Sharp 2007 Annual Report Download

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For the year ended March 31, 2007
Annual Report 2007
“NO BOUNDARIES”

Table of contents

  • Page 1
    For the year ended March 31, 2007 "NO BOUNDARIES" Annual Report 2007

  • Page 2
    ... MESSAGE TO OUR SHAREHOLDERS SPECIAL FEATURE: GLOBAL STRATEGY FOR LCD TVS PRODUCT GROUP OUTLINE FISCAL 2006 REVIEW BY PRODUCT GROUP R&D AND INTELLECTUAL PROPERTY CORPORATE SOCIAL RESPONSIBILITY (CSR) CORPORATE GOVERNANCE RISK FACTORS DIRECTORS AND AUDITORS FINANCIAL SECTION INVESTOR INFORMATION

  • Page 3
    PROFILE Sharp has fashioned a name as a global 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. A key competitive advantage held by Sharp is its "Spiral Strategy" that involves maximizing ...

  • Page 4
    ... during each fiscal year. 3. The number of shares outstanding is net of treasury stock. 4. Effective for the year ended March 31, 2007, net assets are presented based on the new accounting standard, "Accounting Standard for Presentation of Net Assets in the Balance Sheet" (Accounting Standards Board...

  • Page 5
    ...-first products over the years, including the first radio and TV made in Japan, and the world's first all transistordiode electronic desktop calculator. Moving ahead, Sharp seeks to create fresh new products infused with the idea of technology without limits or boundaries. Sharp Annual Report 2007...

  • Page 6
    ... LCD business into one of its leading pillars through a strong sense of technical innovation. Sharp's cutting-edge LCD technology built up over the years further pushes the boundaries in its LCD TV AQUOS. People in living rooms all round the world will continue to enjoy breathtakingly clear pictures...

  • Page 7
    Sharp Annual Report 2007 05

  • Page 8
    06

  • Page 9
    ...again develops a hit product. This time, the unique superheated steam oven HEALSIO, a groundbreaking new oven for household use that enables low-calorie and low-salt cooking while conserving vitamin C, making it ideal for health-conscious consumers. Sharp continues to support people's health through...

  • Page 10
    ... solar cells can be made transparent, providing new applications, including use as windows in buildings and walls of glass buildings to generate photovoltaic power. Sharp seeks to spread the use of photovoltaic power generation systems to help protect the global environment. * According to PV News...

  • Page 11
    Sharp Annual Report 2007 09

  • Page 12
    ... LCDs, we increased sales of System LCDs for mobile equipment, including mobile phones. Additionally, we have taken various other actions, such as capacity enhancement for solar cells and creation of distinctive devices intended for our uniquely featured products. INITIATIVES IN FISCAL 2007 Sharp...

  • Page 13
    ... measures. To further expand our LCD business, we will increase sales of panels for LCD TVs with the start of the third phase at the Kameyama No. 2 Plant. Other measures include further boosting sales of System LCDs for mobile equipment. For other devices, including solar cells, we will also work to...

  • Page 14
    ... proactively to return profits to shareholders, aiming for a dividend pay-out ratio of 30% on a consolidated basis. Sharp established a Chairman position on April 1, 2007, thereby starting a new Chairman/President structure. We seek to further increase profitability and corporate value through this...

  • Page 15
    ... FEATURE: GLOBAL STRATEGY FOR LCD TVS Sharp will continue to take the lead in the global TV market with its state-of-the-art LCD TV AQUOS. While reinforcing capacity at the Kameyama Plant to produce large-size LCD panels, Sharp has created a highly efficient global production system for LCD TVs...

  • Page 16
    ... in a marked increase in brand awareness in North America. Fine-tuned marketing activities and proactive promotional efforts seek to elevate AQUOS to the leading brand in the North American market. Bob Scaglione Senior Vice President of Marketing, Sharp Electronics Marketing Company of America 14

  • Page 17
    ...October 2006, Sharp released 46-inch and 52-inch AQUOS sets into the North American market with LCD panels manufactured at the Kameyama No. 2 Plant. These models have received high acclaim on account of their breathtaking full high-definition picture quality coupled with cutting-edge design adopting...

  • Page 18
    ...In Europe, economic growth continues steadily, and the market holds a great deal of promise with demand of LCD TVs expected to increase as the shift to digital broadcasting gathers pace. Sharp will promote the special features of AQUOS here-high image quality, environmental performance, design-while...

  • Page 19
    ... double-speed drive capability, high contrast ratio and large screen to be the four keys to success in the LCD TV market. The goal is therefore to increase sales of AQUOS which incorporates these technological features as well as impressive design. To strengthen the AQUOS brand in Europe, Sharp will...

  • Page 20
    ... for large LCD TVs is growing steadily ahead of the Beijing Olympics. Sharp aims to advance the appeal of AQUOS nationwide through sales network expansion and proactive marketing and advertising. Tang Xiao Qun Group Deputy General Manager, AV & Home Appliance Group, Sharp Electronics Sales (China...

  • Page 21
    ... production line at the Nanjing Plant, which handles from LCD module to finished set. This enables Sharp to supply leading-edge LCD TVs in a timely fashion to the booming Chinese market. LCD panels manufactured at the Kameyama Plant are held in high esteem in China as they are in Japan. Neon sign...

  • Page 22
    ... HOME APPLIANCES Sharp creates unique products such as ovens that cook with superheated steam and items incorporating Plasmacluster Ion technology. Going forward, we seek to develop more innovative products in consideration of people's health and the environment to ensure comfortable living. SALES...

  • Page 23
    ... LCDs for mobile equipment. SALES ¥628.8 billion 20.1% Main Products TFT LCD modules, Duty LCD modules, System LCD modules OTHER ELECTRONIC COMPONENTS It is Sharp's outstanding optical technology that drives this product group. Sharp seeks to expand business through devices such as solar cells...

  • Page 24
    ...with AQUOS Familink that enables users to operate LCD TV, video recorder and surround sound system with a single remote control. Going forward, we will enhance our line of models to record and play Blu-ray Discs, the next-generation optical disk format. Mobile Phones The mobile phone market in Japan...

  • Page 25
    ... of its superheated steam oven HEALSIO. Amid rising global awareness toward healthy living, we aim to bring the healthy cooking benefits of HEALSIO to a wide range of users. Other Home Appliances Sharp released air conditioners that achieve comfortable airflow, featuring a built-in Plasmacluster Ion...

  • Page 26
    ...facility to adopt eighth generation (8G) glass substrates (2,160 x 2,460mm), which enables the production of 40-inch-class and 50-inchclass LCD panels with extremely high efficiency. In conjunction with the Kameyama No. 1 Plant, designed to produce LCD panels for 30-inch-class LCD TVs, Sharp has now...

  • Page 27
    ... phones, Sharp expanded the business for System LCDs, which ensure high-resolution, high-quality displays. With System LCDs, circuitry can be formed directly on the glass substrate, helping to significantly reduce costs and provide thinner profiles and lighter weights in mobile equipment. Moving...

  • Page 28
    ...An aggressive patent strategy, meanwhile, helps build strong business foundations. R&D STRATEGY Sharp advances a fundamental R&D policy of "selection and concentration." Apart from conducting R&D to strengthen core businesses, including LCD TVs, mobile phones and solar cells, Sharp focuses on themes...

  • Page 29
    ...* IrSS is a trademark of Infrared Data Association® TM 8% Transferring an image from mobile phone to LCD TV at high speed 6% 6.6% 60% 6.1% 40% 4% 2% 0% 20% 0% 03 04 05 06 07 R&D expenditure / Net sales Operating income / R&D expenditure INTELLECTUAL PROPERTY STRATEGY Sharp views its...

  • Page 30
    ... environmental burden at factories and designing eco-conscious products, with our Kameyama Plant and LCD TV AQUOS being prime examples. In fiscal 2006, we succeeded in the practical application of new fast-drying plant-based resin paint and materials for TV cabinets that enable closed-loop recycling...

  • Page 31
    ...living habits in children, the leaders of the next generation. The program will be expanded in fiscal 2007 to include a target of 500 schools a year. Furthermore, Sharp is giving environmental education globally. As an example, Sharp-Roxy Corporation (M) Sdn. Bhd., an affiliate in Malaysia, supports...

  • Page 32
    ... accounting period, the term of office for members of the Board of Directors is set at one year. In addition to the Board of Directors, the company has the Executive Management Committee, where matters of importance related to corporate management and business operation are discussed and reported...

  • Page 33
    ...is responsible for promoting development and operation of internal control systems for Sharp. To enhance compliance throughout the group, in May 2005, Sharp introduced the Sharp Group Charter of Corporate Behavior, a set of principles to guide corporate behavior, and the Sharp Code of Conduct, which...

  • Page 34
    ... companies, product demand, raw material supply and price fluctuations in each region. The political and economic situation in respective areas may also exert an influence on business results and financial position. (2) Exchange rate fluctuations The proportion of consolidated net sales accounted...

  • Page 35
    ... and financial position of Sharp. (10) Leak of personal data and other information Sharp retains personal data and other confidential information concerning its customers, business partners and employees. Extreme care is taken to protect this information. A company-wide management system promotes...

  • Page 36
    ... June 22, 2007) Chairman & CEO Katsuhiko Machida President & COO Mikio Katayama Corporate Senior Executive Vice President Hiroshi Saji Corporate Senior Executive Vice President Shigeo Nakabu Corporate Senior Executive Vice President Masafumi Matsumoto Corporate Senior Executive Vice President...

  • Page 37
    ...63 64 FIVE-YEAR FINANCIAL SUMMARY FINANCIAL REVIEW CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT...

  • Page 38
    ... Communication Equipment...Home Appliances...Information Equipment...Consumer/Information Products ...LSIs ...LCDs ...Other Electronic Components ...Electronic Components...Total ...Sales by Region*5 Japan...The Americas ...Europe ...Asia...Other ...Total ...Japan...The Americas ...Europe ...China...

  • Page 39
    FINANCIAL REVIEW Sharp Corporation and Consolidated Subsidiaries Operations Consolidated net sales for the year ended March 31, 2007 increased by 11.8% from the previous fiscal year, to ¥3,127,771 million, marking a new record high for the fourth consecutive year. [Sales by Product Group (Includes...

  • Page 40
    .... Sales of System LCDs for mobile equipment, such as mobile phones, expanded. Sales in this group increased by 21.6% to Â¥1,042,324 million. â- Other Electronic Components Although sales of solar cells were down on the previous year owing to a shortage in silicon materials, sales of electronic...

  • Page 41
    ... operations and reinforcement of production lines at the new Kameyama No. 2 Plant aimed at providing a stable supply of large-size LCD panels, and enhancement of production capacity for System LCDs at the Mie No. 3 Plant. Other investments were made to expand the production capacity for solar cells...

  • Page 42
    ... to the increase in net income. Foreign currency translation adjustments generated a gain of ¥11,761 million owing to variation in the exchange rate. As a result, net assets amounted to ¥1,192,205 million. The equity ratio was 39.9%. Cash Flows Cash and cash equivalents at the end of the year were...

  • Page 43
    Net cash provided by operating activities increased by ¥50,599 million to ¥314,352 million. Despite a turnaround from a decrease in inventories of ¥2,693 million recorded in the previous year to an increase of ¥86,946 million, depreciation and amortization of properties and intangibles increased...

  • Page 44
    ... BALANCE SHEETS Sharp Corporation and Consolidated Subsidiaries as of March 31, 2006 and 2007 Yen (millions) U.S. Dollars (thousands) 2006 2007 2007 ASSETS Current Assets: Cash and cash equivalents ...Time deposits...Short-term investments (Note 2) ...Notes and accounts receivable- Trade...

  • Page 45
    ...699 thousand shares...Capital surplus...Retained earnings...Net unrealized holding gains on securities ...Foreign currency translation adjustments...Less-Cost of treasury stock: 19,798 thousand shares ...Total shareholders' equity ...Net Assets (Note 7): Common stock: Authorized - 2,500,000 thousand...

  • Page 46
    ...Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2006 and 2007 Yen (millions) U.S. Dollars (thousands) 2006 Net Sales ...Cost of Sales ...Gross profit ...Selling, General and Administrative Expenses ...Operating income ...Other Income (Expenses): Interest and dividend...

  • Page 47
    ...OF SHAREHOLDERS' EQUITY Sharp Corporation and Consolidated Subsidiaries for the Year Ended March 31, 2006 (thousands) Common stock (Note 7) Capital surplus (Note 7) Retained earnings (Note 7) Yen (millions) Net unrealized holding gains on securities Foreign currency translation adjustments Number...

  • Page 48
    ... reported Reclassification due to adoption of new accounting standards for presentation of net assets in the balance sheet at April 1, 2006 Net assets at April 1, 2006 Net income Cash dividends paid Directors' and statutory auditors' bonuses Increase resulting from increase in number of consolidated...

  • Page 49
    ... and disposal of plant and equipment ...Increase in notes and accounts receivable...(Increase) decrease in inventories...Increase in payables ...Other, net ...Total ...Interest and dividends received...Interest paid...Income taxes paid ...Net cash provided by operating activities ...Cash Flows from...

  • Page 50
    ...fair market value which 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...

  • Page 51
    ... is primarily computed on the declining-balance method, except for machinery and equipment in the Mie and Kameyama plants, which are depreciated on the straight line method, over the estimated useful lives. Buildings acquired by the Company and its domestic consolidated subsidiaries on and after...

  • Page 52
    straight-line method over estimated useful lives of principally 5 years, and software embedded in products are amortized over the forecasted sales quantity. (m) Derivative financial instruments The Company and some of its consolidated subsidiaries use derivative financial instruments, which include ...

  • Page 53
    ...for the year ended March 31, 2007, however, cost of software embedded in products is capitalized as an asset when inspected and recognized as manufacturing expense when the products with the embedded software are sold, in accordance with "Accounting Standard for Research and Development Costs." This...

  • Page 54
    ... market value Equity securities ...Other ... ¥ ¥ 46,483 235 46,718 ¥ ¥ 94,134 345 94,479 Redemptions of other securities with maturities as of March 31, 2006 and 2007 were as follows: Yen (millions) U.S. Dollars (thousands) 2006 Corporate Bonds: Due within one year ...Due after one year...

  • Page 55
    ... 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, 2006 and 2007. The Company and its wholly owned domestic subsidiaries have adopted the consolidated tax return system...

  • Page 56
    ...(36,940) (144,248) (38,598) (363,709) 616,564 ¥ ¥ $ Net deferred tax assets and liabilities as of March 31, 2006 and 2007 were included in the consolidated balance sheets as follows: Yen (millions) U.S. Dollars (thousands) 2006 Other current assets...Prepaid expenses and other...Other current...

  • Page 57
    ... from its banks. In addition, the agreements provide that the bank has the right to offset cash deposited against any short-term or longterm debt that becomes due, and in case of default and certain other specified events, against all other debts payable to the bank. Sharp Annual Report 2007 55

  • Page 58
    ... as follows: Year ending March 31 Yen (millions) U.S. Dollars (thousands) 2009...2010...2011...2012...2013 and thereafter... ¥ ¥ 49,288 9,140 52,486 2,021 247,830 360,765 $ $ 421,265 78,120 448,598 17,273 2,118,205 3,083,461 6. Leases Finance leases Information relating to finance leases...

  • Page 59
    ...,744 (b) As lessor Future minimum lease receipts as of March 31, 2006 and 2007 were as follows: Yen (millions) U.S. Dollars (thousands) 2006 Due within one year ...Due after one year ...¥ ¥ 1,172 868 2,040 ¥ ¥ 2007 1,548 1,341 2,889 $ $ 2007 13,231 11,461 24,692 Sharp Annual Report 2007 57

  • Page 60
    ... balance sheets. Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount of cash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional paid-in capital equaled 25% of common stock...

  • Page 61
    ...plan. This plan amendment resulted in an immaterial prior service costs for the year ended March 31, 2006. According to this amendment, the estimated amount of all retirement benefits to be paid at future retirement dates is allocated to each service year mainly based on points. Sharp Annual Report...

  • Page 62
    ... The Company and its consolidated subsidiaries operate in Consumer/Information Products business and Electronic Components business. Consumer/Information Products business includes audio-visual and communication equipment, home appliances and information equipment. Electronic Components business...

  • Page 63
    ... March 31, 2007. With this change, for the year ended March 31, 2007, net sales for Consumer/Information Products are up by ¥3,583 million ($30,624 thousand) and operating income is up by ¥731 million ($6,248 thousand), and net sales for Electronic Components are up by ¥12,031 million ($102,829...

  • Page 64
    ... new accounting standard for retirement benefits in the United Kingdom, resulting in an immaterial impact on segment information for the year ended March 31, 2006. Effective for the year ended March 31, 2007, the Company and its domestic consolidated subsidiaries adopted the new accounting standard...

  • Page 65
    ... accompanying consolidated balance sheets of Sharp Corporation (a Japanese corporation) and its consolidated subsidiaries as of March 31, 2006 and 2007, and the related consolidated statements of income for the years then ended, the consolidated statement of shareholders' equity for the year ended...

  • Page 66
    ... Corporation Sharp Amenity Systems Corporation Sharp Niigata Electronics Corporation Sharp Trading Corporation Sharp Business Computer Software Inc. Sharp Electronics Corporation Sharp Laboratories of America, Inc. Sharp Electronics Manufacturing Company...

  • Page 67
    ... 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 19,563,647 (1.76%) Other Japanese corporations 20,021,018 (1.80%) 42,350,272 (3.82%) Japanese individual shareholders Total...

  • Page 68
    This publication is using environment-friendly soy ink.