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Toward
ultimate evolution
beyond imagination
Annual Report 2006
For the year ended March 31, 2006

Table of contents

  • Page 1
    Annual Report 2006 For the year ended March 31, 2006 Toward ultimate evolution beyond imagination

  • Page 2
    ... create products and services that will make the lives of people throughout the world more enjoyable and comfortable. In the term ended March 31, 2006, Casio strongly promoted and developed its strategic businesses, which are timepieces, digital cameras, electronic dictionaries, cellular phones, and...

  • Page 3
    ....57 84.43 20.00 ¥80.27 76.47 17.00 $0.76 0.72 0.17 *U.S. dollar amounts have been translated from Japanese yen at the rate of ¥117 to U.S.$1, the approximate exchange rate prevailing on March 31, 2006. Net Sales (Millions of yen) 600,000 500,000 400,000 300,000 200,000 100,000 0 02 03 04 05 06...

  • Page 4
    Message from the President Kazuo Kashio, President and CEO It is my great pleasure to report on the Company's performance for the term ended March 31, 2006, and to describe our future business strategies. 2 CASIO COMPUTER CO., LTD.

  • Page 5
    ... digital camera Exilim once again recorded favorable results, thanks to growth in sales in overseas markets. Timepieces, led by Casio's Oceanus brand, a high-end full-metal solar-powered radio-controlled watch, saw a year-on-year rise in sales. This is largely the result of our strategy of targeting...

  • Page 6
    ... Timepieces, Consumer Products (excluding digital cameras), and System Equipment. We have positioned businesses that are expected to experience significant global market growth in the future, while also facing intensifying competition as a large number of companies enter the market, as Expansive...

  • Page 7
    ... financial position. By leveraging our core technologies, which enable the development of lightweight, compact and energy-efficient products, we will continue strengthening our strategic businesses, including Timepieces, Digital Cameras, Electronic Dictionaries, Cellular Phones, and TFT LCDs. The...

  • Page 8
    ... scale) Operating income (right scale) 50 40 30 20 10 Electronic Calculators Electronic Dictionaries Label Printers Visual-related Products Digital Cameras Electronic Musical Instruments Timepieces Principal Products Mobile Network Solutions (MNS) 24.1% Timepieces 12.3% Digital Watches Analog...

  • Page 9
    ... Company enjoys a large market share and which therefore do not require heavy additional investment. The latter (shown in green), comprise products whose markets are still expanding on a global scale, and are characterized by intense competition. These businesses require additional investment using...

  • Page 10
    ... and profitability Casio is positioning its timepieces, electronic dictionaries, digital cameras, cellular phones, and TFT LCDs as its five strategic businesses. In particular, timepieces and electronic dictionaries are the main elements of the Company's core Stable Business, which are expected...

  • Page 11
    .... The world timepiece market, as a saturated market, cannot be expected to show substantial growth in the future. Amid this environment, our main strategy has been to develop a market for solar-powered radio-controlled watches, a high-value-added product that makes full use of the Company's core...

  • Page 12
    ... well-received by customers, making our new electronic dictionaries hit products. One social development behind our decision was the inclusion of an English listening comprehension test as part of the university entrance exams for Japanese universities from 2006. Meanwhile, Japanese business people...

  • Page 13
    ... will continue to undertake product development, making full use of the Company's core technologies. Having successfully established the Exilim brand in the Japanese market, we will continue working to maintain our share among the top-ranking camera makers. In overseas markets, Casio expects to make...

  • Page 14
    ... new features were introduced as part of the global shift toward third-generation (3G) products, allowing for high-speed, high-capacity data transmission. Casio mainly develops, manufactures and sells products for KDDI Corporation's cellular phone service "au" which is ranked No. 2 in Japan. Casio...

  • Page 15
    ... to market changes to minimize risk. Another measure is to develop a third, high-value-added application for TFT LCDs, in addition to digital cameras and cellular phones. Specifically, we will begin supplying our TFT LCDs for portable GPS (global positioning system) car navigation devices, which...

  • Page 16
    ... Research and Development Policy In line with the meaning behind our corporate creed "Creation and Contribution," Casio aims to contribute to society through the development of original products. Leveraging our core competence in lightweight, compact and energy-efficient technologies, such as high...

  • Page 17
    ... and reduce the size, thickness, and weight of electronic devices. Casio has been undertaking EWLP technical development jointly with Japanese IC board manufacturer CMK Corporation since 2002. The EWLP Consortium was set up in April 2006 to work toward the establishment and standardization of EWLP...

  • Page 18
    ... are used in some plastics) in the manufacture of various types of electronic and electrical equipment. All of Casio's products for the European market were RoHS compliant by the end of 2005. We will also steadily work toward elimination of use of substances subject to the Law for the Promotion of...

  • Page 19
    ...at the Casio Science guided tours of its manufacturing plants and other facilities. Students hear Promotion Foundation stories about the founding of Casio and receive an explanation of the Company's current environmental activities. They also get a chance to try their hand at assembling a calculator...

  • Page 20
    ... of our aggressive marketing of solar-powered radio-controlled watches, led by the full-metal high-end Oceanus brand. In the MNS Category, sales rose 6.5% to ¥139,896 million. This is due to strong performances by all new cellular phones, such as the collapsible, water-proof, shock-resistant G'zOne...

  • Page 21
    ... This rise in operating income is the result of Casio's strategy of enhancing value-added by strengthening product appeal, as well as company-wide efforts to improve management efficiency and bolster the Group's financial base through business reform. The operating income margin rose 0.4 percentage...

  • Page 22
    ...March 31, 2006 were down ¥22,357 million from the previous term-end, at ¥125,232 million. This is mainly attributable to the redemption of bonds and an increase in trade receivables in line with the growth in sales of new products during the last month of the term under review. Capital Investment...

  • Page 23
    ... the Casio Group's production efficiency and the operating income margin, we have outsourced a substantial portion of our manufacturing and assembly work to outside service suppliers. There is a risk, however, that quality control will become difficult to enforce. Moreover, problems may arise...

  • Page 24
    ... and confidential business information relating to the promotion and development of its business operations. There are in-house rules governing the use of this information, and each Group company raises awareness of the need for strict control of such information in its employee training program...

  • Page 25
    ... Six-Year Summary Years ended March 31 Casio Computer Co., Ltd. and Subsidiaries 2006 2005 Millions of Yen 2004 2003 2002 2001 For the year: Net sales...Cost of sales ...Selling, general and administrative expenses ...Research and development expenses ...Operating income (loss) ...Net income...

  • Page 26
    ... Years ended March 31, 2006 and 2005 Casio Computer Co., Ltd. and Subsidiaries Assets Current assets: Cash and time deposits (Note 3) ...Marketable securities (Note 5) ...Notes and accounts receivable: Trade ...Other...Allowance for doubtful accounts ...Inventories (Note 4)...Deferred tax assets...

  • Page 27
    ...Additional paid-in capital ...Retained earnings ...Net unrealized holding gains on securities ...Foreign currency translation adjustments...Treasury stock, at cost...Total shareholders' equity ...Â¥ Millions of Yen 2006 2005 Thousands of U.S. Dollars (Note 1) 2006 911 20,747 94,341 35,821 14,332...

  • Page 28
    ... Years ended March 31, 2006 and 2005 Casio Computer Co., Ltd. and Subsidiaries Millions of Yen 2006 2005 Thousands of U.S. Dollars (Note 1) 2006 Net sales (Note 13)...Costs and expenses (Note 13): Cost of sales ...Selling, general and administrative expenses ...Research and development expenses...

  • Page 29
    ...(¥17.00 per share) ...Bonuses to directors and corporate auditors...Loss on sale of treasury stock ...Increase in net unrealized holding gains on securities...Decrease in foreign currency translation adjustments ...Decrease in treasury stock-net ...Balance at March 31, 2006 ... 270,442,868 ¥41,549...

  • Page 30
    ... Statements of Cash Flows Years ended March 31, 2006 and 2005 Casio Computer Co., Ltd. and Subsidiaries Millions of Yen 2006 2005 Thousands of U.S. Dollars (Note 1) 2006 Cash flows from operating activities: Income before income taxes and minority interests ...Depreciation (including software...

  • Page 31
    ...ended March 31, 2006 and 2005 Casio Computer Co., Ltd. and Subsidiaries The Company and its consolidated domestic subsidiaries maintain their official accounting records in Japanese yen, and in accordance with the provisions set forth in the Japanese Commercial Code, the Securities and Exchange Law...

  • Page 32
    ... value). Property, plant and equipment Property, plant and equipment is stated at cost. Depreciation is principally determined by the declining-balance method at rates based on estimated useful lives except for the following buildings. The building of the head office of the Company and buildings...

  • Page 33
    ... of Yen 2006 2005 Thousands of U.S. Dollars 2006 Cash and time deposits ...Time deposits over three months ...Marketable securities within three months...Short-term loans receivable with resale agreement ...Cash and cash equivalents ...4. Inventories Inventories at March 31, 2006 and 2005 consisted...

  • Page 34
    ... following tables summarize book values of securities with no available fair values at March 31, 2006 and 2005. (a) Book value of held-to-maturity debt securities Millions of Yen 2006 2005 Thousands of U.S. Dollars 2006 Certificates of deposit...(b) Book value of available-for-sale securities ¥10...

  • Page 35
    ...deal with, and has a reporting system for derivative transactions reflecting proper internal control functions. Fair value of derivative transactions The aggregate amounts contracted to be paid or received and the fair values of derivative transactions of the Group at March 31, 2006 and 2005 were as...

  • Page 36
    ... used the statutory income tax rate of 40.7% for calculation of deferred income tax assets and liabilities at March 31, 2006 and 2005. The following table summarizes the significant differences between statutory tax rate and the Group's tax rate for financial statement purposes for the years ended...

  • Page 37
    ...39,470 The discount rate and the rate of expected return on plan assets used by the Company are 2.5% and 3.0% in both 2006 and 2005. The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally to each service year using the estimated number of total...

  • Page 38
    ...Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital. Japanese Company Law ("the Law") became effective on May 1, 2006, and, at the same time, the Japanese Commercial Code was repealed ("the Code"). Under the Code, companies were...

  • Page 39
    ..., method of manufacturing and sales, profit management and related assets. 2. Major products in each business segment: (1) Electronics: Electronic calculators, Label printers, Electronic dictionaries, Digital cameras, Electronic musical instruments, Digital watches, Analog watches, Clocks, Cellular...

  • Page 40
    ... countries and the areas which belong to each segment except for Japan were as follows: (1) North America ...U.S.A., Canada, Mexico (2) Europe...U.K., Germany, France (3) Asia ...Taiwan, Hong Kong, South Korea, Malaysia, Singapore, China, India, Indonesia, Thailand (3) Overseas sales For 2006 North...

  • Page 41
    ..., buildings and structures ¥257 million, machinery and equipment ¥189 million and other ¥41 million. Recoverable amounts of this group of assets were the amount of net selling price (fair value less costs to sell). The Company and its domestic consolidated subsidiaries mainly used estimated value...

  • Page 42
    ... reader. We have recomputed the translation and, in our opinion, the consolidated financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 1 to the consolidated financial statements. Tokyo, Japan June 29, 2006 40 CASIO COMPUTER...

  • Page 43
    ..., and LCDs •Casio Hitachi Mobile Communications Co., Ltd. Development, design, and production of cellular phones •Casio Techno Co., Ltd. Customer service for Casio products •Casio Information Systems Co., Ltd. Sales of system equipment •Casio Electronic Devices Co., Ltd. Sales of electronic...

  • Page 44
    ... Number of Shareholders 28,876 Principal Shareholders Shareholdings (thousands) Outstanding voting share Year Month High Low 2005 2006 Japan Trustee Services Bank, Ltd. (Trust Account) The Master Trust Bank of Japan, Ltd. (Trust Account) Nippon Life Insurance Company Casio Bros. Corp. Japan...

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    CASIO COMPUTER CO., LTD. 6-2, Hon-machi 1-chome, Shibuya-ku, Tokyo 151-8543, Japan http://world.casio.com/ Printed in Japan on 100% recycled paper