April 9, 2020
Tetsuo Mukunoki
Legal Counsel
NEC Corporation
7-1, Shiba 5-chome
Minato-ku, Tokyo 108-8001
Japan
Re: NEC Corporation
Registration Statement on Form 20-F
Filed March 17, 2020
File No. 000-12713
Dear Mr. Mukunoki:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response and any amendment you may file in response
to these
comments, we may have additional comments.
Registration Statement on Form 20-F
Forward-Looking Statements, page 1
1. Please note that the safe harbor provided by the Private Securities
Litigation Reform Act
of 1995 is not available for statements contained in an initial Exchange
Act registration
statement. Please remove your reference to the safe harbor.
Item 3. Key information
Selected Financial Data, page 4
2. Please revise the weighted average number of common shares outstanding in
fiscal 2016
to reflect the effects of the ten-for-one share consolidation on October
1, 2017. Refer to
paragraphs 26 - 28 of IAS 33.
Tetsuo Mukunoki
FirstName LastNameTetsuo Mukunoki
NEC Corporation
Comapany NameNEC Corporation
April 9, 2020
April 2 2020 Page 2
Page 9,
FirstName LastName
Item 3. Risk Factors
We conduct a substantial amount of business with a concentrated customer base,
page 12
3. Disclose the reasons why you temporarily became ineligible to
participate in the bidding
process for projects with a significant number of Japanese government
agencies and local
governments in 2016 and 2017.
Item 4. Information on the Company
Medium-Term Management Plan, page 28
4. Please describe any reasonably known trends or uncertainties that you
have experienced,
or may experience, in implementing your Medium-Term Management Plan
due
to COVID-19, specifically any material resource constraints in
implementing this plan.
Item 5. Operating and Financial Review and Prospects
Introduction, page 37
5. We note that you revised your segment structure during fiscal 2019 and
then again in
fiscal 2020. Please include a comprehensive discussion of the reasons
for each of these
changes. In this regard, explain further the changes to your internal
organization during
fiscal 2019, why such changes were made and how they impacted the
composition of your
operating segments. In addition, clarify what lead to additional
changes in your internal
organization in fiscal 2020 and how those changes further impacted
your operating
segments.
Key Components of Results of Operations, page 39
6. For each of the material business segments that you describe, please
disclose that
segment s reliance on a single or few customers. In this regard, you
state on page 12 that
a substantial portion of your revenues are generated by government
entities and NTT
group. Additionally, to the extent that your business is substantially
dependent on a
contractual arrangement with a significant customer, please identify
that customer and file
the contract as an exhibit to your amended registration statement.
7. Please describe how COVID-19 is reasonably expected to affect your
financial condition,
key performance metrics and results of operations. In this regard,
while we note that
during the nine months ended December 31, 2019, revenue increased
6.9%, if it is
reasonably likely that your revenues will decline or otherwise be
materially adversely
affected by the COVID-19 pandemic for the year ended March 31, 2020,
you must
describe these material adverse effects. Please refer to CF Disclosure
Guidance: Topic
No. 9 (March 25, 2020) for additional guidance.
Tetsuo Mukunoki
FirstName LastNameTetsuo Mukunoki
NEC Corporation
Comapany NameNEC Corporation
April 9, 2020
Page 9,
April 3 2020 Page 3
FirstName LastName
Item 5. Operating and Financial Review and Prospects
Recent Developments, page 44
8. Please describe if, and how, remote work arrangements have adversely
affected your
ability to maintain operations, including financial reporting systems,
internal control over
financial reporting and disclosure controls and procedures. In this
regard we note your
initiative to promote telework and staggered work hours
(https://www.nippon.com/en/news/yjj2020021800235/nec-promoting-teleworking-to-
avoid-virus-infections.html). Please describe any challenges you
anticipate to maintain
controls if these arrangements continue for an extended period of
time.
Segment Analysis, page 51
9. You state that while Public Infrastructure revenues benefited from
higher sales from large-
scale projects in the aerospace and defense sector, this was
substantially offset by the
decrease in sales of mobile and industrial equipment by JAE. As
another example, you
indicate that while Enterprise segment profit increased from the
system implementation
service business, such profit was negatively impacted by larger
expenses for research and
development and business structure improvement costs. Where two or
more factors
contribute to a material change in reported amounts, including any
offsetting factors, the
contribution of each identified factor should be described in
quantified terms. Please
revise your disclosures throughout your operating results discussion
accordingly. Refer to
Item 5.A.1 of Form 20-F and Section III.D of SEC Release No. 33-6835.
Note 3. Significant Accounting Policies
Revenue, page F-20
10. You state that you consider variable consideration in determining the
transaction price for
your arrangements. Please revise to clarify the variable consideration
included in your
contracts (e.g. rebates, volume discounts, returns, etc.) and disclose
the methods, inputs,
and assumptions used to estimate variable consideration for each
revenue contract
category. Also, clarify for us what is included in contract
liabilities (e.g. deferred revenue,
refund liabilities, etc.). Refer to paragraph 53 and 126 of IFRS 15.
Note 9. Intangible Assets Including Goodwill, page F-37
11. You state that except for the CGUs for which an impairment loss was
recognized during
fiscal 2019, you believe it is less likely that a significant
impairment will occur even if
your assumptions change to a reasonable extent. For the CGU that was
impaired during
the year, please tell us the amount of remaining goodwill allocated to
that CGU and to the
extent material, please revise to disclose the amount by which the
unit's recoverable
amount exceeds its carrying amount. Refer to paragraph 134(f) of IAS
36.
Tetsuo Mukunoki
NEC Corporation
April 9, 2020
Page 4
Note 23. Provisions, page F-59
12. Please provide us with a comprehensive discussion of the matters included
in your "other"
class of provisions and revise your disclosures to include a description
of individually
significant matters and the expected timing of any resulting outflows of
economic
benefits. In this regard, we note your discussion of certain legal
proceedings on page 80.
Refer to paragraph 85(a) of IAS 37. Lastly, consider revising the
description of this class
to more clearly describe what it represents, such as litigation or legal
proceedings.
Note 29. Personnel Expenses, page F-63
13. Please revise to include all material expense amounts by nature that are
included in cost of
sales and selling, general and administrative expenses. In your response,
provide us with
a breakdown of the expenses included in these line items by nature. Refer
to IAS 1
paragraph 104.
General
14. Tell us the reasons why the company has chosen to voluntarily register
its common stock
under the Securities Exchange Act of 1934.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Frank Knapp, Staff Accountant, at (202) 551-3805 or
Kathleen Collins,
Accounting Branch Chief, at (202) 551-3499 if you have questions regarding
comments on the
financial statements and related matters. Please contact Michael C. Foland,
Attorney-Advisor, at
(202) 551-6711 or Larry Spirgel, Associate Director, at (202) 551-3815 with any
other questions.
Sincerely,
FirstName LastNameTetsuo Mukunoki
Division of
Corporation Finance
Comapany NameNEC Corporation
Office of
Technology
April 9, 2020 Page 4
cc: Takahiro Saito
FirstName LastName