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2 Commitments, 1 Goal
Victor Company of Japan, Limited
Annual Report 2004
For the year ended March 31, 2004

Table of contents

  • Page 1
    2 Commitments, 1 Goal Victor Company of Japan, Limited Annual Report 2004 For the year ended March 31, 2004

  • Page 2
    Victor Company of Japan, Limited

  • Page 3
    ... Role in Culture and the Arts Doing Our Part to Protect the Environment Management Team Financial Section JVC Group (Japan) JVC Group (Global) History of JVC Organization Chart Corporate Data Cautionary Note: Forward-Looking Statements When included in this annual report, the words "will," "should...

  • Page 4
    Financial Highlights Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31 Millions of yen 2004 2003 2002 Thousands of U.S. dollars (Note 1) 2004 For the year: Net sales Overseas Domestic Net income (loss) Capital expenditures Depreciation and amortization At ...

  • Page 5
    ...2004, JVC (the Victor Company of Japan, Limited) reported a 12.8% increase in operating income to ¥25.2 billion, and a 146.4% jump in net income to ¥15.6 billion. This improved profitability was achieved despite a 4.7% decline in net sales year on year, to ¥922.0 billion. The Consumer Electronics...

  • Page 6
    ... our unique products, but also use our size as a strength to take us to the next stage of growth. Leveraging JVC's Uniqueness We have identified five priority business areas that are forecast to grow: high-definition displays, digital high-density storage, network audiovisual systems, Components...

  • Page 7
    ... D-ILA rear projection TVs and DVD recorders. These technologies will enable us to develop our position centered on strategic products created using vertical technology integration. By focusing on our five priority business areas, particularly display and optical disk products, we aim to change our...

  • Page 8
    ... company. That means shaping professionals capable of standing in the shoes of the customer, using JVC's unique technologies to create the next wave of "Only One" products, and then skillfully marketing these products. To achieve this goal, we are working to ensure internal communication processes...

  • Page 9
    ... plan is the "step" after the "hop" we took with the Value Creation 21 plan. We are thus aiming to build a springboard to help us achieve the crucial last "jump," when our "Only One" products start to make a significant contribution to the growth and development of the company. 2 Annual Report 2004...

  • Page 10
    1 8. Commitment One: Accelerating Our Grow Victor Company of Japan, Limited

  • Page 11
    ...1. DVD compact component system with two-way wood cone speakers, realizing the best true-to-life acoustics JVC recording studio engineers and hardware engineers can offer 2. HDD & DVD video recorder combo that allows users to easily record hours of high picture quality TV programming 3. LCD TV with...

  • Page 12
    ...) As of March 31 10. Domestic operating bases 17 locations Overseas operating bases 13 locations 15 locations 20 locations Commitment Two: Continuous Structural 10,000 9,969 Continue structural competitive in the 9,000 8,000 8,032 7,000 0 2001 2004 Victor Company of Japan, Limited

  • Page 13
    ...AHEAD 21 PLAN Becoming a High-Performance Global Company JVC's operating environment is changing drastically as global competition intensifies and customer values diversify. In response, we plan to make structural reform a constant feature of our business, continually recasting businesses to ensure...

  • Page 14
    JVC at a Glance SEGMENT % OF TOTAL FY 2004 SALES SALES (BILLIONS OF YEN) Consumer Electronics 04 03 02 638.1 675.0 641.3 598.6 69.2% 01 0 200 400 600 800 Professional Electronics 04 03 02 67.5 71.0 78.3 83.9 7.3% 01 0 20 40 60 80 100 Components & Devices 04 03 02 47.6 49.7 61.5 ...

  • Page 15
    ... 03 02 -3.5 01 3.2 25.8 25.3 • VCRs • Camcorders • Televisions • Audio component systems • Car AV systems • DVD players/recorders • Despite strong domestic sales of PDP TVs, LCD TVs, DVD recorders and other digital products, segment sales in Japan fell due to a greater-than-expected...

  • Page 16
    ... Electronics is JVC's core business, accounting for around 70% of total group sales. Centered on the development, manufacture and sale of consumer audio and visual products for the global market, more than 80% of segment sales are derived from overseas operations. Although the segment reported...

  • Page 17
    HD-ILA microdisplay rear projection TV with a three-chip engine and the highest-density microdisplay device in this product category High-definition digital video camera, the world's first for the consumer market Eiichi Tsuchiya Consumer Electronics and the Leap Ahead 21 Plan JVC's Leap Ahead 21 ...

  • Page 18
    ... all the time DVD compact component system with two-way wood cone speakers, realizing the best true-to-life acoustics JVC recording studio engineers and hardware engineers can offer A multi-format DVD player compatible with DVD video, DVD audio, DVD-RAM/-RW/-R and CD-R/-RW discs stand out in the...

  • Page 19
    ... Sales of home theater systems, DVD players/recorders, digital video cameras and display products such as PDPs and LCDs were all stronger during the year under review, thanks to carefully targeted marketing activities. Going forward, we plan to strengthen our position in Europe centered on the UK...

  • Page 20
    Professional Electronics This segment develops, manufactures and sells video recording systems, audio equipment, projectors and a range of other products for professional use. Segment sales account for 7.3% of total group sales. In fiscal 2004, although sales fell 4.8% to ¥67.5 billion, the ...

  • Page 21
    ... by expanding sales of professional DV camcorders in new markets such as Eastern Europe and Russia, and tapping demand for computer imaging (CI) cameras and DVD recorders in the medical field. In a market characterized by severe price competition, JVC's professional electronics products are earning...

  • Page 22
    ... & Devices This segment uses its reservoir of proprietary technologies to develop, manufacture and sell electronic components and devices, generating 6.7% of total Group sales. In the year under review, sales surged 30.3% to ¥62.0 billion. However, the segment reported a larger operating loss...

  • Page 23
    ...optical pickups will be used as key devices in DVD recorders manufactured by JVC, we will be able to offer products that standout in the market in terms of both technology and cost. The electronics industry is calling for HDDs with smaller disks and increasingly slimmer drives. Naturally, this means...

  • Page 24
    ... mainly manufactures and sells recordable media and prerecorded software such as CDs and DVDs, while the Software business identifies, develops and manages promising artists, and produces, sells and distributes content. Although sales declined 11.6% to ¥148.0 billion in the year under review...

  • Page 25
    ... digital, high-definition formats; our next challenge will be to ensure we can develop and volume manufacture new products that keep pace with the continuing evolution of media standards. Capitalizing on Changes in the World of Recording Media In May 2004, JVC became the first company in the world...

  • Page 26
    Software & Media : Software Business JVC's Software business comprises a number of key companies: Victor Entertainment, Inc. and Teichiku Entertainment, Inc., involved in the production of content, and Nippon Record Center Co., Ltd., a logistics company. Strategically, Victor Entertainment sits at ...

  • Page 27
    ... Group. Going forward, our aim in the Software business will be to further enhance the JVC brand by offering superior content-designed to make the most of the latest developments in audio and visual performance, and that dovetails with our lineup of high value-added hardware products. Fiscal 2004...

  • Page 28
    ... product development in five priority business areas: high-definition displays, digital high-density storage, network audiovisual systems, Components & Devices, and Software & Media. Each Engineering Division is responsible for the design and commercialization of products, and works closely...

  • Page 29
    ... to the global community through cultural activities will also be a key part of our development as a company. Sponsoring Sporting Events: International Football Tournaments JVC supports a range of sports in numerous countries around the world. In particular, we have been closely involved in the...

  • Page 30
    ... units and components we purchase, as well as a number of OEM products we manufacture, still use solder containing lead. Ensuring all our suppliers and customers use leadfree solder in their products will be an important issue for us going forward. Our GR-HD1 high-definition video camera, the world...

  • Page 31
    ...Substance Management System Project Lead-free Solder Promotion Project 3R Design Group Recycle Committee Division Headquarters Division Sales & Service Support Environmental Administration Division Research & Development International Division Regional Headquarters Local Sales Companies Project for...

  • Page 32
    ...In charge of Technology; General Manager, Technology Development Division; In charge of ILA Center and Intellectual Property President, Media Company 16 Tsutomu Urabe Executive Vice President, AV & Multimedia Company; General Manager, International Sales Division, AV & Multimedia Company 20 Makoto...

  • Page 33
    ... 40 41 42 43 52 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 Annual Report 2004 31.

  • Page 34
    Five-Year Summary Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31 Millions of yen 2004 2003 2002 2001 2000 Thousands of U.S. dollars (Note 1) 2004 For the year: Net sales Overseas Domestic Cost of sales Selling, general and administrative expenses Operating...

  • Page 35
    ... business Total 2004 Sales Share Change Domestic Sales Change Overseas Sales Change 2003 Sales Share Major Products ¥638.1 69.2 % (5.5)% ¥109.4 (10.4)% ¥528.7 (4.4)% ¥675.0 69.8 % VCRs, camcorders, televisions, stereo systems, car AV systems, DVD players, DVD recorders and CD portable systems...

  • Page 36
    ... software, as well as lower sales of software consigned from other companies. Despite the effects of the downturn in the music industry, operating income grew 260.0%, or ¥3.4 billion, to ¥4.7 billion, buoyed by a number of hit titles and the growing shift to digital formats in the recording media...

  • Page 37
    ... of ¥0.7 billion, gain on sales of investment securities of ¥0.3 billion, and a substantial decline in loss from write-down of investment in securities. The company's operating results for fiscal 2004 were in line with initial projections. Taking this into account and JVC's goal of returning...

  • Page 38
    ...as well as working capital and other factors. Net cash used by investing activities increased ¥3.4 billion, to ¥15.8 billion. This rise was mainly attributable to an increase in cash used for purchases of property, plant and equipment, partially offset by proceeds from sales of property, plant and...

  • Page 39
    ... and Amortization Capital expenditures during fiscal 2004 totaled ¥25.9 billion, 23.1%, or ¥4.9 billion, more than the previous fiscal year. This increase represented investments related to the development of new core technologies and the launch of new digital products. Depreciation and...

  • Page 40
    ... over three months of ¥4,105 million (US$38,726 thousand) in 2004 and ¥8,105 million in 2003) 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...

  • Page 41
    ...; Authorized 800,000,000 shares Issued 254,230,058 shares Capital surplus Retained earnings Net unrealized holding gains on securities Foreign currency translation adjustments Treasury stock, at cost Total stockholders' equity 2004 2003 ¥ 29,232 16,928 91,163 412 4,128 73,456 3,136 18,121 236...

  • Page 42
    ... income (expenses): Interest and dividend income Unrealized loss from changes in fair market values of trading securities Equity in income (loss) of affiliated companies Interest expense Gain on sales of investment securities Gain on return of substitutional portion of Employees' Pension Insurance...

  • Page 43
    ...' Equity Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2004, 2003 and 2002 Millions of yen Number of shares of common stock (Thousands) Net unrealized holding gains on securities Foreign currency translation adjustments Common stock Capital surplus...

  • Page 44
    ... dividend income Interest expense Unrealized loss from changes in fair market values of trading securities Increase (Decrease) in accrued restructuring charges Gain on sales of investment securities Decrease in notes and accounts receivable Decrease (Increase) in inventories Increase (Decrease) in...

  • Page 45
    .... Property, plant and equipment Property, plant and equipment are stated at cost. Depreciation is computed primarily by the declining-balance method based on the estimated useful lives of the assets. Certain consolidated overseas subsidiaries use the straight-line method. Annual Report 2004 43...

  • Page 46
    ... are included in selling, general and administrative expenses. This change reflects the recognition that royalty income is directly attributable to the Company's principal operating activities, in light of the increasing number of technological alliances with partners both in Japan and overseas, and...

  • Page 47
    ... of yen 2004 Book value 2003 Book value Thousands of U.S. dollars 2004 Book value Unlisted equity securities Unlisted foreign debt securities Subsidiaries and affiliated companies Total ¥1,627 8 2,144 ¥3,779 ¥2,008 2 916 ¥2,926 $15,349 76 20,226 $35,651 Finished goods Work in process Raw...

  • Page 48
    ... whole or in part, at the option of the Company at prices ranging from 103% to 100% of the principal amount. The price at which shares of common stock shall be issued upon conversion is ¥1,487 ($14.03) per share, subject to adjustment under certain circumstances. The aggregate annual maturities of...

  • Page 49
    ... benefits to be paid at future retirement dates is allocated equally to each service year using the estimated number of total service years. Prior service costs are recognized in income or expense using the straight-line method over 10 years, and actuarial gains and losses are recognized in...

  • Page 50
    ...fair value information as of March 31, 2004 and 2003 of derivative transactions for which hedge accounting has not been applied: Millions of yen March 31, 2004 Contract amount Fair value Recognized gain (loss) Millions of yen Acquisition cost Accumulated depreciation Net book value 2003: Buildings...

  • Page 51
    ...1) Business segment information is as follows: Millions of yen Consumer electronics business Professional electronics business Components & Devices business Software & Media business Other business Eliminations and unallocation Consolidated total Total 2004: Sales External sales Intersegment sales...

  • Page 52
    ... information is as follows: expenses and operating income of Consumer electronics business increased by ¥7,356 million ¥4,066 million, ¥3,290 million respectively. Millions of yen Elimination and unallocation Consolidated total Japan Americas Europe Asia Total 2004: Sales External sales...

  • Page 53
    ... Thousands of U.S. dollars Americas Europe Asia Other areas Total 2004: Overseas sales Consolidated sales Ratio of overseas sales to consolidated sales As explained in Note 3 "CHANGE IN ACCOUNTING METHOD", effective April 1, 2002, the Company changed the method of accounting for royalty income. As...

  • Page 54
    ...the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well...

  • Page 55
    ... VHS VCRs, DV camcorders, Plasma TVs Audio equipment DVD discs (pre-recorded), Electronics components (optical pickups) Professional, educational, and information-related equipment Recording media products, Pre-recorded software (video tapes) CD and DVD discs (pre-recorded) Precision parts (FA and...

  • Page 56
    ... China TVs VCRs, DVD recorders, DV camcorders CD, DVD (pre-recorded software) TVs Audio products Audio products, Electronic components VCRs, DV camcorders TVs, Electronic components, Professional products Electronic components (deflection yokes, motors, optical pickups, etc.) Audio products, Mobile...

  • Page 57
    ... Research and Development Centers â- Company Name â- Country JVC Laboratory of America JVC Singapore R&D Center JVC Asia Laboratories of Singapore JVC Malaysia R&D Center JVC (Beijing) Research & Development Center, Ltd. U.S.A. Singapore Singapore Malaysia China Annual Report 2004 55.

  • Page 58
    ... compact component system 2003 GR-HD1: World's first digital high-definition video camera for consumer use launched 2003 EX-A1: DVD compact component system with the world's first wood cone speakers launched 2004 • Sponsored UEFA EURO 2004TM • Introduced D-ILA rear projection TV 56. Victor...

  • Page 59
    .... Display Component Div. Optical Component Div. Media Company Soft Media Business Center Recording Media Business Center Entertainment Software Company Engineering Dept. Production & Manufacturing Center Asia & the Middle East Company Corporate Management Division for China Annual Report 2004 57...

  • Page 60
    ... Europe GmbH JVC Belgium S.A./N.V. JVC Nederland B.V. JVC International (Europe) GmbH JVC Asia Pte. Ltd. JVC Electronics Singapore Pte. Ltd. JVC Electronics Malaysia Sdn. Bhd. JVC Video Malaysia Sdn. Bhd. JVC Sales & Service (Thailand) Co., Ltd. JVC Manufacturing (Thailand) Co., Ltd. JVC Components...

  • Page 61
    EMZ-1768 Printed in Japan This annual report was printed on recycled paper. Copyright 2004, Victor Company of Japan, Limited. All Rights Reserved.