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Annual Report 2014
Annual Report 2014
Year ended March 31, 2014

Table of contents

  • Page 1
    Annual Report 2014 Year ended March 31, 2014

  • Page 2
    ... non-financial information has been increasing. NEC has published an integrated annual report that provides both financial and non-financial information since 2013. By exchanging opinions with the International Integrated Reporting Council (IIRC), institutional investors, customers and other related...

  • Page 3
    ...฀Activities ฀ • ฀ ETHIBEL฀PIONEER฀&฀EXCELLENCE • MS-SRI฀Morningstar฀Socially฀ ฀ Responsible฀Investment฀Index • oekom฀rated฀as฀Prime฀ NEC฀is฀a฀signatory฀to฀the฀ United฀Nations฀Global฀ Compact. NEC Corporation Annual Report 2014...

  • Page 4
    ...฀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฀environment,฀and฀anti-corruption฀based฀on฀ the...

  • Page 5
    ...safe and secure society Address climate change and environmental preservation Provide everyone the benefits of the digital society Build reliable information and communications infrastructure What we value in our business activities Strengthening risk management and enforcing compliance Earning...

  • Page 6
    ...฀value. ฀ NEC's solutions for society Responsible฀Business฀Unit:฀ ฀Public Enterprise Telecom฀Carriers Smart฀Energy •฀Seafloor฀optical฀cables •฀Seafloor฀seismographs Space •฀Satellite฀communications •฀Earth฀observation •฀Digital฀TV฀transmission...

  • Page 7
    ... become฀a฀social฀value฀innovator฀will฀build฀a฀sound฀ foundation฀for฀the฀next฀century฀of฀our฀growth. Based฀on฀this฀belief฀and฀amid฀our฀ongoing฀business฀activities฀to฀achieve฀our฀mid-term฀management฀plan,฀NEC฀is฀promoting฀"Solutions...

  • Page 8
    ...฀its฀services฀to฀society฀for฀another฀ century?฀What฀is฀the฀ideal฀structure฀which฀enables฀an฀ organization฀to฀respond฀to฀an฀ever-changing฀market?฀ ฀ How฀do฀we฀strengthen฀our฀global฀competitiveness? 07 NEC Corporation Annual Report 2014

  • Page 9
    ...฀with฀the฀establishment฀of฀ the฀Global฀Safety฀Division฀(GSD),฀NEC฀Laboratories฀ Singapore฀in฀Singapore฀(NLS),฀and฀the฀Regional฀Retail฀ Business฀Support฀Center฀(RBSC)฀in฀Malaysia฀as฀international฀logistics฀bases. As฀a฀result฀of฀these...

  • Page 10
    ...฀system฀ Government •฀฀ Delivery฀of฀"Field฀Communication฀System"฀to฀Ground฀Self-Defense฀฀ Force฀ Government •฀฀ Build฀a฀common฀station฀network฀utilizing฀SDN฀at฀Tokyo฀Station,฀฀ for฀JR฀East Companies 09 NEC Corporation Annual Report 2014

  • Page 11
    ...2013,฀we฀also฀launched฀NEC฀ Laboratories฀Singapore฀(NLS)฀to฀develop฀and฀test฀ advanced฀safety-related฀and฀other฀solutions,฀based฀on฀ collaboration฀with฀local฀universities,฀research฀institutions฀ and฀enterprises. NEC Corporation Annual Report 2014...

  • Page 12
    ...฀to฀link฀the฀overseas฀regional฀headquarters฀ with฀offices฀in฀Japan.฀We฀also฀employed฀offshore฀services฀from฀India,฀reinforced฀risk฀analysis฀for฀new฀orders,฀ and฀conducted฀project฀management฀training. 11 NEC Corporation Annual Report 2014

  • Page 13
    ...demand฀for฀advanced฀social฀ infrastructure,฀especially฀in฀Asia. We฀also฀plan฀to฀accelerate฀efforts฀at฀developing฀ locally฀led฀businesses,฀supported฀by฀the฀strong฀base฀in฀ Singapore.฀In฀fiscal฀2015,฀we฀will฀build฀on฀our฀Singaporebased...

  • Page 14
    ...฀net฀income Cash฀dividends At year-end: Total฀assets Owner's฀equity Return฀on฀equity Owner's฀equity฀ratio Interest-bearing฀debt Debt-equity฀ratio฀(times Number฀of฀consolidated฀subsidiaries Non-financial฀indicators Number฀of฀employees Ratio฀of฀outside...

  • Page 15
    ...Business Activities for Value Creation 710.7 695.9 27.8% 0 600.0 26.9% 25.7% 27.5% -60.0 -3.6% 300.0 -110.3 -120.0 2010 2011 2012 2013 2014 0 2010 2011 2012 2013 2014...1,000 0 2010 2011 2012 2013 2014 0 2010 2011 2012 2013 2014 NEC Corporation Annual Report 2014 14

  • Page 16
    AT฀A฀GLANCE NEC฀Corporation฀and฀Consolidated฀Subsidiaries Net฀sales,฀operating฀income฀(loss)฀and฀composition฀of฀sales฀are฀financial฀results฀for฀the฀year฀ended฀March฀31,฀2014. PUBLIC฀BUSINESS NET SALES OPERATING INCOME MAJOR PRODUCTS AND SERVICES ...

  • Page 17
    ...,฀Ltd. NEC฀Embedded฀Products,฀Ltd. NEC฀Fielding,฀Ltd. MAJOR CONSOLIDATED SUBSIDIARIES NEC฀Energy฀Devices,฀Ltd. NEC฀Energy฀Solutions,฀Inc. NEC฀CASIO฀Mobile฀Communications,฀Ltd. NEC฀Lighting,฀Ltd. NEC฀Nexsolutions,฀Ltd. NEC Corporation Annual Report 2014 16

  • Page 18
    ... an฀SDN-based฀"common฀station฀network"฀in฀Tokyo฀ Station,฀built฀for฀the฀East฀Japan฀Railway฀Corporation฀ (JR฀East). In฀the฀medical฀sector,฀we฀enhanced฀the฀lineup฀of฀our฀ MegaOak฀series฀of฀electronic฀medical฀records฀products฀ to฀meet...

  • Page 19
    ...in฀June฀of฀2014,฀and฀ ฀ plan฀to฀expand฀sales฀to฀power฀plants฀and฀factories฀ worldwide.฀In฀cyber฀security,฀the฀Global฀Safety฀Division฀ established฀in฀Singapore฀initiated฀participation฀in฀local฀ public฀safety฀sector฀field฀tests.฀We...

  • Page 20
    ...฀ platform฀for฀Asahi฀Kasei฀Corporation,฀to฀analyze฀business฀data฀in฀real-time. In฀the฀retail฀and฀services฀sector,฀NEC฀provided฀headquarter฀and฀store฀systems฀for฀Halalink฀Worldwide฀(M)฀ Sdn฀Bhd,฀a฀major฀retailer฀in฀Malaysia฀opening...

  • Page 21
    ...Sales฀and฀technological฀support฀ •฀Personnel฀training IT LCM SERVICE Operation฀ and฀ maintenance Export and localization of expertise gained in Japan Global expansion APAC Introduction฀ and฀Expansion LCM฀:฀Life฀Cycle฀Management NEC Corporation Annual Report 2014...

  • Page 22
    ...,฀ NEC฀joined฀with฀Sumitomo฀Corporation฀and฀NTT฀Communications฀Corporation฀in฀building฀communications฀ infrastructure฀in฀Myanmar,฀and฀delivered฀LTE฀microcell฀ compact฀wireless฀base฀stations฀to฀฀ Russia's฀Scartel฀LLC. In฀the฀TOMS฀business...

  • Page 23
    ...฀sectors,฀ such฀as฀electric฀power฀and฀logistics฀companies,฀by฀ leveraging฀NEC's฀global฀network฀as฀we฀aim฀to฀capture฀ a฀major฀share฀of฀the฀international฀market. In฀SDN฀business,฀momentum฀to฀deploy฀the฀solution฀ is฀building฀among...

  • Page 24
    ...,฀reduce฀labor฀and฀improve฀efficiency฀for฀customers,฀ while฀at฀the฀same฀time฀creating฀new฀value฀based฀on฀ICT. Shinichi Shoji Executive฀Vice฀President Fiscal 2014 Performance and Main Accomplishments In฀the฀system฀platform฀business,฀sales฀were...

  • Page 25
    ...฀subsidiaries.฀In฀addition,฀in฀response฀to฀ our฀customers'฀investments฀in฀areas฀of฀growth฀such฀as฀ cloud฀platforms฀and฀big฀data,฀we฀are฀enhancing฀the฀ "NEC฀Solution฀Platforms"฀product฀line,฀which฀provides฀ value-added,฀solution-based...

  • Page 26
    ... and Economic Growth Official Development Assistance (ODA) from Japan NEC฀formed฀a฀consortium฀with฀Sumitomo฀Corporation฀ and฀NTT฀Communications฀Corporation.฀The฀consortium฀ closed฀a฀contract฀with฀Myanmar's฀Ministry฀of฀Communications฀and฀Information...

  • Page 27
    ... of social solutions utilizing ICT solutions and contribute to infrastructure development in emerging countries going forward. II Business Activities for Value Creation Awarded the 42nd ITU-AJ Award, International Cooperation Field Accomplishment Prize NEC Corporation Annual Report 2014 26

  • Page 28
    ..."฀servers฀and฀"iStorage฀ •฀฀ Mobilise฀emergency฀stockpiles •฀฀ Share฀disaster฀information AHA Centre Base for sharing disaster information among ASEAN member countries NEC฀Indonesia฀employees฀who฀oversaw฀the฀project 27 NEC Corporation Annual Report 2014

  • Page 29
    ...secure฀ ฀ travelling฀experience. CTB&NWFB฀vehicles฀that฀run฀in฀Hong฀Kong A฀smartphone฀app฀to฀search฀bus฀routes฀and฀ estimated฀arrival฀times A฀display฀in฀the฀bus฀informing฀passengers฀of฀the฀ next฀stop NEC Corporation Annual Report 2014 28

  • Page 30
    ...systems฀business฀unit฀of฀A123฀Systems,฀ LLC.,฀from฀the฀Wanxiang฀Group฀Corporation฀of฀China฀in฀ May฀2014฀and฀established฀NEC฀Energy฀Solutions,฀Inc.,฀ based฀in฀Massachusetts,฀U.S.฀A123฀Energy฀Solutions฀ has฀a฀world-class฀track฀record...

  • Page 31
    ... Data Center NEC Kanagawa Data Center NEC Yokohama Data Center NEC Kansai Data Center NEC Kansai 2nd Data Center NEC Hiroshima Data Center II Business Activities for Value Creation NEC Tokyo Data Center NEC Kawasaki Data Center NEC Miyazaki Data Center NEC West Japan Data Center (for฀financial...

  • Page 32
    ... Provision of information to station personnel Congestion detection using IP cameras Movable displays Common Station Network NEC UNIVERGE PF Series Thanks to the SDN-based common station network, it is now possible to quickly implement ideas for new services 31 NEC Corporation Annual Report 2014

  • Page 33
    .../ Employees, etc. Build trust through communication An information society friendly to humans and the earth Provide active disclosure and feedback NEC Group Core Values (What we value and base our behavior on) Daily work Fiscal year plan Mid-term growth plan NEC Group Vision 2017 NEC Group Code...

  • Page 34
    ...chain฀is฀needed Furthermore,฀based฀on฀this฀dialogue฀with฀CRF,฀a฀ review฀by฀the฀management฀planning฀and฀IR฀divisions฀ some฀days฀later฀discussed฀an฀assessment฀index฀related฀ to฀"Social฀Value฀Innovation." 33 NEC Corporation Annual Report 2014

  • Page 35
    ... company roles in climate change saw NEC (China) Co., Ltd. give a presentation, speaking about NEC's environmental management philosophy and introducing an energy reduction solution, and discuss issues with representatives from Japan, China and South Korea. The 8th International CSR Forum in China...

  • Page 36
    ...฀to฀coach฀them)฀have฀been฀extended฀ to฀three฀years,฀while฀seminars฀are฀held฀for฀supervisors฀ (managers฀and฀coaches)฀and฀there฀is฀an฀email฀magazine฀issued฀with฀information฀useful฀for฀development. 35 NEC Corporation Annual Report 2014

  • Page 37
    ...฀the฀organization. III Business Foundation to Support Value Creation "NEC Nature Quest" for NEC Group New Employees to Nurture CSR Awareness NEC฀has฀been฀working฀on฀a฀biodiversity฀garden฀project฀ "NEC฀Nature฀Quest"฀in฀Shiba฀Park,฀near฀the฀NEC฀headquarters...

  • Page 38
    ...฀a฀ leading฀global฀company฀under฀the฀NEC฀Group฀Vision฀ 2017.฀In฀fiscal฀2014,฀we฀continued฀on฀from฀the฀previous฀ year฀with฀more฀specific฀details฀and฀implemented฀them฀ during฀training฀at฀overseas฀subsidiaries. The฀program฀has฀two...

  • Page 39
    ...self-declaration฀type฀of฀ISO฀(International฀ Standards฀Organization)฀environmental฀label฀(Type฀II). III Business Foundation to Support Value Creation Scope 3 Categories (excerpt) 1% Scope 2 NEC's direct emissions Scope 3 4% NEC's indirect emissions through electricity use...

  • Page 40
    ...change฀cooling฀technology. Additionally,฀in฀efforts฀to฀accelerate฀global฀business,฀ NEC฀opened฀NEC฀Laboratories฀Singapore฀(NLS)฀as฀a฀ new฀global฀solution฀research฀base.฀NLS฀is฀currently฀ involved฀in฀testing฀related฀to฀public฀safety฀in...

  • Page 41
    ...฀standards฀organizations฀both฀in฀Japan฀and฀overseas.฀ The฀Company's฀external฀engagements฀involving฀intellectual฀property฀include฀licensing฀activities฀to฀reduce฀ business฀risks฀and฀expand฀business฀opportunities. NEC Corporation Annual Report 2014 40

  • Page 42
    ...officers฀and฀general฀ managers฀of฀business฀units,฀etc. (Corporate฀officers) Business฀units/corporate฀staff/affiliate฀companies BUSINESS EXECUTION Internal฀audits Form฀of฀Organization Chair฀of฀the฀Board฀of฀Directors Directors Corporate฀ Auditors*1 No.฀of...

  • Page 43
    ...meetings฀of฀the฀Board฀ of฀Directors,฀including฀tours฀of฀NEC฀and฀subsidiary฀business฀sites฀and฀exhibitions. Outside฀directors฀visited฀the฀Kofu฀factory฀of฀NEC฀Computertechno,฀Ltd.฀(currently฀NEC฀Platforms,฀Ltd.) NEC Corporation Annual Report 2014...

  • Page 44
    ... assessment฀program฀to฀local฀subsidiaries฀and฀manufacturing฀contractors฀in฀China,฀Thailand฀and฀India. An฀Inno฀Community฀ Development฀Organisation฀ instructor฀giving฀guidance Assessors฀on฀ ฀ a฀factory฀inspection 43 NEC Corporation Annual Report 2014

  • Page 45
    ...฀Board฀meetings,฀communicating฀with฀ management฀as฀well฀as฀internal฀and฀outside฀directors,฀effectively฀coordinating฀with฀the฀internal฀ audit฀division฀and฀independent฀auditors,฀and฀checking฀for฀any฀legal฀compliance฀issues. As฀a฀corporate...

  • Page 46
    ...฀ 2010฀ 2013฀ 2014฀ Corporate฀Auditor฀(full฀time) Joined฀NEC฀Corporation General฀Manager,฀Corporate฀Finance฀Division Vice฀President Corporate฀Auditor Satoshi Itoh *2 [Independent฀Corporate฀Auditor]*3 Corporate฀Auditor Certified฀Public฀Accountant 1970฀ 1978...

  • Page 47
    ...Ltd. President฀and฀CEO,฀Komatsu฀Ltd. Chairman฀of฀the฀Board,฀Komatsu฀Ltd. Member฀of฀the฀Board,฀NEC฀Corporation III Business Foundation to Support Value Creation Director,฀Sumitomo฀Corporation Managing฀Director,฀Sumitomo฀Corporation Senior฀Managing฀Director...

  • Page 48
    BUSINESS฀EXECUTION฀STRUCTURE (As฀of฀July฀1,฀2014) At฀NEC,฀the฀president,฀chief฀officers,฀corporate฀officers฀in฀charge฀of฀business฀units฀and฀other฀officers฀interact฀actively฀ in฀exchanging฀information฀and฀discussion,฀to฀enhance฀management...

  • Page 49
    ...of Global Business Unit Shunichiro Tejima Executive Vice President In charge of Telecom Carrier Business Unit In฀fiscal฀2014,฀as฀part฀of฀globalizing฀NEC's฀"Solutions฀for฀Society,"฀ we฀established฀a฀Global฀Safety฀Division฀and฀NEC฀Laboratories฀ Singapore,฀to...

  • Page 50
    ....฀NEC฀will฀ aggressively฀promote฀locally-led฀business฀in฀public฀safety,฀smart฀ energy฀and฀SDN/TOMS,฀as฀well฀as฀trying฀to฀propel฀new฀innovations฀ through฀the฀newly฀established฀NEC฀Laboratories฀Singapore. 49 NEC Corporation Annual Report 2014

  • Page 51
    ... 57 Consolidated Statements of Cash Flows Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥103 = U.S.$1. 2. Please refer to the separate publication "Annual Report 2014 (Financials)" for details of "Note XX" on pages 51 to 58. IV Corporate Data NEC...

  • Page 52
    CONSOLIDATED BALANCE SHEETS NEC Corporation and Subsidiaries March 31, 2013 and 2014 Thousands of U.S. Dollars (Note 1) 2014 2014 Millions of Yen ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 19) ...Short-term investments (Note 19) ...Trade notes and accounts receivable (Note 19) ......

  • Page 53
    ... stock - at cost: 6,381 thousand shares in 2013 and 6,515 thousand shares in 2014 ...Total shareholders' equity ...ACCUMULATED OTHER COMPREHENSIVE INCOME (Note 3): Valuation difference on available-for-sale securities ...Deferred gains or losses on hedges ...Foreign currency translation adjustments...

  • Page 54
    ... (Note 1) PER SHARE OF COMMON STOCK (Note 23): Basic net income (loss) ...Diluted net income ...Cash dividends applicable to the year ...See notes to consolidated financial statements. ¥ (42.44) - - ¥ 11.71 - 4.00 ¥ 12.99 - 4.00 $ 0.13 - 0.04 53 NEC Corporation Annual Report 2014

  • Page 55
    ... of U.S. Dollars (Note 1) 2014 2014 Millions of Yen 2012 2013 INCOME (LOSS) BEFORE MINORITY INTERESTS ...OTHER COMPREHENSIVE INCOME (Note 16): Valuation difference on available-for-sale securities...Deferred gains or losses on hedges ...Foreign currency translation adjustments ...Share of other...

  • Page 56
    ... OF CHANGES IN NET ASSETS NEC Corporation and Subsidiaries Years Ended March 31, 2012, 2013 and 2014 Thousands Shareholders' equity Outstanding number of shares of common stock Common stock Capital surplus Retained earnings Treasury stock Total BALANCE, APRIL 1, 2011 ...Net income (loss...

  • Page 57
    ... on hedges Foreign currency translation adjustments Remeasurements of defined benefit plans Stock subscription rights Total Minority interests Total net assets $177,990 $(10,447) $(68,155) $ - $ 99,388 $- $1,218,262 $8,117,922 327,592 (100,913) (340) 30 14,087 IV Corporate Data 154,942...

  • Page 58
    ... accounts payable ...Others-net ...Sub total ...Interest and dividends received ...Interest paid ...Income taxes paid ...Proceeds from insurance income ...Net cash provided by operating activities ...See notes to consolidated financial statements. ¥ 83,857 57 NEC Corporation Annual Report 2014

  • Page 59
    ...of Yen 2012 2013 2014 Thousands of U.S. Dollars (Note 1) 2014 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment ...Proceeds from sales of property, plant and equipment ...Acquisitions of intangible assets ...Purchases of investment securities ...Proceeds from sales of...

  • Page 60
    NON-FINANCIAL SECTION NEC Corporation and Consolidated Subsidiaries For the years ended March 31, 2013 and 2014 2013 2014 Units People People People People People People People % % Number of employees by region Total ...Japan ...Greater China ...Asia Pacific ...EMEA ...North America ...Latin ...

  • Page 61
    ...ku, Tokyo 108-8001, Japan Established July 17, 1899 Number of Employees 100,914 (NEC Corporation and consolidated subsidiaries) (As of March 31, 2014) Organization Chart President Board Business Innovation Unit System Integration, Services & Engineering Operations Unit Supply Chain Management Unit...

  • Page 62
    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 63
    ... responsibility (CSR) information available on its website. The CSR section contains details of NEC's approach to CSR and activities based on seven CSR initiatives. Division in Charge CSR฀Promotion฀and฀Social฀Contributions฀Office, Corporate Communications Division Investor Relations (IR...

  • Page 64
    7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan Telephone: +81-3-3454-1111 Annual Report 2014 ISSN 0910-0229 ©NEC Corporation 2014 Printed in Japan