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IT’S A BRAND NEW WORLD, ENJOY IT!
ANNUAL REPORT 2006
For the year ended March 31, 2006

Table of contents

  • Page 1
    For the year ended March 31, 2006 IT'S A BRAND NEW WORLD, ENJOY IT! ANNUAL REPORT 2006

  • Page 2
    ...-definition AQUOS LCD TV A brand that brings hopes and dreams alive Create things the world has never seen. This concept is personified in Sharp's predisposition for creativity. With a string of Japan-first and world-first products from TVs and electronic calculators to solar cells and LCDs, Sharp...

  • Page 3

  • Page 4
    ... with prolonged playback capability Mobile phone FOMA® SH902iS A brand that helps define who you are Owning something different from the rest. That is true self-expression. Sharp delivers products overflowing with originality, and featuring sophisticated design and outstanding performance. Choose...

  • Page 5
    Equipped with "One Seg" terrestrial digital broadcasting capability Mobile phone Vodafone 905SH

  • Page 6
    ... superheated steam HEALSIO A brand that cares for our earth and ensures healthy, comfortable living Protect the environment and conserve limited resources. Live healthily and comfortably. This is the widespread dream of many in today's world. And it is Sharp that provides eco-conscious and health...

  • Page 7
    Contribute to environmental preservation Photovoltaic module Sharp is the world's No.1* in solar cell production * According to PV News, a photovoltaic newsletter in the U.S.A. (March 2006 issue)

  • Page 8
    ... 46,518 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 ¥116=U.S.$1, the approximate exchange rate prevailing...

  • Page 9
    .... Sharp has fashioned a global name as a comprehensive electronics manufacturer with a focus on consumer and information products such as LCD TVs and mobile phones and on electronic components such as LCDs and LSIs. Contents 07 09 13 Financial Highlights Message to Our Shareholders Special Feature...

  • Page 10
    ... in fiscal 2005. Consolidated net sales amounted to ¥2,797.1 billion, up 10.1% over the previous year, as a result of sales growth in core products, notably LCD TVs and mobile phones, combined with strong sales of key devices, such as LCDs and solar cells. With regard to profits, operating income...

  • Page 11
    ... an optimum global production system. Sharp is already engaged in integrated LCD TV production, covering the back-end processes of LCD panels and final assembly of LCD TVs, in Japan, China and Malaysia. To cope with the growing LCD TV market in Europe, Sharp is constructing a new LCD module plant in...

  • Page 12
    ... of the LCD TV market. Sharp possesses a number of one-of-a-kind technologies for small- and medium-size LCDs, which are used in mobile phones, game consoles and other electronic equipment. Among these, our System LCDs have received high acclaim from set makers for their high-added-value in...

  • Page 13
    ...-Takeover Plan) in April 2006. This plan is a prior warning type defense measure against potentially hostile takeover bids. It aims to prevent large-scale purchases of Sharp's share certificates or other securities which could harm corporate value and benefits for all shareholders. The Sharp Group...

  • Page 14
    ... forms, including in the development of distinctive, attractive products, in public relations and advertising that demonstrate product benefits and appeal, and in the highquality products and customer support that bring customer satisfaction. For all group employees, establishing a strong brand...

  • Page 15
    ...that drives the creation of new businesses and lifestyles. Besides advanced functions and features, Sharp ensures high-quality workmanship that brings joy and pride to customers. Quality and support Sharp impresses with its product quality and customer support which are beyond expectations. Sales...

  • Page 16
    .... AQUOS LCD TVs contribute to the creation of new lifestyles and raise the value of the Sharp brand in all corners of the world. * LCD TVs of 10 inches and larger, based on Sharp research, fiscal 2005 The Kameyama Plant (Mie Prefecture) realizes start-to-finish production from LCD panels to LCD TVs...

  • Page 17
    ... this environment, Sharp's global leading-edge LCD panels are born. AQUOS perform exceptionally well with respect to the environment - they have a long-life and are energy-saving, for instance. The environmental performance of AQUOS begins at the factory Additionally, the Kameyama Plant aims to...

  • Page 18
    ..., TV commercials, outdoor signs and exhibition in electronics fairs. Communicating the magnificence of AQUOS to as many people as possible is one way Sharp can boost its brand awareness. TV commercial MORE TO SEE (Europe, U.S.A.) By portraying people with their eyes closed, we depict the idea that...

  • Page 19
    Display windows and electronics fairs Hamburg Airport (Germany) Orchard subway station (Singapore) Lujiazui subway station (Shanghai, China) NBC Experience Store (New York, U.S.A.) 2006 International CES (Las Vegas, U.S.A.) Outdoor signs Paris, France London, U.K. Cologne, Germany Chicago, ...

  • Page 20
    ... important matters with the Board of Directors. The CSR Promotion Department is responsible for creating and developing internal control systems for Sharp. In July 2006, Sharp Corporation inaugurated the Advisory Board comprised of eminent persons who play active roles in various sectors of society...

  • Page 21
    ... Corporation introduced a plan regarding large-scale purchases of Sharp Accounting/business audit *also responsible for directing and administrating the assigned subsidiaries Internal audit function: Internal Audit Division Business groups/ Sales and marketing groups* Support, guidance Business...

  • Page 22
    ... to significantly reduce greenhouse gas emissions by means of the energy-creating effects of solar cells and the energy-saving effects of new products manufactured by Sharp. The idea is for the amount of greenhouse gas emissions reduced to exceed the amount emitted by fiscal 2010. Note: In the graph...

  • Page 23
    ..., and Japan's largest* fuel 3 3 cell system at 1,000kW to ensure advanced environmental consciousness in the Kameyama Plant. Meanwhile, our factory in France (Sharp Manufacturing France S.A.) became the first facility overseas to be recognized as a Super Green Factory. Sharp plans to convert all...

  • Page 24
    ...car navigation system displays. Sharp expects that demand for this new type of LCD and the "switchable viewing-angle LCD," which uses the same technology, will increase further in various types of applications. Health-care related technology Research is currently underway on the development of a new...

  • Page 25
    ...use less electric power. The technologies used in the development process of this product, notably integrated circuit technology and LCD technology, form the basis of today's digital appliances, proving the major contribution Sharp has made to the electronics industry. Sharp's electronic calculators...

  • Page 26
    ...digital copier/printers. Sales Main Products Personal computers, personal mobile tools, mobile communications handsets, electronic dictionaries, calculators, POS systems, handy data terminals, electronic cash registers, LCD color monitors, information displays, PC software, digital copier/printers...

  • Page 27
    ... of digital network equipment. Sales Main Products Electronic tuners, RF/infrared data communication units, network components, components for satellite broadcasting, laser diodes, hologram lasers, DVD pickups, optoelectronics, regulators, switching power supplies, solar cells, LEDs, analog ICs...

  • Page 28
    Board of Directors (As of June 22, 2006) President Katsuhiko Machida Corporate Executive Directors Yoshiaki Ibuchi Takashi Nakagawa Takashi Tomita Corporate Directors Itsuro Kato Yoshiki Sano Takashi Okuda Tetsuo Onishi Toshihiko Fujimoto Takuji Okawara Takashi Nukii Toru Chiba Shigeaki Mizushima ...

  • Page 29
    ... 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...

  • Page 30
    ...and development expenses are included in R&D expenditures. *2 For the year ended March 31, 2006, the IC group was renamed the LSI group and some items previously included in ICs have been reclassified and are included in Other Electronic *3 Components. In this connection, "Sales by Product Group" of...

  • Page 31
    ... conventional products, including color TVs and facsimiles. Sales in this group increased by 12.2% to Â¥1,090,905 million. â- Home Appliances Sharp posted particularly strong sales growth in its unique products that boast original technologies, such as superheated steam ovens and air conditioners...

  • Page 32
    ... products such as System LCDs increased, especially those applicable to mobile phones and game consoles. Sales in this group increased by 16.5% to Â¥633,493 million. â- Other Electronic Components Sales of solar cells rose as demand for photovoltaic power generation systems continued to grow...

  • Page 33
    .... In the Americas, strong sales of LCD TVs, copier/printers, LCDs and solar cells led to a 20.4% increase in regional sales to ¥416,820 million. Operating income rose by 32.0% to ¥3,358 million. In Asia, sales increased by 9.6% to ¥295,246 million on account of growth in sales of LCDs. Operating...

  • Page 34
    ... gains on securities increased by ¥14,659 million to ¥27,992 million due to the increase in stock price of shares held. Foreign currency translation adjustments generated a gain of ¥16,994 million owing to variation in the year-end exchange rate. As a result, total shareholders' equity increased...

  • Page 35
    ...of ¥20,032 million in the current year as a result of the decrease in commercial paper, net. Interest-Bearing Debt (billions of yen) Shareholders' Equity (billions of yen) Shareholders' Equity Ratio (%) Cash and Cash Equivalents (billions of yen) 600 1,200 50 300 295 299 271 277 1,098 519...

  • Page 36
    Consolidated Balance Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2005 and 2006 ASSETS Current Assets: Cash and cash equivalents ...Time deposits...Short-term investments (Note 2) ...Notes and accounts receivable- Trade...Installment ...Nonconsolidated subsidiaries and ...

  • Page 37
    LIABILITIES AND 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 (Note 4)...Other ...

  • Page 38
    ...Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2005 and 2006 Yen (millions) U.S. Dollars (thousands) 2005 Net Sales ...Cost of Sales ...Gross profit ...Selling, General and Administrative Expenses ...Operating income ...Other Income (Expenses): Interest and dividend...

  • Page 39
    ... Statements of Shareholders' Equity Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2005 and 2006 Number of Shares (thousands) Yen (millions) U.S. Dollars (thousands) 2005 Common Stock (Note 7) ...1,110,699 2006 1,110,699 ¥ 2005 204,676 ¥ 2006 204,676...

  • Page 40
    ...-term debt...Repayments of long-term debt ...Purchase of treasury stock ...Dividends paid...Other, net ...Net cash (used in) provided by financing activities ...Effect of Exchange Rate Changes on Cash and Cash Equivalents ...Net Increase in Cash and Cash Equivalents ...Cash and Cash Equivalents at...

  • Page 41
    ... 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 42
    ... contribution pension plans and lump-sum retirement benefit plans. The Company and its domestic consolidated subsidiaries provide the allowance for severance and pension benefits based on the estimated amounts of projected benefit obligation and the fair value of the plan assets at the balance sheet...

  • Page 43
    ... the year ended March 31, 2006, the Company and its domestic consolidated subsidiaries adopted the new accounting standard for impairment of fixed assets ("Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed Assets" issued by the Business Accounting Deliberation Council...

  • Page 44
    ...-bearing securities whose carrying amounts were ¥36,014 million and ¥16,754 million ($144,431 thousand) as of March 31, 2005 and 2006, respectively. 3. Inventories Inventories as of March 31, 2005 and 2006 were as follows: Yen (millions) U.S. Dollars (thousands) 2005 Finished products ...Work...

  • Page 45
    ... Taxes The Company is subject to a number of different income taxes which, in the aggregate, indicate a normal tax rate in Japan of approximately 40.6% for the years ended March 31, 2005 and 2006. The Company and the wholly owned domestic subsidiaries have adopted the consolidated tax return system...

  • Page 46
    ... 2010...0.97% unsecured straight bonds, due 2012...0.05%-1.47% unsecured Euroyen notes issued by a consolidated subsidiary, due 2005 to 2013...6.00% mortgage loans for employees' housing from a government-sponsored agency, due 2005 to 2009...0.48%-0.93% payables under securitized lease receivables...

  • Page 47
    ...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 from its banks. In addition, the...

  • Page 48
    ...2006 153,103 (b) As lessor (1) Acquisition cost, accumulated depreciation and book value of leased properties Yen (millions) U.S. Dollars (thousands) 2005 Machinery and equipment: Acquisition cost ...Accumulated depreciation ...Book value ... 2006 2006 ¥ ¥ 91,300 30,582 60,718 ¥ ¥ 105,901...

  • Page 49
    ...630,578 (3) Lease receipts, depreciation and assumed interest income Yen (millions) U.S. Dollars (thousands) 2005 Lease receipts ...Depreciation...... Operating leases (a) As lessee Future minimum lease payments as of March 31, 2005 and 2006 were as follows: Yen (millions) U.S. Dollars (thousands...

  • Page 50
    ... by the Board of Directors after the end of each interim six-month period. Such dividends are payable to shareholders of record at the end of each fiscal year or interim six-month period. In accordance with the Code, final cash dividends and the related appropriations of retained earnings have not...

  • Page 51
    ... return on plan assets used by the Company and its domestic consolidated subsidiaries for the years ended March 31, 2005 and 2006 was 4.5%. The estimated amount of all retirement benefits to be paid at future retirement dates was allocated equally to each service year using the estimated number of...

  • Page 52
    ...), respectively, and were mainly comprised of the Company's cash and cash equivalents and investments in securities. 51 Effective for the year ended March 31, 2006, the consolidated subsidiaries in the United Kingdom adopted a new accounting standard for retirement benefits in the United Kingdom...

  • Page 53
    ...), respectively, and were mainly comprised of the Company's cash and cash equivalents and investments in securities. Effective for the year ended March 31, 2006, the consolidated subsidiaries in the United Kingdom adopted a new accounting standard for retirement benefits in the United Kingdom...

  • Page 54
    ... ended March 31, 2005 and 2006 were as follows: Yen (millions) U.S. Dollars (thousands) 2005 Overseas sales: The Americas...Asia ...Europe...sales were comprised of overseas consolidated subsidiaries' sales and the Company's and its domestic consolidated subsidiaries' export sales to customers. 53

  • Page 55
    ... the accompanying consolidated balance sheets of Sharp Corporation (a Japanese corporation) and its consolidated subsidiaries as of March 31, 2005 and 2006, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended, all expressed in Japanese...

  • Page 56
    ... 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 57
    ... in Mizuho Corporate Bank, Ltd. have been set up as trust assets related to the employee pension trust. Share Distribution Japanese securities companies Treasury stock 20,890,937 (1.88%) Other Japanese corporations 19,798,861 (1.78%) 43,593,384 (3.93%) Japanese individual shareholders Total...

  • Page 58
    22-22, Nagaike-cho, Abeno-ku, Osaka 545-8522, Japan Phone: +81-6-6621-1221 http://www.sharp.co.jp This publication is using environment-friendly soy ink.