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Three Initiatives, One Goal
Victor Company of Japan, Limited
Annual Report 2003
For the year ended March 31, 2003

Table of contents

  • Page 1
    Victor Company of Japan, Limited Annual Report 2003 For the year ended March 31, 2003 Three Initiatives, One Goal

  • Page 2
    ... Customers, Employees and Stockholders Three Initiatives: Reengineer Change Revitalize 3/1 Management Team JVC at a Glance Business Segment Overview JVC's Contribution to Culture and the Arts Financial Section Corporate Data Cautionary Note: Forward-Looking Statements When included in this annual...

  • Page 3
    ...-reengineer our business structure, change our product lineup, and revitalize our corporate culture. And the goal? Nothing less than offering customers The Perfect Experience by transforming the Victor Company of Japan, Limited (JVC) into a highperformance global company. Annual Report 2003 01

  • Page 4
    Victor Company of Japan, Limited Financial Highlights Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31 Millions of yen 2003 2002 2001 Thousands of U.S. dollars (Note 1) 2003 For the year: Net sales Overseas Domestic Net income (loss) Capital expenditures ...

  • Page 5
    Victor Company of Japan, Limited To Our Customers, ers, Employees and Stockholders A Fundamental Change In Approach Masahiko Terada President Annual Report 2003 03

  • Page 6
    ... designed to build a robust corporate structure that will serve JVC well into the future. In the previous fiscal year, the first year of our reform program, we gave priority to building a healthy financial base by dealing with underperforming assets that had a negative impact on results. This led...

  • Page 7
    ... and eastern Europe and Russia. In Asia, and the key Chinese market, we will work to grow sales of televisions, camcorders and car AV systems. And in our home market, centered on our range of "Digital High-definition Universe"1 products, we will implement a sales strategy carefully matched to...

  • Page 8
    ...for management going forward. Moving Closer to Our Ultimate Goal With Our Three Key Initiatives In January 2003 we announced a new brand statement-The Perfect Experience. This statement represents our undertaking to do all we can to enhance our technologies, products and services so customers enjoy...

  • Page 9
    Victor Company of Japan, Limited Three Initiatives: Reengineer Change Revitalize 3 1 Annual Report 2003 07

  • Page 10
    ... leveraging our network of global procurement partners to create an optimal manufacturing framework. In short, we can now more accurately time the development and launch of products to satisfy projected demand. The benefits of reengineering our business structure are already clear- in fiscal 2003 we...

  • Page 11
    ... system for consumer electronics online/introduce more responsive management system based on weekly timetabling Target dates May 2003: 4 factories in Japan and Asia September 2003: 6 factories in US/Europe/Asia (entire consumer electronics manufacturing network) Supply Chain Management • Initial...

  • Page 12
    ...create a global brand synonymous with quality and value, develop a reservoir of expertise that transcends digital technology, and create a corporate culture that cares about details. Our overriding motivation is to create "Only One" products that are leaders in their markets. 10 Annual Report 2003

  • Page 13
    ... DVD Recorders • Using D-VHS, a high-definition recording media, to set JVC apart in the market and grow sales • New moves into the DVD recorder markets in Japan, the US and Europe Network AV Systems • World's first High-Definition camcorder for the consumer market • Dome Color Security...

  • Page 14
    ... people are more closely involved in management and more committed to customer needs. As member of the Matsushita Group, JVC's operations have traditionally been divided across a number of its parent company's business segments. However, following group reorganization in January 2003, JVC became an...

  • Page 15
    Victor Company of Japan, Limited Annual Report 2003 13

  • Page 16
    ... Company of Japan, Limited One Goal: The Perfect Experience Our goal is to offer The Perfect Experience-our promise to enhance our technologies, products and services so that customers enjoy truly moving experiences through music and images-by transforming JVC into a high-performance global company...

  • Page 17
    ..., JVC Europe Ltd., JVC Professional Europe Ltd. Shingo Kawata Executive Vice President, AV & Multimedia Company; In charge of Optical Disc Business Shozo Saito General Manager, Consumer Marketing Div., AV & Multimedia Company Yutaka Ichijo In charge of Corporate Planning and Investor Relations...

  • Page 18
    Victor Company of Japan, Limited JVC at at a a Glance Glance JVC Segment % of Total FY 2003 Sales Sales (Billions of yen) Consumer Electronics 03 02 675.0 641.3 598.6 567.6 0 400 800 69.8% 01 00 Professional Electronics 03 02 71.0 78.3 83.9 87.9 0 50 100 7.3% 01 00 Components & Devices 03...

  • Page 19
    ... VCRs • Camcorders • Televisions • Audito component systems • Car AV systems • DVD players • Higher domestic and overseas sales • Visual products such as high-definition TVs and Plasma TVs performed well in Japan • Fifth year of consecutive double-digit growth in Europe on a local...

  • Page 20
    ... benefits of this strategy began to show through in fiscal 2003. Large sales increases were recorded by relatively new products such as high definition TVs and plasma display panel (PDP) TVs. At the same time, well established products such as digital video cameras, car AV equipment and other audio...

  • Page 21
    Victor Company of Japan, Limited High-Definition Digital Video Cameras High-definition video cameras for the consumer market, another world first for JVC Annual Report 2003 19

  • Page 22
    ... Tsuchiya President, AV & Multimedia Company Digital Video Cameras Compact and easy to use, these products incorporate JVC's own CCD megapixel technology for superior quality DVD Digital Home Cinema Systems The ultimate experience in home entertainment Car Navigation/CD Receivers A combination of...

  • Page 23
    Victor Company of Japan, Limited Pure Digital Micro Systems High-powered and compact, the digital amplifier combines with the direct drive pole speakers to create a sound field of astounding quality Annual Report 2003 21

  • Page 24
    Victor Company of Japan, Limited Professional Electronics This segment develops, manufactures and sells cameras, video decks, audio equipment, displays and a range of other audio and visual equipment for professional users. Business activities also extend to designing and providing complete systems...

  • Page 25
    Victor Company of Japan, Limited Professional DV Camcorders Superior performance and a comprehensive range of specifications make these camcorders the new standard for professional image capture Annual Report 2003 23

  • Page 26
    ... yokes as market contraction leaves only a few surviving manufacturers. We expect substantial growth in high-density build-up multilayer printed wiring boards. Originally used mainly in mobile phones, these boards are now found in digital still cameras (DSCs) and digital video cameras (DVCs). We are...

  • Page 27
    Victor Company of Japan, Limited Optical Pickups JVC's optical pickups, key components in optical disk drives, have gained a reputation for reliability in the industry Annual Report 2003 25

  • Page 28
    ...year. Mini-DV tape is another important product in this business. This tape, a global product, is currently the only cost-efficient media capable of high-definition recording and playback. We expect growth in demand for this tape as our digital video cameras capture a growing share of the camcorder...

  • Page 29
    Victor Company of Japan, Limited DVD-RW Discs Based on industry-leading technology, these products offer high-quality image recording and playback time and again DVD-RAM Discs Durable, versatile and boasting a vast storage capacity, these discs meet all the needs of rewritable media users DVD-R ...

  • Page 30
    ... network" of professionals and artists we manage as well as their JVC-controlled publishing rights. We maximize these assets in many ways: sales of compilation albums and other recorded media featuring our own artists; Internet music distribution services; artist management; music publishing; and...

  • Page 31
    Victor Company of Japan, Limited Keisuke Kuwata: Rock and Roll Hero Annual Report 2003 29

  • Page 32
    ... of the arena into people's homes. That is why we go beyond being a sponsor in name only, and actively support the events behind the scenes by supplying TV monitors and CCTV equipment to the venues. JVC International Jazz Festival JVC Tokyo Video Festival UEFA EURO 2004TM 30 Annual Report 2003

  • Page 33
    ...Year Summary Management's Discussion and Analysis 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 Annual Report 2003 Annual...

  • Page 34
    Victor Company of Japan, Limited Five-Year Summary Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31 Millions of yen 2003 2002 2001 2000 1999 Thousands of U.S. dollars (Note 1) 2003 For the year: Net sales Overseas Domestic Cost of sales Selling, general and...

  • Page 35
    ...641.3 67.2% VCRs, camcorders, televisions, stereo systems, car AV systems, DVD players, CD radio cassette tape players and telephones ¥71.0 7.3 % (9.3)% ¥48.5 (6.4)% ¥22.5 (15.1)% ¥78.3 8.2 % Professional-use and educationaluse systems, information systems, karaoke systems and projectors ¥47...

  • Page 36
    ...year. In Japan, sales of DV camcorders grew, while visual products, such as high-definition televisions and Plasma Display Panels (PDPs), turn in which Direct-Drive Image Light Amplifier (D-ILA) projectors and security products, such as camera systems, faced stiff competition. Overseas, competition...

  • Page 37
    .... Sales fell due to the industry-wide downturn in software and the effects of delays in the launch of music content. The decline was checked by higher sales of software and media consigned from other companies. turnaround in operating income and lower restructuring charges. Annual Report 2003 35

  • Page 38
    ... Company of Japan, Limited LIQUIDITY AND SOURCES OF FUNDS Property, plant and equipment (less accumulated depreciation) at the end of the fiscal year was 10.6%, Cash Flows Operating activities provided net cash of ¥35.8 billion, reflecting the reduction of inventories and improvements in working...

  • Page 39
    ..., and Software & Media. The Engineering Division is responsible for the design and commercialization of products. Overseas, the JVC North America R&D Center and the JVC Singapore R&D Center are mainly involved in the development of software for digital AV equipment based on market developments in...

  • Page 40
    ...and ¥5,105 million in 2002) Marketable securities (Note 6) Notes and accounts receivable: Trade Non-consolidated subsidiaries and affiliated companies Allowance for doubtful accounts Inventories (Note 5) Deferred tax assets (Note 7) Other current assets Total current assets Investments and advances...

  • Page 41
    Victor Company of Japan, Limited Millions of yen Thousands of U.S. dollars (Note 1) 2003 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loans (Note 8) Current portion of long-term debt (Note 8) Notes and accounts payable: Trade Construction Non-consolidated subsidiaries and ...

  • Page 42
    ... Company of Japan, Limited Consolidated Statements of Operations Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen 2003 2002 2001 Thousands of U.S. dollars (Note 1) 2003 Net sales Costs and expenses: Cost of sales Selling...

  • Page 43
    Victor Company of Japan, Limited Consolidated Statements of Stockholders' Equity Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen Number of shares of common stock (Thousands) Net unrealized holding gains on securities ...

  • Page 44
    Victor Company of Japan, Limited Consolidated Statements of Cash Flows Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen 2003 2002 2001 Thousands of U.S. dollars (Note 1) 2003 Cash flows from operating activities: Income ...

  • Page 45
    ... Years ended March 31, 2003, 2002 and 2001 1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS Victor Company of Japan, Limited (the "Company") and its consolidated domestic subsidiaries maintain their official accounting records in Japanese yen and in accordance with the provisions set...

  • Page 46
    .... 2. If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized. 44 Annual Report 2003

  • Page 47
    ... subsidiary of Matsushita Electric Industrial Co., Ltd. ("Matsushita"). At March 31, 2003, Matsushita held 133,227 thousand shares of common stock of the Company, 52.40% of the total outstanding shares. Transactions between the Company and Matsushita for the years ended March 31, 2003, 2002 and 2001...

  • Page 48
    ... one year but within five years Over five years but within ten years Over ten years Total 2002: Available-for-sale securities Government bonds Corporate bonds Others Total ¥ 1 - 2,801 ¥ - - - - ¥ - 991 - ¥991 ¥ - - - - ¥ 1 991 2,801 ¥2,802 ¥ ¥ ¥3,793 46 Annual Report 2003

  • Page 49
    Victor Company of Japan, Limited Available-for-sale securities sold in the years ended March 31, 2003, 2002 and 2001 were as follows: Millions of yen 2003 2002 2001 Thousands of U.S. dollars 2003 Significant components of the Company's deferred tax assets and liabilities at March 31, 2003 and 2002...

  • Page 50
    ... Benefits (Interim Report)", and the effect of transferring the substitutional portion was recognized on the date permission was received from the Ministry of Health, Labor and Welfare. As a result, in the year ended March 31, 2003, the Company and its consolidated domestic subsidiaries recorded...

  • Page 51
    ... of Employees' Pension Insurance Total Not included in the above table is special retirement payments amounting to ¥4,260 million ($35,500 thousand), ¥1,199 million and ¥3,595 million which were expensed in 2003, 2002 and 2001. The discount rate and the rate of expected return on plan assets used...

  • Page 52
    ...of Japan, Limited As the company applied hedge accounting to all derivatives in 2002, market value information for 2002 is not disclosed. Thousands of U.S. dollars March 31, 2003 Contract amount Market value Recognized gain (loss) (2) Future minimum lease payments under the non-capitalized finance...

  • Page 53
    Victor Company of Japan, Limited 15. SEGMENT INFORMATION Information by segment for the years ended March 31, 2003, 2002 and 2001 is shown in the tables below. 1) Business segment information is as follows: Millions of yen Consumer electronics business Professional electronics business Components &...

  • Page 54
    ...Company of Japan, Limited Thousands of U.S.dollars Consumer electronics business Professional electronics business Components & Devices business Software & Media business Other business Eliminations and unallocation Consolidated total Total 2003: Sales External sales $5,624,750 Intersegment sales...

  • Page 55
    Victor Company of Japan, Limited Millions of yen Elimination and unallocation Consolidated total Japan Americas Europe Asia Total 2001: Sales External sales Intersegment sales Total sales Operating expenses Operating income Identifiable assets ¥454,626 263,473 718,099 716,531 ¥ 1,568 ¥...

  • Page 56
    ..., as discussed in Note 3, effective April 1, 2002, Victor Company of Japan, Limited changed the method of accounting for royalty income and related expenses. The consolidated financial statements as of and for the year ended March 31, 2003 have been translated into United States dollars solely for...

  • Page 57
    ... Sdn. Bhd. JVC Video Malaysia Sdn. Bhd. JVC Sales & Service (Thailand) Co., Ltd. JVC Manufacturing (Thailand) Co., Ltd. JVC Components (Thailand) Co., Ltd. P.T. JVC Electronics Indonesia JVC Gulf Fze JVC Korea Co., Ltd. JVC (China) Investment Co., Ltd. JVC Beijing Electronic Industries Co., Ltd. JVC...

  • Page 58
    VICTOR COMPANY OF JAPAN, LIMITED This annual report was printed on recycled paper. Printed in Japan