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Annual Report 2003
For the year ended March 31, 2003

Table of contents

  • Page 1
    Annual Report 2003 For the year ended March 31, 2003

  • Page 2
    ... companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; and fluctuations in market prices of securities...

  • Page 3
    ... assets to reflect the reduction in the statutory income tax rate due to revisions to local enterprise income tax law in Japan on introduction of a new pro-forma standard taxation system in fiscal 2003 and revisions to corporate income tax law in fiscal 1999 in Japan. Matsushita Electric Industrial...

  • Page 4
    ... and manufacturing technologies of the two companies. The new company will be the world's third largest TV-use CRT operation. 2nd Quarter Products and Technology Matsushita Develops Single-chip System LSI for Digital HDTV Matsushita developed a new system LSI for digital high-definition television...

  • Page 5
    ... five new DVD recorders, thereby significantly expanding its product lineup in this high-growth area. The new models offer such features as enhanced simultaneous record and playback functions, built-in hard disk drives (HDDs) with increased capacity, and improved connectivity with digital camcorders...

  • Page 6
    ...-, energy saving- and health-related fields. In January, and again in April 2003, Matsushita carried out comprehensive Groupwide business and organizational restructuring and implemented a new management system to achieve a transition to a new growth strategy. Under the new structure and new system...

  • Page 7
    ...Panasonic ideas for life." This slogan represents the commitment of Matsushita employees around the world, from R&D and manufacturing, to marketing and services, in providing products and services with value- added ideas, which enrich lives and advance society. In line with this slogan, the Company...

  • Page 8
    ...Headquarters reforms V-products Business domain-based structure Management focusing on cash flows Manufacturing innovations Structural Reforms "Deconstruction" Closure/ integration of mfg. bases Black-box technologies Growth Strategies "Creation" Management quality innovation Reform of sales...

  • Page 9
    .... Matsushita's wealth of black-box technologies is the driving force behind the Company's competitive position. In addition to these efforts, the Company implemented such initiatives as the closure/integration of manufacturing locations to improve profitability, reform of employment structures after...

  • Page 10
    ... of business in their respective domains, from R&D and manufacturing, to Concept of Groupwide Business and Organizational Restructuring sales. By delegating Single product line-based divisional management structure Business domain-based management structure such responsibilities, Business expansion...

  • Page 11
    ..., a new standard was implemented, whereby each business domain company pays dividends to the Headquarters at a fixed rate, based on the domain company's consolidated shareholders' equity. Under this system, business domain companies are required to pay dividends whether or not they are profitable...

  • Page 12
    ... management. At the same time, an Executive Officer System, for execution of business at various domestic and overseas Group companies, will be introduced, enabling the Headquarters to carry out corporate strategies that integrate the Group's comprehensive strengths. In addition, Matsushita...

  • Page 13
    ...we will further work to establish, under the domainbased management structure, a positive business cycle where increased sales and production result in increased earnings. As part of the Company's efforts in this respect, we are creating mid-term R&D Business Plans for each business domain, starting...

  • Page 14
    ... for digital AV equipment; multilayer printed circuit boards (ALIVH), lighttouch switches and capacitors for cellular phones; charge coupled devices (CCDs) and batteries for digital still cameras; and display panels for PDP TVs. Special Feature 1 highlights the synergy achieved between DVD recorders...

  • Page 15
    Matsushita Electric Industrial 2003 13

  • Page 16
    ...models with built-in HDDs, SD Memory Card compatibility, VCR combination units, and other advanced functions Disk drives, system LSIs and optical pickups Cell-style production enables flexible are the key devices supporting DVD recorders response to market demand 14 Matsushita Electric Industrial...

  • Page 17
    ...such key devices as optical pickup units and disk drives, Matsushita created a black-box technology-based LSI that integrates several functions, such as disk control, analog signal processing and digital video image processing, all within a single "platform" to make the DVD recorder highly adaptable...

  • Page 18
    .... In fiscal 2003, Matsushita achieved significant success Enhanced Brand Value through Competitive Products and Marketing through development and aggressive marketing of unique products, made possible through the Company's proprietary black-box technologies, most notably in V-products, which met...

  • Page 19
    Matsushita Electric Industrial 2003 17

  • Page 20
    ... Vice President (member of the Board) In charge of Design, Advertising, and Corporate Brands Enhanced Brand Value through Competitive Products and Marketing Digital manufacturing technologies and modularized components have made entry into the manufacture of electronics equipment relatively simple...

  • Page 21
    ... structure, all aimed at making overseas operations an engine for overall corporate growth." Yukio Shohtoku Executive Vice President (member of the Board) In charge of Overseas Operations procurement and production, all on a global basis. To this end, Matsushita will make full use of its black-box...

  • Page 22
    ... Automotive Systems Company Panasonic System Solutions Company Matsushita Kotobuki Electronics Industries, Ltd. AVC Networks Other Home Appliances Home Appliances Business Domains Business Domain Companies and Group Companies Home Appliances, Household Equipment and Healthcare Systems Lighting...

  • Page 23
    ...-line Communications Matsushita's fixed-line communications business encompasses four business areas: communications equipment (cordless telephones), digital imaging equipment (multifunction FAX/printer/copiers, etc.), devices (optical disk drives, etc.) and broadband and solutions (network cameras...

  • Page 24
    Cordless digital phone system capable of supporting up to eight remote handsets HDD car navigation system that fits the main unit, LCD and TV tuner neatly into the dashboard (from left) 3G "camcorder-style" cellular phone with a rotating LCD screen Compact, lightweight cellular phone for Europe ...

  • Page 25
    ... the Household Equipment In fiscal 2003, the Company enjoyed strong sales in the domestic market of safe, energy-efficient 200V IH cooking equipment. With a goal for realization of eco-conscious, comfortable living environments, Matsushita will further expand its business in new eco-related product...

  • Page 26
    ... health monitor that links patients with healthcare providers Components and Devices Air conditioner and oxygen concentrator, both of which utilize the Company's original oxygen enrichment membrane process kitchen and bath systems, but also hot water supply systems and co-generation systems...

  • Page 27
    ... to support these businesses, including components for optical communications, sheet lamination and modular printed circuit boards, where the Company is intensifying new product development efforts. As specific items for which the Company plans to expand sales, Matsushita will concentrate management...

  • Page 28
    ...increases oxygen concentration. In the future, Matsushita will apply this black-box technology to other environment-related products in order to develop new business opportunities. Matsushita discloses information of JVC and its group companies as a new "JVC" segment. JVC, a preeminent manufacturer...

  • Page 29
    ... Based on this Environmental Vision, Matsushita drafted Green Plan 2010, an action plan with specific targets to be achieved over a ten-year period. The Company attained the targets set out for fiscal 2003, the first year of the plan. fiscal 2003, the Company's Green Product development rate (sales...

  • Page 30
    ..., an air purifier, a room air conditioner and a metal halide lamp. In addition, Panasonic AVC Networks Company's Sendai Plant received the Minister of Economy, Trade and Industry Prize as a factory that excels in energy management. These, and other awards, highlight the recognition Matsushita is...

  • Page 31
    ...Five-Year Summary Financial Review Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report Matsushita Electric Industrial 2003 29

  • Page 32
    ... law in Japan on introduction of a new pro-forma standard taxation system in fiscal 2003 and revisions to corporate income tax law in fiscal 1999 in Japan. 5. In order to be consistent with financial reporting practices generally accepted in Japan, operating profit (loss) is presented as net sales...

  • Page 33
    ... the year. 1999 2000 2001 2002 2003 Domestic Sales Overseas Sales Meanwhile significant sales growth was achieved in DVD recorders, which feature a unique "simultaneous recording and playback" function and built-in HDDs, and in digital still cameras that utilize Matsushita's advanced AV technology...

  • Page 34
    ..., Matsushita introduced a washer/dryer featuring the world's first "foam washing" system, new models of safe and clean IH cooking equipment, and an HFC-free refrigerator with the highest level of energy efficiency in Japan. The Company also introduced an air conditioner that offers the same oxygen...

  • Page 35
    .... In FA equipment, the Company focused efforts on reinforcing the cost competitiveness of high-speed electronic-parts-mounting machines, its principal product line. These efforts, together with the global launch of the world's fastest modular chip mounter, resulted in sales increases in Japan and...

  • Page 36
    ... generally favorable in all major product categories, with sales in China of AVC Networks products and Industrial Equipment recording robust growth of more than 50% over the previous year. Earnings Operating Profit (Loss) * Consolidated operating profit for fiscal 2003 increased to ¥126.6 billion...

  • Page 37
    ... R&D management for respective business areas called Strategic Products Platforms, and concentrated on developing products that would contribute to a 150 300 0 1999 2000 2001 2002 2003 Earnings Millions of yen Thousands of U.S. dollars 2003 2002 2001 2000 1999 2003 Operating profit (loss...

  • Page 38
    ...decrease in the discount rate of benefit obligations, negative return on plan assets, and amendments to the employee retirement benefit and pension plans. With respect to minority interests and stockholders' equity, due mainly to the above-mentioned transformation of five companies into wholly owned...

  • Page 39
    ... financial statements, the Company began consolidating certain previously unconsolidated subsidiaries during the year ended March 31, 2003 and has restated prior year amounts. product areas that are expected to drive future growth, including such key devices as system LSIs, PDPs and other...

  • Page 40
    ... of U.S. dollars (Note 2) Assets Current assets: 2003 2002 (Restated-Note 3) 2003 Cash and cash equivalents (Note 11) ...Â¥ 1,167,470 Time deposits (Note 11)...395,559 Short-term investments (Notes 7 and 19)...1,196 Trade receivables (Notes 6, 8 and 11): Notes ...67,440 Accounts ...1,132,508...

  • Page 41
    ...-for-sale securities ...Unrealized gains (losses) of derivative instruments ...Minimum pension liability adjustments ...Total accumulated other comprehensive income (loss) ...Treasury stock, at cost (Note 14): 88,606,377 shares (54,793,408 shares in 2002)...Total stockholders' equity ...Commitments...

  • Page 42
    ... ended March 31, 2003, 2002 and 2001 Millions of yen Thousands of U.S. dollars (Note 2) 2003 Revenues: 2002 2001 2003 (Restated-Note 3) Net sales (Note 6) ...¥ 7,401,714 ¥7,073,837 ¥7,780,519 $61,680,950 Interest income ...22,267 34,361 45,229 185,558 Dividends received ...4,506 8,219...

  • Page 43
    ... Years ended March 31, 2003, 2002 and 2001 Millions of yen Thousands of U.S. dollars (Note 2) 2003 2002 2001 2003 (Restated-Note 3) Common stock (Notes 14 and 17): Balance at beginning of year ...Conversion of bonds ...Stock issued under exchange offering ...Balance at end of year...

  • Page 44
    ... of Cash Flows Matsushita Electric Industrial Co., Ltd. and Subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen Thousands of U.S. dollars (Note 2) 2003 Cash flows from operating activities 2002 2001 2003 (Restated-Note 3) (Note 17): Net income (loss) ...Â¥ (19,453...

  • Page 45
    ... Company's products are marketed under "Panasonic" and several other trade names, including "National," "Technics," "Quasar," "Victor" and "JVC." Sales in fiscal 2003 were categorized as follows: AVC Networks-59%, Home Appliances-16%, Industrial Equipment-4%, and Components and Devices-21%. A sales...

  • Page 46
    ... capital structures. Under SFAS No. 128, basic net income (loss) per share is computed based on the weighted average number of common shares outstanding during each period, and diluted net income per share assumes the dilution that could occur if securities or other contracts to issue common stock...

  • Page 47
    ... Stock Issued to Employees," and related interpretations in accounting for its stock option plans described in Note 14. As the option price at the date of grant exceeded the fair market value of common stock, no compensation costs have been recognized in connection with the plans. If the accounting...

  • Page 48
    ... adjustments...Unrealized holding gains of available-for-sale securities...Unrealized gains of derivative instruments ...Minimum pension liability adjustments ...Total accumulated other comprehensive income (loss) ...Treasury stock, at cost...Total stockholders' equity... ¥7,627,159 ¥7,768,457 46...

  • Page 49
    ...years ended March 31, 2002 and 2001 is as follows: Millions of yen 2002 Previously reported Restated Millions of yen 2001 Previously reported Restated Revenues: Net sales ...Â¥6,876,688 Interest income ...33,556 Dividends received...9,162 Other income ...53,774 Total revenues ...6,973,180 Costs and...

  • Page 50
    ...and 59,984,408 shares of its treasury stock to the minority shareholders. These transactions were accounted for using the purchase method of accounting. The fair value of the acquired minority interests was determined based on the weighted average quoted market price of ¥1,728 ($14.40) per share of...

  • Page 51
    ... 2002 2003 Net loss per share: Basic ...¥ Diluted... (7.85) ¥ (190.38) (7.85) (190.38) $ (0.07) (0.07) 5. Inventories Inventories at March 31, 2003 and 2002 are summarized as follows: Millions of yen Thousands of U.S. dollars 2003 2002 2003 Finished goods ...¥ 426,834 Work in process...

  • Page 52
    ... of U.S. dollars 2003 2002 2001 2003 Net sales ...¥ 1,969,387 ¥1,629,396 ¥1,867,086 Gross profit ...479,985 436,936 502,987 Net income (loss)...(57,088) 4,495 8,720 $16,411,558 3,999,875 (475,733) Trade receivables and payables include the following balances with associated companies at...

  • Page 53
    ... with related carrying amounts as follows: Millions of yen Thousands of U.S. dollars 2003 2002 2003 Carrying amount ...¥ 255,352 ¥274,389 Market value...165,918 275,174 $2,127,933 1,382,650 7. Investments in Available-for-Sale Securities The Company classifies its existing marketable equity...

  • Page 54
    ... million, and the related accumulated depreciation recorded under capital leases was ¥8,239 million ($68,658 thousand) and ¥10,971 million, respectively. During the years ended March 31, 2003 and 2002, the Company and its subsidiary sold and leased back certain machinery and equipment for ¥21,083...

  • Page 55
    ... Company leases machinery and equipment. Leases of such assets are principally accounted for as direct financing leases. Investments in non-cancelable financing leases at March 31, 2003 and 2002 are as follows: Millions of yen Thousands of U.S. dollars 2003 2002 2003 Total minimum lease payments...

  • Page 56
    ... and equipment to manufacture display devices and other components. As the prices of these products significantly decreased due to highly competitive market conditions, the Company projected that the future business of those products would result in operating losses. Impairment losses recorded in...

  • Page 57
    ......3.46 Adjusted diluted net income (loss) per share...¥(202.63) ¥19.96 3.56 ¥23.52 ¥19.56 3.36 ¥22.92 Acquired intangible assets, excluding goodwill, at March 31, 2003 and 2002 are as follows: Millions of yen Thousands of U.S. dollars 2003 Gross carrying amount Accumulated amortization...

  • Page 58
    ...Millions of yen Thousands of U.S. dollars 2004 ...Â¥ 221,604 2005 ...200,491 2006 ...116,199 2007 ...151,767 2008 ...19,022 As is customary in Japan, short-term and long-term bank loans are made under general agreements which provide that security and guarantees for future and present indebtedness...

  • Page 59
    ... credited yearly based on the current rate of pay and market-related interest rate. Net periodic benefit cost for the contributory, funded benefit pension plans, the unfunded lump-sum payment plans, and the cash balance pension plans of the Company for the three years ended March 31, 2003 consisted...

  • Page 60
    ... funded benefit pension plans, the unfunded lump-sum payment plans, and the cash balance pension plans, and the fair value of the plan assets at March 31, 2003 and 2002, and actuarial assumptions used as of March 31, 2003, 2002 and 2001 are as follows: Millions of yen Thousands of U.S. dollars 2003...

  • Page 61
    ... dollars ¥ 105,497 127,089 (72,120) ¥ 54,969 Total Foreign $962,917 204,000 11,750 $215,750 $574,300 430,867 163,100 $593,967 reduction in the statutory income tax rate due to revisions to local enterprise income tax law on introduction of a new pro-forma standard taxation system. Matsushita...

  • Page 62
    ... laws and rates ...32.4 - Other ...(1.3) 5.4 Effective tax rate ...103.4% (9.9)% 41.9% (2.7) (8.1) 10.8 8.0 - 2.2 52.1% The significant components of deferred income tax expenses for the three years ended March 31, 2003 are as follows: Millions of yen Thousands of U.S. dollars 2003 2002 2001...

  • Page 63
    ... dollars 2003 2002 2003 Deferred tax assets: Inventory valuation ...Â¥0,081,552 Expenses accrued for financial statement purposes but not currently included in taxable income ...201,835 Property, plant and equipment ...160,076 Retirement and severance benefits...410,816 Tax loss carryforwards...

  • Page 64
    ...cash dividends. The Company's directors and certain senior executives may be granted options to purchase the Company's common stock. All stock options have a four-year term and become fully exercisable two years from the date of grant. Information with respect to stock options is as follows: Number...

  • Page 65
    ... expense Net-of-tax amount For the year ended March 31, 2001 Translation adjustments ...¥ (148,988 ¥ - Unrealized holding gains of available-for-sale securities: Unrealized holding gains (losses) arising during the period ...(194,989) 79,725 Less: Reclassification adjustment for gains included in...

  • Page 66
    ... Thousands of U.S. dollars Tax expense Net-of-tax amount For the year ended March 31, 2003 Translation adjustments ...$ (883,358) $ - $ (883,358) Unrealized holding gains of available-for-sale securities: 533,025 (852,767) Unrealized holding gains (losses) arising during the period ...(1,385,792...

  • Page 67
    ... the years ended March 31, 2002 and 2001 is a loss of ¥164,056 million and ¥100,195 million, respectively, associated with the implementation of the early retirement programs and the regional-based employee remuneration system in some domestic companies. Included in other deductions of costs and...

  • Page 68
    ... arising from changes in foreign exchange rates, interest rates and commodity prices. The Company assesses these risks by continually monitoring changes in these exposures and by evaluating hedging opportunities. Derivative financial instruments utilized by the Company and some of its subsidiaries...

  • Page 69
    ...advances The fair value of investments and advances is estimated based on quoted market prices or the present value of future cash flows using appropriate current discount rates. Long-term debt The fair value of long-term debt is estimated based on quoted market prices or the present value of future...

  • Page 70
    ... product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. The change in accrued warranty costs for the year ended March 31, 2003 is summarized as follows: Millions of yen Thousands of U.S. dollars 2003 2003...

  • Page 71
    ... By Business Segment: Millions of yen products. "AVC Networks" includes video and audio equipment and information and communications equipment. "Home Appliances" includes home appliances and household equipment. "Industrial Equipment" includes electronic-parts-mounting machines, industrial robots...

  • Page 72
    Millions of yen Thousands of U.S. dollars 2003 2002 2001 2003 Identifiable assets: AVC Networks ...Â¥ 2,837,976 Home Appliances...1,104,572 Industrial Equipment...204,811 Components and Devices...1,632,813 Corporate and eliminations ...2,054,521 Consolidated total ...Â¥ 7,834,693 Depreciation ...

  • Page 73
    ... Sales attributed to countries based upon the customer's location and long-lived assets are as follows: Millions of yen Thousands of U.S. dollars 2003 2002 2001 2003 Sales: Japan ...Â¥ 3,453,836 North and South America...1,420,802 Europe ...999,637 Asia and Others...1,527,439 Consolidated total...

  • Page 74
    ... of the Japanese Securities and Exchange Law, which a Japanese public company is subject to: Millions of yen Thousands of U.S. dollars 2003 2002 2001 2003 Sales: Japan: Customers...Â¥ 4,032,432 Intersegment ...1,107,962 Total ...5,140,394 North and South America: Customers...1,364,283...

  • Page 75
    ...: 2003 Millions of yen, except per share information Net income (loss) Net income per share: (loss) basic Thousands of U.S. dollars, except per share information Net income Net income (loss) (loss) Net income per share: per share: (loss) basic diluted Quarter ended Net sales Net income (loss) per...

  • Page 76
    ...of March 31, 2003 and 2002 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended March 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is...

  • Page 77
    ...Matsushita Senior Managing Directors Semiconductor Company Panasonic AVC Networks Company Panasonic Automotive Systems Company Panasonic System Solutions Company Matsushita Home Appliances Company Packaged Air-Conditioner Company Healthcare Business Company Lighting Company Display Devices Company...

  • Page 78
    Investor Information Corporate Headquarters Investor Relations Office Japanese Stock Exchange Listings Matsushita Electric Industrial Co., Ltd. Investor Relations Office 1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan Phone: +81-6-6908-1121 Web sites: English: http://matsushita.co.jp/ir/en/ ...

  • Page 79

  • Page 80
    http://panasonic.co.jp/global/ Matsushita Electric Industrial Co., Ltd. (Shown above are the global brand name and slogan of Matsushita) This entire report is printed with soy ink on paper which is 50% recycled. Printed in Japan