012, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 1.15 percent and 1.24 percent at March 31, 2013 and2012, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebted­ness to suchbanks. The Company has not been requested to submit such­additional security.
At March 31, 2013, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($42,553 thousand). The line ofcredit expires in March 2016. Under the agreement, Nohmi Bosai
Ltd. is required to pay committed fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2013, the Company had overdraft agreements with 30 banks andits unused lines of credit amounted to ¥28,275 million ($300,798
thousand). The Company incurs no fee on the unused portion of
the lines of credit. The overdraft agreements expire in the period
from April 2013 to March 2014. The Company has the ability andintent to extend these overdraft agreements under similar terms
and conditions.

54

SECOM Annual Report 2013

Long-term debt at March 31, 2013 and 2012 comprisethe ­following:		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Loans, principally from banks due
2012–2033 with interest rates
ranging from 0.59% to 10.05%:
Secured............................................. ¥24,332 ¥22,619
Unsecured......................................... 17,245
9,174
1.14% unsecured bonds due 2013.......
—
3,060
1.13% unsecured bonds due 2014....... 1,471
1,557
Unsecured bonds due 2012–2019with floating interest rates basedon 6-month TIBOR plus
0.00%–0.15%.................................... 11,865 10,992
Obligations under capital leases,
due 2012–2040 (Note 19)................... 11,130 11,674
			................................................. 66,043 59,076
Less: Portion due within one year.......... (17,281) (22,053)
			 ................................................. ¥48,762 ¥37,023$258,851
183,458—
15,649126,223
118,404
702,585(183,840)$518,745

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2013 and 2012 are as follows:		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Time deposits........................................ ¥ 2,210 ¥ 2,210
Short-term and long-term receivables.... 5,527 5,472
Investment securities.............................. 1,084
695
Property, plant and equipment............... 52,721 55,101
Other intangible assets........................... ¥ 818 ¥ 818$ 23,511
58,798
11,532560,862$ 8,702

The aggregate annual maturities on long-term debt at March 31,
2013 are as follows:		Years ending March 31
In millions of yen

2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
Thereafter..............................................
............................................................

¥17,281
11,522
10,8556,472
5,872
14,041¥66,043

In thousands of
U.S. dollars$183,840
122,575
115,479
68,851
62,468149,372$702,585

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a­subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with Japanese GAAP, which vary incertain respects from U.S. GAAP. Those differences are principally,(a) that insurance acqui­sition costs are charged to expense whenincurred under Japanese GAAP whereas under U.S. GAAP, thosecosts are deferred and amortized generally over the premium-­
paying period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas under U.S. GAAP, those liabilities arecomputed based on past experience for unreported losses, andNet periodic pension and severance costs for the years ended
March 31, 2013, 2012 and 2011 are as follows:		In thousands of2013

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2013

$87,968
16,309(23,841)(17,021)
14,968$78,383

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

Special Feature

Net periodic pension andseverance costs:
Service cost.......................... ¥8,269 ¥5,560 ¥6,313
Interest cost......................... 1,533 1,572 1,610
Expected return onplan assets......................... (2,241) (2,130) (2,065)
Amortization of priorservice benefit.................... (1,600) (1,649) (1,687)
Recognized actuarial loss...... 1,407 1,222
924
		 Net periodic pension
		 and severance costs....... ¥7,368 ¥4,575 ¥5,095

Strategic Highlights

		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		
2013
2012
2013

Financial Section

Amounts recognized in the consolidated balance sheet at March
31, 2013 and 2012 consist of:

Financial Review

Change in benefit obligation:
Benefit obligation
at beginning of year.................. ¥85,785 ¥82,500 $ 912,606
Service cost.................................
8,269
5,560
87,968Interest cost................................
1,533
1,572
16,309Actuarial loss..............................
4,055
1,487
43,138
Prior service liability (benefit).......
472
(25)
5,021
Benefits paid...............................
(5,834)(4,957)(62,064)
Acquisition..................................
6,871—
73,096
Settlement..................................
—
(352)
—
Benefit obligation
at end of year........................... 101,151
85,785
1,076,074
Change in plan assets:
Fair value of plan assets
at beginning of year..................
72,21067,831
768,191
Actual return on plan assets........
6,826
1,831
72,617
Employer contribution.................
6,171
6,439
65,649Benefits paid...............................
(3,801)(3,537)(40,436)
Acquisition..................................
1,965—
20,904
Settlement..................................
—
(354)
—
Fair value of plan assets
at end of year...........................
83,371
72,210886,925
Funded status
at the end of year......................... (¥17,780) (¥13,575) ($ 189,149)

SECOM Today

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 defined­contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accord­ingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.
In July 2011, Secom General Insurance Co., Ltd., a subsidiary of
the parent company, settled and transferred a portion of the taxqualified non-­contributory pension plan to the defined contribution
pension plan. In accordance with ASC 715, “Compensation—
Retirement Benefits,” the Company accounted for these transfers as
a partial settlement of benefit obligation. The amount of s­ ettlement
loss was immaterial for the year ended March 31, 2012.

The Management(c) that unearned premiums are calculated based on the documents
authorized by the Supervisory Authorities in Japan whereas under
U.S. GAAP, unearned premiums are reflected based on the lapseand ­surrender over the contract period.
In addition, under certain property and casualty insurance 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, 2013 and 2012was ¥50,882 million ($541,298 thousand) and ¥44,541 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, 2013,2012 and 2011 were gains of ¥724 million ($7,702 thousand),¥328 million and ¥838 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2013, 2012 and 2011 were ¥25 ­million ($266 thousand),¥883 million and ¥681 ­million, respectively.

		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Prepaid pension andseverance costs............................. ¥11,538 ¥ 7,846
Accrued pension andseverance costs............................. (29,318) (21,421)
			Net amount recognized....... (¥17,780) (¥13,575)$122,745(311,894)($189,149)

SECOM Annual Report 2013

55

CONSOLIDATED FINANCIAL STATEMENTS

Other changes in plan assets and benefit obligations ­recognizedin other comprehensive income (loss) for the year ended March 31,
2013 are summarized as follows:

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
		In thousands ofare invested primarily in equity and debt securities, and pooled
In millions of yen
U.S. dollars
funds with the objective to minimize risk and achieve the expected
Current year actuarial gain.......................
(¥ 530)($ 5,638)
rate of return. The investment results are periodically checked andAmortization of actuarial loss...................
(1,407)(14,968)
asset allocation is adjusted as necessary.
Current year prior service benefit.............
472
5,021
Amortization of prior service benefit........
1,600
17,021
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2013 and 2012. The three levels of
			
¥ 135
$ 1,436
inputs used to measure fair value are more fully described in Note 22.
Amounts recognized in accumulated other comprehensive		In millions of yen
income (loss) at March 31, 2013 and 2012 consist of:March 31, 2013
		In thousands ofLevel 1
In millions of yen

Cash and cash
March 31
March 31equivalents................
Equity securities
		
2013
2012
2013
Japanese
Actuarial loss...................................... ¥30,715 ¥32,652$326,755
companies.............
Prior service benefit............................. (5,734) (7,806)(61,000)
Debt securities
			Net amount recognized........... ¥24,981 ¥24,846$265,755
Government
bonds....................
The estimated prior service benefit and actuarial loss for the
Non-government
defined benefit pension plans that will be amortized from accumubonds....................
lated other comprehensive income (loss) into net periodic benefit
Pooled funds................
Call loans.....................
cost over the next year are ¥1,598 million ($17,000 thousand) andInsurance contracts......
¥1,540 million ($16,383 thousand), respectively.
Other...........................
The accumulated benefit obligation for the pension plan was¥92,862 million ($987,894 thousand) and ¥78,805 million at March
31, 2013 and 2012, 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 ¥47,619 million($506,585 thousand), ¥42,896 million ($456,340 thousand) and¥18,564 million ($197,489 thousand), respectively, at March 31,
2013, and ¥35,768 million, ¥32,102 million and ¥14,555 million,
respectively, at March 31, 2012.
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, 2013 and 2012 are as follows:		 March 31

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

2013

2012

1.4%
2.7%

1.8%
2.6%

Weighted-average assumptions used to determine net ­pension
and severance costs for the years ended March 31, 2013, 2012 and2011 are as follows:
Years ended March 31

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

2013

2012

2011

1.8%
3.0%
2.6%

2.1%
3.0%
2.6%

2.2%
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.

56

SECOM Annual Report 2013

Level 2

U.S. dollars

¥

899

¥

—

Level 3

¥

—

Total

¥

899

12,043——

12,043

3,708

75

—

3,783

200
911
26,83120,807
8,071
—
8,836
—
(552)
768
¥43,461 ¥22,486

1,885
47,638
8,071
8,836
216
¥83,371

774
—
—
—
—
¥17,424* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥3 million at March 31, 2013.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The non-goverment bonds invest approximately 50% inJapanese bonds and 50% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 65% in equity securities, 30% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is c­ lassified as Level 3.
		In millions of yen
March 31, 2012

Level 1

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

¥ 1,720

Level 2¥—¥

Level 3

Total—

¥ 1,720

9,420

—

—

9,420

5,772

66

1

5,839

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

2,324
39,819
6,630
6,349
109
¥72,210

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

Level 2

In millions of yen

March 31, 2013

Year ended March 31, 2012

Level 3

Total

$

9,564
128,117
40,24520,053506,787
85,862
94,0002,297$886,925

In millions of yen

Year ended March 31, 2013
		
Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

¥1

¥794

¥16,669

Other

Total

¥450

¥17,914

Total

¥ 6

¥651

¥16,113¥ —¥16,770

—

273

298

—

571

(3)

143

179

—

319

(2)
—
¥ 1

(273)
79
—
—
¥794 ¥16,669

450
—
¥450

254
—
¥17,914

In thousands of U.S. dollars
Year ended March 31, 2013
		
Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

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

$11

Other

Total

$8,447 $177,330 $4,787 $190,575——(6,617)191(6,426)—

1,245

34,319 (2,979)

32,585

—
(11)
$—

—
8,681 2,989
11,670—7,638 3,182
10,809$9,692 $221,351 $8,170 $239,213

The Company expects to contribute ¥6,204 million ($66,000
thousand) to its domestic defined benefit plans in the year ­ending
March 31, 2014.
The following benefit payments, which reflect future ­services, as
appropriate, are expected to be paid.
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

—

(622)

18

(604)

—

117

3,226

(280)

3,063

—
(1)
¥—

—
—
¥911

816
718
¥20,807

281
299
¥768

1,097
1,016
¥22,486

2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
2019–2023............................................

¥ 5,114
4,350
5,013
4,798
5,431
28,658$ 54,404
46,27753,33051,043
57,777
304,872

The parent company and certain subsidiaries have defined contribution pension plans. The contributions to the defined contributionpen­sion plans for the years ended March 31, 2013, 2012 and 2011were ¥1,645 million ($17,500 thousand), ¥1,613 million and¥1,596 million, respectively.

Financial Section—

Financial Review

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

Other

SECOM Today

The following table represents the changes in Level 3 investments
for the years ended March 31, 2013 and 2012.
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.

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

Special Feature* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of $31 thousand at March 31, 2013.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The non-goverment bonds invest approximately 50% inJapanese bonds and 50% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 65% in equity securities, 30% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is c­ lassified as Level 3.

		Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

Strategic Highlights

Cash and cash
equivalents................ $ 9,564 $— $—Equity securities
Japanesecompanies............. 128,117——
Debt securities
Government
bonds....................
39,447798—
Non-government
bonds....................
8,234
2,127
9,692
Pooled funds................
—
285,436 221,351
Call loans.....................
—
85,862—
Insurance contracts......
—
94,000—
Other...........................
—(5,873)
8,170$185,362 $462,350 $239,213

The Management

Level 1In thousands of U.S. dollars

SECOM Annual Report 2013

57

CONSOLIDATED FINANCIAL STATEMENTS

16. Exchange Gains and Losses
Other income for the year ended March 31, 2013 includes net
exchange gains of ¥276 million ($2,936 thousand). Other expenses
for the years ended March 31, 2012 and 2011 include net exchange
losses of ¥145 million and ¥635 million, respectively.
17. Income Taxes
Total income taxes for the years ended March 31, 2013, 2012
and 2011 are allocated as follows:

Reconciliations of the differences between income taxes ­computed
at statutory tax rates and consolidated income taxes are as follows:		In thousands of2013

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2013

Income taxes computed
at statutory tax rate............. ¥45,208 ¥32,853 ¥43,677$480,936
Increase (decrease)		In thousands ofresulting from:
In millions of yen
U.S. dollars
Provision of valuation
Years ended
Year ended
allowance........................
909
7,905
97
9,670
March 31
March 31
Per capita tax.....................
850
806
831
9,043
2013
2012
2011
2013
Reversal of valuation
Consolidated income taxes.... ¥46,849 ¥38,202 ¥43,277$498,394
allowance........................
(518) (6,000)(736)(5,511)
Shareholders’ equity—
Net effect of changes inaccumulated othercorporate tax rates...........
—
2,464
—
—
comprehensive
Other, net..........................
400
174
(592)
4,256
income (loss):		Consolidated
Unrealized holding gains
		 income taxes................ ¥46,849 ¥38,202 ¥43,277$498,394(losses) on securities......... 3,379
1,236 (1,946)
35,947
Unrealized gains
The significant components of deferred tax assets and liabilities
aton derivative­
March 31, 2013 and 2012 are as follows:
instruments......................
5——
53
Pension liability		In thousands ofadjustments.....................
(255)
(763)
(654)
(2,713)In millions of yen
U.S. dollars
Foreign currency
March 31
March 31translation
		
2013
2012
2013
adjustments.....................
————
Equity transactions with
Deferred tax assets:noncontrolling interests
Loss carryforwards........................... ¥11,821 ¥11,137$125,755
and other ............................
—
—
(154)
—
Accrued pension andseverance costs.............................. 10,108
7,357
107,532
		...................................... ¥49,978 ¥38,675 ¥40,523$531,681
Deferred revenue............................. 9,438 10,015
100,404
Adjustment of book value at
The parent company and its domestic subsidiaries were ­subject tothe date of acquisition—a corporate tax of 28.05 percent for the year ended March 31,
		 Land and buildings....................... 8,510
7,033
90,532
2013 and 30 percent for the years ended March 31, 2012 and 2011,
		Other assets.................................
315
285
3,351
an inhabitants tax of approximately 20.3 percent, and a deductible
Property, plant and equipment......... 7,820
7,454
83,191enterprise tax of approximately 7.4 percent, which, in the aggreAccrued bonus................................. 6,266
5,770
66,660gate, results in a statutory tax rate in Japan of approximately 37.8
Write-down on real estate
inventories..................................... 4,536
5,371
48,255percent for the year ended March 31, 2013 and 40.5 ­percent for
Vacation accrual............................... 3,493
3,545
37,160the years ended March 31, 2012 and 2011.
Allowance for doubtful accounts...... 2,676
2,825
28,468Due to the promulgation on December 2, 2011 of the Act for
Intangible assets.............................. 1,499
1,594
15,947
Partial Amendment of the Income Tax Act, etc. for the Purpose of
Investment securities........................
464
1,941
4,936
Creating a Taxation System Responding to Changes in Economic
Other............................................... 9,979
7,241
106,160
and Social Structures and the Act on Special Measures for Securing
		 Gross deferred tax assets.............. 76,925 71,568
818,351
Financial Resources Necessary to Implement Measures for Recon		 Less: Valuation allowance............. (30,227) (29,928)(321,564)
struction Following the Great East Japan Earthquake, the statutory
		 Total deferred tax assets............... 46,698 41,640
496,787
tax rate used to calculate the deferred tax assets and liabilities forDeferredtax
liabilities:
the year ended March 31, 2012 changed mainly from 40.5 percent
Adjustment of book value at
to 37.8 percent for those items scheduled for collection or payment
the date of acquisition—­during the period from April 1, 2012 to March 31, 2015, and to		 Land and buildings....................... (5,632) (5,143)(59,915)
35.4 percent for those items scheduled for collection or payment
		Intangible assets........................... (5,448)(54)(57,957)
on or after April 1, 2015. As a result, income taxes for the year
		Other assets................................. (2,075) (1,303)(22,074)
ended March 31, 2012 increased by ¥2,464 million.
Deferred installation costs................ (7,086) (7,920)(75,383)
Unrealized holding gains on
securities........................................ (5,777) (2,236)(61,457)
Investments in affiliated companies... (5,105) (5,057)(54,309)
Prepaid pension andseverance costs.............................. (4,010) (2,710)(42,660)
Other............................................... (4,558) (4,468)(48,489)
		 Gross deferred tax liabilities.......... (39,691) (28,891)(422,244)
			 Net deferred tax assets ............ ¥ 7,007 ¥12,749$ 74,543

58

SECOM Annual Report 2013

$163,691
71,809(10,585)(150,372)$ 74,543

		 In thousands ofExpires in the years ending March 31
In millions of yen
U.S. dollars¥ 2,885
2,926
—
—
8,429
6,963
2,220
1,426
3,431
¥28,280$ 30,691
31,128——89,67074,074
23,617
15,17036,501$300,851

The operating loss carryforwards of overseas subsidiaries at
March 31, 2013 amounted to ¥4,575 million ($48,670 thousand), apart of which will begin to expire in the year ending March 31, 2014.

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		
2013
2012
2011

Net income attributable
to SECOM CO., LTD............... ¥70,580 ¥41,237 ¥62,665
Transfers from (to)noncontrolling interests:
		 Decrease in additional
		 paid-in capital related to		 the acquisition of Secom		 Techno Service Co., Ltd.’s		 ownership interests..........
—(476) (5,692)
		Other, net...........................
(752)
(166)
151
Net transfers from (to)noncontrolling interests.......
(752)(642) (5,541)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests......... ¥69,828 ¥40,595 ¥57,124

2013$750,851—(8,000)(8,000)$742,851(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 ¥437,743 million($4,656,840 thousand) at March 31, 2013.

Financial Section

2014......................................................
2015......................................................
2016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
..............................................................

		In thousands ofFinancial Review

The Company has not recognized deferred tax liabilities of ¥551
million ($5,862 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥16,968 million ($180,511 thousand)at March 31, 2013 as they are not expected to be remitted in theforeseeable future.
At March 31, 2013, the operating loss carryforwards of domestic
subsidiaries amounted to ¥28,280 million ($300,851 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:

SECOM TodayDeferred income taxes(Current assets)................................ ¥15,387 ¥12,853
Deferred income taxes(Other assets)...................................
6,750 10,185
Other current liabilities.......................
(995) (1,174)
Deferred income taxes(Liabilities)........................................ (14,135) (9,115)
		 Net deferred tax assets .............. ¥ 7,007 ¥12,749

Special Feature

18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect ofchangesin the Company’s ownership interest in its consolidated		In thousands ofsubsidiaries.
In millions of yen
U.S. dollars
The net income attributable to SECOM CO., LTD. and transfers
March 31
March 31from (to) noncontrolling interests for the years ended March 31,
		
2013
2012
2013
2013, 2012 and 2011 are as follows:

Strategic Highlights

The total amount of unrecognized tax benefits for the years
ended March 31, 2013, 2012 and 2011 were 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, 2013, 2012 and 2011.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation
could affect the total amount of unrecognized tax benefits in the
future periods. Based on the information available as of March 31,
2013, 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 2012, with few exceptions.

The Management

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, 2013, 2012 and2011 was an increase of ¥299 million ($3,181 ­thousand), a decreaseof ¥3,771 million and an increase of ¥1,604 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, 2013 and 2012.
Net deferred tax assets at March 31, 2013 and 2012 are reflectedin the accompanying consolidated balance sheets under the­following captions:

SECOM Annual Report 2013

59

CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to March 31, 2013, the parent company’s Board of
Directors declared an annual cash dividend of ¥105 ($1.12) per
share, totaling ¥22,918 million ($243,809 thousand), to shareholders of record on March 31, 2013. The dividend declared wasapproved at the general shareholders’ meeting held on June 25,
2013. Dividends are recorded in the year they are declared.
The Japanese Companies Act provides that a company can makedividends of surplus anytime with resolution of the shareholders.
(3) Common Stock in Treasury
For the year ended March 31, 2012, common stock in treasury
decreased by ¥1,264 million, primarily due to allotment withrespect to the absorption-type merger of Secom Techno Service
Co., Ltd.
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act.
(4) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) attributable
to SECOM CO., LTD. for the years ended March 31, 2013, 2012
and 2011 are as follows:
In millions of yen
Pre-tax
amount

For the year ended March 31, 2013:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥10,990
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
(697)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
5
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
8
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(799)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
22
Foreign currencytranslation adjustments....................
9,346
			Other comprehensive
			 income (loss)............................ ¥18,875

60

SECOM Annual Report 2013

Tax
(expense)or benefit

Net-of-tax
amount(¥3,603) ¥ 7,387

224

(473)

(2)

3

(3)

5

235

(564)

20

42

—

9,346

(¥3,129) ¥15,746

In millions of yen
Pre-tax
amount

For the year ended March 31, 2012:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥3,230
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
521
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
—
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
6
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(1,867)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
(509)
Foreign currencytranslation adjustments....................
(3,432)			Other comprehensive
			 income (loss)............................ (¥2,051)
For the year ended March 31, 2011:
Unrealized holding losses on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. (¥ 4,760)
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
(658)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
3
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
9
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(1,052)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
(574)
Foreign currencytranslation adjustments....................
(6,399)			Other comprehensive
			 income (loss)............................ (¥13,431)

Tax(expense)or benefit

Net-of-tax
amount(¥1,009)¥2,221

(227)

294

—

—

—

6

489

(1,378)

274

(235)

—

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

227

(431)

—

3

—

9

424

(628)

230

(344)

—

(6,399)¥2,600 (¥10,831)

Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total minimum lease payments.................
Less: Amount representing interest...........
Present value of net minimum
lease payments (Note 13)........................
Less: Current portion................................
Long-term capital leaseobligations..........................................

¥ 2,639
2,071
1,382
1,011
800
8,232
16,135(5,005)$ 28,074
22,032
14,702
10,755
8,511
87,575
171,649(53,245)

11,130(2,238)118,404(23,808)¥ 8,892$ 94,596

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum lease
payments............................................

¥ 7,794
7,886
7,847
7,825
7,824
39,085$ 82,915
83,894
83,47983,245
83,234
415,797¥78,261$832,564

and automobiles..............................
Other intangible assets.......................
Accumulated depreciation.................
		 ..................................................

10,198 10,349
163
127(8,598) (8,215)¥ 9,972 ¥10,496

Financial Section

20. Lessor		In thousands of
The Company’s leasing operations consist principally of leasing
In millions of yen
U.S. dollarsof security merchandise, security systems and real estate for office
March 31
March 31
and medical institutions. Most of the security merchandise, security
		
2013
2012
2013
systems and certain real estate for medical institutions on lease areclassified as sales-type leases or direct-financing leases. Other leases
Buildings and improvements.............. ¥ 8,209 ¥ 8,235$ 87,330
Machinery, equipmentare ­classified as ­operating leases.

Financial Review

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

SECOM Today

Rental expenses under operating leases for the years ended
March 31, 2013, 2012 and 2011 were ¥18,264 million ($194,298
thousand), ¥16,419 million and ¥16,504 million, respectively. A­significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon ­expiration.
On December 8, 2000, the Company entered into a lease­agreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial­reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, annual lease payments for the site
are approximately ¥1,299 million ($13,819 thousand) over a
20-year period.
The future minimum lease payments required under operat­ing
leases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2013 are as follows:

Special Feature

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.
On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The lease term
is 30 years beginning May 1, 1996. On July 15, 2010, the Company
also entered into a long-term lease agreement for the building andadjoining land. The lease term is also 30 years beginning July 15,
2010. For ­financial reporting purposes, the portion of these leasearrangements relating to the building has been classified as a­capital lease; accordingly, an asset of approximately ¥7,209 million($76,691 thousand) has been recorded in the building and improvements account. The portion of the lease relating to the land has
been classified as an operating lease. The future minimum lease
payments for the site at March 31, 2013 were ¥6,252 ­million($66,511 thousand).
A summary of leased assets under capital leases at March 31,
2013 and 2012 is as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

Strategic Highlights

For the year ended March 31, 2013:
Unrealized holding gains on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period.................................... $116,915 ($38,330) $78,585
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income.......................... (7,415)
2,383(5,032)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
53
(21)
32
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
85
(32)
53
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period.............. (8,500)
2,500(6,000)		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
234
213
447
Foreign currencytranslation adjustments.................... 99,426—
99,426
			Other comprehensive
			 income (loss)............................ $200,798 ($33,287) $167,511

Depreciation expenses for assets under capital leases for the years
ended March 31, 2013, 2012 and 2011 were ¥2,688 million($28,596 thousand), ¥2,630 million and ¥3,368 million,­respectively.
The following is a schedule by year of future minimum lease­payments under capital leases and the present value of the net­minimum lease payments at March 31, 2013:

The Management

In thousands of U.S. dollars

108,489
1,734(91,468)$106,085

SECOM Annual Report 2013

61

CONSOLIDATED FINANCIAL STATEMENTS(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
		In thousands of­Payable, Trade; Other Payables; Deposits Received; Accrued
In millions of yen
U.S. dollars
Income Taxes; and Accrued ­Payrolls
March 31
March 31
The carrying amounts approximate fair value because of the
		
2013
2012
2013
short-term maturities of such instruments.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2013 and 2012 is as follows:

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

¥52,780 ¥34,950(4,671) (2,982)$561,489(49,691)

1,262 1,261(9,609) (6,911)
39,762 26,318(12,034) (7,882)¥27,728 ¥18,436

13,426(102,224)
423,000(128,021)$294,979

The following is a schedule by year of future minimum lease­ ayments to be received under sales-type leases and direct-­pfinancing leases at March 31, 2013:
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum lease
payments to be received.....................

¥15,007
11,615
8,720
5,734
3,291
8,413

$159,648
123,564
92,76661,00035,01189,500¥52,780$561,489(2) Short-Term Investments; Investment Securities
The fair values of short-term investments and investment­securities are principally based on quoted market prices.
(3) Long-Term Receivables Including Current Portion
The long-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 Portion
The long-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 are­estimated based on the present value of future cash flows,­discounted using the interest rates currently being offered for­similar contracts.

(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from ­financial institutions.
		
In thousands ofIn millions of yen
U.S. dollars
The carrying amounts and estimated fair values of finan­cial instruments, excluding debt and equity securities, which are ­disclosed in
March 31
March 31
Notes 2 (7) and 7 at March 31, 2013 and 2012 are as follows:
		
2013
2012
2013
A summary of investment in property under operating leases andproperty held for lease at March 31, 2013 and 2012 is as follows:

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

¥35,458 ¥36,950
28,541 29,426
662
662(9,687) (9,190)¥54,974 ¥57,848$377,213
303,628
7,043(103,054)$584,830

The future minimum rentals under noncancelable operatingleases at March 31, 2013 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum rentals................

¥2,138
425
297
297
297
5,448
¥8,902$22,745
4,521
3,160
3,160
3,160
57,956$94,702

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.

62

SECOM Annual Report 2013

		In millions of yen

		March 31

2013
Carrying
amountNon-derivatives:
Assets—		Long-term receivables
		 including current		 portion (Less allowance		 for doubtful accounts)..... ¥55,976
Liabilities—
		Long-term debt
		 including current		 portion............................ 66,043
		Investment deposits
		 by policyholders.............. 29,483
Derivatives:
Assets—		Equity swaps
		 (Other current assets)......
59
Liabilities—
		 Interest rate swaps
		 (Other liabilities)..............
239

Estimated
fair value

2012
Carrying
amountEstimated
fair value¥57,159 ¥43,837¥45,196

66,15559,07659,20530,83130,75531,171

59

—

—

239

160

160

March 31, 2013
Carrying
amount		

In millions of yen
March 31, 2013

$595,489 $608,074
702,585 703,777
313,649 327,989
628

2,543

2,543

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

¥ 2,601¥

97,257

17,606

39,588

154,451—¥97,301

59¥20,266—¥39,58859¥157,155

¥
¥

¥
¥

¥
¥

¥
¥

—
—

239
239

Total

—

¥

—
—

		

2,645

239
239

In millions of yen
March 31, 2012

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

Level 1

Level 233

¥ 2,609¥

96,716¥96,749

16,007¥18,616

27,368¥27,368

140,091¥142,733

¥
¥

¥
¥

¥
¥

¥
¥

¥

—
—

Level 3

160
160

Total

—

¥

—
—

2,642

160
160

In thousands of U.S. dollars
March 31, 2013
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents...... $468 $ 27,670 $— $ 28,138
Short-term
investments andinvestment
securities................ 1,034,648 187,298 421,149
1,643,095
Derivatives (Other
current assets)........
—
628
—
628
Total assets.................. $1,035,116 $215,596 $421,149 $1,671,861

— $
— $

2,543 $
2,543 $

— $
— $

2,543
2,543

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.

SECOM Annual Report 2013

Financial Section

Liabilities:
Derivatives(Other liabilities)..... $Total liabilities.............. $Financial Review

Level 1— Inputs are quoted prices in active markets for ­identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, andinputs that are derived principally from or corroborated
by observable market data by correlation or othermeans.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’s own
assumptions about the assumptions that market­participants would use in establishing a price.

44¥

Level 3

SECOM Today

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:

Liabilities:
Derivatives(Other liabilities).....
Total liabilities..............

Level 2

Special Feature

628

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

Level 1Strategic Highlights

Non-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:
Assets—		 Equity swaps (Other current assets)...........
Liabilities—
		 Interest rate swaps (Other liabilities)..........

Estimated
fair value

The following table represents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2013 and 2012. Transfers between levels are recognizedat the end of their respective reporting periods.

The Management

In thousands of U.S. dollars

63

CONSOLIDATED FINANCIAL STATEMENTS

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 are comprised principally of debt securities, which
are valued 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 unobservable inputs contain discount rates, exit
timing and future cash flows. An increase (decrease) in the discountrates, the later (earlier) exit and a decrease (increase) in the future
cash flows would result in a decrease (increase) in the fair value of
non-marketable securities.
For the year ended March 31, 2013, ¥3,403 million ($36,202
thousand) of debt securities were transferred from Level 1 to Level
2 because the observable markets in which these instruments weretraded became inactive.

Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of¥10,179 million ($108,288 thousand) were written down to theirfair value of ¥10,178 million ($108,277 thousand), resulting in another-than-temporary impairment charge of ¥1 million ($11 thousand), which was included in earnings for the year ended March 31,
2013. For the year ended March 31, 2012, non-marketable equity­securities with a carrying amount of ¥9,801 million were written
down to their fair value of ¥9,756 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.

23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations in
Derivative Financial Investmentsinterest rates. The Company assesses interest rate risk by con­tinually
Derivative financial instruments are comprised of forward exchangemonitoring changes in the exposure and by evaluating hedging
contracts, interest rate swaps and others. These derivative instruopportunities. The Company does not hold or issue derivativements are valued using observable market data and classified as
financial instruments for trading purposes. The Company is also
Level 2 liabilities.
exposed to credit-related losses in the event of non-­perfomance bycounterparties to derivative financial instru­ments, but it is not
The following table represents the changes in Level 3 assets
expected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognized­measured on a recurring basis for the years ended March 31, 2013
financial institutions and contracts are diversified amongst aand 2012.
		In thousands of­number of major financial institutions.
In millions of yen
U.S. dollars
Years ended
March 31

Year ended
March 31

		
2013
2012
2013

Balance at beginning of year............... ¥27,368 ¥27,431
Total gains or losses(realized or unrealized):		 Included in earnings....................
4,934 3,998
		 Included in other		 comprehensive income..............
162
19
Purchases........................................
4,283 4,055
Sales...............................................
(108) (6,662)
Redemptions...................................
(343)
(235)
Foreign currency translation
adjustments..................................
3,292 (1,238)
Balance at end of year........................ ¥39,588 ¥27,368
Changes in unrealized gains
or losses relating to instruments
still held at end of year:
		 Included in earnings.................... ¥ 4,831 ¥ 1,736$291,149
52,4891,723
45,564(1,149)(3,649)35,022$421,149$ 51,394

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.

64

SECOM Annual Report 2013

(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 Hedge
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

Gains (losses) reclassified from accumulated other comprehensive
income into income (effective portion)		In thousands ofLocationInterest rate swaps Other expenses

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2011

2013

(¥9)

(¥8)

(¥12)

($96)

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

Years ended
March 31

Year ended
March 31
2013

$628

2012

$ —
($138)¥4$53

SECOM Annual Report 2013

Financial Section¥—

Financial Review¥5

SECOM Today

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2013
for the ­purchase of property, plant and equipment of ­approximately
Derivatives designated as hedging instruments¥5,661 million ($60,223 thousand).
Liabilities:
		In thousands of
The Company provides guarantees to third parties mainly withIn millions of yen
U.S. dollars
respect to bank loans extended to its affiliated companies and other
March 31
March 31
entities. Such guarantees are provided to enhance the credit standLocation
2013
2012
2013
ing of the affiliated companies and other entities. For each guarantee provided, the Company would have to per­form under theInterest rate swaps
Other liabilities
¥68
¥—
$724
guarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
Derivatives not designated as hedging instruments
		In thousands ofmaximum amount of undiscounted pay­ments the Company would
In millions of yen
U.S. dollars
have to make in the event of default amounts to ¥2,014 million
March 31
March 31($21,426 thousand) at March 31, 2013. The carrying amounts ofLocation
2013
2012
2013
the liabilities recognized for the Company’s obligations under these­guarantees at March 31, 2013 and 2012 were deemed insignificant.
Assets:Equity swaps
Other current
Pasco Corporation, a subsidiary of the parent company, filed a		assets
¥ 59
¥ —
$ 628
lawsuit against Sumitomo Mitsui Banking Corporation asking fora confirmatory judgment to the effect that it does not owe an
Liabilities:
Interest rate swaps Other liabilities
¥171
¥160
$1,819obligation in the amount of ¥2,010 million to Sumitomo Mitsui
Banking Corporation with the Tokyo District Court on October
Effects of derivative instruments on the consolidated statements
31, 2005. Sumitomo Mitsui Banking Corporation alleged that itof income for the years ended March 31, 2013, 2012 and 2011 aremade a loan to a third party and acquired from the third party its
as follows:
claim against Pasco Corporation for an alleged sale of equipment
to Pasco Corporation, as collateral for the loan, and demanded
Derivatives designated as cash flow hedging instruments
Pasco Corporation to pay such claim to Sumitomo Mitsui Banking
Gains (losses) recognized in accumulated other comprehensive
Corporation. On December 5, 2005, Sumitomo Mitsui Banking
income (effective portion)
Corporation brought a cross action against Pasco Corporation		In thousands ofin ­relation to a demand for payment of a transferred receivable.
In millions of yen
U.S. dollars
Subsequently, both actions were consolidated according to a court
Years ended
Year ended
procedure. The oral argument was concluded on October 31, 2008,
March 31
March 31
and on March 27, 2009 Tokyo District Court rendered the following
		
2013
2012
2011
2013
judgement:

Special Feature

2011

Equity swaps
Other income¥59 ¥ — ¥ —Forward exchange Other expenses
contracts		
¥ — ¥ — (¥286)
Interest rate swaps Other expenses (¥13) (¥ 9) (¥ 31)

Location

2013

In millions of yen

Fair values of derivative instruments reflected in the ­consolidatedbalance sheet as of March 31, 2013 and 2012 are as follows:

Interest rate swaps

Strategic Highlights(4) Derivative Instruments Not Designated as Hedges
The Company enters into forward exchange contracts to reduce
exposure to fluctuations in currency rates, interest rate swap agreements to reduce exposure to fluctuations in interest rates relating
primarily to debt obligations and other agreements. Changes infair value of these derivative financial instruments, which are not­designated as hedges, are reported in current income.

The Management

effectiveness is not material for the years ended March 31, 2013,2012 and 2011 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
Approximately ¥4 million ($43 thousand) of net derivative income
included in accumulated other comprehensive income, net of tax at
March 31, 2013, will be reclassified into current income within 12
months from that date. At March 31, 2013 and 2012, the notional
principal amount of interest rate swap agreements designated as
cash flow hedges was ¥3,664 million ($38,979 thousand) and nil,respectively.

65

CONSOLIDATED FINANCIAL STATEMENTS

26. Segment Information
The Company discloses financial and descriptive ­information
about the Company’s reportable operating segments. The o­ perating
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, real estate development and sales,
Pasco Corporation appealed the case to the Tokyo High Court on
and information and communication related and other services.
April 6, 2009.
Following the decision, Pasco Corporation provided a reserve for
The security services segment provides various types of secu­rity
litigation loss of ¥2,415 million for the year ended March 31, 2009.
services by utilizing the Company’s unique security systems andmanufacturing and selling security merchandise. The fire protection
On May 10, 2010, Pasco Corporation and Sumitomo Mitsui
services segment provides various types of fire protection equipBanking Corporation reached a settlement under which Pasco
ment, such as automatic fire alarm and fire extinguishing and other
Corporation will pay to Sumitomo Mitsui Banking Corporation anfire protection systems for office buildings, plants, tunnels, ships,
amount of ¥1,750 million, after several oral proceedings and­settlement negotiations at the Tokyo High Court.
residences and cultural monuments. The medical ser­vices segment
Pursuant to the settlement, Pasco Corporation accounted forprovides intravenous solutions to patients at home, home-based¥781 million as a reversal of reserve for litigation loss in the year
­nursing care services, medical data trans­mission services by utilizing
ended March 31, 2010, and provided for ¥1,770 million, a sum of
the Company’s network and leas­ing of real estate for medical instithe above settlement amount and related litigation expenses, in thetutions. In addition, the VIE, of which the Company is the primaryconsolidated balance sheet as of March 31, 2010. These amounts
beneficiary manage hospitals and health ­care-related institutions.
were paid in the year ended March 31, 2011.
The insurance services ­segment represents the non-life insuranceIn the year ended March 31, 2012, Pasco Corporation recognized
related underwriting business in the Japanese market. The geographic information services segment represents surveying andand paid ¥799 million for legal settlement related to software.
measuring services and GIS services. The real estate development andOther than those items above, it is not anticipated that damages,
if any, resulting from other legal actions will have a material impact
sales ­segment represents development and sales of condominiums
on the Company’s consolidated financial statements.
that reinforce security. The information and communication related
and other services ­segment represents data center services, business25. Supplemental Cash Flow Information
continuity plan support, information security services, cloud s­ ervices,
Supplemental cash flow information is as follows:leasing of real estate and hotel ­management business.
Corporate expenses consist principally of general and administra		
In thousands oftive expenses of the planning, personnel and admin­istrative departIn millions of yen
U.S. dollars
ments of the parent company and administrative departments ofYears ended
Year ended
March 31
March 31
the foreign holding company.
Intersegment sales are priced on a basis intended to ­approximate
2013
2012
2011
2013
amounts charged to unaffiliated customers.
Cash paid during the
Identifiable assets are those assets used exclusively in the operayear for:tions of each segment or which are allocated when used jointly.
Interest.............................. ¥ 1,568 ¥ 1,601 ¥ 1,689 $ 16,881
Income taxes..................... 31,761 38,538 39,719
337,883
Corporate assets, which are held by the parent company and theNon-cash investing andforeign holding company for general and administra­tive facilities,
financing activities:­consist principally of cash and cash equivalents, short­-term investAdditions to obligations
ments, investment securities, land, buildings and improvements,
under capital leases.........
2,381 2,604 4,240
25,330machinery, equipment and automobiles.
Significant acquisitions
1.		Pasco Corporation must pay money to Sumitomo Mitsui Banking
Corporation in an amount of ¥2,010 million as well as interest at
the rate of 6 percent per annum on ¥600 million, from
November 1, 2005, and on ¥1,410 million, from December 1,
2005, up to the full payment of the respective amounts;
2.		Pasco Corporation incurs the cost of lawsuits including the costcaused by supplementary participation; and3.		The judgement can be provisionally executed.

(Note 4)—
		Assets acquired............... 131,747
		Liabilities assumed.......... (63,833)
		Noncontrolling		 interests........................ (21,873)
		Considerations for		 equity........................... 46,041
		Repayment of		 long-term debt............. 27,000
		 Cash and cash		 equivalents on hand.....
(6,859)		Total considerations........ ¥ 66,182 ¥66

SECOM Annual Report 2013

—
—

—
—

1,401,564(679,074)——(232,692)——

489,798——

287,234——¥——(72,968)$ 704,064

(1) Business Segment Information		In thousands of

2013

		
In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

2012

$4,812,628
26,426
4,839,054
1,214,149
45,8301,259,979
1,499,543
1,755
1,501,298
381,532
29,957
411,489

288,52137,617
326,138$9,168,989

2011

2013

2012

Operating income (loss):
Security services............. ¥102,855 ¥101,416 ¥ 99,855
Fire protection
services........................
5,981
4,443
3,158
Medical services.............
5,458
7,884
1,771
Insurance services..........
2,712
(80)
(180)
Geographic information
services........................
2,302
3,449
3,393
Real estate development
and sales......................
1,585(21,598)
525
Information andcommunication related
and other services........
5,754(4,037)
3,239
Total.............................. 126,647
91,477111,761
Corporate expenses
and eliminations..........
(13,879)(12,651)(11,329)
Operating income.......... ¥112,768 ¥ 78,826 ¥100,432
Other income.................
9,990
7,527
11,870
Other expenses..............
(3,161)(5,233)(4,458)
		 Income before income
		 taxes and equity in net
		 income of affiliated		 companies................ ¥119,597 ¥ 81,120 ¥107,844$1,094,202
63,62858,06428,851
24,48916,862
61,213
1,347,309(147,649)$1,199,660
106,277(33,628)$1,272,309

		In thousands of2013

In millions of yen

U.S. dollars

March 31

March 31

2011

2013

2012

Assets:Security services............. ¥ 441,020 ¥ 417,202 ¥ 399,361
Fire protection
services........................ 119,781
85,78680,346
Medical services............. 168,217
160,505
154,818
Insurance services.......... 179,949
167,436
177,571
Geographic
information services.....
66,04065,96858,697
Real estatedevelopment
and sales......................
31,27644,92462,284
Information andcommunication related
and other services........ 211,839
101,124
95,154
Total.............................. 1,218,122 1,042,945 1,028,231
Corporate items.............
83,091
97,140103,943
Investments inaffiliated companies.....
39,13739,73938,978
		Total assets.................. ¥1,340,350 ¥1,179,824 ¥1,171,152$ 4,691,703
1,274,266
1,789,543
1,914,351
702,553
332,723
2,253,606
12,958,745
883,947

Financial Review

428,000
77,340505,340
9,389,277(220,288)

Year ended
March 31

SECOM Today

544,617
1,362
545,979

U.S. dollars

Years ended
March 31

Special Feature

Net sales andoperating revenue:
Security services—
		Customers.................... ¥452,387 ¥434,667 ¥424,706
		Intersegment.................
2,484
1,791
2,095
			.................................. 454,871
436,458
426,801
Fire protection services—
		Customers.................... 114,130
80,67875,176
		Intersegment.................
4,308
4,093
4,887
			.................................. 118,438
84,77180,063
Medical services—
		Customers.................... 140,957
134,550
125,020
		Intersegment.................
165
148
151
			.................................. 141,122
134,698
125,171
Insurance services—
		Customers.................... 35,864
33,55833,133
		Intersegment.................
2,816
2,750
2,635
			.................................. 38,680
36,30835,768Geographic information
services—
		Customers.................... 51,194
50,17343,539
		Intersegment.................
128
216
167
			.................................. 51,322
50,38943,706
Real estate development
and sales—
		Customers.................... 27,121
11,724
24,817
		Intersegment.................
3,536
526
95
			.................................. 30,657
12,25024,912
Information andcommunication related
and other services—
		Customers.................... 40,232
27,13225,477
		Intersegment.................
7,270
6,800
6,541
			.................................. 47,502
33,93232,018
Total................................ 882,592
788,806
768,439
Eliminations..................... (20,707)(16,324)(16,571)
		 Total net sales and		 operating revenue....... ¥861,885 ¥772,482 ¥751,868

In millions of yen

Strategic Highlights

2013

In millions of yen

The Management

Information by business and geographic segments for the years
ended March 31, 2013, 2012 and 2011 is as follows:

416,351$14,259,043
Financial Section

SECOM Annual Report 2013

67

CONSOLIDATED FINANCIAL STATEMENTS

The following table is a breakdown of security services revenue to		In thousands ofIn millions of yen
U.S. dollars
external customers by service category. The security services busiYears ended
Year ended
ness is managed as a single operating segment by the ­Company’s
March 31
March 31
management.
2013

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

2012

2013

2011

¥44,723¥43,806¥44,604$475,777

1,739
5,936
895

1,836
6,167
1,601

1,490
5,137
1,200

18,50063,149
9,521

2,293

1,812

1,666

24,394

30

42

48

319

4,760
60,376298

2,580
57,844273

2,587
56,732219

50,638642,298
3,170¥60,674¥58,117¥56,951$645,468¥36,034¥33,853¥27,643$383,340

1,306
13,834
36

670
5,573
26

3,602
5,563
14

13,894
147,170
383

1,328

2,162

2,166

14,128

17

17

19

181

10,614
63,169181

12,58654,887
107

3,157
42,16434

112,915672,011
1,925¥63,350¥54,994¥42,198$673,936

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.

		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

¥311,604 ¥304,408 ¥302,529$3,314,936

2013

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

2012

47,877

46,68946,372509,330

20,532

20,60920,129218,426

72,37462,961

55,676

769,936¥452,387 ¥434,667 ¥424,706$4,812,628(2) Geographic Segment Information
Net sales and operating revenue attributed to countries based on
the geographical location of customers and long-lived assets for theyears ended March 31, 2013, 2012 and 2011 were as follows:		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

Net sales andoperating revenue:
Japan......................... ¥828,835 ¥743,727 ¥726,381
Other.........................
33,05028,75525,487
		Total....................... ¥861,885 ¥772,482 ¥751,868$8,817,393
351,596$9,168,989

2013

2012

		
In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2011

2013

Long-lived assets:
Japan........................ ¥508,104 ¥399,901 ¥395,884
Other........................
6,008
5,857
5,161
		Total...................... ¥514,112 ¥405,758 ¥401,045$5,405,362
63,915$5,469,277

2013

2012

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
27. Subsequent Events
The Company has evaluated subsequent events through July 30,
2013, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

68

SECOM Annual Report 2013

INDEPENDENT AUDITORS’ REPORTThe Management

We have audited the accompanying consolidated financial statements of SECOM CO., LTD. and its subsidiaries, which comprise thec­ onsolidated balance sheets as of March 31, 2013 and 2012, 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 the
ラインは、ロゴに必要なクリアスペースです。
­consolidated financial statements.

Strategic Highlights

The Board of Directors and Shareholders
SECOM CO., LTD.:に、他のオブジェクトやテキストが入らないよう、ご留意ください。

Emphasis of Matter
As discussed in Note 2 to the consolidated financial statements, in the year ended March 31, 2011, SECOM CO., LTD. and its subsidiaries
adopted Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. Our opinion is not modified with respect to this matter.

Financial Section

Convenience translations
The accompanying consolidated financial statements as of and for the year ended March 31, 2013 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated­financial 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 Review

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, 2013 and 2012, 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.

SECOM Today

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 financial­statements. 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’s­internal 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.

Special FeatureManagement’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 p­ reparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.

Tokyo, Japan
July 30, 2013

SECOM Annual Report 2013

69

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

70

SECOM Annual Report 2013

SUMMARY OF SELECTED FINANCIAL DATA

In millions of yen
2013

2012

2011

2010

2009

2008

¥ 30,560
19,122528,721¥ 61,756
17,998574,554

5.0
2.2
1.1
5.1
13.4
86.6
100.0
5.3
10.4

5.7
3.1
1.4
3.8
14.0
86.0
100.0
3.5
6.7

6.8
1.7
2.0
5.5
16.0
84.0
100.0
5.4
10.6

6.5
1.6
2.6
3.6
14.3
85.7
100.0
4.1
8.2

11.9
2.4
1.9
3.6
19.8
80.2
100.0
2.7
5.8

17.5
1.2
1.8
4.0
24.5
75.5
100.0
4.9
10.7

6.9
2.1

7.5
2.1

7.6
2.2

8.2
2.1

7.9
2.2

8.2
2.3

60.0
2.24
78.8

63.4
2.49
51.8

62.5
2.49
65.1

64.9
2.55
53.5

64.4
2.66
32.4

63.8
2.81
53.7

Financial Section¥ 46,989
18,533569,799

Financial Review¥ 62,665
18,533
593,495

SECOM Today

Consolidated financial ratios
Percentage of working capital accounted for by:
Debt
		Bank loans..................................................................................
		 Current portion of long-term debt...............................................
		Straight bonds.............................................................................
		 Other long-term debt..................................................................
			Total debt................................................................................
SECOM CO., LTD. shareholders’ equity...........................................
			Total capitalization...................................................................
Return on total assets (percentage) (a)...................................................
Return on equity (percentage) (b)..........................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization........................................................
Rental expense under operating leases............................................
Ratio of accumulated depreciation to depreciable
assets (percentage)...........................................................................
Net property turnover (times) (c)...........................................................
Before-tax interest coverage (times) (c)(d)................................................

¥ 41,237
19,623612,855

Special Feature

Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD...................................... ¥ 70,580
Cash dividends (paid)(2)........................................................................ 19,645
SECOM CO., LTD. shareholders’ equity............................................... 679,176

Strategic Highlights

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue......................................................... ¥861,885 ¥772,482 ¥751,868 ¥670,644 ¥684,016 ¥701,836
434,667
424,706
424,385436,918
435,306
Security services:............................................................................. 452,387
52.5%
56.3%
56.5%
63.3%
63.9%
62.0%
				 As a percentage of net sales and operating revenue............
304,408
302,529
303,459
308,279
301,521
		 Electronic security services........................................................... 311,604
36.1
39.4
40.2
45.2
45.1
43.0
				 As a percentage of net sales and operating revenue............
		 Other security services—
46,68946,372
46,21347,99946,648
			Static guard services................................................................ 47,877
5.6
6.0
6.2
6.9
7.0
6.6
				 As a percentage of net sales and operating revenue............
20,60920,12919,823
20,31019,547
			Armored car services................................................................ 20,532
2.4
2.7
2.7
3.0
3.0
2.8
				 As a percentage of net sales and operating revenue............
67,29866,501
66,03668,30966,195					Subtotal........................................................................... 68,409
54,89060,33067,59062,961
55,676
		 Merchandise and other............................................................... 72,374
8.4
8.2
8.8
9.6
8.2
7.4
				 As a percentage of net sales and operating revenue............
80,132
84,17582,57280,67875,176
Fire protection services.................................................................... 114,130
13.2
11.9
12.3
11.8
10.4
10.0
				 As a percentage of net sales and operating revenue............
56,30952,22050,741
134,550
125,020
Medical services.............................................................................. 140,957
16.4
8.4
7.6
7.2
17.4
16.6
				 As a percentage of net sales and operating revenue............
29,142
21,53033,22933,55833,133
Insurance services........................................................................... 35,864
4.2
4.3
3.2
4.7
4.4
4.4
				 As a percentage of net sales and operating revenue............
41,91840,20739,37650,17343,539Geographic information services..................................................... 51,194
5.9
6.3
5.9
5.6
6.5
5.8
				 As a percentage of net sales and operating revenue............
13,26822,07229,928
11,724
24,817
Real estate development and sales.................................................. 27,121
3.1
2.0
3.2
4.3
1.5
3.3
				 As a percentage of net sales and operating revenue............
Information and communication related
25,49026,89430,684
27,13225,477and other services......................................................................... 40,232
4.7
3.8
3.9
4.4
3.5
3.4
				 As a percentage of net sales and operating revenue............

The Management

SECOM CO., LTD. and Subsidiaries
Years ended March 31

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

SECOM Annual Report 2013

71

SUMMARY OF SELECTED FINANCIAL DATA

2013

2012

2011

2010

2009

2008

Number of shares outstanding
233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
Issued8,323,599
Owned by the Company........................................... 15,018,951 15,017,691 15,258,553 15,254,334 15,251,520
Balance..................................................................... 218,269,766 218,271,026 218,030,164 218,034,383 218,037,197 224,965,118
Per share information
Net income attributable to SECOM CO., LTD.
¥ 188.97¥ 287.41¥ 215.51¥ 323.36¥ 137.42¥ 274.51
per share (in yen) (1) .................................................
90.00
85.00
85.00
90.00
85.00
80.00
Cash dividends paid per share (in yen) (2) ...................
SECOM CO., LTD. shareholders’ equity
2,807.77
2,722.08
2,613.34
3,111.64
2,424.91
2,553.97
per share (in yen) (3) .................................................
365.28458.62383.36491.52299.72448.19Cash flow per share (in yen) (1) (e) ................................
1.44
1.42
1.57
1.56
1.50
1.90
Price/Book value ratio................................................
21.43
13.45
18.98
15.00
26.41
17.63
Price/Earnings ratio...................................................
11.09
8.43
9.87
10.67
12.11
10.80
Price/Cash flow ratio.................................................
4,050
3,865
4,850
4,090
3,630
4,840
Stock price at year-end (in yen).................................
Notes: (a) Net income attributable to SECOM CO., LTD. / Total assets(b) Net income attributable to SECOM CO., LTD. / SECOM CO., LTD.
shareholders’ equity(c) Including discontinued operations(d)		(Income before income taxes and equity in net income of affiliatedcompanies + Interest expense)/Interest expense(e) (Net income attributable to SECOM CO., LTD. + Depreciation andamortization - Dividends approved) / Average number of shares outstanding
during each period

72

SECOM Annual Report 2013

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2013, cash dividends of ¥22,918 million (¥105
per share) were approved at the general shareholders’ meeting on June 25,2013 (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 DATASHAREHOLDER INFORMATION

2012

2011

2010

2009

2008

27,62829,11830,33831,48830,85928,512

—%
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%

0.00%
35.67
2.55
3.76
38.17
13.31
6.54
100.00%

—%
33.84
3.86
3.81
41.71
13.21
3.57
100.00%Strategic Highlights

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

2013

The Management

SECOM CO., LTD.
As of March 31

Special Feature

PRICE INFORMATION (TOKYO STOCK EXCHANGE)

2012

2013

April–June....................................................................................
July–September............................................................................
October–December......................................................................
January–March............................................................................
April–June....................................................................................
July–September............................................................................
October–December......................................................................
January–March............................................................................

Nikkei Stock Average (in yen)

Low

High

Low

¥4,145
3,975
3,830
4,190
4,040
4,125
4,360
5,120

¥3,660
3,435
3,390
3,390
3,325
3,580
3,860
4,295

¥10,004.20
10,137.73
9,050.47
10,255.15
10,109.87
9,232.21
10,395.18
12,635.69¥ 9,351.40
8,374.13
8,160.01
8,378.36
8,295.63
8,365.90
8,534.12
10,486.99

SECOM Today

2011

Price per share (in yen)High

Financial Review
Financial Section

SECOM Annual Report 201373

COMMON STOCK DATACOMMON STOCK ISSUES
			Shares
		
		
Date

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

Additional
shares issued(In thousands)

outstanding
after issue(In thousands)

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

1,968
2,760
1,196
1,244
4,320
1,880
2,060
6,798
2,042
6,300
7,560
3,000
4,836
5,320
194
1,418
186
6,031
2,878
1,609
3,541
439
1,808
22,986
1,446
2,949
2,035
267
6,986
477
613
1,825
29
159
116,410
273
25
175
6
8

9,200
11,96013,156
14,40018,72020,60022,66029,45831,50037,80045,36048,36053,19658,51658,71060,12860,314
66,34569,22370,832
74,37374,812
76,62099,606
101,052
104,001
106,036
106,303113,289
113,766
114,379
116,204
116,233
116,392
232,802
233,075
233,100
233,275
233,281
233,289¥00,460,000
598,000
657,800
720,000
936,000
1,030,000
1,133,000
1,472,900
1,575,000
1,890,000
2,268,000
2,418,000
2,659,800
3,000,000
3,280,942
5,329,282
5,602,945
5,602,945
11,269,932
15,021,200
15,021,200
16,063,099
21,573,139
21,573,139
25,070,104
32,244,732
37,338,751
37,991,568
56,756,263
58,214,178
59,865,105
65,253,137
65,327,060
65,709,927
65,709,927
66,096,852
66,126,854
66,360,338
66,368,827
66,377,829—
3 for 10
1 for 10—
3 for 10—
1 for 10
3 for 10—
2 for 10
2 for 10—
1 for 10
1 for 10———
1 for 10——
0.5 for 10——
3 for 10
—
—
—
—
—
—
—
—
—
—
10 for 10*
—
—
—
—
—

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

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, 2013, 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 2013

CONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONTENTSCONDENSED CONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP).................................................................................... 76
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP).................................................................................... 78
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(BASED ON JAPANESE GAAP).................................................................................... 78

SECOM Annual Report 201375

CONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED CONSOLIDATED BALANCE SHEETS (BASED ON JAPANESE GAAP)SECOM CO., LTD. and Subsidiaries
As of March 31
In millions of yen

ASSETS

2013

2012

2011

2010

2009

2008

Current assets:
Cash on hand and in banks................................................ ¥ 175,427 ¥ 182,412 ¥ 172,958 ¥ 146,929 ¥0,127,476 ¥0,200,403
56,08954,01156,546
48,861
56,667
63,696
Cash deposits for armored car services...............................
46,50028,00029,50036,50036,50019,000Call loans...........................................................................
106,638
85,74473,956
73,844
77,39885,595
Notes and accounts receivable, trade..................................
24,05924,83022,754
20,824
20,13921,125Due from subscribers..........................................................
14,723
19,936
7,313
15,98916,786
9,306
Short-term investments......................................................
27,56914,605
15,433
14,742
14,993—
Lease receivables and investment in leased assets...............
—
—
—
—
—
27,080Inventories.........................................................................
12,321
9,597
8,823
10,987
10,730—
Merchandises and products................................................
12,944
9,082
11,481
18,493
6,177
90,230Real estate inventories........................................................
4,526
2,527
2,249
1,427
2,174
—
Work in process.................................................................
7,563
5,671
4,233
5,312
9,534
—
Costs on uncompleted construction contracts....................
13,34833,27648,29655,916
60,950—Work in process for real estate inventories..........................
6,430
5,950
5,750
5,932
5,840
—
Raw materials and supplies.................................................
14,384
11,383
12,216
11,684
11,135
11,840
Deferred income taxes........................................................
4,158
4,389
3,908
3,088
4,125
7,246
Short-term loans receivable................................................
18,453
13,48912,566
15,275
15,57813,827
Other ...............................................................................
(2,302)(1,428)(1,704)(2,207)(2,762)(1,813)
Allowance for doubtful accounts........................................
542,836
503,479
486,284
483,600
473,445547,538
				Total current assets..................................................

Fixed assets:
Tangible assets:
		 Buildings and improvements...........................................
		 Security equipment and control stations.........................
		Land...............................................................................
		Other..............................................................................

155,839
67,200115,652
22,83997,95566,900104,426
21,464

102,855
63,49097,73018,63897,692
63,03493,424
18,86985,41565,63189,29722,92384,54565,45081,71633,636

Intangible assets.................................................................

55,07925,04325,553

21,885

21,331

22,332

Investments and others:
189,042
177,655
188,001
187,777
201,923
241,957
		Investment securities.......................................................
42,33846,19747,57650,48859,88054,599
		 Long-term loans receivable.............................................
19,572
19,13018,73018,61818,876
17,834
		 Prepaid pension and severance costs...............................
11,711
14,793
20,11019,84824,41322,740		 Deferred income taxes....................................................
43,70642,37643,422
44,63046,12947,579		Other..............................................................................
(16,742)(17,584)(18,111)(18,403)(19,122)(17,455)
		 Allowance for doubtful accounts....................................
706,241
598,359
607,998
597,864
616,698
654,936
				Total fixed assets......................................................
32
45
117
213
338
365
Deferred assets...................................................................
				Total assets ............................................................. ¥1,249,110 ¥1,101,884 ¥1,094,400 ¥1,081,679 ¥1,090,483 ¥1,202,840

76

SECOM Annual Report 2013

2013

2012

2011

2010

2009

2008

9,625
10,7002,884
38,235
8,415
12,585

14,091
21,586
3,080
38,091
8,909
13,097

17,006
16,085501
36,777
8,399
13,264

12,673
15,338571
34,2103,740
13,807

13,52420,024—32,532
5,042
16,096

2,443

2,509

2,433

2,398

2,244

2,220

133,627
2,242
237,091
484,970

127,812
1,817
214,586
430,366

135,498
1,481
238,270
440,344

150,180
1,557
246,171456,525

167,0111,621
251,218
507,874

162,329
1,057
252,828
572,565

11,783(41)(27,760)(16,018)

4,559
(28)
(37,556)(33,026)

2,192
(35)
(34,166)(32,010)

4,521
(17)
(27,871)(23,367)(3,901)(27)(30,008)(33,937)(3,306)(90)(9,907)(13,304)

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

95,11463,50961,81066,562

63,65463,035764,139
671,517654,055
625,153582,608630,274
				Total net assets.........................................................
				 Total liabilities and net assets.................................... ¥1,249,110 ¥1,101,884 ¥1,094,400 ¥1,081,679 ¥1,090,483 ¥1,202,840

SECOM Annual Report 2013

Financial Section

Accumulated other comprehensive income:Unrealized gains (losses) on securities..................................
Deferred losses on hedges...................................................
Foreign currency translation adjustments.............................
				 Total accumulated other comprehensive income.......

Financial Review

NET ASSETS
Shareholders’ equity:
Common stock.................................................................... ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377 ¥ 66,377
83,054
83,054
83,054
83,054
83,054
83,056
Capital surplus....................................................................
609,275
565,261549,747
507,434
478,355
475,987
Retained earnings...............................................................
(73,664)(73,659)(74,923)(74,907)(74,896)(44,877)
Common stock in treasury, at cost.......................................
685,042
641,034
624,255
581,959
552,891
580,543
				Total shareholders’ equity.........................................

SECOM Today

8,847
19,8283,438
36,125
13,40017,137

Special Feature

Long-term liabilities:
Straight bonds.....................................................................
Long-term loans..................................................................
Lease obligations.................................................................
Guarantee deposits received................................................
Deferred income taxes.........................................................
Accrued pension and severance costs..................................
Accrued retirement benefits for directors andcorporate auditors.............................................................
Investment deposits by policyholders, unearned
premiums and other insurance liabilities............................
Other..................................................................................
				Total long-term liabilities...........................................
				Total liabilities...........................................................

Strategic Highlights

Current liabilities:
Notes and accounts payable, trade...................................... ¥ 43,684 ¥ 30,731 ¥ 25,959 ¥ 24,774 ¥0,028,374 ¥0,030,459
42,35047,98547,42648,09485,383136,034
Bank loans..........................................................................
4,487
5,983
2,914
1,761
5,036
1,936
Current portion of straight bonds........................................
537
354
354
247
202
—
Lease obligations.................................................................
31,406
27,62722,85723,35923,19528,988
Payables—other..................................................................
29,282
14,68819,353
20,907
18,983
24,610Accrued income taxes.........................................................
4,377
3,833
2,850
3,302
2,932
3,456
Accrued consumption taxes.................................................
4,571
4,169
3,792
3,633
3,534
3,641
Accrued expenses................................................................
30,88030,83430,58233,554
31,29832,061
Deferred revenue................................................................
14,031
12,73911,925
12,13912,741
12,210Accrued bonuses.................................................................
—
—
—
1,770
2,415
—
Reserve for litigation losses..................................................
1,714
834
530
145
—
—
Reserve for losses on construction contracts........................
40,55435,99733,52736,66042,55846,337
Other..................................................................................
247,879
215,780
202,074
210,353
256,655
319,737
				Total current liabilities...............................................

The Management

In millions of yen

LIABILITIES77CONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED CONSOLIDATED STATEMENTS OF INCOME (BASED ON JAPANESE GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2013

2012

2011

2010

2009

2008

Revenue ................................................................................
		 Percentage change from prior year..................................

¥765,635 ¥679,173¥663,887 ¥654,678 ¥678,400 ¥682,619
12.7%
2.3%
1.4%
(3.5%)(0.6%)
11.2%

Costs of revenue ....................................................................
		 As a percentage of revenue.............................................

504,006
65.8

458,452
67.5

423,98363.9

415,39063.4

444,77165.6

433,030
63.4

Gross profit ............................................................................
		 As a percentage of revenue.............................................

261,62934.2

220,72032.5

239,904
36.1

239,28836.6

233,62834.4

249,589
36.6

Selling, general and administrative expenses...........................
		 As a percentage of revenue.............................................

153,258
20.0

139,64220.6

140,76221.2

140,749
21.5

145,99421.5

144,883
21.3

Operating profit......................................................................
		 As a percentage of revenue.............................................

108,370
14.2

81,07811.9

99,141
14.9

98,53915.1

87,63412.9

104,706
15.3

Non-operating income............................................................
Non-operating expenses.........................................................

11,171
5,922

12,9706,209

17,428
6,895

9,158
9,371

12,957
9,666

20,125
10,552

Ordinary profit........................................................................
		 As a percentage of revenue.............................................

113,618
14.8

87,83912.9

109,674
16.5

98,32715.0

90,92413.4

114,278
16.7

Extraordinary profit.................................................................
Extraordinary losses.................................................................

984
2,623

287
11,558

1,717
5,749

3,370
5,463

482
27,875

2,748
4,984

Income before income taxes...................................................
		 As a percentage of revenue.............................................

111,980
14.6

76,567
11.3

105,642
15.9

96,233
14.7

63,531
9.4

112,043
16.4

Income taxes—current............................................................
Income taxes—deferred..........................................................

43,211(252)

32,0234,600

37,303
1,383

38,172
4,944

41,768(3,244)42,602
2,656

Net income before minority interests in subsidiaries................

69,021

39,943

66,955———

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

5,363

4,454

6,109

5,505

3,504

5,278

Net income.............................................................................
		 As a percentage of revenue.............................................
		 Percentage change from prior year..................................

63,6588.3
79.4

35,4895.2(41.7)

60,8469.2
27.8

47,611
7.3
121.4

21,5023.2(65.0)

61,5069.0
5.5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (BASED ON JAPANESE GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31

78

In millions of yen
2013

2012

2011

2010

2009

2008

Net income before minority interests in subsidiaries................
Other comprehensive income (loss):
Unrealized gains (losses) on securities..................................
Deferred gains on hedges....................................................
Foreign currency translation adjustments.............................
Share of other comprehensive gains (losses) of affiliatedcompanies accounted for under the equity method...........

¥69,021¥39,943¥66,955

¥—

¥—

¥—

7,500
—
6,222

2,318
8
(2,262)(2,970)16(5,191)

—
—
—

—
—
—

—
—
—

4,402

(1,281)(1,069)———

		 Total other comprehensive income (loss)..........................

18,124(1,217)(9,214)———Comprehensive income...........................................................

87,14638,72657,740———Comprehensive income attributable to:
Owners of the parent company...........................................
Minority interests................................................................

80,666
6,480

34,473
4,253

52,203
5,537

—
—

—
—

—
—

SECOM Annual Report 2013

NONCONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONTENTSCONDENSED NONCONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP).................................................................................... 80
CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP).................................................................................... 82

SECOM Annual Report 2013

79

NONCONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED NONCONSOLIDATED BALANCE SHEETS (BASED ON JAPANESE GAAP)SECOM CO., LTD.
As of March 31
In millions of yen

ASSETS

2013

2012

2011

2010

2009

2008

¥ 54,136
53,551700
14,856
9,691
2,528
1,048
5,585
1,012
2,332
5,268
152

¥ 82,631
52,386720
14,324
10,039
2,159
456
5,152
1,470
2,253
4,269
369

¥ 74,680
54,641
221
11,563
6,074
2,385
456
4,279
1,167
2,051
4,938
277

¥ 44,607
46,957248
11,434
6,484
2,556
2,429
6,574
1,082
2,016
4,720
171

¥ 31,149
54,258389
11,630
6,732
2,415
455
5,652
1,101
2,034
4,446
173

¥ 77,130
60,821
534
11,661
6,760
2,921
454
6,298
952
1,913
4,714
236

19,076
4,827(248)
174,521

15,197
1,639(268)
192,804

4,040
1,857
(206)
168,428

3,669
2,129
(450)
134,634

11,471
3,457(567)
134,801

17,782
2,720(568)
194,333

Fixed assets:
Tangible assets:
		 Buildings and improvements.............................................
		Automobiles.....................................................................
		 Security equipment and control stations...........................
		 Machinery and equipment................................................
		 Tools, furniture and fixtures..............................................
		Land.................................................................................
		 Construction in progress...................................................
		Other................................................................................

17,059521
65,329288
2,979
29,802
1,719
235

16,409231
65,341361
3,301
28,5551,710
374

22,310243
61,461565
3,151
28,3901,743
513

22,360368
60,860828
3,519
28,352
1,203
654

23,055386
63,064
1,071
3,717
28,306
1,588
634

21,969122
62,4191,267
3,239
25,9131,961
14Intangible assets:
		Goodwill...........................................................................
		Software...........................................................................
		Other................................................................................

2,978
4,269
2,061

3,350
5,487
1,586

—
6,751
815

—
7,580
975

—
6,578
542

—
7,184
516

21,58323,906

20,96921,76921,26728,668236,309

190,305

203,036

193,899

192,775

194,110

1,827
4,243
55

1,883
4,298
59

1,874
4,687
53

1,874
5,088
55

1,874
8,468
40

1,874
8,453
31

151,514
123,716
7,747
8,147
21,59424,013
16,263
15,903
—
130
3,991
4,181
2,728
2,713
(20,307)(19,326)
574,796506,643¥749,317 ¥699,448

113,536
8,047
25,872
14,321
13,865
4,181
2,831(12,995)
526,227¥694,656

128,727
8,583
25,816
14,364
14,0994,334
800(12,544)533,572¥668,207

134,636
8,702
26,412
14,561
14,763
4,896
1,065(13,354)545,056¥679,858

66,354
8,859
26,165
13,769
6,760
4,893
975
(6,812)478,710¥673,043

Current assets:
Cash on hand and in banks..................................................
Cash deposits for armored car services.................................
Notes receivable...................................................................
Due from subscribers............................................................
Accounts receivable, trade....................................................
Receivables—other...............................................................
Short-term investments........................................................
Merchandise........................................................................
Supplies...............................................................................
Prepaid expenses..................................................................
Deferred income taxes..........................................................
Short-term loans receivable..................................................
Short-term loans receivable to subsidiaries andaffiliated companies...........................................................
Other...................................................................................
Allowance for doubtful accounts..........................................
				Total current assets....................................................

Investments and others:
		Investment securities.........................................................
		 Investment securities in subsidiaries and		 affiliated companies........................................................
		 Investments in subsidiaries and		 affiliated companies........................................................
		 Long-term loans receivable...............................................
		 Long-term loans receivable to employees..........................
		 Long-term loans receivable to subsidiaries and		affiliated companies......................................................
		Lease deposits..................................................................
		 Long-term prepaid expenses.............................................
		 Prepaid pension and severance costs.................................
		 Deferred income taxes......................................................
		Insurance funds................................................................
		Other................................................................................
		 Allowance for doubtful accounts......................................
				Total fixed assets........................................................
				Total assets................................................................

80

SECOM Annual Report 2013

2,40027,65980
13,756
4,343
3,938
2,062
716
22,06622,3406,116
640106,121¥

1,672
29,38671
10,824
3,719
12,4501,422
722
20,362
22,2295,468
2,107
110,439¥

2,009
24,49251
10,811
3,425
14,637
1,491
555
23,62522,5585,493
2,133
111,287

2009

¥

2,319
60,89343
10,981
3,742
11,8491,622
597
28,451
22,735
5,537
1,928
150,704

2008

¥

2,757
30,401—
10,8383,607
15,8341,566
640
31,29922,903
5,372
1,958
127,180

2,217
18,099
—
3,945

2,253
18,262—4,040

182
17,965—
4,394

192
18,146—
4,766—
18,174
—
5,087

857
25
26,031150,205

1,294
10
25,568
131,689

1,232
11
25,799136,238

1,174
272
23,989135,276

1,104
12
24,221
174,926

1,070—
24,333
151,513¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377¥ 66,377

83,054—
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

83,054—
83,054

83,054
1
83,056

9,028

9,028

9,028

9,028

9,028

9,028

800
2,212
508,398
520,439(73,664)596,206

800
2,212
478,914490,954(73,659)
566,727800
2,212
472,070
484,110(74,923)558,619800
2,212
445,579
457,620(74,907)532,145800
2,212
418,306
430,347(74,896)504,883

800
2,212
405,015
417,055(44,877)
521,612

2,905

1,031

(201)

786

48

(82)

2,905
599,112¥749,317

1,031
567,758¥699,448(201)
558,417¥694,656

786
532,931¥668,20748
504,932¥679,858(82)
521,529¥673,043

SECOM Annual Report 2013

Financial Section

2,449
17,859788
4,051

Financial Review

Valuation, translation adjustments and others:
Unrealized gains (losses) on securities..................................
				Total valuation, translation adjustments				 and others..............................................................
				Total net assets.........................................................
				 Total liabilities and net assets....................................

¥

2010

SECOM Today

NET ASSETS
Shareholders’ equity:
Common stock....................................................................
Capital surplus:
		 Additional paid-in capital.................................................
		 Other capital surplus........................................................
				Total capital surplus..................................................
Retained earnings:
		Legal reserve....................................................................
		 Other retained earnings:
			 Reserve for system developments.................................
			General reserve............................................................
			 Accumulated earnings carried forward.........................
				Total retained earnings.............................................
Common stock in treasury, at cost.......................................
				Total shareholders’ equity.........................................

3,044
26,598121
15,042
4,333
19,5102,538
726
24,131
21,671
6,089
365
124,1742011

Special Feature

Long-term liabilities:
Lease obligations.................................................................
Guarantee deposits received................................................
Deferred income taxes.........................................................
Accrued pension and severance costs..................................
Accrued retirement benefits for directors andcorporate auditors.............................................................
Other..................................................................................
				Total long-term liabilities...........................................
				Total liabilities...........................................................

¥

2012

Strategic Highlights

Current liabilities:
Accounts payable................................................................
Bank loans..........................................................................
Lease obligations.................................................................
Payables—other..................................................................
Payables—construction.......................................................
Accrued income taxes.........................................................
Accrued consumption taxes.................................................
Accrued expenses................................................................
Deposits received................................................................
Deferred revenue................................................................
Accrued bonuses.................................................................
Other..................................................................................
				Total current liabilities...............................................

2013

The Management

In millions of yen

LIABILITIES81

NONCONSOLIDATED FINANCIAL DATA(BASED ON JAPANESE GAAP) [REFERENCE]CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME (BASED ON JAPANESE GAAP)SECOM CO., LTD.
Years ended March 31
In millions of yen
2013

82

2012

2011

2010

2009

2008

Revenue ................................................................................
		 Percentage change from prior year..................................
Service charges....................................................................
		 Percentage change from prior year..................................
Sales of merchandise...........................................................
		 Percentage change from prior year..................................

¥355,393 ¥345,476¥329,297 ¥328,773 ¥336,893 ¥337,611
2.9%
4.9%
0.2%
(2.4%)(0.2%)
3.5%
305,300
299,523
290,252
291,325
294,386
291,350
1.9
3.2
(0.4)
(1.0)
1.0
3.2
50,09245,952
39,04537,44742,506
46,261
9.0
17.7
4.3(11.9)(8.1)
5.5

Costs......................................................................................
		 As a percentage of revenue.............................................
Costs of service...................................................................
		 As a percentage of service charges..................................
Costs of sales......................................................................
		 As a percentage of merchandise sales..............................

210,790
59.3
174,33157.1
36,45872.8

203,38658.9
169,92856.7
33,45872.8

191,28458.1
160,20355.2
31,081
79.6

188,701
57.4
160,349
55.0
28,352
75.7

193,84257.5
161,548
54.9
32,29476.0

192,41757.0
158,03154.2
34,38674.3

Gross profit.............................................................................
		 As a percentage of revenue.............................................
Gross profit on service.........................................................
		 As a percentage of service charges..................................
Gross profit on sales............................................................
		 As a percentage of merchandise sales..............................

144,60340.7
130,969
42.9
13,63427.2

142,08941.1
129,595
43.3
12,49427.2

138,01341.9
130,048
44.8
7,964
20.4

140,07242.6
130,976
45.0
9,095
24.3

143,05042.5
132,83845.1
10,21224.0

145,19343.0
133,31845.8
11,874
25.7

Selling, general and administrative expenses...........................
		 As a percentage of revenue.............................................

74,651
21.0

71,89320.8

69,32421.0

68,54420.8

70,43420.9

71,03821.0

Operating profit......................................................................
		 As a percentage of revenue.............................................

69,952
19.7

70,196
20.3

68,68820.9

71,52721.8

72,61621.6

74,15522.0

Non-operating income............................................................
Non-operating expenses.........................................................

10,173
3,789

8,048
3,032

8,863
3,050

9,225
3,290

9,721
3,990

9,607
4,575

Ordinary profit........................................................................
		 As a percentage of revenue.............................................

76,33621.5

75,21221.8

74,501
22.6

77,462
23.6

78,34623.3

79,18723.5

Extraordinary profit.................................................................
Extraordinary losses.................................................................

1,219
1,052

23,001
40,695

106
2,637

561
4,639

67
27,0682,221
566

Income before income taxes...................................................
		 As a percentage of revenue.............................................

76,502
21.5

57,518
16.6

71,97021.9

73,38422.3

51,34515.2

80,842
23.9

Income taxes...........................................................................
		 Effective tax rate..............................................................

27,37435.8

30,69953.4

26,946
37.4

27,57837.6

18,93136.9

30,79538.1

Net income.............................................................................
		 As a percentage of revenue.............................................
		 Percentage change from prior year..................................

49,128
13.8
83.2

26,8187.8(40.4)

45,02313.7(1.7)

45,80613.9
41.3

32,4149.6(35.2)

50,046
14.8
5.9

SECOM Annual Report 2013

CORPORATE INFORMATION

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG AZSA LLC
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

		Percentage
Issued capitalof equity/(In millions of yen)voting rights

Lines of business

Domestic<Security services>
Secom Joshinetsu Co., Ltd.
Secom Hokuriku Co., Ltd.
Secom Yamanashi Co., Ltd.
Secom Mie Co., Ltd.
Secom Sanin Co., Ltd.
Secom Kochi Co., Ltd.
Secom Miyazaki Co., Ltd.
Secom Ryukyu Co., Ltd.
Secom Jastic Co., Ltd.
Secom Jastic Joshinetsu Co., Ltd.
Secom Jastic Hokuriku Co., Ltd.
Secom Jastic Yamanashi Co., Ltd.
Secom Jastic Sanin Co., Ltd.
Secom Jastic Kochi Co., Ltd.
Secom Jastic Miyazaki Co., Ltd.
Secom Static Hokkaido Co., Ltd.
Secom Static Tohoku Co., Ltd.
Secom Static Nishi-Nihon Co., Ltd.
Secom Static Kansai Co., Ltd.
Secom Static Ryukyu Co., Ltd.
Secom Sado Co., Ltd.
JK. Siress Co., Ltd.
Japan Safety Guard Co., Ltd.
Japan Nuclear Security System Co., Ltd.
Meian Co., Ltd.
Secom Tech Sanin Co., Ltd.
Secom Techno Joshinetsu Co., Ltd.
Secom Win Co., Ltd.
TES Co., Ltd.
Secom Engineering Co., Ltd.
Secom Industries Co., Ltd.
Otec Electronics Co., Ltd.
Secom Alpha Co., Ltd.
Yanoshin Air Conditioning Co., Ltd.
Secom Mine Security Co., Ltd.
Social Rehabilitation Support Kitsuregawa Co., Ltd.
Secom Kitsuregawa Security Co., Ltd.
Home Life Kanri Co., Ltd.

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Installation of security equipment
Installation of security equipment
Installation of security equipment and facilities
Maintenance of equipment
Design, construction and maintenance of facilities
Manufacturing of security equipment
Manufacturing and sales of security systems
Sales of security and water-treatment equipment
Sales of air-conditioning equipment
Security services
Operation of PFI correctional facilities
Security services
Condominium management

Financial Review
Financial Section

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

SECOM Today(50.9)%
59.1
70.0
51.0
67.0
40.0
68.3
50.0
100.0
(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)
100.0
100.0
100.0
100.0
(100.0)(54.5)(100.0)
60.0
50.0
51.0
(100.0)(100.0)66.7(100.0)
100.0
100.0
82.0
100.0
100.0
100.0
51.7
100.0
(100.0)Special Feature¥3,530		
201		
15		
50		
286		
50		
30		
76		
210		
40		
10		
10		
10		
10		
10		
50		
50		
50		
50		
10		
24		
10		
100		
200		
60		
23		
30		
15		
20		
100		
499		
200		
271		
80		
30		
10		
50		
40		

(As of June 30, 2013)

Strategic Highlights

MAJOR CONSOLIDATED SUBSIDIARIESThe Management(As of June 30, 2013)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:(Continued )SECOM Annual Report 201383

CORPORATE INFORMATION

MAJOR CONSOLIDATED SUBSIDIARIES		Percentage
Issued capitalof equity/(In millions of yen)voting rights

Lines of business<Fire protection services>
Nohmi Bosai Ltd.
¥13,302		
(50.4)%
				
Ichibou Co., Ltd.
28		(73.2)
Kyushu Nohmi Co., Ltd.
30		(100.0)Chiyoda Service Co., Ltd.
20		(70.0)
Nohmi Engineering Corp.
40		
(100.0)Nohmi System Co., Ltd.
20		(100.0)
Iwate Nohmi Co., Ltd.
30		(100.0)
Tohoku Nohmi Co., Ltd.
32		(100.0)
Aomori Nohmi Co., Ltd.
20		(100.0)
Osaka Nohmi Co., Ltd.
20		(100.0)
Nissin Bohsai Co., Ltd.
50		(100.0)Chiba Nohmi Co., Ltd.
10		(100.0)Shikoku Nohmi Co., Ltd.
20		(100.0)Nohmi Techno Engineering Co., Ltd.
40		(100.0)Akita Nohmi Co., Ltd.
20		(100.0)Fukushima Nohmi Co., Ltd.
20		(100.0)Nohmi Plant Niigata Co., Ltd.
20		(100.0)
Hokkaido Nohmi Co., Ltd.
20		(100.0)
Yashima Bosai Setsubi Co., Ltd.
20		
(81.8)
Nittan Co., Ltd.
2,303		100.0				Nittan Electronic Co., Ltd.
60		(100.0)Nittan Denko Co., Ltd.
10		(100.0)Nittan Hokkaido Service Center Co., Ltd.
10		(100.0)Nittan Tohoku Service Center Co., Ltd.
10		(100.0)Nittan Nagoya Service Center Co., Ltd.
10		(100.0)Nittan Service Center Osaka Co., Ltd.
10		(100.0)Nittan Hiroshima Service Center Co., Ltd.
10		(100.0)Nittan Shikoku Service Center Co., Ltd.
10		(100.0)Nittan Fukuoka Service Center Co., Ltd.
10		(100.0)
Sogo Denki Trading Co., Ltd.
10		(100.0)
Shell beach Co., Ltd.
10		(100.0)

Manufacturing and sales of fire protection equipment
and facilities
Installation of fire protection equipment
Installation and maintenance of fire protection equipment
Building management
Installation of fire protection equipment
Maintenance of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of environmental monitoring systems
Installation of ­fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation of fire protection equipment
Installation, sale and maintenance of fire protection
equipment
Manufacturing of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment
Installation and maintenance of fire protection equipment<Medical services>
Secom Medical System Co., Ltd.
Mac Corp.
Yoshikikaku Co., Ltd.
Kensei Co., Ltd.
Ryomay Royal Life Co., Ltd.
Alive Medicare Co., Ltd.
Secom Medical Resource Co., Ltd.
Secomfort Co., Ltd.
Secomfort West Co., Ltd.
US Chemical Co., Ltd.
Secom Medipharma Co., Ltd.

Home health/nursing care and other medical-related services
Sales of medical equipment
Operation of restaurants and shops at medical facilities
Management of pharmacies
Management of nursing homes
Management of nursing homes
Medical staffing solutions
Management of nursing homes
Management of nursing homes
Management of pharmacies
Wholesaling of pharmaceuticals

6,545		
95		
20		
100		
210		
50		
10		
100		
100		
3		
10		

100.0
(100.0)(100.0)(100.0)86.5(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

84

SECOM Annual Report 2013

(As of June 30, 2013)(Continued )The Management

MAJOR CONSOLIDATED SUBSIDIARIES
Lines of business<Insurance services>
Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

(100.0)%97.1

Non-life insurance agency
Non-life insurance<Geographic information services>
Pasco Corp.
Pasco Space Mapping Technology Co., Ltd.
GIS Hokkaido Co., Ltd.
GIS Tohoku Co., Ltd.
GIS Kanto Co., Ltd.
GIS Kansai Co., Ltd.
Mid Map Tokyo Corp.
RIIC Corp.
Higashi-Nihon Sogo Keikaku Co., Ltd.
Satellite Vision Corp.

8,758		
25		
190		
50		
40		
99		
15		
20		
200		
20		

69.8
(100.0)(100.0)(84.6)(52.6)(100.0)(60.0)(51.0)(100.0)(100.0)Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services<Real estate development and sales>
Secom Home Life Co., Ltd.

3,700		

99.9Development of residential buildings

Information, communication, information security
services and software development
Data center business
Real estate leasing
Management of real estate
Credit services
Printing services
Car maintenance
Employee welfare for SECOM Group
Employment agency
Hotel management
General office services
Lifestyle support services
Comprehensive lifestyle support services(Continued )Financial Review

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

SECOM Today<Information and communication related
and other services>
Secom Trust Systems Co., Ltd.
1,469		100.0				At Tokyo Corp.
13,378		
50.9
Arai & Co., Ltd.
3,000		86.7Arai Corporation, Inc.
10		
(100.0)
Secom Credit Co., Ltd.
400		
100.0
Secom Corp.
100		
100.0
Secom Auto Service Co., Ltd.
45		
100.0
Wonder Dream Co., Ltd.
490		
100.0
Secom Staff Service Co., Ltd.
50		(100.0)
The Windsor Hotels International Co., Ltd.
165		
100.0
Secom Business Plus Co., Ltd.
20		
100.0
Secom Home Service Co., Ltd.
32		
100.0
Kurashi-TEL Co., Ltd.
100		
60.0

Special Feature¥ 225		16,809		(As of June 30, 2013)

Strategic Highlights

		Percentage
Issued capitalof equity/(In millions of yen)voting rights

Financial Section

SECOM Annual Report 201385

CORPORATE INFORMATION

MAJOR CONSOLIDATED SUBSIDIARIES		Percentage		of equity/
Issued capitalvoting rights

Overseas<Security services>
Secom plc
Secom (China) Co., Ltd.
Dalian Secom Security Co., Ltd.
Shanghai Secom Security Co., Ltd.
Beijing Jingdun Secom
Electronic Security Co., Ltd.
Qingdao Secom Security Co., Ltd.
Guangdong Jinpeng Secom Security Co., Ltd.
Fujian Secom Security Co., Ltd.
Sichuan Secom Security Co., Ltd.
Shaanxi Secom Security Co., Ltd.
Zhejiang Secom Security Co., Ltd.
Liaoning Secom Security Co., Ltd.
Tianjin Secom Property Management Co., Ltd.
PT. Secom Indonesia
Thaisecom Pitakkij Co., Ltd.
Secom Australia Pty. Ltd.
Secom Technical Services Unit Trust
Secom Australia (ACT) Unit Trust
Secom Guardall NZ Ltd.
Secom Vietnam Co., Ltd.

Lines of business£44,126 thousand¥5,550 million
US$2,000 thousand
US$3,500 thousand
US$2,500 thousand

100.0%
100.0(95.0)(85.0)(80.0)

Security services
Holding company
Security services
Security services
Security services

US$1,000 thousand
US$4,500 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb10,000 thousand
Rmb15,000 thousand
Rmb10,000 thousand
Rmb2,000 thousand
US$4,111 thousand
THB378,857 thousand
AUD17,297 thousand
AUD5,951 thousand
AUD700 thousand
NZD1,604 thousand
US$600 thousand(80.0)(90.0)(95.0)(91.0)(91.0)(97.0)(60.0)(80.0)
49.0
70.0
100.0
(70.0)(100.0)(80.0)
80.0

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Comprehensive building management services
Security services
Security services
Security services
Security services
Security services
Security services
Security service-related consulting<Other services>
Shanghai Nohmi Secom
US$14,300 thousand(100.0)Fire Protection Equipment Co., Ltd.				
Nohmi Taiwan Ltd.
NT$15,000 thousand(58.0)
				
Nittan Europe Ltd.
£1,194 thousand(100.0)Nittan Fire Protection System (Zhongshan) Co.,Ltd.
US$1,400 thousand(70.0)
Taiwan Nittan Fire & Safety Co.,Ltd.
NT$7,600 thousand(60.5)
Nittan Fire Prevention Technology (Beijing) Corp.
US$550 thousand(100.0)
Pasco Philippines Corp.
PHP20,400 thousand(100.0)
Pasco China Corp.
Rmb22,320 thousand(99.0)
Suzhou Super Dimension Earth Science Research
Rmb1,000 thousand(92.0)and Development Co., Ltd.
Shanghai Pasco China Corp.
Rmb800 thousand(100.0)
Pasco (Thailand) Co., Ltd.
THB129,000 thousand(100.0)
PT. Nusantara Secom InfoTech
US$3,304 thousand(100.0)				
FM-International Oy
EUR10,994 thousand(100.0)Aerodata International Surveys BVBAEUR87 thousand(80.7)
Pasco Europe B.V.
EUR4,000 thousand(100.0)
Pasco North America Inc.
US$3,421 thousand(100.0)
Keystone Aerial Surveys Inc.
US$0.6 thousand(70.0)
Airmag Surveys Inc.
US$15 thousand(100.0)Base Aerofotogrametria E Projetos S.A.
BRL5,000 thousand(51.0)The Westec Security Group, Inc.
US$0.3 thousand
100.0
ClearLight Partners, LLC—		(99.7)
ClearLight Partners II, LLC—		(99.0)

Manufacturing and sales of fire protection equipment
and facilities
Manufacturing and sales of fire protection equipment
and facilities
Sales of fire protection equipment
Sales of fire protection equipment
Sales of fire protection equipment
Sales of fire protection equipment
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services andsoftware development
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Geographic information services
Holding company
Investment
Investment

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM CO., LTD. and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

86

SECOM Annual Report 2013

(As of June 30, 2013)

Profile

SECOM’s BASIC BUSINESS AREAS
SECOM offers a wide range of services and ­products withthe aim of realizing its Social System Industry vision.

Since its establishment in 1962,

SECOM CO.,Centralized Security Systems

Security Services
Centralized Security Systems
Commercial Use:

has sought to develop and encourage broad acceptance

SECOM AXSECOM AX is an on-line security ­system with advanced on-site image sensors
that incorporate microphones to enable the SECOM control center staff to checkthe subscriber’s premises by listening and viewing.
SECOM IXSECOM IX is a remote imaging security system for ­commercial facilities offering
around-the-clock services.
INTELLIGENT EMERGENCY ALERT SYSTEMThe Intelligent Emergency Alert System automatically recognizes robberies or othersuspicious situations and alerts a SECOM control center without the need foranyone to push an emergency alarm button, applying advanced image recognitionand voice processing technologies to aid in the early detection of irregularities.
SECOM DXSECOM DX is an on-line security system developed to meet the needs of shops,
offices, warehouses, factories and other commercial and industrial
establishments.
SECOM TXSECOM TX is an on-line security system for commercial ­buildings with more than
one tenant.
HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.
SECOM LX
SECOM LX is an on-line security system that includes an access control function.
SECOM FXSECOM FX is a system that combines monitoring for intruders and fire withfacility control functions.

that contribute to security and peace of mind, in line withthrough its business activities. Such efforts have enabled

Beginning with Japan’s first on-line security system for commercial use, SECOM has developed a wide
range of pioneering services and systems over the years. These include an on-line home security system
and COCO-SECOM, a mobile personal security system for outdoor use.
Today, the overarching mission of SECOM—comprising the parent company and its subsidiaries andaffiliated companies—is to provide safety and security for people whenever and wherever necessary.
Accordingly, SECOM is pressing ahead with efforts to realize its vision for the future, the Social System
Industry, which describes a framework of distinctive, integrated services and systems that make life
more secure, convenient and comfortable. To this end, SECOM is leveraging its extensive businessportfolio—which has expanded to include security services, fire protection services, medical services,
insurance services, geographic information services, real estate development and sales, and informationand communication related and other services—to create a solid foundation for future growth, andworking not only to enhance individual businesses but also to integrate services and systems, thereby
yielding considerable synergies to drive future growth.
With the aim of maximizing Group synergies to expand the scope of its operations, SECOM­continues to promote the “ALL SECOM” concept, which focuses on rallying Group strengths to create
uniquely SECOM systems and services that enhance convenience and comfort and deliver security
and peace of mind, thereby ensuring that SECOM remains an ever-present and trusted part of life forcustomers everywhere.
SECOM has expanded into 19 countries and territories outside of Japan, providing security
services, fire protection services, medical services and geographic information services customized
to reflect local needs and sensibilities. SECOM continues working to further strengthen and growits overseas operations.

Residential Use:

SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
around-the-clock ­intrusion- and fire-prevention services, emergency call services,
gas leak monitoring and medical emergency call ­services. SECOM Home Security
G-Custom combines these features with other useful services, including aFire Protection Services
Fire Alarm Systems
This business encompasses the assembly, installation and sale of a broad rangeof equipment and systems, including automatic fire alarm systems, environmental monitoring systems, and fire and smoke control systems, suited to buildingsof varying sizes and uses, from homes to large-scale ­commercial and industrial
facilities.
Fire Extinguishing Systems
SECOM offers an extensive lineup, including fire sprinklers and other water fire
extinguishing systems, foam fire extinguishing systems, dry chemical fire extinguishing systems and inert gas fire extinguishing systems, for applications­ranging from office buildings to chemical plants and tunnels.
Maintenance Services
This business centers on inspection, maintenance and repair services, as well
as around-the-clock on-line monitoring and other services provided through a­customer services center.
OthersThis category comprises the installation and maintenance of parking lot control
systems and the assembly and sale of printed circuit boards for manufacturers inother industries, including medical and electronics equipment.

87

SECOM Annual Report 2013

Static Guard Services

Static guard services are provided for facilities where customer needs are best
served by professionally trained on-site personnel.

Armored Car Services

Subscriber

PoliceDept.

SECOM provides armored car services for the collection and ­transportation of
cash and other valuables.

SECOM AED Package Service

Fire
Dept.
Gas
Company• Alert emergency
services asnecessary

Alert using
1 telephone

3 Dispatch SECOM emergency

circuits

response personnel

SECOM
Emergency
Depot

SECOM
Control Center

2 Alert SECOM

emergency
response personnel

storage service for important personal data and information on other services
available from Group-selected collaborating companies.
SECURITY SYSTEMS FOR CONDOMINIUMS AND APARTMENTS
SECOM provides comprehensive building ­management functions forcondominiums and total safety with a centralized ­security sys­tem for each unit
in the building. SECOM’s menu includes services for small-scale apartments.
SECOM REMOTE MONITORING FOR SENIORSSECOM Remote Monitoring for Seniors bundles basic services, including fire
protection, emergency alert, medical emergency alert, everyday monitoring andconsulting on health-related matters, with a safety confirmation service whereby
SECOM staff check regularly by calling or visiting.
SECOM MY DOCTOR PLUS
SECOM My Doctor Plus is an emergency medical alert system for seniors
featuring an exclusive portable device that incorporates a GPS locator and acellular phone. Whether indoors or out, the device, when activated, sends anemergency signal to SECOM. If requested, SECOM dispatches emergency
response personnel. If deemed necessary, SECOM staff also contacts emergency

Medical Services
HOME MEDICAL SERVICESSECOM’s medical services for patients at home include pharmaceutical services,encompassing the preparation and delivery of prescription pharmaceuticals, andhome nursing services provided through visiting nurse stations. SECOM also
provides consulting and support services for physicians opening home medicalcare clinics.
HOME-BASED PERSONAL CARE SERVICESSECOM provides patients recovering at home with caregivers to assist withpersonal hygiene, bathing, exercise and other daily activities, as well as provide
light housekeeping.
SECOM UBIQUITOUS ELECTRONIC MEDICAL REPORT (EMR)
SECOM Ubiquitous EMR is a medical report system for home medical care aimed
at clinics and small and medium-sized hospitals. The system enables the sharingof data among members of the home-care team, including the primary
physician, visiting nurse and pharmacy.
Hospi-net
Hospi-net, a remote image diagnosis support service, transmits magnetic
resonance imaging (MRI), computerized tomography (CT) and other images to
SECOM’s Hospi-net center, where ­diagnostic experts examine them and provide
consultation to the primary physician.
MY SPOONMy Spoon is a robot that enables people with impaired upper body mobility to
eat with minimal assistance. This is the first robot of its kind in Japan.
RESIDENCES FOR SENIORS AND NURSING HOMESSECOM manages the Sacravia Seijo, Royal Life Tama, Comfort Garden Azamino
and Comfort Hills Rokko residences for seniors and the Alive Care Home seriesof nursing homes.
SECOM Health Care CLUBSECOM Health Care Club is a membership-based club that provides accessto a variety of health management services, including testing with a PET/CT
scanner. The club is offered through an alliance with Yotsuya Medical Cube,
a cutting-edge clinic in Tokyo.

services and sends preregistered emergency information to the subscriber’s
device, thereby ensuring it is immediately available to ambulance attendants
and hospital staff. Other services include telephone health consultation.
SECOM will also act as go-between with nursing care providers for individuals
who have independently contracted care services.

Large-Scale Proprietary Security Systems

TOTAX ZETATOTAX ZETA integrates networking capabilities and a security system into acomprehensive local control ­system for industrial ­complexes and buildings.

COCO-SECOM

COCO-SECOM is an innovative system that uses signals from Global
Positioning System (GPS) satellites and cellular telephone base stations tolocate moving objects, such as people, vehicles and property. As an option,customers can also request to have emergency response personnel dispatchedto the location of the object or an emergency alert relayed to a ­predetermined
telephone number.

Insurance Services
SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that f­ eatures
reduced premiums for subscribers to commercial security systems.
SECOM ANSHIN MY HOME
SECOM Anshin My Home is a comprehensive fire insurance policy that­features reduced premiums for subscribers to home security systems.
MEDCOM
MEDCOM is an unrestricted treatment policy that covers the cost of cancer
treatment not covered by Japan’s national health insurance scheme, as well as
the patient’s portion of the cost of medical care covered by the national healthinsurance scheme. MEDCOM also provides hospital referrals and ­treatmentrelated ­consulting services.
SECOM ANSHIN MY CAR
SECOM Anshin My Car is a comprehensive automobile insurance policy that
includes on-site emergency services in the event of an accident, as well as
discounts for drivers without a traffic violation history or on cars equippedwith antitheft devices.

Geographic Information Services
PasCAL Series
Designed for local governments, the PasCAL series of comprehensive GIS
services facilitates the effective use of GIS in a variety of situations.
MarketPlanner Series
The MarketPlanner series uses a variety of data sorting and presentation­methods to support the efforts of growing companies to establish area
­marketing strategies.
Safe Route Mapping Service
This service helps companies ensure their employees are able to reach homesafely and assists crisis management efforts in the event of a major
earthquake. A version of this service is also available to individuals.

The SECOM AED Package Service is a full-service package encompassing
leasing and maintenance of emergency lifesaving kits featuring automatedexternal defibrillators (AEDs) to non-medical professionals.

Merchandise

SECOM CCTV SYSTEMThe SECOM CCTV system is a multifunctional, cost-effective closed-circuit­surveillance camera system. The system provides stable monitoring evenin places where insufficient light makes clear images difficult and allows the
combined use of digital and analog cameras. It is also capable of detecting
attempts to disable or destroy the camera.
SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
SESAMO SERIESThe SESAMO series comprises access-control systems for use in ­corporate
offices, factories, parking facilities and any other security-sensitive areas.
These systems employ such technologies as contactless IC pass cards,
magnetic cards, personal identification numbers, f­ingerprint identificationand palm vein identification.
TOMAHAWK SERIESThe Tomahawk series is an extensive lineup of innovative ­extinguishingsystems, including Tomahawk Mach II residential-use fire extinguisher
and Tomahawk III high-speed automated fire extinguishing system withgas suppression.
PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat­resistance and performance.
SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
LASER SENSOR
Laser Sensor is an external monitoring sensor that uses a laser beam tofacilitate effective detection of intrusions over a broad area. The sensor is
flexible and can be programmed to accommodate various monitoring areas.

Real Estate Development and Sales
REAL ESTATE DEVELOPMENT AND SALESSECOM offers Glorio condominiums.

Information and Communication Related and Other Services
DATA CENTERS
Robust facility construction, stable electric power supplies, dependable
networks and top-grade SECOM security enable SECOM to provide safe
storage for information assets, as well as a variety of other services.
LARGE-SCALE DISASTER RESPONSE SERVICESSECOM provides solutions encompassing everything from services that
optimize companies’ preparedness for disasters to services that assist
companies when disaster strikes and during post-disaster reconstruction.
These include SECOM Safety Confirmation Service, which helps companies
confirm the safety of employees in the event of a disaster, as well as to gather
and share crucial information on conditions on the ground.
INFORMATION SECURITY SERVICESSECOM provides a variety of services designed to protect subscribers’
information against cyber attacks and other dangers, including diagnosing
and analyzing network problems, monitoring for system and network viruses
and emergency on-site response services in the event an irregularity isdetected.
CLOUD-BASED SERVICES
Capitalizing on its data center, information security, computer network andother service capabilities, SECOM provides a wide range of cloud-based
services, including SECOM Anshin Eco Document Digitization Service, whichhelps improve customers’ business processes.
Secom Home Service/Seikatsu Tasuke
Secom Home Service is a suite of convenient lifestyle support services for
SECOM Home Security subscribers ranging from patrolling subscribers’ homes
when occupants are away to assistance with housekeeping. Seikatsu Tasuke is
a comprehensive suite of lifestyle and household support services.
SECOM Annual Report 201388

Directors, Audit and Supervisory Board Members andExecutive Officers

Directors

SECOM CO., LTD.

Makoto Iida

Juichi Toda

Founder

Co-Founder

ANNUAL REPORT 2013

SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Shuji Maeda

Koichi Sato

Yasuo Nakayama

Hiroshi Ito

Kazuaki Anzai

Tokyo 150-0001, Japan

President andRepresentative Director

Executive Vice President

Executive Director

Executive Director

Executive Director

http://www.secom.co.jp/

Yasuyuki Yoshida

Junzo Nakayama

Tatsuro Fuse

Kenichi Furukawa

Takaharu Hirose

Takashi Sawada

Director

Director

Director

Director

Outside Director

Outside Director

ANNUAL REPORT 2013
Year ended March 31, 2013

Audit andSupervisory
Board Members
Seiji Sakamoto
Katsuhisa Kuwahara
Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya*

Executive Officers
Shuji Maeda

Shunji Ogahara

Yasuyuki Yoshida

Takayuki Ito

Keitaro Arai

President andRepresentative Director

Managing Executive Officer

Director

Executive Officer

Executive Officer

Naohide Nakamura

Junzo Nakayama

Minoru Takaoka

Hiromichi Sonoda

Managing Executive Officer

Director

Executive Officer

Executive Officer

Toshiyuki Mukai

Tatsuro Fuse

Hideo Morishita

Hiroshi Ishikawa

Managing Executive Officer

Director

Executive Officer

Executive Officer—the Social System Industry —Masahiro Takeda

Kenichi Furukawa

Tsuneo Komatsuzaki

Yoichi Sugimotoby providing comprehensive,

Managing Executive Officer

Director

Executive Officer

Executive Officer

integrated services and systems

Teruhisa Yoshimura

Ryohei Komatsu

Tatsuya Izumida

Managing Executive Officer

Executive Officer

Executive Officer

that make life more secure,

Koichi SatoIn response to changing customer
needs, SECOM is working to

Executive Vice President

Yasuo Nakayama

realize its vision for the future

Executive Director

Hiroshi Ito
Executive Director

Kazuaki Anzaiconvenient and comfortable.

Executive Director*Outside(As of July 31, 2013)

Printed in Japan

89

SECOM Annual Report 2013

Directors, Audit and Supervisory Board Members andExecutive Officers

Directors

SECOM CO., LTD.

Makoto Iida

Juichi Toda

Founder

Co-Founder

ANNUAL REPORT 2013

SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Shuji Maeda

Koichi Sato

Yasuo Nakayama

Hiroshi Ito

Kazuaki Anzai

Tokyo 150-0001, Japan

President andRepresentative Director

Executive Vice President

Executive Director

Executive Director

Executive Director

http://www.secom.co.jp/

Yasuyuki Yoshida

Junzo Nakayama

Tatsuro Fuse

Kenichi Furukawa

Takaharu Hirose

Takashi Sawada

Director

Director

Director

Director

Outside Director

Outside Director

ANNUAL REPORT 2013
Year ended March 31, 2013

Audit andSupervisory
Board Members
Seiji Sakamoto
Katsuhisa Kuwahara
Ken Tsunematsu*
Hideki Kato*
Kenichi Sekiya*

Executive Officers
Shuji Maeda

Shunji Ogahara

Yasuyuki Yoshida

Takayuki Ito

Keitaro Arai

President andRepresentative Director

Managing Executive Officer

Director

Executive Officer

Executive Officer

Naohide Nakamura

Junzo Nakayama

Minoru Takaoka

Hiromichi Sonoda

Managing Executive Officer

Director

Executive Officer

Executive Officer

Toshiyuki Mukai

Tatsuro Fuse

Hideo Morishita

Hiroshi Ishikawa

Managing Executive Officer

Director

Executive Officer

Executive Officer—the Social System Industry —Masahiro Takeda

Kenichi Furukawa

Tsuneo Komatsuzaki

Yoichi Sugimotoby providing comprehensive,

Managing Executive Officer

Director

Executive Officer

Executive Officer

integrated services and systems

Teruhisa Yoshimura

Ryohei Komatsu

Tatsuya Izumida

Managing Executive Officer

Executive Officer

Executive Officer

that make life more secure,

Koichi SatoIn response to changing customer
needs, SECOM is working to

Executive Vice President

Yasuo Nakayama

realize its vision for the future

Executive Director

Hiroshi Ito
Executive Director

Kazuaki Anzaiconvenient and comfortable.

Executive Director*Outside(As of July 31, 2013)

Printed in Japan

89

SECOM Annual Report 2013