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Repositioning for a New Paradigm
Annual Report 2011
For the year ended March 31, 2011

Table of contents

  • Page 1
    Annual Report 2011 For the year ended March 31, 2011 Repositioning for a New Paradigm

  • Page 2
    ... around electronics, guided by its corporate vision of becoming an Eco-Positive Company. Sales Composition by Product Group (Year ended March 31, 2011) Electronic Components Other Electronic Devices Solar Cells LCDs Consumer/Information Products Audio-Visual and Communication Equipment Health and...

  • Page 3
    ... LCDs. Through such efforts, we will work to reinforce our business foundations and improve profitability. Financial Highlights Message to Our Shareholders Interview with the President 2 Segment Outline 4 Fiscal 2010 Review by Product Group 6 R&D and Intellectual Property 18 Corporate Social...

  • Page 4
    ... performance, business activities and financial position may differ materially from the assumptions and estimates provided on account of such risks, uncertainties and other factors. Sharp is under no obligation to update these forward-looking statements in light of new information, future events or...

  • Page 5
    ... -150 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 Financial Highlights Ratio to net sales [right axis] Ratio to net sales [right axis] Net Assets (billions of yen) Capital Investment (billions of yen) R&D Expenditures (billions of yen) (%) 1,500 350 300 200 12 1,200 250 900...

  • Page 6
    ... the development of energysaving and energy-creating products that anticipate growing market needs, while promoting the reform of our business structure and reinforcing our business foundations. Message to Our Shareholders Katsuhiko Machida Chairman Mikio Katayama President 4 SHARP CORPORATION

  • Page 7
    ...health conscious business, focusing on energy-saving and energy-creating products" and "Contribute to ubiquitous society with one-of-a-kind LCDs." We have also set a corporate vision of becoming an Eco-Positive Company committed to the twin objectives of contributing to the environment and promoting...

  • Page 8
    ... the production of thin-film solar cells, as well as a joint-venture company to carry out a solar power generation business as an independent power producer. We also built a solar power generation plant in that country. In China, we have been providing technology support as part of our engineering...

  • Page 9
    ...financial unease in Europe, and concerns over crude oil price hikes stemming from political instability in the Middle East and North Africa. Expanding Business Domain Solutions Expand value chain Engineering business Propose total solutions Strengthen B2B business • Propose total-solution systems...

  • Page 10
    ... the process of restructuring its LCD business. What is your view on the current state of that business? The market for large-size LCDs, mainly for TVs, remains challenging. Meanwhile, in the mobile LCD market, there is a tight supply/demand balance for high valueadded LCDs. In both fields, we need...

  • Page 11
    ... markets for LCD TVs in Europe and the U.S. and slow sales of local TV brands in China, however, supply began to outstrip demand, leading to falling panel prices and increasing market inventories. Sharp responded to this situation by adjusting production at its large-size LCD panel plants. Amidst...

  • Page 12
    ...area in which Sharp holds the top share Added value Growth area LCD panel size Growth area Small- and medium-size for mobile devices Smartphones, tablet terminals For PCs Widespread-size for TVs Large-size for TVs & non-TVs Sharp's one-of-a-kind technologies Increased purchase from alliance...

  • Page 13
    ...-to-40inch TVs (in the center of the diagram), it is extremely difficult to secure healthy profits in these areas, with major LCD panel manufacturers across the board facing declines in profits. By contrast, in the areas where cutting-edge elemental and production technologies are required, Sharp is...

  • Page 14
    ... larger in North America and China. We will also actively advance our non-TV business, a market with exciting growth potential. Multi-screen display system used in the venue for the APEC Japan 2010 Economic Leaders' Meeting (12 large-size LCD monitors used to reproduce a pond) 12 SHARP CORPORATION

  • Page 15
    Sharp's large-size LCD TVs (at a U.S. electronics retail store) TV commercial for a 70-inch AQUOS Quattron model in the U.S. Overseas LCD TV Business In fiscal 2010, the LCD TV market in general was strong, buoyed by solid growth in Japan as a result of the EcoPoint Program and steady expansion of...

  • Page 16
    ... are working to expand our solar cell business with the aim of becoming a total solutions company in the solar cell market. We will achieve this by pursuing business in a broad value chain that encompasses system design, installation, sale, and maintenance of solar power generation systems for home...

  • Page 17
    ...to start operating at the end of 2011. These examples illustrate Sharp's efforts to expand its solar cell business with the aim of becoming a total solutions company in the solar cell market. Our aim is to pursue business in a broad value chain that encompasses system design, installation, sale, and...

  • Page 18
    ... to link with AQUOS LCD TVs and features a high-quality graphics engine, comes with functions that clearly differentiate it from other smartphones. In addition to creating such distinctive smartphones, Sharp will release models of conventional mobile phones designed to meet consumer needs. Through...

  • Page 19
    ... friendly products and services, such as LED lights and solar cells made using proprietary energy-saving and energycreating technologies. I am convinced that fulfilling our corporate vision of becoming an Eco-Positive Company will make a direct contribution to further growth in our corporate value...

  • Page 20
    ... Products Audio-Visual and Communication Equipment Main Products LCD color televisions, color televisions, projectors, DVD recorders, Blu-ray Disc recorders, Blu-ray Disc players, mobile phones, mobile communications handsets, electronic dictionaries, calculators, facsimiles, telephones Sales...

  • Page 21
    ... Total Assets (billions of yen) 08 09 10 11 07 08 09 10 11 Capital Investment (billions of yen) 2,000 1,500 300 200 1,000 100 500 0 0 07 08 09 10 11 07 08 09 10 11 Sales (billions of yen) Operating Income (Loss) (billions of yen) 3,000 150 100 2,000 50 1,000 0 0 -50 07...

  • Page 22
    ... LCD TVs in Japan expanded, mainly as a result of the Eco-Point Program. Overseas markets, including China and emerging countries, also sustained steady growth. During the year, Sharp attracted considerable attention with new product releases, including the AQUOS Quattron models, which combine Sharp...

  • Page 23
    ...300 200 100 0 7.6% Health and Environmental Products Against a backdrop of growing demand in Japan generated by a very hot summer and the benefits of the Eco-Point Program, Sharp worked hard to increase sales of refrigerators and air conditioners equipped with Plasmacluster Ion technology. We also...

  • Page 24
    ...producing high value-added panels, such as high-definition LCDs and 3D LCDs, at full capacity owing to tight supply due to the limited number of manufacturers capable of producing such high-end displays. In order to respond to rapidly growing demand, we will install production equipment for LCDs for...

  • Page 25
    ... systems, and feed-in tariffs. Against this backdrop, Sharp promoted business in more diverse value chains. For example, we constructed a solar power generation plant in a joint venture with Enel Green Power of Italy. We also acquired Recurrent Energy, a U.S. developer of distributed solar projects...

  • Page 26
    ...-film transistor in the LCD panel. This increases light transmittance per pixel and therefore allows to reduce power consumption. Also, high display quality can be achieved by employing proprietary UV2A technology. Sharp will utilize some of the existing production lines at the Kameyama No. 2 Plant...

  • Page 27
    ... applicants (WIPO data). *2 Sharp received the Fiscal 2010 Intellectual Property Achievement Award from the Ministry of Economy, Trade and Industry for its outstanding utilization of trademarks. DC Appliances Air conditioner Refrigerator Induction cooker TV LED light Solar Cells Intelligent Power...

  • Page 28
    ... Sales Service Production Perspective of social con tribution through business activities "Con tribute to the culture, benefits, and welfare of people throughout the world" • The business creed is the central axis of all business activities. • "Sincerity" means a working attitude mindful...

  • Page 29
    ... Green Products (SGPs). Sharp's AQUOS Quattron LCD TV is certified as an SGP. It realizes both energy savings and high image quality through the combination of a highly efficient LED backlight system and an LCD panel that substantially increases optical efficiency by employing UV2A technology and...

  • Page 30
    ..., Eco-Products 2010 10th Environmental Forum in China Examples of Initiatives Educational support activities To help raise awareness of global warming and eco-friendly lifestyles, Sharp has run a program of environmental education classes at elementary schools throughout Japan since October...

  • Page 31
    ... view of solar power system Annual Report 2011 29 Corporate Social Responsibility (CSR) Activities to support people with disabilities Sharp works hard to expand employment opportunities for people with disabilities. These efforts are spearheaded by Sharp Tokusen Industry Co., a subsidiary...

  • Page 32
    ... publicizing information. Status of Corporate Governance System The Board of Directors Meetings of Sharp Corporation are held on a monthly basis in principle to make decisions on matters stipulated by law and management-related matters of importance, and to supervise the state of business execution...

  • Page 33
    ... number of members. In addition to the Board of Directors, the Company has an Executive Management Committee, where matters of importance related to corporate management and business operation are discussed and reported twice a month in principle. This committee facilitates prompt executive decision...

  • Page 34
    ... to impact the operations, business results and financial position of Sharp. All references to possible future developments in the following text were made by Sharp as of March 31, 2011. (1) Global Market Trends Sharp manufactures and sells products and services in different regions around the...

  • Page 35
    ...Sharp's business results and financial position. Further, in a case where an accident occurs related to one of Sharp's products, report of said incident, based on the Consumer Product Safety Law and related regulations in Japan, and disclosure of the accident information based on a system for public...

  • Page 36
    ... Katsuaki Nomura Corporate Auditors Full-time Corporate Auditors Kunio Ito*1 Executive Officers Chairman Makoto Kato*1 Senior Executive Managing Officer Executive Officers Junzo Ueda Shinji Hirayama*2 Katsuhiko Machida President Nobuyuki Sugano Executive Managing Officers Takashi Okuda...

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

  • Page 38
    ... in capital investment. *2 Effective for the year ended March 31, 2008, pursuant to an amendment to the Corporate Tax Law, the Company and its domestic consolidated subsidiaries have depreciated tangible fixed assets acquired on and after April 1, 2007 in accordance with the method stipulated...

  • 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*4 Japan The Americas Europe China Other Total Japan The Americas Europe China...

  • Page 40
    ... and other benefits expenses of ¥116,491 million. As a result, operating income increased by ¥26,993 million to ¥78,896 million. 1,000 500 0 07 08 09 10 11 Consumer/Information Products Electronic Components Notes: 1. Effective for the year ended March 31, 2011, the Company has applied...

  • Page 41
    ... sales both in Japan and overseas. Sales by Product Group Yen (millions) U.S. Dollars (thousands) 2010 Audio-Visual and Communication Equipment Health and Environmental Equipment Information Equipment Consumer/Information Products LCDs Solar Cells Other Electronic Devices Electronic Components...

  • Page 42
    ... was allocated to expansion of production capacity of the LCD panel plant at GREEN FRONT SAKAI, in order to meet brisk demand for LCD TVs in the first half of the fiscal year. We also installed new production equipment at the Fukuyama Plant in order to increase production capacity for blue LED chips...

  • Page 43
    ... The equity ratio was 35.6%. Equity Ratio (%) Cash Flows Cash and cash equivalents at end of year stood at ¥241,110 million, a decrease of ¥87,015 million over the prior year, as combined payments in investing and financing activities exceeded proceeds from operating activities. Net cash provided...

  • Page 44
    ... Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2010 and 2011 Yen (millions) U.S. Dollars (thousands) ASSETS Current Assets: Cash and cash equivalents (Note 7) Time deposits (Note 7) Short-term investments (Notes 2 and 7) Notes and accounts receivable (Note 7) - Trade...

  • Page 45
    ... - Trade Construction and other Nonconsolidated subsidiaries and affiliates Accrued expenses Income taxes (Note 4) Other current liabilities (Note 4) Total current liabilities Long-term Liabilities: Long-term debt (Notes 5 and 7) Allowance for severance and pension benefits (Note 11) Other long-term...

  • Page 46
    Consolidated Statements of Operations Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2010 and 2011 Yen (millions) U.S. Dollars (thousands) 2010 Net Sales Cost of Sales Gross profit Selling, General and Administrative Expenses Operating income Other Income (Expenses...

  • Page 47
    Consolidated Statements of Comprehensive Income Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2010 and 2011 Yen (millions) U.S. Dollars (thousands) 2010 Income Before Minority Interests Other Comprehensive Income: Net unrealized holding gains (losses) on securities...

  • Page 48
    Consolidated Statements of Changes in Net Assets Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2010 and 2011 (thousands) Common stock (Note 9) ¥ 204,676 Yen (millions) Capital surplus (Note 9) ¥ 268,538 Number of Shares Balance at March 31, 2009 Net income ...

  • Page 49
    Consolidated Statements of Cash Flows Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2010 and 2011 Yen (millions) U.S. Dollars (thousands) 2010 Cash Flows from Operating Activities: Income before income taxes and minority interests Adjustments to reconcile income ...

  • Page 50
    ...generally accepted in Japan ("Japanese GAAP"), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards ("IFRS"). The financial statements of the Company's overseas consolidated subsidiaries for consolidation purposes have...

  • Page 51
    ... straight-line method over the estimated useful life of principally 5 years, and software embedded in products is amortized over the forecasted sales quantity. (l) Derivative financial instruments The Company and some of its consolidated subsidiaries use derivative financial instruments, including...

  • Page 52
    ... for Equity Method of Accounting for Investments Effective for the year ended March 31, 2011, the Company and its domestic consolidated subsidiaries have applied the "Accounting Standard for Equity Method of Accounting for Investments" (Accounting Standards Board of Japan (ASBJ) Statement No.16...

  • Page 53
    ... and 2011. 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 statements purposes for the year ended March 31...

  • Page 54
    ...2011 were 0.4% and 0.8%, respectively. The Company and its consolidated subsidiaries Financial Section have had no difficulty in renewing such loans when loans have come due or management has determined such renewal advisable. Short-term borrowings including current portion of long-term debt as of...

  • Page 55
    ... 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. The aggregate annual maturities of long-term debt as of March 31, 2011 were as follows: Years ending March 31...

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

  • Page 57
    ... and currency swap contracts, its consolidated subsidiaries execute transactions after the Company approves. For other securities and investments in capital, the Company regularly monitors prices and issuer's financial positions, and continually reviews the possession by taking these indices...

  • Page 58
    ... 2010 Consolidated Balance Sheet Amount Fair Value Difference (1) Cash and cash equivalents, and Time deposits (2) Notes and accounts receivable (3) Investments in securities Other securities Total Assets (4) Notes and accounts payable (excluding other accounts payable) (5) Bank loans and Current...

  • Page 59
    (Note 1) Methods of Calculating the Fair Value of Financial Instruments and Matters Related to Securities and Derivative Transactions (1) Cash and cash equivalents, Time deposits, and Short-term investments The fair value of time deposits and Short-term investments approximates their book value, due...

  • Page 60
    ... to an increase in the number of projects for power companies. In this field, the role of a solar developer is significant. Therefore, the Company acquired shares of Recurrent Energy, LLC, a leading company for development and marketing of solar power generation plants in the U.S. Taking 58 SHARP...

  • Page 61
    ... cal year, and net sales, and profit and loss on the Consolidated Statements. The estimated amount is un-audited. Annual Report 2011 59 Financial Section Consideration for the acquisition: amount of investment in Recurrent Energy, LLC as of the date of business combination Other costs directly...

  • Page 62
    ... 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 operations reflect dividends applicable to the respective period. On June 23, 2011, the shareholders approved...

  • Page 63
    ... in the manufacturing and marketing method of products. The Consumer/Information 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...

  • Page 64
    ... for the years ended March 31, 2010 and 2011 were as follows: Yen (millions) U.S. Dollars (thousands) 2010 Net Sales: Consumer/Information Products: Customers Intersegment Total Electronic Components: Customers Intersegment Total Adjustments The amount presented in Consolidated Financial Statements...

  • Page 65
    ...No. 20, issued by the ASBJ on March 21, 2008). Related information Sales by product/service for the year ended March 31, 2011 were as follows: Yen (millions) U.S. Dollars (thousands) 2011 Sales to outside customers: LCD Color TVs LCDs Mobile Phones Others Total ¥ 803,592 614,373 413,277 1,190,731...

  • Page 66
    ... charges for the year ended March 31, 2011 are mainly related to the reorganization of LCD plants, including depreciation and maintenance charges concerning plants that are suspended due to the production line change to meet the increasing demand for high value-added products. 64 SHARP CORPORATION

  • Page 67
    ... our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sharp Corporation and subsidiaries as of March 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity...

  • Page 68
    ... Sharp Laboratories of America, Inc. Sharp Electronics Manufacturing Company of America, Inc. Sharp Leasing USA Corp. Sharp US Holding Inc. Recurrent Energy, LLC *2 Sharp Electronics of Canada...

  • Page 69
    Investor Information (As of March 31, 2011) Shareholders Number of Shareholders 130,142 Principal Shareholders Nippon Life Insurance Company Meiji Yasuda Life Insurance Company Mizuho Corporate Bank, Ltd. The Bank of Tokyo-Mitsubishi UFJ, Ltd. Japan Trustee Services Bank, Ltd. (Trust Account) The...

  • Page 70
    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 vegetable oil-based ink.