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Victor Company of Japan, Limited
Annual Report 2007
For the year ended March 31, 2007
The Perfect
Experience

Table of contents

  • Page 1
    The Perfect Experience Victor Company of Japan, Limited Annual Report 2007 For the year ended March 31, 2007

  • Page 2
    ... with family, or just having fun, we want to help you have a good time. How? By providing unique, high-quality products and services that bring the energy, rhythm, and emotion of audiovisual content to you and creating new and exciting ways to communicate. In this way, we hope to inject richness and...

  • Page 3
    ...international community. Page Page Page Page 18 19 20 21 Environmental Activities Supporter of Culture and the Arts Management Team Corporate Governance Corporate Information The year 2007 marks the 80th year of JVC's founding. We are striving to transform JVC into both a technology and marketing...

  • Page 4
    JVC at a Glance Segment Percent of Total Fiscal 2007 Sales Sales (Billions of Yen) Consumer Electronics '07 '06 '05 '04 '03 543.3 600.4 627.3 638.1 675.0 0 200 400 600 800 73.2% Professional Electronics '07 '06 '05 '04 '03 64.0 67.6 68.3 67.5 71.0 0 20 40 60 80 8.6% Components & Devices '07 ...

  • Page 5
    ... 25.3 0 10 20 30 • LCD TVs, projection TVs, CRT TVs, and projectors • Digital video cameras • Car electronics • Audio systems • DVD players/recorders • VCRs • While sales of hard disk camcorders are robust worldwide, sales of displays and audio products are weak, and overall segment...

  • Page 6
    ...) • JVC Awarded Prestigious Institute of Electrical and Electronics Engineers (IEEE) Milestone for Development of VHS Video (October 2006) • D-ILA HD Home Theater Projection System DLA-HD1 Introduced (November 2006) • Compact Component System EX-A3 Introduced (January 2007) • Digital HD LCD...

  • Page 7
    ... of our display business in Japan and the Americas. Sales of our HD-ILA rear projection TVs in the Americas were weak, negatively impacted by the sharp decline in selling prices for digital rear projection TVs and plasma and other flat-panel TVs. Likewise, sales of our LCD TVs in Japan were below...

  • Page 8
    ... of our rear projection TV business, including next-generation models. We look to strengthen our main profitable businesses, such as video cameras and car electronics systems, and expand their sales by directing a large portion of our management resources to them. In the music entertainment software...

  • Page 9
    ... projectors aimed at consumers in Japan and elsewhere as the mainstay of the ILA business • Review the basic strategy for rear projection TVs, including the development of next-generation models • Review each business segment, including the sale or transfer of each business Components & Devices...

  • Page 10
    ... image and sound technologies stem from our technology-driven corporate culture that is built on many years of experience. • Our brand power is underpinned by our global production and sales networks. • Our business model combines entertainment software and hardware and links together what...

  • Page 11
    ...LCD TVs Our LCD TV business is pushing ahead with two product lineups. Our high-end line offers greater added value through the use of exclusive, cutting-edge JVC technologies that deliver high picture and sound quality and fast frame rates for LCDs. Our basic line comprises models aimed at securing...

  • Page 12
    D-ILA Equipped Products The mainstays of the D-ILA (Direct-drive Image Light Amplifier) business are rear projection TVs and front projectors that use JVC's original in-house-manufactured reflective LCD device "D-ILA" as the key device. In fiscal 2007, our goal was to boost sales further by ...

  • Page 13
    ... "K2" high-quality sound technology, wood cone speakers, and front surround sound systems for home theaters, we seek to provide products that stand apart from those of our rivals. In fiscal 2007, we continued to introduce high-value-added products. These include a compact component system with JVC...

  • Page 14
    ...Everio marine promotion for the Middle East Participants try their hand at filming at the JVC video festival tour in China. Europe In fiscal 2007, despite growth in LCD TVs and hard disk camcorders, sales in Europe fell due to large declines in sales of DVD recorders, CRT TVs, and audio equipment...

  • Page 15
    ... sales of intercom systems in particular. In professional creation products, we will harness our video camera technologies in consumer electronics, our sound and imaging technologies, and our network technologies to cement the market foundation we have built in professional Pro HD camcorders and...

  • Page 16
    ...the market stems from high-performance, high-quality parts that leverage JVC's original technologies and manufacturing processes. The Components & Devices segment helps create highvalue-added products by leveraging the Company's storehouse of technologies. In fiscal 2007, sales rose 18% year on year...

  • Page 17
    .... In prerecorded software, we will enhance corporate value through management that derives synergies from Group software companies, including Victor Entertainment. 15 DVD-RW Disk Our 8cm DVD-RW disks for video cameras use JVC's original Ultra Hard Coat disk surface protection technology and deliver...

  • Page 18
    ... developing new technologies is strong, as exemplified by the high-value-added products introduced in fiscal 2007. Among these products are: • The world's first high-definition hard disk drive camcorder targeted at consumers, with full HD 1920x1080i video quality. • The new full HD LCD TV models...

  • Page 19
    ... 10 years down the line. In addition, we set up the Consumer AV Development Center in Yokohama in 2006 to focus on developing core consumer electronics technologies that are directly linked to each business department's product development, and we established the similar Car & AV System Development...

  • Page 20
    ..." (products with designs that are environment friendly) and "clean factories" (operating sites that take into account environmental considerations). URL: Japanese: www.victor.co.jp/company/environ Thanks in particular to products such as digital video cameras, hard disk motors, and car CD receivers...

  • Page 21
    ... corporate heart, JVC has sponsored the well-known JVC International Jazz Festival series since 1984. These events provide audiences worldwide opportunities to enjoy the always new sensations and excitement of jazz through our products. This program has been one of JVC's contributions to world music...

  • Page 22
    ... Procurement and Entertainment Software & Software Media Business 13 Naomasa Mizuno General Manager, Human Resources Div. Directors 6 Shingo Kawata Deputy General Manager, Technology Development Division; General Manager, Consumer AV Development Center, Technology Development Division 14 17...

  • Page 23
    ... JVC employs a business group system and a regional company system to speed up management processes. The Management Committee is an advisory body that is overseen by the Representative Directors and designed to promote flexible decision making and the accurate communication of management information...

  • Page 24
    ... 1, 2007) Victor Company of Japan, Limited (JVC) President Auditors' Office Secretary Office Corporate Planning Headquarters SCM Promotion Office Human Resources Div. Americas Company Europe Company Asia & the Middle East Company Corporate Management Division for China ILA Business Group General...

  • Page 25
    ... Japanese Manufacturing Sites Plant Location Yokohama, Kanagawa Yokosuka, Kanagawa Maebashi, Gunma Yamato, Kanagawa Main Products High-density, multilayer printed wiring boards (PWBs) Video cameras, TVs, projectors, D-ILA devices, electronic components (PWBs) Audio equipment DVD discs (prerecorded...

  • Page 26
    ...motors, optical pickups, etc.) Audio products, car electronics products Camcorders, VCRs, DVD recorders, TVs Electronic components (deflection yokes) Electronic components (motors) b Europe: Regional Company and Sales Subsidiaries Company Name Regional Company JVC Europe Ltd. Sales Subsidiaries JVC...

  • Page 27
    ...systems Procurement of manufacturing parts Sales of electronic components and devices International procurement office (IPO) for components Production of consumer products b Global Software-Related Companies Company Name JVC Entertainment (Korea) Inc. Location Korea Business Planning and production...

  • Page 28
    ... GR-HD1, high-definition digital video camera • Introduced EX-A1, compact component system • Sponsored UEFA EURO 2004 • Introduced HD-ILA hybrid projection TV, HD-61MD60/52MD60, in North America • Introduced hard disk camcorder, Everio GZ-MC200/MC100 • Introduced digital audio players, XA...

  • Page 29
    ... Page Page 28 10-Year Summary 30 Financial Review 34 Consolidated Balance Sheets 36 Consolidated Statements of Operations 37 Consolidated Statements of Changes in Net Assets 38 Consolidated Statements of Cash Flows 39 Notes to Consolidated Financial Statements 56 Independent Auditors' Report 27

  • Page 30
    ... rate prevailing on March 31, 2007. 2. Stockholders' equity = Total net assets - Minority interests (as recorded on the balance sheets). 3. Net income (loss) per share of common stock for the years ended March 31 from 1998 to 2002 have not been recalculated using the new accounting standard...

  • Page 31
    ... 2002 2001 2000 1999 1998 Thousands of U.S. dollars (Note 1) 2007 ¥967,640 638,092 329,548 668,821 276,520 22,299...213,441 307,000 Thousands of U.S. dollars (Note 1) Millions of yen 2003 2002 2001 2000 1999 1998 2007 ¥149,172 146,410 479,750 ¥118,948 146,246 513,365 ¥150,067 180,515 586,628...

  • Page 32
    ..., DVD recorders, and other consumer electronics as well as the slump at the Software & Media segment. Regarding overseas sales, growth in sales of HDD camcorders and LCD TVs was not sufficient to counter declining sales of D-ILA hybrid projection TVs, CRT TVs, and audio products in the Americas...

  • Page 33
    ... from the year earlier. In Japan, the Company's share of the camcorder market increased, and its camcorder sales grew thanks to its hard disk camcorder models, but the whittling back of the DVD recorder lineup led to lower sales in this category, and sales of audio products and LCD TVs also declined...

  • Page 34
    ... artists signed to our labels fared well, none of them became blockbuster hits, and the downtrend in recordable media product selling prices resulted in a decline in segment sales. reflecting the write-off of idle assets. Investments and advances decreased ¥8.2 billion, largely as a result of...

  • Page 35
    ...to the previous fiscal year-end. Capital Expenditures/Depreciation and Amortization In fiscal 2007, capital expenditures decreased 14.6% from the previous fiscal year, to ¥25.2 billion. The Company's investment chiefly went to production facilities for LCD TVs and camcorders. Stockholders' Equity...

  • Page 36
    Consolidated Balance Sheets Victor Company of Japan, Limited and its consolidated subsidiaries March 31, 2007 and 2006 Millions of yen Thousands of U.S. dollars (Note 1) 2006 2007 ASSETS Current assets: Cash and cash equivalents Notes and accounts receivable: Trade Non-consolidated subsidiaries ...

  • Page 37
    ...of yen Thousands of U.S. dollars (Note 1) 2006 2007 LIABILITIES AND NET ASSETS Current liabilities: Bank loans (Note 9) Current portion of long-term debt (Note 9) Notes and accounts payable: Trade Non-consolidated subsidiaries and affiliated companies Accrued income taxes (Note 8) Accrued expenses...

  • Page 38
    Consolidated Statements of Operations Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2007, 2006 and 2005 Millions of yen 2007 2006 2005 Thousands of U.S. dollars (Note 1) 2007 Net sales Costs and expenses: Cost of sales Selling, general and administrative...

  • Page 39
    ... Statements of Changes in Net Assets Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2007, 2006 and 2005 Millions of yen Number of shares of common stock (Thousands) Net unrealized Net unrealized holding gains gains on on availablehedging for-sale securities...

  • Page 40
    Consolidated Statements of Cash Flows Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2007, 2006 and 2005 Millions of yen 2007 2006 2005 Thousands of U.S. dollars (Note 1) 2007 Cash flows from operating activities: Income (Loss) before income taxes and ...

  • Page 41
    ... Financial Statements Victor Company of Japan, Limited and its consolidated subsidiaries Years ended March 31, 2007, 2006 and 2005 1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set...

  • Page 42
    ... Companies") had no trading securities or held-to-maturity debt securities. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for by the equity method, are stated at moving-average cost. Available-for-sale securities with available fair market...

  • Page 43
    ... Financial Accounting Standard Implementation Guidance No. 9 issued by the Accounting Standards Board of Japan on December 27, 2005), (collectively, the "Additional New Accounting Standards"). Accordingly, the Company prepared the statements of changes in net assets for the year ended March 31, 2007...

  • Page 44
    ... Electric Industrial Co., Ltd. ("Matsushita"). At March 31, 2007, Matsushita held 133,227 thousand shares of common stock of the Company, 52.7% of the total outstanding shares. Transactions between the Company and Matsushita for the years ended March 31, 2007, 2006 and 2005, and the account balances...

  • Page 45
    ... are subject to income taxes regulation of the countries in which they domicile. The following table summarizes the significant differences between the statutory tax rate and the Companies' effective tax rate for financial statement purposes for the years ended March 31, 2007 and 2005. 43

  • Page 46
    Information for 2006 is not prepared as the Company incurred a loss before income taxes and minority interests in the year ended March 31, 2006. 2007 2005 Statutory tax rate: Lower tax rates of overseas subsidiaries Expenses not deductible for tax purposes Effect of changes in valuation allowance ...

  • Page 47
    ... current liabilities for the year ended March 31, 2007. 11 FINANCIAL COVENANTS The Company has concluded syndicated loan agreements with its banks to establish efficient fund procurement in order to secure its working capital in the year ended March 31, 2007. (1) Commitment Agreement of Syndicated...

  • Page 48
    ... equally to each service year using the estimated number of total service years. 13 CONTINGENT LIABILITIES The contingent liabilities of the Companies at March 31, 2007 are as follows: Millions of yen Thousands of U.S. dollars As endorser of export bills discounted with banks As guarantor for...

  • Page 49
    ... and managed by the Company's accounting department and the member of the Board of Directors in charge of finance. The results of all such transactions are reported to the Director in charge of finance. The following summarizes hedging derivative financial instruments used by the Companies and...

  • Page 50
    16 LEASE INFORMATION Lessee: The Companies use certain buildings, machinery and equipment and other assets under non-capitalized finance and operating leases. Finance leases which do not transfer ownership to lessees are not capitalized and are accounted for in the same manner as operating leases. ...

  • Page 51
    ... INFORMATION Information by segment for the years ended March 31, 2007, 2006 and 2005 is shown in the tables below. (1) Business segment information is as follows: Millions of yen Consumer electronics business Professional electronics business Components & Devices business Software & Media business...

  • Page 52
    ...140 Millions of yen Consumer electronics business Professional Components electronics & Devices business business Software & Media business Other business Eliminations and unallocation Consolidated total Total 2005: Sales External sales Intersegment sales Total sales Operating expenses Operating...

  • Page 53
    ...the Company's cash and cash equivalents, investment securities and general corporate assets. (2) Geographical segment information is as follows: Millions of yen Elimination and Japan Americas Europe Asia Total unallocation Consolidated total 2007: Sales External sales Intersegment sales Total sales...

  • Page 54
    ...,988) ¥000,373 ¥ (95,385) ¥074,275 Thousands of U.S. dollars Elimination and unallocation Consolidated total Japan Americas Europe Asia Total 2007: Sales External sales Intersegment sales Total sales Operating expenses $2,215,382 $1,511,754 $1,707,669 $0,859,144 1,500,144 3,715,526 3,712...

  • Page 55
    ... and equipment and others Buildings, land and others ¥519 231 855 200 $4,398 1,958 7,246 1,695 (Grouping method) For assets used for business, grouping is based on the business segmentation, while considering the management control unit, and for idle properties, each property is considered...

  • Page 56
    ...", "Components & Devices business", "Entertainment business" and "Other business". Until the year ended March 31, 2007, the Company reported its business segment information as "Consumer electronics business", "Professional electronics business", "Components & Devices business", "Software & Media...

  • Page 57
    ... for the year ended March 31, 2007 would have been as follows: Millions of yen Consumer electronics business Professional electronics business Components & Devices business Eliminations and unallocation Entertainment business Other business Total Consolidated total 2007: Sales External sales...

  • Page 58
    ... the consolidated financial statements, which states that: - the Company decided a resolution of capital reduction of JVC Entertainment Inc., a subsidiary in the United States, and implemented on April 10, 2007. - the Company changed its business segments, from the fiscal year ending March 31, 2008...

  • Page 59
    ... (Europe) GmbH JVC Asia Pte. Ltd. JVC Electronics Singapore Pte. Ltd. JVC Manufacturing 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 (China) Investment Co...

  • Page 60
    Victor Company of Japan, Limited Annual Report 2007 EMZ-1865 Printed in Japan This annual report was printed on recycled paper. Copyright 2007, Victor Company of Japan, Limited. All Rights Reserved.