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2012
Bringing the World
a One-of-a-Kind Competitive Edge
Annual Report 2012
For the year ended March 31, 2012

Table of contents

  • Page 1
    Bringing the World a One-of-a-Kind Competitive Edge 2012 2010 2005 2004 2002 2001 2000 1993 1992 1991 1989 1973 1966 1964 1963 1962 1953 1925 1915 1912 Annual Report 2012 For the year ended March 31, 2012

  • Page 2
    ... LCD TV 2005 Commences sales of a superheated steam oven, the first in home cooking appliance 2004 Begins mass production of System LCDs as a display for mobile phones and other mobile devices 2002 Starts selling the AQUOS LCD TV 2001 Debuts air purifier equipped with Plasmacluster Ion technology...

  • Page 3
    ... Business 14 Fiscal 2011 Review by Product Group 16 R&D and Intellectual Property 20 Corporate Social Responsibility (CSR) 22 Corporate Governance 26 Risk Factors 28 Directors, Corporate Auditors and Executive Officers 31 Financial Section 34 Investor Information 36 37 69 Annual Report...

  • Page 4
    ... of shares of common stock outstanding during each fiscal year. 4. 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...

  • Page 5
    ... of yen) Capital Investment (billions of yen) R&D Expenditures (%) 1,500 350 300 200 12 1,200 250 900 200 150 9 100 600 150 100 300 50 0 0 0 50 6 3 0 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 Ratio to net sales [right axis] Annual Report 2012 3 Financial Highlights

  • Page 6
    ... the global market launch of new one-of-a-kind products that will impress and amaze. Meanwhile, in terms of production strategy, Sharp has entered into an agreement with the Hon Hai Group, the world's leading electronic manufacturing service company, to establish a strategic global partnership...

  • Page 7
    ..., General Manager, Global Business, Administration and Manufacturing Promotion; Group General Manager, Global Business Group President of Sharp Corporation Representative Director, President of Sharp Corporation October 2011 April June 2012 2012 Annual Report 2012 5 Message to Our Shareholders

  • Page 8
    ... included Japan's first and world's first products. We are aiming to become a "globally competitive company" through continuous efforts to create one-of-a-kind products that impress and amaze people and to change our business model in the commoditized digital products field. 6 SHARP CORPORATION

  • Page 9
    ... products, notably LCD TVs and mobile phones, has become a "power game" in which success or failure in the global market is determined by sheer production scale. In this context, having a slight technological advantage no longer carries any meaning in the face of overwhelming capacity. In light...

  • Page 10
    ... in production technologies, procurement capabilities and cost-competitiveness. In this way, we plan to actively promote Sharp-brand products with cost advantages to markets around the world. To further strengthen the alliance, the Hon Hai Group will make an equity investment in Sharp Corporation...

  • Page 11
    ...grow into a truly global company. To date, Sharp has maintained steady sales and profits in the Japanese market. However, we did not build an adequate framework to pursue product development, sales, and servicing that meet the needs of overseas markets, especially in rapidly growing emerging markets...

  • Page 12
    ... Energy Solutions Business Generate New Demand 1. System equipment (storage batteries, HEMS, etc.) New one-of-a-kind strategy Current one-of-a-kind strategy centered on home appliances Products other than home appliances Centered on solar cell module sales Energy solutions business 2. Design...

  • Page 13
    ... example. We will use this strategy to tap new markets by creating new applications and providing levels of value unseen in the past. Now, I will introduce an example of efforts we're making in new markets outside of home appliances. Our IGZO LCDs offer three key features: high-definition, low power...

  • Page 14
    ... With respect to our financial position, we will work to achieve an improvement of a total of ¥400 billion. We will make off-balance-sheet arrangements for our large-size LCD business and enhance equity capital by issuing new shares through a third-party allotment to the Hon Hai Group. We will also...

  • Page 15
    ... Raising corporate value has a variety of meanings. In light of our current harsh business environment, raising shareholder value through the improvement of profitability and the strengthening of our financial position is among our top priorities. It is the management's responsibility to work with...

  • Page 16
    ...energy solutions business through a wide variety of activities, including the provision of residential solar power generation systems and the design, construction, sales, power generation and maintenance services of large-scale solar power generation plants. Solar Cell Market Trends The world solar...

  • Page 17
    ...Solar cells Roles of a HEMS Air conditioner Dedicated tablet terminal Utility power Visualizes electricity usage Controls home appliances Enables optimal control of energy sources Security Storage battery Refrigerator LCD TV Water heater Electric vehicle Image of Home Energy Management System...

  • Page 18
    ... Products Technology Revolution in LCD Panels Special Feature 2: One-of-a-Kind Devices and Products 16 Leveraging Sharp's proprietary technologies, centered on IGZO LCDs, we will realize the features of high-definition, low-power consumption and high-performance touch screens, and will create new...

  • Page 19
    ... with Semiconductor Energy Laboratory Co., Ltd. *2 Photo-alignment technology that can precisely control the alignment of liquid crystal molecules in a simple LCD panel structure *3 Compared with Sharp's LCD panels that employ amorphous silicon TFTs Annual Report 2012 17 Special Feature 2: One-of...

  • Page 20
    ... make a shift in categories for home appliances and provide new solutions. Plasmacluster Ion Technology Sharp also has a history of generating new demand by developing various one-of-a-kind technologies in the field of home appliances. Plasmacluster Ion technology is one such example. It is an air...

  • Page 21
    ... that makes daily life more comfortable and reassuring in June 2012. The robotic home appliance not only employs Plasmacluster Ion technology, but is also equipped with artificial intelligence technology, allowing users to enjoy a diverse range of responses based on the level of battery power...

  • Page 22
    ... appliances, beauty appliances, Plasmacluster Ion generators, LED lights, solarpowered LED lights, network control units Total Assets Information Equipment 30.7% Segment Outline 20 SHARP CORPORATION 69.3% Main Products POS systems, handy data terminals, electronic cash registers, information...

  • Page 23
    ... of yen) Operating Income (Loss) 3,000 150 100 2,000 50 0 -50 1,000 0 -100 08 (billions of yen) 09 10 11 12 (billions of yen) 08 09 10 11 12 Total Assets Capital Investment 2,000 1,500 300 200 1,000 100 500 0 0 08 09 10 11 12 08 09 10 11 12 Annual Report 2012

  • Page 24
    ... to establish Sharp's brand image as a leading company of large-screen TVs, based on the global rollout of large-screen models, while striving to create products that will stimulate new demand. Fiscal 2011 Review by Product Group 22 80-inch AQUOS Blu-ray Disc Recorders/Players In Japan, while the...

  • Page 25
    ... of energy saving, Sharp worked to increase sales of LED lights, with a focus on ceiling lights. In addition, against the backdrop of growing health consciousness, we increased sales of air purifiers equipped with Plasmacluster Ion technology. We also started the business of beauty appliance and...

  • Page 26
    ... demand for the higher-performance LCD panels that feature thinness, high-definition and low power consumption. Fiscal 2011 Review by Product Group 24 6.1-inch IGZO LCD for mobile devices (prototype) Large-size LCDs The market condition deteriorated globally, reflecting the slowing growth in...

  • Page 27
    ... cell modules to total systems and establish a business model that is more resilient to changing market conditions and currency rate ï¬,uctuations. In Japan, we devoted our efforts to expanding sales of Black Solar high-efficiency monocrystalline solar cells designed for residential applications...

  • Page 28
    ...Agency New Energy and Industrial Technology Development Organization (NEDO) R&D and Intellectual Property 26 Dye-sensitized solar cell modules Solar power generation system Broadband router LCD color monitor Repeater Dedicated plug Recovery support system for elderly motor function Sharp has...

  • Page 29
    ... registrations globally. * International patent applications (PCT applications) in 2011: Sharp ranked 4th among applicants (WIPO data) Super Hi-Vision LCD As the world's first direct-view type display for a nextgeneration, high-definition TV broadcast service, Sharp has developed* an 85-inch LCD...

  • Page 30
    ... solutions and happiness to everyone. •฀ "Creativity"฀means฀a฀working฀attitude฀not฀content฀with฀ the way things are. An attitude that always seeks to add value, and to make efforts to innovate and improve. Sincerity and Creativity Business Activities R&D Design Procurement...

  • Page 31
    ..." page of the corporate website, participation in environmental exhibitions, the holding of forums on the environment, and active use of newspapers, television and other media. Annual Report 2012 29 Corporate Social Responsibility (CSR) Eco-Positive Operations Sharp works actively to raise the...

  • Page 32
    ... SHARP CORPORATION Great East Japan Earthquake response Sharp made monetary donations and also provided company products (home appliances, solar power generation systems, etc.) to people in the disaster-stricken areas right after the Great East Japan Earthquake. Sharp continues to carry out support...

  • Page 33
    ...- and technology-oriented company. In an effort to further strengthen manufacturing competency, Sharp is committed to improving the speed and quality of managerial decisions. Our business activities are limited to the development, production and sale of products and devices, which have a strong...

  • Page 34
    ...of the company management during each accounting period, the term of office for members of the Board of Directors is set at one year. As an advisory body to the Board of Directors, Sharp has established an Internal Control Committee, which deliberates on basic policies, the state of development and...

  • Page 35
    ... of and swift responses to risk. Plan Regarding Large-Scale Purchases of Sharp Corporation Shares (Takeover Defense Plan) In order to protect and enhance the corporate value and common interests of shareholders of a manufacturing firm such as Sharp, a company must develop inhouse and make good use...

  • Page 36
    ... 2012. (1) Global Market Trends Sharp manufactures and sells products and services in different regions around the world. Business results and financial position are thus subject to economic and consumer trends (especially trends in private consumption and corporate capital investment), competition...

  • Page 37
    ...results and financial position. (10) Leakage 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 38
    ... Morimoto Akira Atarashi Paul Molyneux Mototaka Taneya Toshiyuki Osawa Shigeaki Mizushima *2 Yoichiro Natsuzumi Masuo Okumura*2 Kozo Takahashi Senior Executive Managing Officers Tetsuo Onishi Nobuyuki Sugano Fujikazu Nakayama *1 Outside Directors *2 Outside Corporate Auditors SHARP CORPORATION

  • Page 39
    ... Five-Year Financial Summary Financial Review Consolidated Balance Sheets Financial Section Annual Report 2012 37 38 Consolidated Statements of Operations 40 Consolidated Statements of Comprehensive Income 44 Consolidated Statements of Changes in Net Assets 46 Consolidated Statements of Cash...

  • Page 40
    ... Financial Summary Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31 Yen (millions) U.S. Dollars (thousands) 2008 Net Sales Domestic sales Overseas sales Operating Income (Loss) Income (Loss) before Income Taxes and Minority Interests Net Income (Loss) Net Assets Total...

  • Page 41
    ...Sales to Outside Customers) 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*3 The Americas Europe China Other Total Japan The Americas...

  • Page 42
    ... segments (Consumer/ Information Products and Electronic Components). Operating income (loss) figures are the amounts before adjustment of intersegment trading. 3. Capital investment figures shown in "Capital Investment and Depreciation" include the amount of leased properties. SHARP CORPORATION

  • Page 43
    ... LCD TVs 60 inches and larger, especially in North America. However, overall sales of LCD TVs declined significantly over the previous year, mainly due to decreased demand following the end of analog TV broadcasting in Japan, as well as greater-than-expected price declines. Sales of mobile phones...

  • Page 44
    ..., due to falling sales of devices for digital products such as LCD TVs. Capital Investment and Depreciation Capital investment amounted to ¥118,899 million, down 31.1% from the previous year. Much of this investment was allocated to expansion of mobile LCD production lines, in order to respond to...

  • Page 45
    ... notes and accounts receivable of ¥60,547 million in the previous year. Net cash used in investing activities amounted to ¥159,557 million, a decrease of ¥85,056 million. This was mainly due to a ¥77,236 million decline in purchase of property, plant and equipment. Net cash provided by financing...

  • Page 46
    ... Sheets Sharp Corporation and Consolidated Subsidiaries as of March 31, 2011 and 2012 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 47
    ...debt (Notes 5 and 7) Notes and accounts payable (Note 7) - 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...

  • Page 48
    ... Dollars 2011 Per Share of Common Stock (Note 8): Net income (loss) Diluted net income Cash dividends ¥ 17.63 16.47 17.00 ¥ 2012 (341.78) - 10.00 $ 2012 (4.22) - 0.12 The accompanying notes to the consolidated financial statements are an integral part of these statements. SHARP CORPORATION

  • Page 49
    Consolidated Statements of Comprehensive Income Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2011 and 2012 Yen (millions) U.S. Dollars (thousands) 2011 Income (Loss) before Minority Interests Other Comprehensive Income: Net unrealized holding gains (losses) on ...

  • Page 50
    ...) Financial Section 48 Number of Shares Balance at beginning of fiscal 2012 Net loss Dividends from surplus Change of scope of consolidation Change of scope of equity method Purchase of treasury stock Disposal of treasury stock Net changes of items other than shareholders' equity Balance at end...

  • Page 51
    Consolidated Statements of Cash Flows Sharp Corporation and Consolidated Subsidiaries for the Years Ended March 31, 2011 and 2012 Yen (millions) U.S. Dollars (thousands) 2011 Cash Flows from Operating Activities: Income (loss) before income taxes and minority interests Adjustments to reconcile ...

  • Page 52
    ... securities with available fair market values are stated 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...

  • Page 53
    ... assets except for lease assets is computed using the straight-line method. Software costs are included in other assets. Software used by the Company is amortized using the straightline method over the estimated useful life of principally 5 years, and software embedded in products is amortized...

  • Page 54
    ...grant to the above new shares any voting rights to exercise at its ordinary general meeting of shareholders scheduled on June 26, 2012. 2. Issue Price means the amount paid pursuant to the Japanese Corporate Law. 2) Purpose of Offering The Company resolved the capital and business alliance with the...

  • Page 55
    ... Sharp Display Products Corporation Development, production and sales of LCD panels The Company purchases LCD panels from the subsidiary. 2. Investments in Securities The following is a summary of other securities with available fair market values as of March 31, 2011 and 2012: Yen (millions) 2012...

  • Page 56
    ...Company is subject to a number of different income taxes which, in the aggregate, indicate a statutory tax rate in Japan of approximately 40.6% for the years ended March 31, 2011 and 2012. The Company and its wholly owned domestic subsidiaries have adopted the consolidated tax return system of Japan...

  • Page 57
    ...), while deferred income tax calculated for the year ended March 31, 2012 increased by ¥2,054 million ($25,358 thousand) and net unrealized holding gains (losses) on securities increased by ¥359 million ($4,432 thousand). 5. Short-term Borrowings and Long-term Debt Short-term borrowings including...

  • Page 58
    ... to offset cash deposited against any shortterm 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, 2012 were as follows: Years ending March 31...

  • Page 59
    ... consolidated subsidiaries obtain necessary funds, mainly 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...

  • Page 60
    ... of Corporate Accounting and Control Group on a daily basis. The Accounting Department has set up the specialized section for transaction results and position management, and reports the result of transactions to the General manager of Corporate Accounting and Control Group on a daily basis...

  • Page 61
    ... (thousands) 2012 Consolidated Balance Sheet Amount Fair Value Difference (1) Cash and cash equivalents, Time deposits, and Short-term investments $ 2,411,420 $ 2,411,420 4,549,679 4,634,704 (2) Notes and accounts receivable (excluding other accounts receivable) (3) Investments in securities...

  • Page 62
    ...740 U.S. Dollars (thousands) 2012 Due in one year or less Due after one year Cash and cash equivalents, Time deposits, and Short-term investments Notes and accounts receivable (excluding other accounts receivable) Total $ 2,411,420 4,032,975 $ 6,444,395 $ - 601,728 $ 601,728 SHARP CORPORATION

  • Page 63
    ... the financial statements at the end of such fiscal year. However, cash dividends per share shown in the accompanying consolidated statements of operations reï¬,ect dividends applicable to the respective period. On June 26, 2012, the shareholders approved the declaration of year end cash dividends...

  • Page 64
    ... allocated to each service year mainly based on points. 11. Segment Information General information about reportable segments The Company Group's reportable segments are components of the Group whose operating results are regularly reviewed by the Board of Directors when making resource allocation...

  • Page 65
    ... in Consolidated Financial Statements Investments in Nonconsolidated Subsidiaries and Affiliates accounted for using the equity methods: Consumer/Information Products Electronic Components Adjustments The amount presented in Consolidated Financial Statements Increase in Plant, Equipment and...

  • Page 66
    ... increase in long-term prepaid expenses. Financial Section 64 Related information Sales by product/service for the years ended March 31, 2011 and 2012 were as follows: Yen (millions) U.S. Dollars (thousands) 2011 Sales to outside customers: LCD Color TVs LCDs Mobile Phones Others Total ¥ 803,592...

  • Page 67
    ...its consolidated subsidiaries reduced the book value of idle and unused-in-the-future production equipment of thin-film solar cells in the Katsuragi Plant etc. to recoverable amount, and recognized the decreased amount of ¥6,656 million ($82,173 thousand) as impairment loss for the year ended March...

  • Page 68
    ... primary component of LCD panels, as well as to achieve improvement of the competitiveness of such businesses. (4) Date of business divestiture [1] Transfer of shares Financial Section 66 through March 26, 2013 (Planned) [2] Absorption-type company split June 30, 2012 (Planned) (5) Other items with...

  • Page 69
    ... comprehensive income, statements of changes in net assets and statements of cash ï¬,ows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements Management is responsible for...

  • Page 70
    ... Display Products Corporation iDeep Solutions Corporation Sharp Support & Service Corporation Sharp Electronics Corporation Sharp Laboratories of America, Inc. Sharp Electronics Manufacturing Company of America, Inc. Sharp US Holding Inc...

  • Page 71
    ... 20, 2012: Seavans South Building, 1-2-3 Shibaura, Minato-ku, Tokyo 105-0023, Japan Phone: +81-3-5446-8208 Fax: +81-3-5446-8206 Websites: (English) http://sharp-world.com/corporate/ir/index.html (Japanese) http://www.sharp.co.jp/corporate/ir/index.html Annual Report 2012 69 Investor Information

  • Page 72
    22-22, Nagaike-cho, Abeno-ku, Osaka 545-8522, Japan Phone: +81-6-6621-1221 http://www.sharp.co.jp