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Annual Report 2008
Performance Enhanced
For the year ended March 31, 2008

Table of contents

  • Page 1
    For the year ended March 31, 2008 Performance Enhanced Annual Report 2008

  • Page 2
    ... Visions for 2012 Product Group Outline Fiscal 2007 Review by Product Group R&D and Intellectual Property Corporate Social Responsibility (CSR) Corporate Governance Risk Factors Directors, Corporate Auditors and Executive Officers Financial Section Investor Information 01 Sharp Annual Report 2008

  • Page 3
    ...such as LCD TVs and mobile phones and on electronic components such as LCDs and solar cells. A key competitive advantage held by Sharp is its "Spiral Strategy" that involves maximizing synergies to propel the development of distinctive products infused with unique devices. Through further innovation...

  • Page 4
    ... ...Domestic sales ...Overseas sales...Operating Income ...Income Before Income Taxes and Minority Interests...Net Income ...Net Assets ...Total Assets ...Capital Investment ...R&D Expenditures...Per Share of Common Stock (yen and U.S. dollars) Net income ...Cash dividends ...Net assets...Return on...

  • Page 5
    ...500 6 60 60 4 1,000 50 500 3 30 2 0 04 05 06 07 08 0 04 05 06 07 08 Ratio to net sales 0 0 04 05 06 07 08 Ratio to net sales 0 Net Assets* (billions of yen) Capital Investment (billions of yen) R&D Expenditures (billions of yen) (%) 1,500 350 344 314 200 196 189 12 1,200 1,241...

  • Page 6
    ... the Special Feature on pages 12~20.) Sharp has positioned fiscal 2008 as a critical year in initiating a new growth strategy aimed at realizing "Visions for 2012." We will continue working to further increase profitability and enhance corporate value by boldly tackling diverse management challenges...

  • Page 7
    Katsuhiko Machida Chairman & CEO Mikio Katayama President & COO 06

  • Page 8
    ... Tax Law in Japan. If we calculate operating income using the previous method, the amount would have been ¥198.7 billion, up 6.5%. Net income was ¥101.9 billion, up 0.2% over the previous year. As with net sales, this was a new record high for the fifth year in a row. 07 Sharp Annual Report...

  • Page 9
    ... environmental problems, and the aging population Q What are the features and aims of the "21st century manufacturing complex" being built in Sakai City, Osaka Prefecture? The major feature of the complex is that it will be home not only to Sharp's new LCD panel plant and solar cell plant but...

  • Page 10
    ... waste in manufacturing processes and energy consumption as one virtual company. The LCD panel plant will be the first in the world to use 10th generation glass substrates. Exploiting this advantage to maximum effect, we will produce LCD panels for TVs that mark the industry's highest standards...

  • Page 11
    ...devices for the fast-changing electronics industry, where technological innovations occur at breakneck speed. For this reason, it is important for management and manufacturing divisions to work very closely to make critical management decisions. Our business activities are limited to the development...

  • Page 12
    ... continue returning profit actively, targeting a dividend payout ratio of 30% on a consolidated basis. Internal reserve funds are being provided for investment in plant and equipment in areas of future growth, and for development of uniquely featured products and proprietary electronic devices. They...

  • Page 13
    ...2012 Sharp formulated two new visions for its 2012 centennial anniversary: "Realize a true ubiquitous network society with our world's best LCDs" and "Contribute to society by environment- and healthrelated business with energy-saving and energy-creating equipment as the core." This special feature...

  • Page 14
    ... virtual company that operates as if it were the single plant of a single company. At the LCD panel plant, Sharp engineers will work closely with their counterparts at leading material and other manufacturers to share knowledge and expertise, and create the world's best LCD panels for TVs from image...

  • Page 15
    ... employed at the new LCD panel plant The Kameyama Plant employs 6G and 8G glass substrates The new LCD panel plant being built in Sakai City, Osaka will be the first in the world to use 10th generation (10G) glass substrates, ensuring highly efficient production of large-size LCD panels in the...

  • Page 16
    Special Feature: Towards the Realization of Visions for 2012 Proposing new lifestyles with next-generation LCD TVs incorporating leading-edge technology Sharp has devised innovative designs for new LCD TVs (prototype) that will revolutionize living spaces - folding screen style (left) and wall-...

  • Page 17
    ... unique devices facilitate the birth of new mobile equipment Ultra mobile PC for WILLCOM, Inc. Mobile phone for SOFTBANK MOBILE Corp. Wireless PDA for T-Mobile USA A true ubiquitous network society where people worldwide can access a network anytime and anywhere is close at hand. To help realize...

  • Page 18
    ...-generating systems. Sharp will work to develop business for both types in order to supply solar cells that best fit the needs of respective regions, and to expand use of photovoltaic power generation around the world. Crystalline solar cells Features: High conversion efficiency, suitable...

  • Page 19
    ...a global production system for thin-film solar cells, using this new plant as a model when deploying other plants overseas. In addition, Sharp is promoting the development of new technology aimed at further expanding the solar cell business, notably concentrator photovoltaic power systems that apply...

  • Page 20
    Special Feature: Towards the Realization of Visions for 2012 Creating high-value-added products made with environment- and health-related technology Air conditioner incorporating Plasmacluster Ion technology Air purifier equipped with Plasmacluster Ion technology Superheated steam oven HEALSIO ...

  • Page 21
    ..., beginning with North America and including Asia, Oceania, Europe and China, while working to expand products incorporating this technology by making the engine more advanced. LED Lighting LED lighting is not only energy efficient and long lasting, it boasts other features such as flicker-free...

  • Page 22
    ... and Communication Equipment % of Total Sales Main Products LCD color televisions, color televisions, projectors, DVD recorders, DVD players, Blu-ray Disc recorders, Blu-ray Disc players, 1-bit digital audio products, facsimiles, telephones, mobile phones, PHS (personal handyphone system) terminals...

  • Page 23
    ...Other Electronic Components % of Total Sales Main Products Solar cells, components for satellite broadcasting, terrestrial digital tuners, RF modules, network components, laser diodes, LEDs, optical pickups, optical sensors, components for optical communications, regulators, switching power supplies...

  • Page 24
    ... 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 that are ideal for large-volume recording of high-definition content. Mobile Phones Despite long-standing demand for high-end...

  • Page 25
    ... supporting people's lives by enhancing its range of health-related products. Air conditioner incorporating Plasmacluster Ion technology Information Equipment Wireless PDAs Sharp supplies wireless PDAs to WILLCOM, Inc. and EMOBILE Ltd. in Japan and T-Mobile USA overseas. The design and user...

  • Page 26
    ... inside the company as well as to strategic partners. We also started construction of a new plant for LCD panels, which will be the nucleus of the "21st century manufacturing complex" planned for Sakai City, Osaka Prefecture. The LCD plant will be the first in the world to use 10th generation glass...

  • Page 27
    ... equipment. Sharp launched tuner modules for "One Seg" terrestrial broadcast reception for mobile phones that feature the industry's smallest package size and lowest power consumption*. We also mass-produced high-power blue-violet laser diodes for Blu-ray Disc recorders/players that achieve power...

  • Page 28
    ...R&D policy of "selection and concentration" aimed at realizing sustainable growth. An aggressive patent strategy, meanwhile, helps build strong business foundations. R&D Strategy In addition to conducting R&D to strengthen core businesses such as LCD TVs, mobile phones and solar cells, Sharp focuses...

  • Page 29
    .... Personal protein chip analyzing equipment Solid-State Lighting Technology Sharp is promoting the development of solid-state lighting technology using unique high-output semiconductor optical devices and highly efficient phosphors. Besides featuring exceptional energy-saving performance compared to...

  • Page 30
    ... cell production volume of 2,000MW at the end of 2007. A new plant for thin-film solar cells in Sakai City, Osaka Prefecture is slated to begin operations by March 2010, capable of expanding annual production volume to 1,000MW. By increasing production efficiency significantly at the plant, Sharp...

  • Page 31
    ...our production facilities and sales and service locations around Japan. Sharp pushed ahead with activities to promote Sharp Forests at 10 locations in fiscal 2007. We newly opened Kagawa Sharp Forest and Fukuoka Sharp Koso Forest, and preparations were made to establish forests in Kameyama City, Mie...

  • Page 32
    ...Officer System, creating a structure that steadily facilitates nimble, efficient business execution. Sharp seeks to further strengthen the current Director/Corporate Auditor System, which allows management and manufacturing divisions to work very closely, enabling the business to expand. Sharp works...

  • Page 33
    ...the authority of the Board of Directors at the time. Plan Regarding Large-Scale Purchases of Sharp Corporation Shares (Takeover Defense Plan) Sharp Corporation is a publicly traded company that permits shareholders to freely sell and purchase its shares. Therefore, *For details of the Plan, please...

  • 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
    ... financial position of Sharp. Further, in case a major accident occurs related to one of Sharp's products, disclosure of said incident, based on a system of accident reporting and disclosure pursuant to the Consumer Product Safety Law and related regulations in Japan, could diminish its brand image...

  • Page 36
    ... Executive Officers Full-time Corporate Auditors Junzo Ueda Shinji Hirayama CEO Katsuhiko Machida COO Mikio Katayama Corporate Auditors Hiroshi Chumon Yoichiro Natsuzumi Executive Vice Presidents Masafumi Matsumoto Toshio Adachi Toshishige Hamano Yoshiaki Ibuchi Senior Executive Managing Officer...

  • Page 37
    ... 65 Five-Year Financial Summary Financial Review Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statement of Changes in Net Assets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report Consolidated Subsidiaries 36

  • Page 38
    ......Operating Income ...Income Before Income Taxes and Minority Interests...Net Income ...Net Assets*1 ...Total Assets ...Capital Investment*2 ...Depreciation and Amortization*3...R&D Expenditures ...Sales by Product Group*4 (Sales to Outside Customers) Audio-Visual and Communication Equipment...Home...

  • Page 39
    ... for mobile equipment in Japan. Sales in this group increased by 15.7% to ¥1,598,948 million. • Home Appliances Sharp posted steady sales of distinctive products that make the most of its unique technology, such as air conditioners and air purifiers equipped with Plasmacluster Ion technology...

  • Page 40
    ...-size LCD panels for TVs and mobile phones expanded. Regional sales increased by 6.2% over the prior year to ¥2,941,635 million. Operating income decreased by 11.5% to ¥144,502 million due to the impact of an increase in depreciation and amortization in line with an amendment to the Corporate Tax...

  • Page 41
    ... production lines at the Kameyama No. 2 Plant aimed at providing a stable supply of large-size LCD panels, to develop a new LCD panel plant planned for Sakai City, Osaka Prefecture, and to strengthen production facilities at foreign subsidiaries in the Americas and Europe. The capital investment...

  • Page 42
    ... ratio was 40.1%. Cash Flows Cash and cash equivalents at the end of the year were ¥339,266 million, an increase of ¥9,980 million over the prior year as proceeds from operating activities and financing activities exceeded payments in investing activities associated with capital investments. Net...

  • Page 43
    ... amortization of properties and intangibles of ¥57,008 million. Net cash used in investing activities amounted to ¥394,962 million, an increase of ¥66,173 million. The primary factor was an increase of ¥68,379 million in purchase of plant and equipment. Net cash provided by financing activities...

  • Page 44
    ... Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2007 and 2008 Yen (millions) U.S. Dollars (thousands) 2007 2008 2008 ASSETS Current Assets: Cash and cash equivalents ...Time deposits...Short-term investments (Note 2) ...Notes and accounts receivable- Trade...Installment...

  • Page 45
    ...,495 Capital surplus...Retained earnings...Less cost of treasury stock: 20,021 thousand shares in 2007 and 10,174 thousand shares in 2008 ...Net unrealized holding gains on securities ...Net unrealized gains on hedging derivatives, net of taxes ...Foreign currency translation adjustments...Minority...

  • Page 46
    ... Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2007 and 2008 Yen (millions) U.S. Dollars (thousands) 2007 Net Sales ...Cost of Sales ...Gross profit ...Selling, General and Administrative Expenses ...Operating income ...Other Income (Expenses): Interest and dividend...

  • Page 47
    ... gains derivatives, translation on securities net of taxes adjustments Minority interests (thousands) Number of shares Total Shareholders' equity at March 31, 2006 as previously reported Reclassification due to adoption of new accounting standards for presentation of net assets in the balance...

  • Page 48
    ... dividends received...Interest paid...Income taxes paid ...Net cash provided by operating activities ...Cash Flows from Investing Activities: Purchase of time deposits ...Proceeds from redemption of time deposits ...Proceeds from sales of short-term investments ...Acquisitions of plant and equipment...

  • Page 49
    ... at 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 net assets. Realized gains and losses on the sale of...

  • Page 50
    ... market value or the net asset value is carried forward to the next year. ( f ) Leases Finance leases, except those leases for which the ownership of the leased assets is considered to be transferred to the lessee, are primarily accounted for as operating leases. (g) Inventories Finished products...

  • Page 51
    ... are of good credit rating financial institutions. (n) Changes in accounting methods (1) Accounting Standard for Directors' Bonus Effective for the year ended March 31, 2007, the Company and its domestic consolidated subsidiaries adopted the new accounting standard "Accounting Standard for Directors...

  • Page 52
    ... income taxes and minority interests was up by ¥4,865 million, compared to amounts calculated by the previous method. (6) Depreciation Methods Used for Amortization for Tangible Fixed Assets Effective for the year ended March 31, 2008, pursuant to an amendment to the Corporate Tax Law, the Company...

  • Page 53
    ...(976) Fair market value Equity securities...Other ... ¥ ¥ 46,779 150 46,929 ¥ ¥ 88,304 194 88,498 Redemption of other securities with maturities as of March 31, 2007 and 2008 was as follows: Yen (millions) U.S. Dollars (thousands) 2007 Corporate Bonds: Due within one year ...Due after one...

  • Page 54
    ... and 2008. The Company and its wholly owned domestic subsidiaries have adopted the consolidated tax return system of Japan. The following table summarizes the significant differences between the normal tax rate and the effective tax rate for financial statement purposes for the years ended March 31...

  • Page 55
    ... allowance...Total deferred tax assets ...Deferred tax liabilities: Retained earnings appropriated for tax allowable reserves ...Undistributed earnings of overseas subsidiaries ...Net unrealized holding gains on securities ...Other...Total deferred tax liabilities ...Net deferred tax assets ... 2008...

  • Page 56
    ...in Japan, substantially all of the bank borrowings are subject to general agreements 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 55 Sharp Annual Report...

  • Page 57
    ...,525 179,738 361,535 2,377,455 3,834,273 6. Leases Finance leases Information relating to finance leases, excluding those leases for which the ownership of the leased assets is considered to be transferred to the lessee, as of, and for the years ended March 31, 2007 and 2008 is as follows: (a) As...

  • Page 58
    ... Due within one year...Due after one year...¥ ¥ 102,667... 261,899 237,424 24,333 Operating leases (a) As lessee Future minimum lease...Dollars (thousands) 2007 Due within one year...Due after one year...¥ ¥ 1,334 2,965 4,299 ¥... within one year ...Due after one year ...¥ ¥ 1,548 1,341 2,889 ¥ ¥ ...

  • Page 59
    ... retained earnings and capital surplus, respectively, which are potentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with the Law. Year end cash dividends are...

  • Page 60
    ...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 and its domestic consolidated subsidiaries was 2.5% for the years ended...

  • Page 61
    ... equipment. Electronic Components business includes LSIs, LCDs and other electronic components. Information by business segment for the years ended March 31, 2007 and 2008 is as follows: Yen (millions) U.S. Dollars (thousands) 2007 Net Sales: Consumer/Information Products: Customers...Intersegment...

  • Page 62
    ... Products is down by ¥3,096 million ($31,273 thousand) and operating income for Electronic Components is down by ¥4,138 million ($41,798 thousand), compared to amounts calculated by the previous method. Effective for the year ended March 31, 2008, the amended "Auditing Treatment Relating...

  • Page 63
    ... amended Corporate Tax Law. With this change, for the year ended March 31, 2008, in the Japan, operating income is down by ¥7,234 million ($73,071 thousand), compared to amounts calculated by the previous method. Effective for the year ended March 31, 2008, the amended "Auditing Treatment Relating...

  • Page 64
    ... in Note 1. (n) Changes in accounting methods, royalty and technical assistance fees and the corresponding costs originally included in "Other, net" of Other Income (Expenses) were reclassified into "Net sales" and "Cost of sales," respectively, effective for the year ended March 31, 2007. With this...

  • Page 65
    ...of Sharp Corporation and consolidated subsidiaries as of March 31, 2008 and 2007, and the related consolidated statements of income, changes in net assets and cash flows for the years then ended, expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company...

  • Page 66
    ... Niigata Electronics Corporation Sharp Trading Corporation Sharp Business Computer Software Inc. Sharp Yonago Corporation SD Future Technology Co., Ltd. Sharp Electronics Corporation Sharp Laboratories of America, Inc. Sharp Electronics Manufacturing Company...

  • Page 67
    ... shares held by Japanese financial institutions. 325,203,511 (29.28%) Stock Exchange Listings Tokyo, Osaka, Nagoya, Fukuoka, Sapporo Mizuho Trust & Banking Co., Ltd. Osaka Stock Transfer Agency Department 11-16, Sonezaki 2-chome, Kita-ku, Osaka 530-0057, Japan Sharp Corporation Investor Relations...

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