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ANNUAL REPORT 2005
For the year ended March 31, 2005
YOUR FUTURE AWAITS

Table of contents

  • Page 1
    For the year ended March 31, 2005 YOUR FUTURE AWAITS ANNUAL REPORT 2005

  • Page 2
    Into the future...Sharp opens yet another door. Driven by one-of-a-kind technology, Sharp has the ability to roll out unique products never-seen-before in Japan or indeed the world. Moving on, Sharp will open new doors that lead us into the future with innovative products that both inspire and ...

  • Page 3
    65V LC-65GE1 AQUOS, the world's largest* 65V-inch digital high-definition LCD TV *As of June 3, 2005, for digital high-definition LCD TVs

  • Page 4

  • Page 5

  • Page 6
    ... 49,101 Cash Dividends per Share of Common Stock (yen and U.S. dollars) Shareholders' Equity Total Assets Number of Shares Outstanding (thousands of shares) Number of Employees (Notes) 1. The translation into U.S. dollar figures is based on ¥106=U.S.$1, the approximate exchange rate prevailing...

  • Page 7
    .... 01 03 06 Financial Highlights A Message to Our Shareholders Sharp Business Strategy LCD TVs and Large-Size LCDs Small- and Medium-Size LCDs Photovoltaic Power Generation Systems Mobile Phones Home Appliances Business Creed Sharp Corporation is dedicated to two principal ideals: "Sincerity and...

  • Page 8
    ..., a new 45V-inch digital high-definition LCD TV (HDTV) that features a full-spec high-definition LCD panel received high plaudits from the market. We also enjoyed strong sales of unique products such as 3G mobile phones equipped with our original high-value-added LCDs, and a Superheated Steam Oven...

  • Page 9
    ... related to energy-creating and energy-saving products, we have set our new corporate vision to be a company that has "zero global warming impact by 2010." This means that we will strive to limit to the greatest extent possible the amount of greenhouse gas emissions resulting from Sharp's business...

  • Page 10
    ... performance to support the implementation of business strategy, Sharp constantly works to strengthen human resource management. Initiatives include enhancing our core personnel development policies, instituting a resultsoriented compensation system that is closely linked to an individual...

  • Page 11
    Open the Door to Tomorrow Sharp Business Strategy SHARP ANNUAL REPORT 2005 06

  • Page 12
    ... Plant Kameyama Plant in Mie Prefecture Sharp will also aggressively introduce new models with ultra-large screens, an area previously held for Plasma Display Panel (PDP) TVs, beginning with the AQUOS 65V-inch digital high-definition TV. Looking ahead, we aim to bolster our dominance in flat-panel...

  • Page 13
    ... No. 3 Plant, our key facility for System LCDs, to boost our advantage in the market. In the coming years, we intend to expand sales through the cultivation of new markets, along with conventional applications in mobile phones and PDAs. 32V 37V 45V AQUOS digital high-definition LCD TVs Electronic...

  • Page 14
    ...glass buildings. We anticipate that their adoption as a building material will expand. In fiscal 2004, Sharp brought to the market the Illuminating Solar Panel "Lumiwall" in which energy-efficient, long-life, high-brightness LEDs for illumination are combined with thin-film "see-through" solar cells...

  • Page 15
    Sharp integrates technology with know-how to meet diverse requirements in diverse settings. Satellites (Photo courtesy of the Japan Aerospace Exploration Agency (JAXA)) Unmanned lighthouse (Photo courtesy of Japan Coast Guard) Water purification plant (Nara, Japan) Bruchwegstadion football ...

  • Page 16
    ... items have received high praise from the market. Going forward, we will promote the creation of distinctive mobile phones leveraging the competencies we possess in our unique devices, including LCD panels, CCD and CMOS camera modules, and flash memories. We constructed a new central building at our...

  • Page 17
    ...cooking Plasmacluster Ion air purifier Eliminating harmful substances in the air for more comfortable living 5 Home Appliances Contributing to people's wellbeing with healthconscious and environmentally friendly products Amid increasing global awareness towards the environment and personal health...

  • Page 18
    ... of the law in our business operations, we have assigned a Chief of Legal Affairs at each business group and affiliate company. As of June 30, 2005, Sharp was a constituent of the following three SRI indices (equity indices) in Japan and overseas: • FTSE4Good Global Index (UK); September 2004...

  • Page 19
    ... a high level of environmental consciousness, determined by our unique set of evaluation and assessment criteria. All production sites in Japan have cleared the Green Factory standards. Among them, the Kameyama Plant and the Mie Plant have been designat- Environment Day at a local school (Malaysia...

  • Page 20
    ...patent strategy support Sharp's one-of-a-kind products Sharp actively develops new technologies for the creation of one-of-a-kind products and devices, while at the same time, conducts basic research for future businesses. As for intellectual property, an aggressive patent strategy helps us to build...

  • Page 21
    ... Corporate Research and Development Group Display Technology Development Group Production Technology Development Group Designated Researcher Laboratories Division Laboratories SLA/Sharp Laboratories of America, Inc. STT/Sharp Technology (Taiwan) Corp. SSDI/Sharp Software Development India Pvt...

  • Page 22
    ...mobile tools, electronic dictionaries, calculators, POS systems, handy data terminals, electronic cash registers, workstations, LCD color monitors, PC software, digital copier/printers, electrostatic copiers, PC peripherals, supplies for copiers and printers, FA equipment, ultrasonic cleaners Sales...

  • Page 23
    ...display modules Sales (billions of yen) 543 421 346 03 04 05 Other Electronic Components The key word in this product group is "optics." Sharp seeks to expand its business through devices such as solar cells, laser diodes and LEDs. A wide range of devices, including RF data communication units...

  • Page 24
    ...Executive Vice President Hiroshi Saji Corporate Senior Executive Director Akihiko Kumagai Corporate Senior Executive Director Toshishige Hamano Corporate Senior Executive Director Masaaki Ohtsuka Corporate Senior Executive Director Akira Mitarai Corporate Senior Executive Director Shigeo Nakabu...

  • Page 25
    ... Summary Financial Review Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report Consolidated Subsidiaries SHARP ANNUAL REPORT 2005 20

  • Page 26
    ..., product groupings have been recategorized and changed from Audio-Visual Equipment, Home Appliances, Communication and Information * Equipment, and Electronics Components to Audio-Visual and Communication Equipment, Home Appliances, Information Equipment, ICs, LCDs and Other Electronic Components...

  • Page 27
    ...coming digital high-definition era. Especially, the sales of large-size wide-screen LCD models equipped with LCD panels manufactured at the Kameyama Plant were in good shape. As for mobile phones, in Japan, Sharp worked to expand sales of mobile phones by rolling out a new series of 3G mobile phones...

  • Page 28
    ... demand for LCD panels for TVs, Sharp increased production capacity of large-size LCDs at its Kameyama Plant to boost sales. Also sales of small- and medium-size LCDs especially applicable to mobile phones and portable game consoles were expanded. Sales of original System LCDs increased to meet the...

  • Page 29
    ...market price erosion, Sharp posted strong growth in LCD TVs, 3G mobile phones, high-value-added LCDs for mobile equipment and solar cells. As a result, sales increased by 14.4% over the previous year to ¥2,256,428 million. Operating income surged 29.3% to ¥138,769 million. In the Americas, despite...

  • Page 30
    ..., the inventory ratio against monthly turnover was 1.5 months, consistent with the previous year. Finished products were up ¥23,738 million to ¥180,002 million, work in process was up ¥6,572 million to ¥63,763 million, and raw materials were up ¥21,745 million to ¥81,958 million. Plant and...

  • Page 31
    ... in income before income taxes and minority interests. Net cash used in investing activities amounted to ¥259,008 million, up ¥89,562 million from the previous year. The primary factor was an increase of ¥87,259 million in acquisitions of plant and equipment. Net cash provided by financing...

  • Page 32
    Consolidated Balance Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2004 and 2005 ASSETS Current Assets: Cash and cash equivalents ...Time deposits...Short-term investments (Note 2) ...Notes and accounts receivable- Trade...Installment ...Nonconsolidated subsidiaries and ...

  • Page 33
    ...SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings, including current portion of long-term debt (Note 5) ...Notes and accounts payable- Trade...Construction and other...Nonconsolidated subsidiaries and affiliates ...Accrued expenses...Income taxes... severance and pension benefits (Note 9)...

  • Page 34
    ...2004 Per Share of Common Stock (Note 7): Net income...Diluted net income...Cash dividends... 2005 2005 ¥ 55.37 54.73 18.00 ¥ 70.04 69.60 20.00 $ 0.66 0.66 0.19 The accompanying notes to consolidated financial statements are an integral part of these statements. 29 SHARP ANNUAL REPORT 2005

  • Page 35
    ... Statements of Shareholders' Equity Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2004 and 2005 Number of Shares (thousands) Yen (millions) U.S. Dollars (thousands) 2004 Common Stock (Note 7) ... 2005 2004 2005 2005 1,110,699 1,110,699 ¥ 204,676...

  • Page 36
    ... ...Foreign exchange loss...Loss on sales and disposal of plant and equipment...Increase in notes and accounts receivable...(Increase) decrease in inventories ...Increase in payable...Other, net ...Total ...Interest and dividends received ...Interest paid ...Income taxes paid ...Net cash provided by...

  • Page 37
    ... financial statements Sharp Corporation (the "Company") and its domestic consolidated subsidiaries maintain their official accounting records in Japanese yen and in accordance with the provisions set forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in...

  • Page 38
    ... is calculated as the average of market prices during the last month of the fiscal year. Unrealized holding gains and losses on these securities are reported, net of applicable income taxes, as a separate component of shareholders' equity. Realized gains and losses on sales of such securities are...

  • Page 39
    ... service lives (16 years) commencing with the following period. Directors and statutory auditors customarily receive lump-sum payments upon their termination, subject to shareholders' approval. Such payments are charged to income when paid. ( l ) Research and development expenses and software costs...

  • Page 40
    ...cost 2005 Unrealized losses Unrealized gains Fair market value Equity securities...Acquisition cost 2005 Unrealized losses Unrealized gains Fair market value Equity securities ......millions) Acquisition cost 2004 Unrealized losses Unrealized gains Fair market value Equity securities ...Other ...

  • Page 41
    ... securities whose carrying amounts were ¥36,729 million and ¥36,014 million ($339,755 thousand) as of March 31, 2004 and 2005, respectively. 3. Inventories Inventories as of March 31, 2004 and 2005 were as follows: Yen (millions) U.S. Dollars (thousands) 2004 Finished products ...Work in process...

  • Page 42
    ... the consolidated tax return system of Japan. Significant components of deferred tax assets and deferred tax liabilities as of March 31, 2004 and 2005 were as follows: Yen (millions) U.S. Dollars (thousands) 2004 Deferred tax assets: Inventories...Allowance for doubtful receivables ...Accrued...

  • Page 43
    ...) U.S. Dollars (thousands) 2004 Bank loans ...Banker's acceptances payable ...Commercial ...consolidated subsidiary, due 2004 to 2008 ...6.00%-7.20% mortgage loans for employees' housing from a government-sponsored agency, due 2004 to 2009...0.48%-0.93% payables under securitized lease receivables...

  • Page 44
    ... with each bank which provide, among other things, that security and guarantees for present and future indebtedness will be given upon request of the bank, and that any collateral so furnished will be applicable to all indebtedness to that bank. To date, the Company has not received such requests...

  • Page 45
    ... ¥ 89,059 195,221 284,280 $ 840,179 1,841,708 $ 2,681,887 (3) Lease receipts, depreciation and assumed interest income Yen (millions) U.S. Dollars (thousands) 2004 Lease receipts ...Depreciation ...Assumed interest income ... 2005 2005 ¥ 11,122 10,052 1,483 ¥ 16,074 14,569 1,990 $ 151...

  • Page 46
    ... with the Code, final cash dividends and the related appropriations of retained earnings have not been reflected in the financial statements at the end of such fiscal year. However, cash dividends per share shown in the accompanying consolidated statements of income reflect dividends applicable to...

  • Page 47
    ... Service costs ...Interest costs on projected benefit obligation ...Expected return on plan assets ...Amortization of net transition obligation ...Recognized actuarial loss ...Amortization of prior service costs...Expenses for severance and pension benefits...The discount rate used by the Company...

  • Page 48
    ... Products business and Electronic Components business. Consumer/Information Products business includes audio-visual and communication equipment, home appliances and information equipment. Electronic Components business includes ICs, LCDs and other electronic components. Information by business...

  • Page 49
    ......Intersegment ...Total ...Elimination ...Consolidated ...Operating Income: Japan ...The Americas ...Asia ...Europe ...Other...Elimination ...Consolidated ...Total Assets: Japan ...The Americas ...Asia ...Europe ...Other...Elimination and Corporate Assets ...Consolidated ... 2005 2005 ¥ 1,458...

  • Page 50
    ... thousand), respectively, and were mainly comprised of the Company's cash and cash equivalents and investments in securities. For the year ended March 31, 2005, a new geographic segment "Europe", which had been previously categorized as a part of the "Other" segment was disclosed separately, given...

  • Page 51
    ... the accompanying consolidated balance sheets of Sharp Corporation (a Japanese corporation) and its consolidated subsidiaries as of March 31, 2004 and 2005, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended, all expressed in Japanese...

  • Page 52
    ... Systems Corporation Sharp Niigata Electronics Corporation Sharp Trading Corporation Sharp Electronics Corporation Sharp Laboratories of America, Inc. Sharp Electronics Manufacturing Company of America, Inc. Sharp Electronics of Canada...

  • Page 53
    ...Co., Ltd. Osaka Stock Transfer Agency Department 11-16, Sonezaki 2-chome, Kita-ku, Osaka 530-0057, Japan Phone Osaka: +81-6-6313-5127 Tokyo: +81-3-5213-5213 Principal Shareholders (As of March 31, 2005) Japan Trustee Service Bank, Ltd. (Trust Account) Nippon Life Insurance Company Meiji Yasuda Life...

  • Page 54
    22-22, Nagaike-cho, Abeno-ku, Osaka 545-8522, Japan Phone: +81-6-6621-1221 http://www.sharp.co.jp This publication is printed on recycled paper using environment-friendly soy ink.