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Annual Report 2015
Year ended March 31, 2015

Table of contents

  • Page 1
    Annual Report 2015 Year ended March 31, 2015

  • Page 2
    ... The NEC Way Global environment Stakeholders Customers/ Shareholders and Other Investors/ Business Partners/ Local Communities/ Employees, etc. Build trust through communication An information society friendly to humans and the earth Provide active disclosure and feedback NEC Group Core Values...

  • Page 3
    ... growth Core ICT assets Big Data SDN Cloud platform Cyber security, etc. Equality New values and market creation Closing the social divide and eliminating inequality Corporate Key Message: Orchestrating a brighter world 6 NEC fuses innovative ICT technology, services and knowledge cultivated...

  • Page 4
    ... Subsidiaries Reference Guidelines • Global Reporting Initiative (GRI) "Sustainability Reporting Guidelines 4.0" • United Nations Global Compact • ISO 26000 Business Foundation to Support Value Creation 35 Corporate Governance 38 Messages from Outside Director and Audit & Supervisory Board...

  • Page 5
    ... our operations and build relationships of trust. One of the ongoing practices began in 2005, when NEC became a signatory to the United Nations Global Compact (UNGC). NEC continues to conduct corporate business activities in compliance with the ten principles in the areas of human rights, labor, the...

  • Page 6
    ... amounts of data are processed and analyzed in real Seven Themes for Social Value Creation Quality of Life Sustainable Earth Work Style Real time Dynamic Remote Safer Cities & Public Services Industry Eco-System Communication Lifeline Infrastructure 05 NEC Corporation Annual Report 2015

  • Page 7
    ... Games (Tokyo 2020). Tokyo 2020 is an opportunity for Japan to evolve into a mature society, and also represents a chance for NEC to accelerate its transformation into a social value innovator through contributions primarily to Tokyo 2020's Specialist Public Safety Equipment & Software and Network...

  • Page 8
    ...an affluent society, a society that ensures safety, security, efficiency and equality. Mid-term Management Policy (1) Focus on Solutions for Society Transformation into a "Social Value Innovator" • Focus management resources on businesses that advance social infrastructure through ICT • Create...

  • Page 9
    ... Toshima City Office, Tokyo Safety/ Security Cloud Energy *1 vCPE:virtualized Customer Premises Equipment *2 NFV:Network Functions Virtualization (2) Focus on Asia, Promotion of "Locally-led" Businesses The NEC Group is expanding international business with an aim to establish a foundation for...

  • Page 10
    ... Convention Center l Implemented solutions for SMRT Corporation to enhance bus service excellence l Signed MOU with Singapore Economic Development Board to collaborate on cyber security, smart energy, health care and IoT l Cooperating with KT Corporation in SDN field l Awarded an order to build New...

  • Page 11
    ... resources from these initiatives into growth fields, such as businesses related to the Social Security and Tax Number System and the Tokyo 2020 Olympic and Paralympic Games, thereby achieving more efficient business management. In fiscal 2016, we will set the course of direction that the NEC Group...

  • Page 12
    ... Executive Vice President, CFO (Chief Financial Officer) and Member of the Board Fiscal 2015 Performance The NEC Group recorded consolidated net sales of ¥2,935.5 billion for fiscal 2015, a decrease of ¥107.6 billion or 3.5% year on year. While the Public business saw an increase in sales...

  • Page 13
    ...the previous fiscal year, the acquisition of trust beneficiary rights set to land and buildings of the NEC Group's Tamagawa business facilities was offset by cash inflows from the gain on sales of subsidiaries and affiliates' stocks. As a result, free cash flows, the sum of cash flows from operating...

  • Page 14
    ...'s equity ratio (%) Interest-bearing debt ...Debt-equity ratio (times) ...Number of consolidated subsidiaries ...Number of employees ...CO2 emissions reduction by providing IT solutions (thousand tons) ...Improvement in energy efficiency of products (%) ... 13 NEC Corporation Annual Report 2015

  • Page 15
    ... n Established NEC Management Partner, Ltd. in a reorganization of four staff service subsidiaries n Completed acquisition of storage system business to power companies and established NEC Energy Solutions, Inc. in North America 4,340 -9.5 Notes: 1. U.S. dollar amounts are translated from yen, for...

  • Page 16
    ... Services, System Equipment 28% Examples of Solutions by Business Sector/Industry Government: Social Security and Tax, Fingerprint Identification, Air Traffic Control, Satellite Communications/ Earth Observation, Outdoor Communication Enterprise Business Net sales Operating income Main customers...

  • Page 17
    ...& System Integration Corporation NetCracker Technology Corp. Major Consolidated Subsidiaries Enterprise Network Solutions IP Telephony Systems, WAN/Wireless Access Equipment, LAN Products Services Data Center Infrastructure, Maintenance and Support NEC Platforms, Ltd. NEC Fielding, Ltd. NEC Display...

  • Page 18
    ...9.1% 600.0 40.0 400.0 20.0 200.0 Large-scale space chamber at the Satellite Integration Center Cyber Security Factory NeoFace Monitor, PC security software using facial recognition 0 2013 2014 2015 0 2013 2014 2015 Operating Income Operating Income Ratio 17 NEC Corporation Annual Report 2015

  • Page 19
    ... opportunities, including the Tokyo 2020 Olympic and Paralympic Games. Furthermore, we will accelerate the transformation as a service provider in the ICT field for global development, while focus on building business models that are competitive in the international market. NEC Corporation Annual...

  • Page 20
    .... Fiscal 2015 Main Accomplishments NEC provides "NEC Global Enterprise Solutions", an integrated solution based on our strong track record in Japan and prominent services. In fiscal 2015, NEC expanded its sales and services globally in addition to Japan. To Create Supported Pioneer Corporation for...

  • Page 21
    ... Security and Tax Number System; failure sign monitoring systems and demand forecasts using Big Data; and cloud services catered to customers' needs. In expanding global business, NEC sets "NEC Global Enterprise Solutions," a set of strong solutions with prominent track records in Japan, as its core...

  • Page 22
    ... In the telecom carrier business, we supply equipment mainly to telecom carriers for network implementation, along with network control platform systems and operating services. NEC's wealth of experience in large-scale network implementation and strong technical capabilities contribute to the...

  • Page 23
    ... market to grow in response to advancing network operation controls going forward. NEC will expand business with its subsidiary NetCracker Technology Corp. For telecom carrier SDN/NFV, we believe that obtaining rapid commercialization results will expand business opportunities among global telecom...

  • Page 24
    ... labor and improve efficiency for customers, while at the same time creating new value based on ICT. Shinichi Shoji Executive Vice President Fiscal 2015 Performance In the system platform business, sales were ¥728.9 billion, a decrease of 6.6% year on year, due to the special demand for corporate...

  • Page 25
    ... forward. NEC's Issues and Responses To provide strong ICT assets as a foundational business and support business units in promoting the "Solutions for Society" amid such an operating environment, the System Platform Business Unit will streamline costs and expenses by standardizing parts used in...

  • Page 26
    ...business teams will work on creating new social value as a point of customer contact in the field, and contributing to the development of a society in which people can live more prosperous lives. NEC's Branch Network Spreads Across Japan NEC Headquarters Office and Branches (64 locations) * Number...

  • Page 27
    ... Morita Executive Vice President In Charge of Global Business Unit Business Activities for Value Creation Three Keys to Achieving the Mid-term Management Policy NEC's mid-term management policy is to create a foundation for growth globally by focusing on Asia and promoting "locally-led" businesses...

  • Page 28
    ... Shinsuke Takahashi President & CEO NEC Corporation of America communication offering. The Retail solution team also enhanced their portfolio by developing a new point of sale system that integrates hardware, software and services enabling a full life-cycle management retail solution. In addition...

  • Page 29
    ... an order to build a large communications project in Saudi Arabia, and sales have increased at NEC Africa since Business Activities for Value Creation Naoki Iizuka President & CEO NEC Europe its establishment in 2011. We will further reinforce our business operations in emerging market. In Europe...

  • Page 30
    ... strategy. In this business, the Global Safety Division (GSD), established in Singapore in April 2013, is the key to achieving growth. GSD is set out for product planning and development, and sales support for the global market. GSD worked closely with NEC Laboratories Singapore, a research lab...

  • Page 31
    ... its policy for economic development. As part of the Plan Vive Digital, NEC participated in Kiosco Vive Digital, which aims to create more than 4,200 ICT rooms as Internet access points throughout Colombia. NEC was selected to participate as a project member, through the official public bid process...

  • Page 32
    ... one key area in the "Solutions for Society." We will promote a safe and secure social infrastructure for solving social issues with customers by providing a wide range of solutions that leverage SDN. Example of an SDN backup traffic control-framework for traffic control centers Normal Times Each...

  • Page 33
    ... stable supply of water without waste. NEC will continue to provide new value through smart water management, including its Water Leak Detection Service, to solve social problems related to water. Water leak sensor logger Business Activities for Value Creation NEC Corporation Annual Report 2015 32

  • Page 34
    ...lives through the comprehensive display of the service operations, the analysis and management of integrated data, and forecasts and automation based on them. The citizens now enjoy a more efficient way of using public services in their city lives. M2M sensor 33 NEC Corporation Annual Report 2015

  • Page 35
    ... Taking advantage of this opportunity, NEC called attention to the usefulness of the cameras and made a Business Activities for Value Creation NEC's Supply of Infrared Thermographic Cameras as an Important Measure against Ebola In November 2014, the Japanese government added U.S.$100 million to its...

  • Page 36
    ... units in the promotion of the company's business, toward realization of the NEC Group Vision 2017. Corporate Directors are appointed as chief officers and they function to oversee business execution by each business unit from a company-wide perspective. 35 NEC Corporation Annual Report 2015

  • Page 37
    ...understanding of the NEC Group, including tours of NEC and subsidiary business sites and exhibitions. We will continue to provide various kinds of support. Business Foundation to Support Value Creation Outside Director and A&SBMs on tour at the OCC Corporation's Submarine System Plant in Kitakyushu...

  • Page 38
    ...and reports on matters related to the status of the NEC Group's business execution, such as monitoring progress with respect to meeting budgets approved by the Board of Directors, with the aim of sharing management information and promoting execution efficiency. Status of Fiscal 2015 Chief officers...

  • Page 39
    ... of having a governance system that is best suited for the company's future vision for itself. As a member of the Board, I will continue to work in attaining sustainable growth of the NEC corporate value. Outside Director Hitoshi Ogita Business Foundation to Support Value Creation Compliance and...

  • Page 40
    ... Financial Officer) and Member of the Board After being engaged in the management of accounting and financial affairs at the business units and overseas subsidiaries, Kawashima is now in charge of the NEC Group's accounting and financial strategies. Notes: 1 NEC has notified the Tokyo Stock Exchange...

  • Page 41
    ... knowledge and specialized experience as an attorney at law in fields such as IT. (Appointed in June 2015) For further details on the Directors and Audit & Supervisory Board Members of NEC Corporation, please visit the following websites: Directors http://www.nec.com/en/global/about/executives...

  • Page 42
    ... our business model and grow these operations as a Social Value Innovator, and further pursue the NEC Group operational reforms and work on formulating the next mid-term management plan to be a leading global company. Junji Yasui Senior Executive Vice President and CSCO (Chief Supply Chain Officer...

  • Page 43
    ...Plan 2015," we aim to provide financial support for the execution of growth strategies in key areas, including SDN, Big Data, cloud, safety/security, and energy, and continue to build a foundation for business expansion. Takemitsu Kunio Senior Vice President In charge of Smart Energy Business Unit...

  • Page 44
    ... seminar on business related to Japan's upcoming Social Security and Tax Number System in March. Members of senior management also engage in dialog with shareholders through the General Meeting of Shareholders. Additionally, the IR Office holds briefings for individual investors several times a year...

  • Page 45
    ... vice president of NEC's Global Business Unit, represented the Company to share its "Solutions for Society" (such as an ID system using NEC's biometric identification technology and a broadband network system) to promote NEC's ability to improve safety, security, efficiency, and social equality with...

  • Page 46
    ... perspectives through networking with people from other companies. In line with this action plan, in fiscal 2015 NEC implemented the following policies and events aimed at providing women with career support and raising employee awareness. l Business unit manager interviews about employing women at...

  • Page 47
    ... at overseas subsidiaries in 30 countries managed by the Global Business Unit. It was in seven Business Foundation to Support Value Creation One NEC Survey (Japan) In fiscal 2015, this survey was conducted at NEC Corporation and 33 NEC Group companies in Japan. The purposes were to identify...

  • Page 48
    ... social problems. All of our employees discuss how to maximize value for customers, create opportunities to share awareness, and utilize ICT to contribute to solving social issues where customers are located. "The NEC Group Values Day:" Aimed at Maximizing Benefits for Customers and Society NEC...

  • Page 49
    ... initiatives, NEC is working toward achieving a new environmental management target for CO2 reductions that is five times greater than that for the overall CO2 emissions from our entire supply chain by fiscal 2020. Business Foundation to Support Value Creation Social Value that NEC Contributes for...

  • Page 50
    ... mixture learning Secure distribution Computing networking Security Analyze Control Integrated solutions Autonomous and adaptive control Dynamic Smart traffic Many-core parallel processing technology SDN Optical digital coherence Ultra-small wireless HW Remote Optimum water supply High...

  • Page 51
    ... expand business opportunities. NEC Corporation Annual Report 2015 Seven themes for social value innovation Customer challenges Partners (Technical cooperation) Create "Solutions for Society" Core competency Deliver solutions No.1/Only 1 technology Solution prototype Verify value with partners...

  • Page 52
    ... suppliers' CSR based on the NEC Group Procurement Policy. One aspect of that has been CSR-Process Management Reviews (CSR-PMR), which have been conducted since fiscal 2013. The reviews involve visiting suppliers' sites and conducting onsite assessments of human rights, labor, health, and safety...

  • Page 53
    ...Consolidated Statements of Cash Flows Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥120 = U.S.$1. 2. Please refer to the separate publication "Annual Report 2015 (Financials)" for details of "Note XX" on pages 53 to 60. Corporate Data NEC Corporation...

  • Page 54
    Consolidated Balance Sheets NEC Corporation and Subsidiaries March 31, 2014 and 2015 Millions of Yen Thousands of U.S. Dollars (Note 1) 2015 2015 ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 19) ... 2014 ¥ 206,637 2,322 842,308 214,395 74,431 167,626 (4,810) 1,502,909 ¥ 181,...

  • Page 55
    ... 12 and 24): SHAREHOLDERS' EQUITY: Common stock: Authorized - 7,500,000 thousand shares Issued - 2,604,733 thousand shares in 2014 and 2015 ...Capital surplus ......) 106,625 Corporate Data ACCUMULATED OTHER COMPREHENSIVE INCOME: Valuation difference on available-for-sale securities ...Deferred gains ...

  • Page 56
    ... (Note 1) 2015 2015 2013 2014 PER SHARE OF COMMON STOCK (Note 23): Basic net income ...Diluted net income ... ¥11.71 - 4.00 ¥12.99 - 4.00 ¥22.05 - 4.00 $0.18 - 0.03 Cash dividends applicable to the year See notes to consolidated financial statements. 55 NEC Corporation Annual Report 2015

  • Page 57
    Consolidated Statements of Comprehensive Income NEC Corporation and Subsidiaries Years Ended March 31, 2013, 2014 and 2015 Millions of Yen 2013 2014 2015 Thousands of U.S. Dollars (Note 1) 2015 INCOME BEFORE MINORITY INTERESTS ... ¥38,753 2,096 (845) 16,724 - 5,690 23,665 ¥62,418 ¥53,468 8,...

  • Page 58
    Consolidated Statements of Changes in Net Assets NEC Corporation and Subsidiaries Years Ended March 31, 2013, 2014 and 2015 Thousands Shareholders' equity Outstanding number of shares of common stock Common stock Capital surplus Retained earnings Treasury stock Total BALANCE, MARCH 31, 2012 ...

  • Page 59
    ... (Note 1) Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustments Remeasurements of defined benefit plans Stock subscription rights Total net assets Total Minority interests $285,767...

  • Page 60
    Consolidated Statements of Cash Flows NEC Corporation and Subsidiaries Years Ended March 31, 2013, 2014 and 2015 Millions of Yen 2013 2014 2015 Thousands of U.S. Dollars (Note 1) 2015 CASH FLOWS FROM OPERATING ACTIVITIES Income before income taxes and minority interests Depreciation ...

  • Page 61
    ... SCOPE OF CONSOLIDATION ...CASH AND CASH EQUIVALENTS, AT END OF YEAR ...NON-CASH INVESTING AND FINANCING ACTIVITIES  Finance leases ... (212,542) 1,721,975 - $1,509,433 ¥1,670 26,437 ¥1,326 - ¥781 - $6,508 -  Contribution of securities to retirement benefit trust NEC Corporation Annual...

  • Page 62
    ... by the Global Business Unit Scope: NEC Corporation and domestic consolidated subsidiaries Frequency rate: Number of deaths and injuries due to industrial accidents divided by total working hours times one million Severity rate: Number of lost working days divided by total working hours times one...

  • Page 63
    ... Unit System Integration, Services & Engineering Operations Unit Supply Chain Management Unit Corporate Sales and Sales Operations Unit Branch Offices Global Business Unit Regional Headquarters (RHQs) Public Business Unit Shares of Common Stock Issued Stock Exchange Listing Tokyo (Stock Code...

  • Page 64
    CAUTIONARY STATEMENTS: This annual report contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and business performance of NEC Corporation and its consolidated subsidiaries (collectively "NEC"). Written forward-looking statements may ...

  • Page 65
    ...website. Division in Charge CSR Promotion and Social Contributions Office, Corporate Communications Division Investor Relations http://www.nec.com/en/global/ir Posted on the NEC Investor Relations (IR) website are IR presentation materials and other documents, NEC's financial position and business...

  • Page 66
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