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TOSHIBA ANNUAL REPORT 1999
Page
37.
EMBRACING THE FUTURE
ANNUAL REPORT
Year Ended March 31, 1999 19
99

Table of contents

  • Page 1
    TOSHIBA ANNUAL REPORT 1999 EMBRACING THE FUTURE ANNUAL REPORT Year Ended March 31, 1999 19 99 Page 37.

  • Page 2
    ... MEDICAL SYSTEMS COMPANY HOME APPLIANCES COMPANY ELEVATOR AND BUILDING SYSTEMS COMPANY FINANCIAL HIGHLIGHTS REVIEW OF OPERATIONS INFORMATION & COMMUNICATION SYSTEMS ELECTRONIC DEVICES & MATERIALS POWER & INDUSTRIAL SYSTEMS CONSUMER PRODUCTS SERVICES & OTHER RESEARCH & DEVELOPMENT ENVIRONMENTAL...

  • Page 3
    .... Why? To build a solid, highly profitable operating base and to continue to develop as one of the electronics industry's leading companies. In fiscal 1998, we implemented a host of programs as part of this drive. The discussion that follows explains them and management's vision for Toshiba. Page 1.

  • Page 4
    ... private-sector demand in Japan had a major impact, as did a precipitous price decline in semiconductor memories, sluggish demand for semiconductors for consumer products, price erosion in PC peripherals due to the increasing popularity of low-priced PCs, and soft sales of power plant and equipment...

  • Page 5
    ... our corporate-level vision for Toshiba as a whole. The corporate headquarters' staff also has a redefined role: to advance companywide and group strategies and projects. Corporate Staff concentrates its energies on corporate planning, auditing and advice to top management. Corporate Project Page...

  • Page 6
    ... projects. Corporate Support Services provides the in-house companies with specialist services in fields as diverse as research and development, legal affairs, intellectual property, logistics and environmental issues. Change of business portfolio - We continue to shift resources to fields with high...

  • Page 7
    ...shifting resources to logic devices and system LSIs. An excellent example of this strategy in action is co-development of advanced microprocessors with Sony Computer Entertainment Inc. for its next-generation game consoles and the establishment of a manufacturing joint venture to promote the project...

  • Page 8
    ...visual products, digitization is allowing us to add value to our products. In home appliances, we are reducing over-dependence on Japan with a new strategy that looks to the world and to markets with greater growth potential, particularly in Asia. Our complementary alliances with Carrier Corporation...

  • Page 9
    TOSHIBA ANNUAL REPORT 1999 A NEW LOOK. A NEW TOSHIBA. April 1, 1999 marked the start of a new in-house company system at Toshiba Corporation. The following pages introduce the new companies and profile their basic strategies. Page 7.

  • Page 10
    ...Group Air Conditioners & Appliances Group Environmental Management Business Group Energy Systems Group Industrial Equipment Group Electron Tube, Device & Material Group Semiconductor Group Liquid Crystal Display Division Electronic Devices Sales & Marketing Group 3. Power Systems & Services Company...

  • Page 11
    ... STAFF CORPORATE SUPPORT SERVICES BASIC COMMITMENT Blending Toshiba's expertise in computer, communications and control systems, the company delivers optimized solutions and services to a broad range of customers. Markets served range from government agencies to the manufacturing, financial...

  • Page 12
    ... A NEW LOOK. A NEW TOSHIBA. Information and Industrial Sy Blending Toshiba's expertise in computer, communications and control systems, the company delivers optimized solutions and services to a broad range of customers. Markets served range from government agencies to the manufacturing, financial...

  • Page 13
    ...adoption of supply chain management, and with its cumulative expertise gained through the supply of diverse plant systems, and sales, logistics, inventory control and other front-end systems. Leveraging its highly diverse experience enables the company to deliver high value-added services across the...

  • Page 14
    ... as a main supplier of IC cards to Barclays Bank, a leading British commercial bank. company's ultra-slim A-4 and B-5 sized models. Today, 18% of portable PC users worldwide use a Toshiba-almost one in five. Underpinning this market leadership is the company's high-density packaging technology and...

  • Page 15
    ... Company is visual equipment, such as color TVs, DVD players, digital cameras and LCD data projectors. In the market for large-screen TVs, generally defined as models of 29 inches and over, flat picture tube models accounted for over 70% of the Japanese market in 1998. Toshiba enjoys strong sales...

  • Page 16
    .... A NEW TOSHIBA. Power Systems & Servi The ability to supply turnkey nuclear, thermal and hydroelectric power plants and substations enables the Power Systems & Services Company to support energy infrastructures around the world. Through strategic alliances with leading manufacturers in Japan and...

  • Page 17
    ... venture companies with GE, in Japan and Mexico, began to manufacture turbine airfoils for thermal power steam generators in April and June 1999, respectively. Toshiba is also allied with GE in the development, manufacture and sale of next-generation combined-cycle systems. This technology combines...

  • Page 18
    ... expansion in system LSIs and other growth areas. In doing so, the company will utilize its advanced process technology, highly sophisticated product development capabilities, and experience of selling a broad line of devices to customers around the world. The Advanced Microelectronics Center...

  • Page 19
    ...% of the value of total semiconductor sales. As part of this drive, a jointHopes are high for SmartMedia, a de facto standard for digital still picture storage, to also find applications in the recording of music and other types of content. venture company was formed in June 1999 with Sony Computer...

  • Page 20
    ... shorter, the company is focused on delivering technologies and products that promote the breakthrough in performance and functions of sets and systems required by customers. Toshiba's new production line at the Fukaya Operations started manufacturing low-temperature polysilicon TFT LCDs in April...

  • Page 21
    ... is helping the company to maintain its industry leadership. In Japan, satellite broadcasts are bringing viewers more channels and spurring demand for large-screen TVs. Toshiba has a broad lineup, from 28-inch to 36-inch models, all taking full advantage of the company's Super Brightron flat picture...

  • Page 22
    .... Medical System Toshiba is one of the world's leading suppliers of medical equipment, particularly diagnostic imaging modalities such as X-ray diagnostic equipment, CT scanners, and diagnostic ultrasound systems. In addition to the latest equipment for medical facilities worldwide, the company is...

  • Page 23
    ... In diagnostic ultrasound systems, Toshiba continues to introduce a steady stream of competitive products that preserve its position atop the world ranking. PowerVision 6000 and MiniVision (Just Vision in overseas markets) are recent products that have won high marks. Toshiba's diagnostic ultrasound...

  • Page 24
    ... 1999 A NEW LOOK. A NEW TOSHIBA. Home Appliances Company The binding concept is to develop products The "Miharibanko" refrigerator employs a "twin cooler format" to keep food fresh for twice as long while cutting power consumption. that will provide solutions to people's needs by capitalizing on...

  • Page 25
    ...-type vacuum cleaner uses an air-cycle system to efficiently clean surfaces. May 1999, Toshiba entered an alliance with the Scandinavia-based AB Electrolux, the world's largest household appliance manufacturer. The agreement covers technology exchanges, joint product development, product sourcing...

  • Page 26
    ... REPORT 1999 A NEW LOOK. A NEW TOSHIBA. A steady stream of high-value products promote the company's strategy of close cooperation with its affiliated companies to provide total solutions for buildings and other facilities, including upgrades and maintenance for installed equipment. From this base...

  • Page 27
    ... its markets not just in Japan but overseas. Electronic control, systems technologies and other fields in which the company is adept are a central part of this strategy and will allow the company to deliver value-added products. Toshiba launched the SPACEL TM The Taipei Financial Center, which has...

  • Page 28
    ... HIGHLIGHTS Toshiba Corporation and its subsidiaries Years ended March 31, 1999 and 1998 Millions of yen 1999 1998 Thousands of U.S. dollars 1999 Net sales - Japan ...- Overseas ...Net sales ...Operating income ...Income before income taxes and minority interest ...Net (loss) income ...Research...

  • Page 29
    ... 20 Mar. 97 98 99 Sales Annual Increase (%) Share of Net Sales Mar. '97 '98 In mobile communications equipment, Toshiba is benefiting from a surge in demand in Japan to purchase upgraded handsets that accommodate e-mail and other new services. In North America, the rapid shift from analog...

  • Page 30
    ... game console. The world's first 128-bit microprocessor, this device is capable of processing immense volumes of multimedia data at very high speeds. A production joint venture company located at Toshiba's Oita Operations was formed by the two partners in June 1999. In memory devices, projections...

  • Page 31
    ... power systems. % Sales Annual Increase (%) Share of Net Sales Mar. '97 '98 To preserve superiority in thermal power generation, Toshiba has formed an alliance with General Electric Company in the field of next-generation, combined-cycle generation systems that employ 1,500°C-class gas turbines...

  • Page 32
    ... other parts of the world. In the industrial systems sector, one major achievement of the year was the delivery of main power conversion systems and other key components for The 700 Series Shinkansen trains for the Central Japan Railway Company. In the elevators and escalators business, Toshiba made...

  • Page 33
    ... world's largest manufacturer of air conditioning equipment, in August 1999. The two companies established a joint venture company, Toshiba Carrier Corporation, which started operations in April 1999. The new company will seek to improve competitiveness in the global market, combining the technology...

  • Page 34
    ... to shift more researchers to the individual 100 labs supporting the in-house companies. This crystallized a commitment to speeding up Mar. 97 98 99 % time to market for new products and to meeting the market needs properly. The corporate R&D Center '99 Proportion of Net Sales Mar. '97 '98...

  • Page 35
    ...demand for smaller portable products with higher performance. REAL-TIME 3D IMAGE RECOGNITION AND PROCESSING Real-time recognition and display of 3D images on PCs became a reality in July 1998. The company's new technology can accurately distinguish moving objects from their background, including the...

  • Page 36
    ... of products, from consumer products to communications equipment and power systems. READY FOR RECYCLING In April 2001, a new law will come into force and make home appliance companies responsible for recycling the TVs, refrigerators, washing machines and air conditioners they manufacture. Toshiba is...

  • Page 37
    ... and supports bulk decoloring. A commercialized version of the system is expected to simplify paper recycling and to reduce its cost, and will promote a higher recycling rate for reused paper. A super-cogeneration system at the company's Fuchu Operations fuses a gas-turbine cogeneration system with...

  • Page 38
    TOSHIBA ANNUAL REPORT 1999 BOARD OF DIRECTORS TAIZO NISHIMURO* President and Chief Executive Officer and Director MASAICHI KOGA*... TAKESHI IIDA YUJI KIYOKAWA Executive Vice Presidents Senior Vice Presidents CORPORATE AUDITORS ATSUMI UCHIYAMA MASAYOSHI MOTOKI KENJIRO HAYASHI KAZUO CHIBA OSAMU ...

  • Page 39
    ... for logic ICs and semiconductors used in consumer products. Second was a decline in demand for systems from corporate customers due to reduced private-sector capital expenditures in Japan. Third was soft sales of power and industrial systems. The average U.S. dollar exchange rate for sales rose...

  • Page 40
    ...sector capital expenditures and sluggish personal consumption, continued to pose challenges. NORTH AMERICA-Sales rose 6 percent from the prior fiscal year on the back of higher PC sales, as Toshiba unveiled new products, and strong television sales were fueled by robust consumer spending. ASIA-Sales...

  • Page 41
    ...resulted from good overseas sales of TVs and improved profitability of washing machines and air conditioners in Japan. Services & other reported a 5 percent decrease in operating income to ¥23.4 billion (US$194 million). Toshiba estimates that the net effect of foreign exchange movements during the...

  • Page 42
    ... ...Services & Other ...Corporate ...Consolidated ...Capital expenditures: Information & Communication Systems ...Electronic Devices & Materials ...Power & Industrial Systems ...Consumer Products ...Services & Other ...Corporate ...Consolidated ...¥ 120,924 302,885 423,809 (651,417) ¥5,300,902...

  • Page 43
    TOSHIBA ANNUAL REPORT 1999 Geographic Segments Millions of yen Years ended March 31 1999 1998 1997 Thousands of U.S. dollars 1999 Net sales: Japan Unaffiliated customers ...Intersegment ...Total ...Overseas Unaffiliated customers ...Intersegment ...Total ...North America Unaffiliated customers ......

  • Page 44
    ...-generation networking technology, portable PCs, digital broadcasting equipment and DVD, achieving finer design rules in semiconductor production, developing LSIs, polysilicon-type LCDs, nuclear power plants, new cellular telephones, digital copying machines and environmental systems. Furthermore...

  • Page 45
    ... is enhanced by means of in-house publicity and events and the company web site. Progress in Y2K readiness is reported periodically to the Board of Directors. (3) Current situation All Toshiba products have been checked for Y2K compliance. Where necessary, Toshiba is notifying customers of potential...

  • Page 46
    ... will be offered by emergency communication channels Toshiba will establish. In order to assure a swift response, these will also operate during holidays, particularly at 1999 year-end and the new year in 2000. Systems and procedures for customer support will include a 24-hour-service inquiry hot...

  • Page 47
    ...Corporation ... 100 79 100 100 60 75 100 100 100 57 100 100 100 100 100 88 100 100 100 100 56 100 100 50 100 100 100 U.K. Toshiba Information Systems (UK) Ltd...100 Toshiba (UK) Ltd...100 The Netherlands Toshiba Medical Systems Europe B.V...100 Germany Toshiba Electronics Europe GmbH ...100 Toshiba...

  • Page 48
    ...CONSOLIDATED BALANCE SHEETS Toshiba Corporation and its subsidiaries As of March 31, 1999 and 1998 Thousands of U.S. dollars (Note 3) 1998 1999 Millions of yen ASSETS Current assets: Cash and cash equivalents ...Marketable securities (Note 4) ...Notes and accounts receivable, trade (Note 8)- Notes...

  • Page 49
    TOSHIBA ANNUAL REPORT 1999 Millions of yen Thousands of U.S. dollars (Note 3) 1998 1999 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings (Note 8) ...Current portion of long-term debt (Note 8) ...Notes payable, trade ...Accounts payable, trade... stock, ¥50 par value ...

  • Page 50
    ... ANNUAL REPORT 1999 CONSOLIDATED STATEMENTS OF INCOME Toshiba Corporation and its subsidiaries For the years ended March 31, 1999 and 1998 Thousands of U.S. dollars (Note 3) 1998 1999 Millions of yen 1999 Sales and other income: Net sales ...Other income ... ¥5,300,902 126,078 5,426,980 ¥5,458...

  • Page 51
    ...Toshiba Corporation and its subsidiaries For the years ended March 31, 1999 and 1998 Millions of yen Additional paid-in capital Accumulated other comprehensive income (loss) Common stock... pension ...dollars (Note 3) Additional paid-in capital Accumulated other comprehensive income (loss) Common stock...

  • Page 52
    ... OF CASH FLOWS Toshiba Corporation and its subsidiaries For the years ended March 31, 1999 and 1998 Thousands of U.S. dollars (Note 3) 1999...Dividends paid ...Decrease in short-term borrowings ...Net cash (used in) provided by financing activities ...Effect of exchange rate changes on cash and ...

  • Page 53
    ... activities. The products are manufactured and marketed throughout the world with approximately 60 percent of sales in Japan and the remainder in North America, Asia, Europe and elsewhere. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PREPARATION OF FINANCIAL STATEMENTS - The company and its...

  • Page 54
    ... each period. Diluted EPS assumes the dilution that could occur if dilutive convertible debentures were converted into common stock. FINANCIAL INSTRUMENTS - The company uses a variety of derivative financial instruments, which include forward exchange contracts, interest rate swap agreements and...

  • Page 55
    ... Certified Public Accountants issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for the costs of computer software developed or obtained solely to meet the company's internal needs...

  • Page 56
    ...mainly consist of corporate debt securities. Contractual maturities of debt securities classified as available-for-sale were as follows at March 31, 1999: Millions of yen Carrying amount Fair value Thousands of U.S. dollars Carrying amount Fair value...gains on those sales for the years ended March 31,...

  • Page 57
    ...leases consists of sales-type and direct financing leases mainly of information systems, medical equipment, agricultural and industrial equipment and others. Other finance receivables represent transactions in a variety of forms, including commercial loans, and installment sales of consumer products...

  • Page 58
    ... on quoted market prices at those dates. Summarized financial information of the affiliated companies accounted for by the equity method is shown below: Millions of yen March 31 1999 1998 Thousands of U.S. dollars 1999 Current assets ...Other assets including property, plant and equipment ...Total...

  • Page 59
    ...) was in support of the company's commercial papers. These lines of credit have commitment fee requirements. Long-term debt at March 31, 1999 and 1998 comprise the following: Millions of yen March 31 1999 1998 Thousands of U.S. dollars 1999 Loans, principally from banks and insurance companies, due...

  • Page 60
    ... periodic pension and severance cost for 1999 and 1998 included the following components: Millions of yen Years ended March 31 1999 1998 Thousands of U.S. dollars 1999 Service cost - benefits earned during the year ...Interest cost on projected benefit obligation ...Expected return on plan assets...

  • Page 61
    ...change in ownership rate and other ...Benefits paid ...Foreign currency exchange impact ...Benefit obligation at end of year ...Change in plan assets: Fair value of plan assets at beginning of year ...Actual return on plan assets ...Employer contribution ...Plan participants' contributions ...Effect...

  • Page 62
    ... ended March 31, 1999 and 1998, the net foreign exchange loss was ¥10,596 million ($87,570 thousand) and ¥33,229 million, respectively. 13. INCOME TAXES: The company is subject to a number of different taxes based on income which, in the aggregate, indicate a normal statutory tax rate in Japan...

  • Page 63
    ... to stated capital. The amount of retained earnings available for dividends is based on the parent company's retained earnings determined in accordance with generally accepted accounting principles and the Commercial Code in Japan. Retained earnings at March 31, 1999 include year-end dividends of...

  • Page 64
    ... is shown below: Millions of yen March 31 1999 1998 Thousands of U.S. dollars 1999 Foreign currency translation adjustments: Balance at beginning of year ...Current-period change ...Balance at end of year ...Minimum pension liability adjustment: Balance at beginning of year ...Current-period change...

  • Page 65
    ... and diluted EPS for the years ended March 31, 1999 and 1998 were 3,218,983 thousand and 3,218,992 thousand, respectively. 16. FINANCIAL INSTRUMENTS: The company operates internationally, giving rise to exposure to market risks from fluctuations in foreign currency exchange and interest rates. In...

  • Page 66
    ...payable, trade, notes and accounts payable for construction and employees' savings deposits, it was assumed that the carrying amount approximated fair value for the majority of these instruments because of their short maturities. Quoted market prices were used for marketable securities and a part of...

  • Page 67
    ... for the years ended March 31, 1999 and 1998. The presentation of information concerning the Company's operating segments, its products and services, and its geographic areas is required by accounting principles generally accepted in the United States of America for a complete presentation...

  • Page 68
    ...Toshiba America Information Systems, Inc. Irvine, California, U.S.A. Toshiba America Consumer Products, Inc. Wayne, New Jersey, U.S.A. Toshiba Hawaii, Inc. Honolulu, Hawaii, U.S.A. Toshiba International Corporation Houston, Texas, U.S.A. Toshiba America Electronic Components, Inc. Irvine, California...

  • Page 69
    ..., Malaysia WS Elevators Sdn. Bhd. Penang, Malaysia Toshiba Capital (Asia) Ltd. Singapore Toshiba Asia Pacific Pte., Ltd. Singapore Toshiba Medical Systems Asia Pte., Ltd. Singapore Toshiba Data Dynamics Pte., Ltd. Singapore Toshiba Video Products Pte., Ltd. Singapore International Video Products Pte...

  • Page 70
    ...Toshiba Electronics (UK) Ltd. Toshiba Electronics Asia, Ltd. Toshiba Electronics Europe GmbH Toshiba Electronics Malaysia Sdn. Bhd. Toshiba Electronics Taiwan Corporation Toshiba Europe GmbH Toshiba Information Equipment (Philippines), Inc. Toshiba Information Systems (UK) Ltd. Toshiba International...

  • Page 71
    ...of March 31, 1999) For further information, please contact: Corporate Communications Office TOSHIBA CORPORATION 1-1, Shibaura 1-chome, Minato-ku Tokyo 105-8001, Japan Phone: (03) 3457-2096 Facsimile: (03) 5444-9202 or via the Internet at: http://www.toshiba.co.jp Product names may be trademarks of...

  • Page 72
    TOSHIBA ANNUAL REPORT 1999 Page 70. Printed in Japan