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Annual Report 2010
For the year ended March 31, 2010
Our Edge Lies
in the Future

Table of contents

  • Page 1
    Annual Report 2010 For the year ended March 31, 2010 Our Edge Lies in the Future

  • Page 2
    ...-saving LCD panels and energy-creating solar cells, and will continue to create innovative products such as solar products and LED lights. In this way, Sharp is working to both contribute to protecting the environment and to realize a new society built around electronics, guided by its corporate...

  • Page 3
    ... Aiming to be an Eco-Positive Company 18 Segment Outline 20 Fiscal 2009 Review by Product Group 24 R&D and Intellectual Property 26 Corporate Social Responsibility (CSR) 29 Corporate Governance 32 Risk Factors 34 Directors, Corporate Auditors and Executive Officers 35 Financial Section 65...

  • Page 4
    ...fiscal year. 5. The number of shares outstanding is net of treasury stock. Forward-Looking Statements This annual report contains certain statements describing the future plans, strategies and performance of Sharp Corporation and its consolidated subsidiaries (hereinafter "Sharp"). These statements...

  • Page 5
    ...n Ratio to net sales *Refer to footnote (Note 2) on page 2 Capital Investment (billions of yen) 400 R&D Expenditures (billions of yen) 200 (%) 8.0 300 150 6.0 200 100 4.0 100 50 2.0 0 06 07 08 09 10 0 06 07 08 09 10 0 n Ratio to net sales Annual Report 2010 03 Financial Highlights

  • Page 6
    Message to Our Shareholders Message to Our Shareholders Katsuhiko Machida Chairman Mikio Katayama President 04 SHARP CORPORATION

  • Page 7
    ...in the world. In LCD TVs, we launched our LED AQUOS product featuring high image quality with low power consumption. In mobile phones, we worked to expand sales of our unique products that have built-in solar cells and highdefinition CCD cameras. In health and environmental products, we expanded our...

  • Page 8
    ... fiscal 2008, Sharp suffered its first net loss since becoming a listed company on the Tokyo Stock Exchange due to the global recession and financial crisis. We responded to this downturn by establishing two goals for fiscal 2009: returning to profitability and putting a new business model in place...

  • Page 9
    ...for our health and environmental equipment businesses. The Sharp brand is very well established in these regions. Despite these strengths, in the global LCD TV sector, Korean companies have a very high market share, while in mobile phones we account for only about 1% of global handset sales. We must...

  • Page 10
    ... companies. By Material/equipment/IPR, knowProduct planning/design/procureleveraging alliances, we will reduce the Sales/servicing/solution how/element technology ment/production/logistics Value chain burden of investment in production, while Product innovation Process innovation Value innovation...

  • Page 11
    ... in our small- and medium-size LCD business by increasing sales of high value-added displays, a market sector where we are very competitive. Large-size LCDs/LCD TVs With demand in emerging countries growing faster than expected, supplies of LCD panels for TVs are projected to remain tight until...

  • Page 12
    ... home appliances, including air purifiers, and other products. In addition, 24 companies in other industries are applying our Plasmacluster Ion technology for automobiles, high-speed rail cars and many other applications. We plan to further increase B2B sales of Plasmacluster Ion products and grow...

  • Page 13
    ... to improve our investment efficiency and our profitability. This is important because it will give us a sounder financial position and support the growth of our business operations. As a company, meanwhile, Sharp places priority on acting as a responsible global citizen by helping to protect the...

  • Page 14
    Special Feature Utility Area LCD Panel Plant Logistics Area Glass Plant Color Filter Plant 12 SHARP CORPORATION

  • Page 15
    ... supply and wastewater treatment Sewerage treatment LCD panels Solar cells Photoresist Glass Co., Ltd. Japan K.K. n Daido Air Products Electronics, Inc. n Dai Nippon Printing Co., Ltd. n Daiwa House Industry Co., Ltd. n Iwatani Corporation n Kanden Energy Solution Co., Inc. n Kobelco Eco-Solutions...

  • Page 16
    Saving Energy LCD Panel Plant An LCD Panel Plant-a Mother Plant for a New Business Model The factory uses the latest technology to realize super-efficient production of high-performance LCD panels to supply the growing world market for LED TVs and 3D TVs. This plant is the mother plant for a new ...

  • Page 17
    State-of-the-art LCD Panel Technology by Sharp Special Feature UV2A technology allows highly efficient use of backlighting and saves energy, while four-primary-color technology produces vivid, natural images. Sharp fuses these advances to create a one-of-a-kind LCD panel technology at its plant in ...

  • Page 18
    ... at GREEN FRONT SAKAI will realize world-class productivity and conversion efficiency while supplying a rapidly expanding global market. Markets for solar cells are expected to expand across many regions of the world. In addition to Europe, where strong sales are projected to continue, subsidies for...

  • Page 19
    ...-saving LCD panels and energy-creating solar cells. The office facilities on site also incorporate the latest in environmental technology, further reducing the overall environmental burden generated by business activities. Environmental Performance (1): Eco-friendly, High-efficiency Manufacturing...

  • Page 20
    .../Information Products Audio-Visual and Communication Equipment Health and Environmental Equipment Information Equipment Main Products LCD color televisions, color televisions, projectors, DVD recorders, Blu-ray Disc recorders, Blu-ray Disc players, mobile phones, PHS (personal handy-phone system...

  • Page 21
    ... Electronic Devices Main Products TFT LCD modules, Duty LCD modules, System LCD modules Main Products Crystalline solar cells, thin-film solar cells Main Products CCD/CMOS imagers, LSIs for LCDs, microprocessors, flash memory, analog ICs, components for satellite broadcasting, terrestrial digital...

  • Page 22
    ..., and aim to grow sales. AQUOS Blu-ray Disc recorder Mobile Phones Despite the downturn in the domestic market, Sharp continued to expand its product lineup, including unique handsets featuring high-definition CCD cameras and solar cells, and as a result retained the top share* in the Japanese...

  • Page 23
    ... efficiency of their business activities, and offering ideas for comfortable and environmentally friendly office spaces. Digital MFP Annual Report 2010 21 Fiscal 2009 Review by Product Group This product group saw sales and profits increase mainly due to increased sales of air purifiers equipped...

  • Page 24
    ... in market prices of LCDs for mobile phones and portable game devices. In addition to efforts to overhaul the cost structures of existing businesses, Sharp worked to cultivate new markets and develop new technologies with the aim of shifting to high valueadded businesses. We are promoting design-in...

  • Page 25
    ... business by vertically integrating it from LED chips through to products equipped with LEDs. 12 megapixel CCD camera module LED device for lighting Annual Report 2010 23 Fiscal 2009 Review by Product Group Sales and profits both increased for this product group. Sales increased mainly in Japan...

  • Page 26
    ... speed. 2 R&D and Intellectual Property AQUOS LCD TV embedded with a Chinese LC font Mobile communications technology Sharp is working to develop a wireless communication technology that transmits large volumes of data efficiently using only limited frequencies. This research is a joint effort...

  • Page 27
    ... filing lawsuits. Sharp is also promoting obtainment of design and trademark registrations based on its brand strategy and aiming to increase the number of applications and registrations globally. Annual Report 2010 25 R&D and Intellectual Property The Tokai University team with the solar car...

  • Page 28
    ... in each of these areas and is promoting efforts across the group. Socially Responsible Investment (SRI) Recognition Sharp has received recognition in Japan and overseas for its strong commitment to corporate citizenship. As of the end of June 2010, Sharp was recognized by major SRI evaluating...

  • Page 29
    ... technologies. Eco-Positive Products EP Products Eco-Positive Company EP Operations LED AQUOS featuring high environmental performance Corporate Social Responsibility (CSR) Expand contribution to protecting the environment through creating energy-saving/-creating products and services...

  • Page 30
    ... business sites. Sharp will continue these various support activities, including promotion of employment for people with disabilities. Environmental education class for elementary school students Awards presented by the Osaka Prefectural Association of Employment Development 28 SHARP CORPORATION

  • Page 31
    ... Report Corporate Auditors Office Operational audit Operational audit Accounting audit Business Promotion Committee Executive officers Division general managers Sales subsidiary presidents, etc. Ensure apt policy execution/ information sharing Business execution (Business groups/functional groups...

  • Page 32
    ... Officer System to carry out swift and efficient business execution, and to maximize the functions of the Board of Directors by optimizing the number of members. In addition to the Board of Directors, the Company has an Executive Management Committee, where matters of importance related to corporate...

  • Page 33
    .... A key point in management systems of the future will be how to achieve both the piece-wise strengthening of each business and the overall optimization of the entire company or group. I believe that a bold strategy to achieve both of these will further strengthen the appeal of the Sharp brand. By...

  • Page 34
    ... affect brand image or influence Sharp's business results and financial position. (4) Business Partners Sharp procures materials and receives services from a large number of business partners, and transactions are made only once a detailed credit check of the company has been completed. However...

  • Page 35
    ... TFT LCD business. In addition, civil lawsuits seeking monetary damages resulting from alleged anticompetitive behavior have been filed in North America and Europe against Sharp. Sharp also received a cease and desist order and a surcharge payment order from the Japan Fair Trade Commission. However...

  • Page 36
    ... Ito*1 Corporate Auditors Executive Officers Full-time Corporate Auditors Chairman Senior Executive Managing Officer Executive Officers Junzo Ueda Shinji Hirayama*2 Corporate Auditors Katsuhiko Machida President Kenji Ohta Executive Managing Officers Mikio Katayama Executive Vice Presidents...

  • Page 37
    ... Section 36 Five-Year Financial Summary 38 Financial Review 42 Consolidated Balance Sheets 44 Consolidated Statements of Operations 45 Consolidated Statements of Changes in Net Assets 46 Consolidated Statements of Cash Flows 47 Notes to Consolidated Financial Statements 63 Independent...

  • Page 38
    ... Balance Sheet" (Financial Standards Implementation Guidance No. 8). Prior year figure has not been restated. *2 The amount of leased properties is included in capital investment. *3 Effective for the year ended March 31, 2008, pursuant to an amendment to the Corporate Tax Law, the Company and its...

  • Page 39
    ......Total ...Audio-Visual and Communication Equipment ...Health and Environmental Equipment . . Information Equipment ...Consumer/Information Products ...LCDs ...Solar Cells ...Other Electronic Devices...Electronic Components...Total ...Sales by Region*5 Japan...The Americas...Europe...China...

  • Page 40
    ... systems and the start of a scheme to require utility companies to buy back surplus power generated. Consumer/Information Products Audio-Visual and Communication Equipment Sales in this group were ¥1,332,980 million, down 2.5% from the prior year. Though sales of Blu-ray Disc recorders and LCD TVs...

  • Page 41
    ... the prior year. Sales increased for LCD TVs, solar cells, Plasmacluster Ion generators and air purifiers featuring Plasmacluster Ion technology. Sales of LCD panels for mobile devices significantly declined. Profitability improved for LCD TVs, mobile phones and health and environmental products. In...

  • Page 42
    ... enhancing competitiveness and improving profitability of large-size LCD panels. Additionally, a portion of this investment also relates to the construction of a new solar cell plant at GREEN FRONT SAKAI. By business segment, capital investment for Consumer/Information Products was ¥32,648 million...

  • Page 43
    ... equity ratio was 36.8%. Cash Flows Cash and cash equivalents at end of year were ¥328,125 million, an increase of ¥10,767 million over the prior year, as proceeds from operating activities exceeded payments in investing activities, associated with capital investments and payments for financing...

  • Page 44
    Consolidated Balance Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2009 and 2010 Yen (millions) 2009 2010 U.S. Dollars (thousands) 2010 ASSETS Current Assets: Cash and cash equivalents (Note 7) ...Time deposits (Note 7) ...Notes and accounts receivable (Note 7)- Trade ......

  • Page 45
    ... 23,076 546,489 5,629,902 59,370 250,826 5,940,098 Capital surplus ...Retained earnings ...Less cost of treasury stock: 10,219 thousand shares in 2009 and 10,285 thousand shares in 2010 ...Net unrealized holding gains (losses) on securities ...Deferred gains (losses) on hedges ...Foreign currency...

  • Page 46
    ... Section Per Share of Common Stock (Note 9): Net income (loss) ...Diluted net income ...Cash dividends ...The accompanying notes to the consolidated financial statements are an integral part of these statements. ¥ (114.33) - 21.00 ¥ 4.00 3.78 17.00 $ 0.04 0.04 0.18 44 SHARP CORPORATION

  • Page 47
    ... Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2009 and 2010 (thousands) Yen (millions) Net unrealized holding gains (losses) on securities Deferred gains (losses) on hedges Foreign currency translation adjustments Number of shares Common stock (Note 9) Capital...

  • Page 48
    ... in Cash and Cash Equivalents resulting from Merger ...Increase in Cash and Cash Equivalents resulting from Change of Accounting Period of Consolidated Subsidiaries ...Cash and Cash Equivalents at End of Year ...The accompanying notes to the consolidated financial statements are an integral part of...

  • Page 49
    ...consolidated financial statements The accompanying consolidated financial statements of Sharp Corporation ("the Company") and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting...

  • Page 50
    ... assets. Software used by the Company is amortized using the straight-line method over the estimated useful life of principally 5 years, and software embedded in products is amortized over the forecasted sales quantity. Financial Section (l) Derivative financial instruments The Company and some...

  • Page 51
    ... Inventories" (Accounting Standards Board of Japan (ASBJ) Statement No. 9, issued by the ASBJ on July 5, 2006). As a result, for the year ended March 31, 2009, operating loss and loss before income taxes and minority interests increase by ¥5,274 million and ¥12,919 million, respectively, compared...

  • Page 52
    ... Retirement Benefits (Part 3)" (ASBJ Statement No. 19, issued by the ASBJ on July 31, 2008). This change has no impact on the financial statements for the year ended March 31, 2010. 2. Investments in Securities The following is a summary of other securities with available fair market values as of...

  • Page 53
    ... 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 statements purposes for the year ended March 31, 2010: 2010 Normal tax rate...Differences in normal tax rates of overseas...

  • Page 54
    ...indebtedness to that bank. In addition, the agreements provide that the bank has the right to offset cash deposited against any short-term or long-term debt that becomes due, and in case of default and certain other specified events, against all other debts payable to the bank. 52 SHARP CORPORATION

  • Page 55
    ...: Years ending March 31 Yen (millions) U.S. Dollars (thousands) 2012 ......relating to finance leases that do not transfer ownership for which the starting date of the lease transaction is on and before March 31, 2008, as of, and for the years ended...2,587 - Financial Section Operating leases (a) As...

  • Page 56
    ... plan, for its main business of manufacturing and distributing electronics equipment, electronic components and other products. Any surplus funds are invested in high quality financial instruments, deem to be low risk. Short-term operating funds are obtained through issuing commercial paper and bank...

  • Page 57
    ... by "( ). " (Note 1) Methods of Calculating the Fair Value of Financial Instruments and Matters Related to Securities and Derivative Transactions (1) Cash and cash equivalents, and Time deposits Are stated at book value, as the fair value of time deposits approximates their book value, due to their...

  • Page 58
    ...'s consolidated subsidiary, Sharp Display Financial Section Products Corporation, has succeeded the business, in the production and sales business, of large-sized LCD panels and LCD modules, through an absorption-type corporate split. This transaction allows the production of large-sized LCD panels...

  • Page 59
    ... damages resulting from the alleged anticompetitive behavior have been filed in North America and Europe ¥29,281 ¥29,281 $318,272 $318,272 against the Company and some of its subsidiaries. The Company also received a cease and desist order and a surcharge payment order from the Japan Fair Trade...

  • Page 60
    ... Products business segment includes audio-visual and communication equipment, health and environmental equipment and information equipment. The Electronic Components business segment includes LCDs, solar cells and other electronic devices. Information by business segment for the years ended...

  • Page 61
    ... of Inventories" (Accounting Standards Board of Japan (ASBJ) Statement No. 9, issued by the ASBJ on July 5, 2006). As a result, for the year ended March 31, 2009, operating loss for Consumer/ Information Products increases by ¥1,347 million and operating loss for Electronic Components increases by...

  • Page 62
    ......Intersegment...Total ...Elimination ...Consolidated ...Operating Income (Loss): Japan...The Americas...Europe...China ...Other...Elimination ...Consolidated ...Total Assets: Japan...The Americas...Europe...China ...Other...Elimination and Corporate Assets ...Consolidated ... ¥ 1,637 ,056 784...

  • Page 63
    ...of Inventories" (Accounting Standards Board of Japan (ASBJ) Statement No. 9, issued by the ASBJ on July 5, 2006). As a result, for the year ended March 31, 2009, operating loss for "Japan" increases by ¥5,274 million, compared to amounts calculated under the previous method. Also, valuation methods...

  • Page 64
    ...consideration of business characteristics and business operation. As a result, idle assets are identified as respective cash generating units. As a part of the reorganization of LCD plants, the Company and its consolidated subsidiaries mainly reduced the book value of LCD production facilities which...

  • Page 65
    ... respects, the consolidated financial position of Sharp Corporation and subsidiaries as of March 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan. Without qualifying...

  • Page 66
    ... Sharp Electronics Manufacturing Company of America, Inc. Sharp Electronics of Canada Ltd. Sharp Electronica Mexico S.A. de C.V. Sharp Corporation Mexico, S.A. de C.V. Sharp Electronics (Europe...

  • Page 67
    ...,817 Number of shares held Percentage of total shares (%) Nippon Life Insurance Company Japan Trustee Services Bank, Ltd. (Trust Account) Meiji Yasuda Life Insurance Company Mizuho Corporate Bank, Ltd. The Bank of Tokyo-Mitsubishi UFJ, Ltd. The Master Trust Bank of Japan, Ltd. (Trust Account) The...

  • Page 68
    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.