UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTIONS 13 ORor 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedMarch 31, 2002
2003
Commission file number1-6784
MATSUSHITA DENKI SANGYO KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
(Translation of Registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | |
American Depositary Shares* |
New York Stock Exchange and Pacific Exchange | ||
Common Stock | ||
New York Stock Exchange and Pacific Exchange |
* | ||
Each American Depositary Share represents one share of Common Stock. |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
(Title of Class)
This form contains 125143 pages.
Page | ||||||||||||||
1 | ||||||||||||||
2 | ||||||||||||||
PART I | ||||||||||||||
Item 1. | 3 | |||||||||||||
Item 2. | ||||||||||||||
3 | ||||||||||||||
Item 3. | 3 | |||||||||||||
A. | 3 | |||||||||||||
B. | 4 | |||||||||||||
C. | 4 | |||||||||||||
D. | 4 | |||||||||||||
Item 4. | 10 | |||||||||||||
A. | 10 | |||||||||||||
B. | 15 | |||||||||||||
C. | 28 | |||||||||||||
D. | 29 | |||||||||||||
Item 5. | 31 | |||||||||||||
A. | 31 | |||||||||||||
B. | 38 | |||||||||||||
C. | 42 | |||||||||||||
D. | 43 | |||||||||||||
E. | 44 | |||||||||||||
F. | 44 | |||||||||||||
G. | 44 | |||||||||||||
H. | 44 | |||||||||||||
Item 6. | 49 | |||||||||||||
A. | 49 | |||||||||||||
B. | 55 | |||||||||||||
C. | 55 | |||||||||||||
D. | 57 | |||||||||||||
E. | 58 |
CONTENTS
85 |
Page | |||||||||
Item 16A. | 85 | ||||||||
Item 16B. | |||||||||
85 | |||||||||
Item 16C. | |||||||||
85 | |||||||||
Item 16D. | 85 | ||||||||
PART III | |||||||||
Item 17. | 86 | ||||||||
Item 18. | 142 | ||||||||
Item | |||||||||
142 |
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Indicate the number of outstanding shares (excluding treasury stocks) of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Outstanding as of | ||||||||
Title of Class | March 31, 2003 (Japan Time) | March 28, 2003 (New York Time) | ||||||
Common Stock | ||||||||
2,359,316,711 | ||||||||
American Depositary Shares, each representing 1 share of common stock | 119,692,554 |
Indicate by check mark whether the Company (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]x No [ ].¨ .
Indicate by check mark which financial statement item the Company has elected to follow.
Item 17. [X]x Item 18. [ ].¨.
All information contained in this Report is as of March 31, 20022003 or for the year ended March 31, 20022003 (fiscal 2002)2003) unless the context otherwise indicates.
The noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on July 8, 2002August 25, 2003 was 118.66117.43 yen = U.S.$1.
Cautionary Statement Regarding Forward-Looking Statements
This annual report includes forward–lookingforward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about Matsushita and its groupGroup companies (the Matsushita Group). To the extent that statements in this annual report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Matsushita Group in light of the information currently available to it,them, and involve known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause the Matsushita Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Matsushita undertakes no obligation to publicly update any forward-looking statements after the date of this annual report (July 2002)(September 2003). Investors are advised to consult any further disclosures by Matsushita in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.
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The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency rate fluctuations, notably between the yen, the U.S. dollar, the Euro,euro, Asian currencies and other currencies in which the Matsushita Group operates businesses, or in which assets and liabilities of the Matsushita Group are denominated; the ability of the Matsushita Group to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the ability of the Matsushita Group to realize expected benefits of various restructuring activities in its business and organization, including the share exchanges with five subsidiaries currently in progress;organization; the ability of the Matsushita Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; any changes in the Matsushita Group’s financial and operational position or business environment due to its business restructuring; current and potential, direct and indirect trade restrictions imposed by other countries;countries over trade, manufacturing, labor and operations; and fluctuations in market prices of securities and other assets in which the Matsushita Group has holdings, as well as future changes or revisions to accounting policies or accounting rules.
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Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd. and its consolidated subsidiaries as a group), best known for its “Panasonic” brand name, is one of the world’s leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. Based in Osaka, Japan, the Company recorded consolidated net sales of approximately 7,402 billion yen for fiscal 2003. Over the past eight decades, the Company has grown from a small domestic household electrical equipment manufacturer into a comprehensive electronic and electric equipment, systems and components manufacturer operating internationally. Of the fiscal 2003 net sales, nearly one-half was represented by sales in Japan, with the rest by overseas sales.
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable
Item 2. Offer Statistics and Expected Timetable
Not applicable
Yen (billions), except per share amounts and yen exchange rates | ||||||||||||||||||||
Fiscal year ended March 31, | ||||||||||||||||||||
2002 | 2001 | 2000 | 1999 | 1998 | ||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Net sales | 6,877 | 7,682 | 7,299 | 7,640 | 7,891 | |||||||||||||||
Income (loss) before income taxes | (548 | ) | 101 | 219 | 202 | 356 | ||||||||||||||
Net income (loss) | (431 | ) | 42 | 100 | 24 | 99 | ||||||||||||||
Per common share: | ||||||||||||||||||||
Net income (loss): | ||||||||||||||||||||
Basic | (207.65 | ) | 19.96 | 48.35 | 11.60 | 47.04 | ||||||||||||||
Diluted | (207.65 | ) | 19.56 | 46.36 | 11.58 | 44.01 | ||||||||||||||
Dividends | 12.50 | 12.50 | 14.00 | 12.50 | 13.00 | |||||||||||||||
($0.100 | ) | ($0.116 | ) | ($0.125 | ) | ($0.097 | ) | ($0.107 | ) | |||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total assets | 7,627 | 8,156 | 7,955 | 8,055 | 8,661 | |||||||||||||||
Long-term debt | 692 | 542 | 644 | 709 | 690 | |||||||||||||||
Stockholders’ equity | 3,243 | 3,773 | 3,684 | 3,642 | 3,854 | |||||||||||||||
Common stock | 259 | 211 | 210 | 209 | 209 | |||||||||||||||
Number of shares | ||||||||||||||||||||
issued at year-end (thousands) | 2,138,515 | 2,079,573 | 2,062,671 | 2,062,345 | 2,112,318 | |||||||||||||||
Yen exchange rates per U.S. dollar: | ||||||||||||||||||||
Year-end | 132.70 | 125.54 | 102.73 | 118.43 | 133.29 | |||||||||||||||
Average | 125.05 | 110.60 | 111.35 | 128.19 | 122.78 | |||||||||||||||
High | 115.89 | 104.19 | 101.53 | 108.83 | 111.42 | |||||||||||||||
Low | 134.77 | 125.54 | 124.45 | 147.14 | 133.99 |
Yen exchange rates for | Jan. | Feb. | Mar. | Apr. | May | Jun. | ||||||||||||||||||
each month during the | 2002 | 2002 | 2002 | 2002 | 2002 | 2002 | ||||||||||||||||||
previous six months: | ||||||||||||||||||||||||
High | 130.93 | 132.26 | 127.07 | 128.13 | 123.08 | 119.38 | ||||||||||||||||||
Low | 134.64 | 134.77 | 133.46 | 133.40 | 128.66 | 125.64 |
Yen (billions), except per share amounts and yen exchange rates | |||||||||||||||
Fiscal year ended March 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
(Restated) | (Restated) | (Restated) | (Restated) | ||||||||||||
Income Statement Data: | |||||||||||||||
Net sales | 7,402 | 7,074 | 7,781 | 7,405 | 7,753 | ||||||||||
Income (loss) before income taxes | 69 | (538 | ) | 105 | 248 | 194 | |||||||||
Net income (loss) | (19 | ) | (428 | ) | 42 | 106 | 20 | ||||||||
Per common share: | |||||||||||||||
Net income (loss): | |||||||||||||||
Basic | (8.70 | ) | (206.09 | ) | 19.96 | 51.49 | 9.75 | ||||||||
Diluted | (8.70 | ) | (206.09 | ) | 19.56 | 49.32 | 9.75 | ||||||||
Dividends | 10.00 | 12.50 | 12.50 | 14.00 | 12.50 | ||||||||||
($0.107 | ) | ($0.100 | ) | ($0.116 | ) | ($0.125 | ) | ($0.097 | ) | ||||||
Balance Sheet Data: | |||||||||||||||
Total assets | 7,835 | 7,768 | 8,295 | 8,076 | 8,196 | ||||||||||
Long-term debt | 588 | 708 | 563 | 662 | 726 | ||||||||||
Stockholders’ equity | 3,178 | 3,248 | 3,770 | 3,678 | 3,635 | ||||||||||
Common stock | 259 | 259 | 211 | 210 | 209 | ||||||||||
Number of shares issued at year-end (thousands) | 2,447,923 | 2,138,515 | 2,079,573 | 2,062,671 | 2,062,345 | ||||||||||
Yen exchange rates per U.S. dollar: | |||||||||||||||
Year-end | 118.07 | 132.70 | 125.54 | 102.73 | 118.43 | ||||||||||
Average | 121.96 | 125.05 | 110.60 | 111.35 | 128.19 | ||||||||||
High | 115.71 | 115.89 | 104.19 | 101.53 | 108.83 | ||||||||||
Low | 133.40 | 134.77 | 125.54 | 124.45 | 147.14 |
Feb. 2003 | Mar. 2003 | Apr. 2003 | May 2003 | Jun. 2003 | Jul. 2003 | |||||||
Yen exchange rates for each month during the previous six months: | ||||||||||||
High | 117.14 | 116.47 | 118.25 | 115.94 | 117.46 | 117.24 | ||||||
Low | 121.30 | 121.42 | 120.55 | 119.50 | 119.87 | 120.55 |
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Notes: | 1. | Dividends per share reflect those paid during each fiscal year. The dollar amounts of the dividends per share have been computed at the exchange rates prevailing on the respective payment dates. |
2. |
3. |
B. Capitalization and Indebtedness | ||
C. Reasons for the Offer and Use of Proceeds
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(2) | Legal Proceedings | |
In November 1991, Loral Fairchild Corporation, a Delaware corporation, filed two lawsuits in the United States District Court for the District of Virginia against the Company, Matsushita Electric Corporation of America and 36 other defendants. The suits were consolidated. All defendants were charged with infringement of two U.S. patents by virtue of the production abroad and sale in the United States of certain charge coupled devices (CCDs), which are used in products such as video cameras and facsimile machines. In December 1991, this action was transferred to the United States District Court for the Eastern District of New York. The action seeks damages, attorneys’ fees and a permanent injunction. The Company has asserted that the patents are invalid and not infringed upon by its products incorporating CCDs. This litigation has been bifurcated between liability and damages and has been stayed as to all defendants except one defendant. In a first liability trial involving this defendant, a jury held that it infringed the two U.S. patents at issue. In July 1996, the court granted, among other things, its subsequent motion for judgment as a matter of law, overturning the verdict. Loral Fairchild Corporation appealed this decision to the Court of Appeals for the Federal Circuit and oral argument was held in June 1997. In June 1999, the Federal Circuit affirmed the district court’s claim construction and its non-infringement decision.
In July 1992, Matsushita Electronics Corporation (MEC, a former subsidiary now merged into the Company), which manufactures CCDs, commenced a suit in the United States District Court for the Southern District of New York seeking a declaration that MEC’s CCDs and all end products incorporating MEC’s CCDs (collectively “products”) are licensed under the two U.S. patents at issue. In April 1993, the district court granted MEC’s motion for summary judgment and ruled that the products were licensed. The Court of Appeals for the Federal Circuit affirmed the decision in September 1994, and denied Loral Fairchild’s petition for rehearing in November 1994. MEC’s tort claim against Loral Fairchild and its parent, Loral Corporation, concerning certain liability issues was denied by the District Court in August 1997. The decision has not been appealed.
Management is of the opinion that, based on the information currently available, any outcome of these actions against Matsushita will not have a material adverse effect on Matsushita’s operations or financial position.
There are a number of other legal actions and administrative investigations against Matsushita. Management is of the opinion that damages, based on the information currently available, if any, resulting from these actions will not have a material effect on Matsushita’s results of operations or financial position.
(3) | Dividend Policy | |
Maximizing benefit for shareholders has always been one of the fundamental policies of the Company. Consistent with this policy, Matsushita traditionally has distributed regular dividends to its shareholders on a periodic basis. However, due to factors including the severe economic conditions outlined in Section A of item 5, as well as unsatisfactory business results for fiscal 2002, the Board of Directors resolved to decrease the annual cash dividend.
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- 58 -Matsushita plans to utilize retained earnings for future business growth and to strengthen the corporate management structure.
No significant changes have occurred since the date of the annual financial statements included in this annual report.
Tokyo Stock Exchange | New York Stock Exchange | |||||||||||||||
Price per Share of | Price per American | |||||||||||||||
Common Stock (yen) | Depositary Share (dollars)* | |||||||||||||||
Fiscal Year ended March 31 | High | Low | High | Low | ||||||||||||
1998 | 2,520 | 1,750 | 21.10 | 13.51 | ||||||||||||
1999 | 2,375 | 1,640 | 19.50 | 12.80 | ||||||||||||
2000 | 3,320 | 2,050 | 30.30 | 17.35 | ||||||||||||
2001 | 3,190 | 1,932 | 29.90 | 16.00 | ||||||||||||
2002 | 2,360 | 1,398 | 19.43 | 11.14 |
The primary market for the Company’s common stock (Common Stock) is the Tokyo Stock Exchange (TSE). The Common Stock is traded on the First Section of the TSE and is also listed on four other stock exchanges in Japan. In addition, the Company’s Common Stock is listed on the Euronext Amsterdam Stock Exchange and the Euronext Paris Stock Exchange in the form of original Common Stock of the Company, and on the Frankfurt Stock Exchange and the Duesseldorf Stock Exchange in the form of co-ownership shares in a Global Bearer Certificate. In the United States, the Company’s American Depositary Shares (ADSs) have been listed on and traded in the New York Stock Exchange (NYSE) and the Pacific Exchange in the form of American Depositary Receipts (ADRs). There may from time to time be a differential between the Common Stock’s price on exchanges outside the United States and the market price of ADSs in the United States.
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Tokyo Stock Exchange | New York Stock Exchange | ||||||||||||||||
Price per Share of | Price per American | ||||||||||||||||
Common Stock (yen) | Depositary Share (dollars)* | ||||||||||||||||
Fiscal Year ended March 31 | High | Low | High | Low | |||||||||||||
2001 | |||||||||||||||||
1st quarter | 3,070 | 2,410 | 29.28 | 22.65 | |||||||||||||
2nd quarter | 2,995 | 2,660 | 28.18 | 25.05 | |||||||||||||
3rd quarter | 3,190 | 2,430 | 29.90 | 22.13 | |||||||||||||
4th quarter | 2,800 | 1,932 | 25.25 | 16.00 | |||||||||||||
2002 | |||||||||||||||||
1st quarter | 2,360 | 1,901 | 19.43 | 15.35 | |||||||||||||
2nd quarter | 1,960 | 1,402 | 15.92 | 11.50 | |||||||||||||
3rd quarter | 1,697 | 1,398 | 13.89 | 11.60 | |||||||||||||
4th quarter | 1,826 | 1,482 | 14.50 | 11.14 | |||||||||||||
2003 | |||||||||||||||||
1st quarter | 1,787 | 1,528 | 14.64 | 12.13 | |||||||||||||
Most recent 6 months | High | Low | High | Low | |||||||||||||
January, 2002 | 1,815 | 1,623 | 13.70 | 12.35 | |||||||||||||
February, 2002 | 1,725 | 1,482 | 12.83 | 11.14 | |||||||||||||
March, 2002 | 1,826 | 1,573 | 14.50 | 12.21 | |||||||||||||
April, 2002 | 1,749 | 1,576 | 13.66 | 12.13 | |||||||||||||
May, 2002 | 1,787 | 1,628 | 14.64 | 12.76 | |||||||||||||
June, 2002 | 1,783 | 1,528 | 14.47 | 12.51 |
ADRs were originally issued pursuant to a Deposit Agreement dated as of April 28, 1970, as amended from time to time (Deposit Agreement), among the Company, JP Morgan Chase Bank of New York, the successor entity to Morgan Guaranty Trust Company of New York, as Depositary (Depositary), and the holders of ADRs. Effective December 11, 2000, Matsushita again revised its ADR Deposit Agreement and executed a 10:1 ADS ratio change. As a result, one ADS now represents one share of Common Stock. ADRs evidence ADSs deposited under the Deposit Agreement with Sumitomo Mitsui Banking Corporation, as agent of the Depositary, or successor(s) to such agent(s).
The following table sets forth for the periods indicated the reported high and low closing prices of the Company’s Common Stock on the TSE, and the reported high and low closing composite prices of the Company’s ADSs on the NYSE:
Tokyo Stock Exchange | New York Stock Exchange | |||||||
Price per Share of Common Stock (yen) | Price per American Depositary Share (dollars)* | |||||||
Fiscal Year ended March 31 | High | Low | High | Low | ||||
1999 | 2,375 | 1,640 | 19.34 | 13.00 | ||||
2000 | 3,320 | 2,050 | 30.30 | 17.48 | ||||
2001 | 3,190 | 1,932 | 29.90 | 16.30 | ||||
2002 | 2,360 | 1,398 | 19.15 | 11.33 | ||||
2003 | 1,787 | 1,011 | 14.47 | 8.53 |
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Tokyo Stock Exchange | New York Stock Exchange | |||||||
Price per Share of Common Stock (yen) | Price per American Depositary Share (dollars)* | |||||||
Fiscal Year ended March 31 | High | Low | High | Low | ||||
2002 | ||||||||
1st quarter | 2,360 | 1,901 | 19.15 | 15.60 | ||||
2nd quarter | 1,960 | 1,402 | 15.68 | 11.61 | ||||
3rd quarter | 1,697 | 1,398 | 13.55 | 11.73 | ||||
4th quarter | 1,826 | 1,482 | 14.30 | 11.33 | ||||
2003 | ||||||||
1st quarter | 1,787 | 1,528 | 14.47 | 12.27 | ||||
2nd quarter | 1,697 | 1,248 | 14.29 | 10.36 | ||||
3rd quarter | 1,325 | 1,115 | 10.88 | 9.37 | ||||
4th quarter | 1,263 | 1,011 | 10.53 | 8.53 | ||||
2004 | ||||||||
1st quarter | 1,202 | 860 | 10.05 | 7.33 | ||||
Most recent 6 months | High | Low | High | Low | ||||
February, 2003 | 1,220 | 1,043 | 10.00 | 8.90 | ||||
March, 2003 | 1,105 | 1,011 | 9.11 | 8.53 | ||||
April, 2003 | 1,054 | 860 | 8.90 | 7.33 | ||||
May, 2003 | 1,132 | 942 | 9.25 | 8.01 | ||||
June, 2003 | 1,202 | 1,097 | 10.05 | 9.34 | ||||
July, 2003 | 1,490 | 1,210 | 12.30 | 10.19 |
* | The prices of American Depositary Shares are based upon reports by the NYSE, with all fractional figures rounded up to the nearest two decimal points. The prices of ADSs, prior to the December 11, 2000 ADS ratio change, have been restated on the current basis that each ADS represents one share of Common Stock. |
B. Plan of Distribution | ||
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See Section A of Item 9.
Not applicable
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Not applicable
Not applicable
Item 10.Additional Information
A. Share CapitalOrganization
The Company is a joint stock corporation (kabushiki kaisha) incorporated in Japan under the Commercial Code (shoho) of Japan. The Company is registered in the Commercial Register (shogyo tokibo) maintained by the Moriguchi Branch Office of the Osaka Legal Affairs Bureau.
Objects and purposes
Article 3 of the Articles of Incorporation of the Company provides that its purpose is to engage in the following lines of business:
1. | manufacture and sale of electric machinery and equipment, communication and electronic equipment, as well as lighting equipment; |
2. | manufacture and sale of gas, kerosene and kitchen equipment, as well as machinery and equipment for building and housing; |
3. | manufacture and sale of machinery and equipment for office and transportation, as well as for sales activities; |
4. | manufacture and sale of medical, health and hygienic equipment, apparatus and material; |
5. | manufacture and sale of optical and precision machinery and equipment; |
6. | manufacture and sale of batteries, battery-operated products, carbon and manganese and other chemical and metal products; |
7. | manufacture and sale of air conditioning and anti-pollution equipment, as well as industrial machinery and equipment; |
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8. | manufacture and sale of other machinery and equipment; | ||
9. | engineering and installation of machinery and equipment related to any of the preceding items as well as engineering and performance of and contracting for other construction work; | ||
10. | production and sale of software; | ||
11. | sale of iron and steel, nonferrous metals, minerals, oil, gas, ceramics, paper, pulp, rubber, leather, fibre and their products; | ||
12. | sale of foods, beverages, liquor and other alcoholics, agricultural, livestock, dairy and marine produces, animal feed and their raw materials; | ||
13. | manufacture and sale of drugs, quasi-drugs, cosmetics, fertilizer, poisonous and deleterious substance and other chemical products; | ||
14. | sale of woods and other construction materials and general merchandise; | ||
15. | motion picture and musical entertainment business and promotion of sporting events; | ||
16. | export and import of products, materials and software mentioned in each of the preceding items (other than item 9); | ||
17. | providing repair and maintenance services for the products, goods and software mentioned in each of the preceding items for itself and on behalf of others; | ||
18. | provision of information and communication services, and broadcasting business; | ||
19. | provision of various services utilizing the Internet including Internet access and e-commerce; | ||
20. | business related to publishing, printing, freight forwarding, security, maintenance of buildings, nursing care, dispatch of workers, general leasing, financing, non-life insurance agency and buying, selling, maintaining and leasing of real estate; | ||
21. | investment in various businesses; | ||
22. | accepting commission for investigations, research, development and consulting related to any of the preceding items; and | ||
23. | all other business or businesses incidental or related to any of the preceding items. |
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Directors | ||
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Common Stock | ||
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General | ||
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Authorized capital
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As of March 31, 2003, 2,447,923,088 shares of Common Stock were issued. All shares of Common Stock of the Company have no par value.
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Dividends
The Articles of Incorporation of the Company provide that the accounts shall be closed on March 31 of each year and that year-end dividends, if any, shall be paid to shareholders, beneficial shareholders and pledgees of record as of the end of such day. After the close of the fiscal period, the Board of Directors prepares, among other things, a proposed allocation of profits for year-end dividends and other purposes; this proposal is submitted to the Board of Corporate Auditors of the Company and to independent certified public accountants and then submitted for approval at the ordinary general meeting of shareholders, which is normally held in June each year. In addition to provisions for year-end dividends, if any, and for the legal reserve and other reserves, the allocation of profits customarily includes a bonus to Directors and Corporate Auditors. In addition to year-end dividends, the Board of Directors may by its resolution declare a cash distribution pursuant to Article 293-5 of the Commercial Code and Article 34 of the Articles of Incorporation (an “interim dividend”) to shareholders, beneficial shareholders and pledgees of record as of the end of each September 30, without the shareholders’ approval, but subject to the limitations described below.
The Commercial Code provides that a company may not make any distribution of profit by way of year-end dividends or interim dividends for any fiscal period unless it has set aside in its legal reserve an amount equal to at least one-tenth of the amount paid by way of appropriation of retained earnings for such fiscal period or equal to one-tenth of the amount of such interim dividends until the aggregate amount of capital surplus and legal reserve equals to at least one-quarter of its stated capital. Under the Commercial Code, the Company is permitted to distribute profits by way of year-end or interim dividends out of the excess of its net assets over the aggregate of:
(i) its stated capital;
(ii) its capital surplus;
(iii) its accumulated legal reserve;
(iv) the legal reserve to be set aside in respect of the fiscal period concerned; and
(v) other amounts as provided for by ordinance of the Ministry of Justice.
In the case of interim dividends, the net assets are calculated by reference to the non-consolidated balance sheet as at the last closing of the Company’s accounts in the same manner as year-end dividends, but adjusted to reflect; (x) any subsequent payment by way of appropriation of retained earnings and transfer to legal reserve in respect thereof; (y) any subsequent transfer of retained earnings to stated capital; and (z) if the Company has been authorized, pursuant to a resolution of an ordinary general meeting of shareholders, to purchase shares of its Common Stock (see “Item 10.B. Memorandum and Articles of Association—Common Stock—Acquisition by the Company of its Common Stock”), the total amount of the purchase price of such shares so authorized by such resolution that may be paid by the Company, provided that interim dividends may not be paid where there is a risk that at the end of the fiscal year there might not be any excess of net assets over the aggregate of the amounts referred to in (i) through (v) above.
In Japan the ex-dividend date and the record date for dividends precede the date of determination of the amount of the dividends to be paid.
Under its Articles of Incorporation, the Company is not obligated to pay any dividends which are left unclaimed for a period of three years after the date on which they first became payable.
69
For information as to Japanese taxes on shareholder dividends, see “E. Taxation—Japanese Taxation.”
Stock splits
The Company may at any time split shares in issue into a greater number of shares by resolution of the Board of Directors, and may in principle amend its Articles of Incorporation to increase the number of authorized shares to be issued in proportion to the relevant stock split pursuant to a resolution of the Board of Directors rather than a special resolution of a general meeting of shareholders as is otherwise required for amending the Articles of Incorporation.
In the event of a stock split, generally, shareholders will not be required to exchange share certificates for new share certificates, but certificates representing the additional shares resulting from the stock split will be issued to shareholders. When a stock split is to be made, the Company must give public notice of the stock split, specifying the record date therefor, at least two weeks prior to such record date. In addition, promptly after the stock split takes effect, the Company must give notice to each shareholder specifying the number of shares to which such shareholder is entitled by virtue of the stock split.
General meeting of shareholders
The ordinary general meeting of shareholders of the Company for each fiscal year is normally held in June in each year in Kadoma-shi, Osaka, Japan. In addition, the Company may hold an extraordinary general meeting of shareholders whenever necessary by giving notice of convocation thereof at least two weeks prior to the date set for the meeting.
Notice of convocation of a shareholders’ meeting setting forth the place, time and purpose thereof, must be mailed to each shareholder having voting rights (or, in the case of a non-resident shareholder, to his or her standing proxy or mailing address in Japan) at least two weeks prior to the date set for the meeting. Under the Commercial Code, such notice may be given to shareholders by electronic means, subject to the consent of the relevant shareholders. The record date for an ordinary general meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least three per cent of the total number of voting rights for a period of six months or more may require the convocation of a general meeting of shareholders for a particular purpose by submitting a written request to a Representative Director. Unless such shareholders’ meeting is convened promptly or a convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene such shareholders’ meeting.
Any shareholder or group of shareholders holding at least 300 voting rights or one percent of the total number of voting rights for a period of six months or more may propose a matter to be considered at a general meeting of shareholders by submitting a written request to a Representative Director at least eight weeks prior to the date of such meeting.
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Voting rights
So long as the Company maintains the unit share system (see “Item 10.B. Memorandum and Articles of Association—Common Stock—Unit share system” below; currently 1000 shares constitute one unit) a holder of shares constituting one or more full units is entitled to one voting right per unit of shares subject to the limitations on voting rights set forth in the following two sentences. A corporate shareholder more than one-quarter of whose total voting rights are directly or indirectly owned by the Company may not exercise its voting rights with respect to shares of Common Stock of the Company that it owns. In addition, the Company may not exercise its voting rights with respect to its shares that it owns. If the Company eliminates from its Articles of Incorporation the provisions relating to the unit of shares, holders of Common Stock will have one voting right for each share they hold. Except as otherwise provided by law or by the Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a majority of the number of voting rights of all the shareholders represented at the meeting. The Commercial Code and the Company’s Articles of Incorporation provide, however, that the quorum for the election of Directors and Corporate Auditors shall not be less than one-third of the total number of voting rights of all the shareholders. The Company’s shareholders are not entitled to cumulative voting in the election of Directors. Shareholders may exercise their voting rights through proxies, provided that the proxies are also shareholders holding voting rights. The Company’s shareholders also may cast their votes in writing, or exercise their voting rights by electronic means pursuant to the method determined by the Board of Directors.
The Commercial Code and the Company’s Articles of Incorporation provide that in order to amend the Articles of Incorporation and in certain other instances, including a reduction of stated capital, the removal of a Director or Corporate Auditor, a dissolution, merger or consolidation with a certain exception under which a shareholders resolution is not required, the transfer of the whole or an important part of the business, the taking over of the whole of the business of any other corporation with a certain exception under which a shareholders resolution is not required, share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with a certain exception under which a shareholders resolution is not required, splitting of the corporation into two or more corporations with a certain exception under which a shareholders resolution is not required, or any offering of new shares at a “specially favorable” price (or any offering of stock acquisition rights to subscribe for or acquire shares of Common Stock (“stock acquisition rights”) or bonds with stock acquisition rights at a “specially favorable” exercise conditions) to any persons other than shareholders, the quorum shall be one-third of the total voting rights of all the shareholders and the approval by at least two-thirds of the voting rights of all the shareholders represented at the meeting is required (the “special shareholders resolutions”).
Issue of additional shares and pre-emptive rights
Holders of the Company’s shares of Common Stock have no pre-emptive rights under its Articles of Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as the Board of Directors determines, subject to the limitations as to the offering of new shares at a “specially favorable” price mentioned under “Voting rights” above. The Board of Directors may, however, determine that shareholders shall be given subscription rights regarding a particular issue of new shares, in which case such rights must be given on uniform terms to all shareholders as at a record date at least two weeks prior to which public notice must be given. Each of the shareholders to whom such rights are given must also be given notice of the expiry thereof at least two weeks prior to the date on which such rights expire.
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Rights to subscribe for new shares may be made generally transferable by a resolution of the Board of Directors. Whether the Company will make subscription rights generally transferable in future rights offerings will depend upon the circumstances at the time of such offerings.
Subject to certain conditions, the Company may issue stock acquisition rights by a resolution of the Board of Directors. Holders of stock acquisition rights may exercise their rights to acquire a certain number of shares within the exercise period as prescribed in the terms of their stock acquisition rights. Upon the exercise of stock acquisition rights, the Company will be obliged to issue the relevant number of new shares or alternatively to transfer the necessary number of treasury stock held by it.
Liquidation rights
In the event of a liquidation of the Company, the assets remaining after payment of all debts and liquidation expenses and taxes will be distributed among shareholders in proportion to the respective numbers of shares of Common Stock held.
Record date
March 31 is the record date for the Company’s year-end dividends. So long as the Company maintains the unit share system, the shareholders and beneficial shareholders who are registered as the holders of one or more unit of shares in the Company’s registers of shareholders and/or beneficial shareholders at the end of each March 31 are also entitled to exercise shareholders’ rights at the ordinary general meeting of shareholders with respect to the fiscal year ending on such March 31. September 30 is the record date for interim dividends. In addition, the Company may set a record date for determining the shareholders and/or beneficial shareholders entitled to other rights and for other purposes by giving at least two weeks’ prior public notice.
The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on the third business day prior to a record date (or if the record date is not a business day, the fourth business day prior thereto), for the purpose of dividends or rights offerings.
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Acquisition by the Company of its Common Stock
The Company may acquire its own shares through a stock exchange on which such shares are listed (pursuant to an ordinary resolution of an ordinary general meeting of shareholders), by way of tender offer (pursuant to an ordinary resolution of an ordinary general meeting of shareholders), or by purchase from a specific party other than a subsidiary of the Company (pursuant to a special resolution of an ordinary general meeting of shareholders) or from a subsidiary of the Company (pursuant to a resolution of the Board of Directors). When the proposal for such acquisition by the Company from a specific party other than a subsidiary of the Company is submitted to an ordinary general meeting of shareholders, any other shareholder may make a written request to a Representative Director, more than five calendar days prior to the relevant shareholders’ meeting, to include him/her as the seller in the proposed purchase. Any such acquisition of shares must satisfy certain requirements, including that, in cases other than the acquisition by the Company of its own shares from a subsidiary of the Company, the total amount of the purchase price may not exceed the amount of the retained earnings available for dividend payments after taking into account a reduction, if any, of the stated capital, capital surplus or legal reserve (if such reduction of the stated capital, capital surplus or legal reserve has been authorized pursuant to a resolution of the relevant ordinary general meeting of shareholders), minus the amount to be paid by way of appropriation of retained earnings for the relevant fiscal year and the amount to be transferred to stated capital. If the Company purchases shares from its subsidiaries, the total amount of the purchase price may not exceed the amount of the retained earnings available for interim dividend payments minus the amount of any interim dividend the Company actually paid. However, if it is anticipated that the net assets on the non-consolidated balance sheet as at the end of the relevant fiscal year will be less than the aggregate amount of the stated capital, capital surplus and other items as described in (i) through (v) to “Dividends” above, the Company may not acquire such shares.
Shares acquired by the Company may be held by it for any period or may be cancelled by a resolution of the Board of Directors. The Company may also transfer to any person the shares held by it, subject to a resolution of the Board of Directors and to other requirements similar to those applicable to the issuance of new shares, as described in “Issue of additional shares and pre-emptive rights” above. The Company may also utilize its treasury stock for the purpose of transfer to any person upon exercise of stock acquisition rights or for the purpose of acquiring another company by way of merger, share exchange or corporate split through exchange of treasury stock for shares or assets of the acquired company.
Unit share system
The Articles of Incorporation of the Company provide that 1,000 shares constitute one unit of shares of Common Stock. Although the number of shares constituting one unit is included in the Articles of Incorporation, any amendment to the Articles of Incorporation reducing (but not increasing) the number of shares constituting one unit or eliminating the provisions for the unit of shares may be made by a resolution of the Board of Directors rather than by a special shareholders resolution, which is otherwise required for amending the Articles of Incorporation. The number of shares constituting one unit, however, cannot exceed 1,000 or one two-hundredth (1/200) of all issued shares.
Under the unit share system, shareholders shall have one voting right for each unit of shares that they hold. Any number of shares less than a full unit will carry no voting rights.
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Unless the Company’s Board of Directors adopts a resolution to eliminate the provision for the unit shares from the Articles of Incorporation or the shareholders amend the Articles of Incorporation by a special shareholders resolution to eliminate the provision not to issue share certificates for less than a unit of shares, a share certificate for any number of shares less than one full unit will in general not be issued. As the transfer of shares normally requires the delivery of the share certificates therefor, any fraction of a unit for which no share certificates are issued is not transferable.
A holder of shares constituting less than one unit may require the Company to purchase such shares at their market value in accordance with the provisions of the Share Handling Regulations of the Company.
A holder who owns ADRs evidencing less than 1,000 ADSs will indirectly own less than one full unit of shares of Common Stock. Although, as discussed above, under the unit share system holders of less than one full unit have the right to require the Company to purchase their shares, holders of ADRs evidencing ADSs that represent other than integral multiples of full units are unable to withdraw the underlying shares of Common Stock representing less than one full unit and, therefore, are unable, as a practical matter, to exercise the rights to require the Company to purchase such underlying shares unless the Company’s Articles of Incorporation are amended to eliminate the provision not to issue share certificates for the numbers of shares less than a unit. As a result, access to the Japanese markets by holders of ADRs through the withdrawal mechanism will not be available for dispositions of shares of Common Stock in lots less than one full unit. The unit share system does not affect the transferability of ADSs, which may be transferred in lots of any size.
Sale by the Company of shares held by shareholders whose address is unknown
The Company is not required to send a notice to a shareholder if a notice to such shareholder fails to arrive at the registered address of the shareholder in the Company’s register of shareholders or at the address otherwise notified to the Company continuously for five years or more.
In addition, the Company may sell or otherwise dispose of shares of Common Stock for which the location of the shareholder is unknown. Generally, if (i) notices to a shareholder fail to arrive continuously for five years or more at the shareholder’s registered address in the Company’s register of shareholders or at the address otherwise notified to the Company, and (ii) the shareholder fails to receive dividends on the shares continuously for five years or more at the address registered in the Company’s register of shareholders or at the address otherwise notified to the Company, the Company may sell or otherwise dispose of the shareholder’s shares by a resolution of the Board of Directors and after giving at least three months’ prior public and individual notice, and holding or depositing the proceeds of such sale or disposal of shares at the then market price of the shares for the shareholder, the location of which is unknown.
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Reporting of substantial shareholdings
The Securities and Exchange Law of Japan and regulations thereunder requires any person, regardless of his/her residence, who has become, beneficially and solely or jointly, a holder of more than five percent of the total issued shares of Common Stock of a company listed on any Japanese stock exchange or whose shares are traded on the over-the-counter market in Japan, to file with the Director-General of a competent Local Finance Bureau of Ministry of Finance within five business days a report concerning such shareholdings.
A similar report must also be filed in respect to any subsequent change of one percent or more in any such holding or any change in material matters set out in reports previously filed, with certain exceptions. For this purpose, shares issuable to such person upon conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights are taken into account in determining both the number of shares held by such holder and the issuer’s total issued share capital. Copies of such report must also be furnished to the issuer of such shares and all Japanese stock exchanges on which the shares are listed or (in the case of shares traded over-the-counter) the Japan Securities Dealers Association.
Except for the general limitation under Japanese anti-trust and anti-monopoly regulations against holding of shares of Common Stock of a Japanese corporation which leads or may lead to a restraint of trade or a monopoly, and except for general limitations under the Commercial Code or the Company’s Articles of Incorporation on the rights of shareholders applicable regardless of residence or nationality, there is no limitation under Japanese laws and regulations applicable to the Company or under its Articles of Incorporation on the rights of non-resident or foreign shareholders to hold the shares of Common Stock of the Company or exercise voting rights thereon.
There is no provision in the Company’s Articles of Incorporation that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to merger, consolidation, acquisition or corporate restructuring involving the Company.
C. | Material Contracts | |
All contracts concluded by the Company during the two years preceding the date of this report were entered into in the ordinary course of business.
The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet orders and ministerial ordinances (the “Foreign Exchange Regulations”) govern the acquisition and holding of shares of Common Stock of the Company by “exchange non-residents” and by “foreign investors.” The Foreign Exchange Regulations currently in effect do not, however, affect transactions between exchange non-residents to purchase or sell shares outside Japan using currencies other than Japanese yen.
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Exchange non-residents are:
(ii) | corporations whose principal offices are located outside Japan. |
Generally, branches and other offices of non-resident corporations that are located within Japan are regarded as residents of Japan. Conversely, branches and other offices of Japanese corporations located outside Japan are regarded as exchange non-residents.
Foreign investors are:
(i) | individuals who are exchange non-residents; |
(ii) | corporations that |
(iii) | corporations (1) of which 50% or more of their shares are held by individuals who are exchange non-residents and/or corporations (a) that are organized under the |
In general, the acquisition of shares of a Japanese company (such as the shares of Common Stock of the Company) by an exchange non-resident from a resident of Japan is not subject to any prior filing requirements. In certain limited circumstances, however, the Minister of Finance may require prior approval of an acquisition of this type. While prior approval, as described above, is not required, in the case where a resident of Japan transfers shares of a Japanese company (such as the shares of Common Stock of the Company) for consideration exceeding 100 million yen to an exchange non-resident, the resident of Japan who transfers the shares is required to report the transfer to the Minister of Finance within 20 days from the date of the transfer, unless the transfer was made through a bank, securities company or financial futures trader licensed under Japanese law.
Under the Foreign Exchange Regulations, dividends paid on and the proceeds from the sale in Japan of shares of Common Stock of the Company held by non-residents of Japan may generally be converted into any foreign currency and repatriated abroad.
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E. | Taxation | |
The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the ownership and disposition of shares of Common Stock and ADSs. Prospective purchasers and holders of the shares of Common Stock or ADSs should consult their own tax advisors concerning the tax consequences of their particular situations.
The following is a summary of the principal Japanese national and U.S. federal tax consequences of the ownership and disposition of shares of Common Stock or ADSs by an Eligible U.S. Holder and a U.S. Holder (each as defined below), as the case may be, that holds those shares or ADSs as capital assets (generally, property held for investment). This summary does not purport to address all material tax consequences that may be relevant to holders of shares of Common Stock or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers, investors liable for alternative minimum tax, investors that own or are treated as owning 10% or more of the Company’s voting stock, investors that hold shares of Common Stock or ADSs as part of a straddle, hedge, conversion transaction or other integrated transaction, persons that hold shares of Common Stock or ADSs through a partnership or other pass-through entity and Eligible U.S. Holders and U.S. Holders, as the case may be, whose functional currency is not the U.S. dollar) may be subject to special tax rules. This summary is based on the national or federal tax laws of Japan and of the United States as in effect at the date hereof, as well as on the current income tax convention between the United States and Japan (the “Treaty”), all of which are subject to change (possibly with retroactive effect) and to differing interpretations. U.S. Holders should note that the United States and Japan have reached an agreement in principle on the text of a new income tax convention, which after a formal signature process, will be subject to ratification according to the procedures of each of the two countries. In addition, this summary is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement for ADSs and in any related agreement will be performed in accordance with its terms.
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of shares of Common Stock or ADSs that, for U.S. federal income tax purposes, is:
a corporation or other entity taxable as a corporation organized in or under the laws of the United States, |
an estate the income of which is subject to U.S. federal income tax without regard to its source, or |
a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons, or that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. |
An “Eligible U.S. Holder” is a U.S. Holder that:
is a resident of the United States for purposes of the Treaty, |
does not maintain a permanent establishment or fixed base in Japan to which shares of Common Stock or ADSs are attributable and through which the U.S. Holder carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services), and |
is |
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The following is a summary of the principal Japanese tax consequences (limited to national taxes) to Eligible U.S. Holders that hold shares of Common Stock of the Company or ADRs evidencing ADSs representing shares of Common Stock of the Company.
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Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on dividends paid by a Japanese corporation. The Company withholds taxes from dividends it pays as required by Japanese law. Stock splits in themselves are not subject to Japanese income tax.
Under Japanese tax law, the rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to non-residents of Japan or non-Japanese corporations is generally 20%. However with respect to dividends paid on listed shares issued by a Japanese corporation (such as the shares of Common Stock of the Company) to any corporate or individual shareholders (including those shareholders who are Eligible U.S. Holders), except for any individual shareholder who holds 5% or more of the outstanding total of the shares issued by the relevant Japanese corporation, the aforementioned 20% withholding tax rate is reduced to (i) 10% for dividends due and payable on or after April 1, 2003 but on or before December 31, 2003, (ii) 7% for dividends due and payable on or after January 1, 2004 but on or before March 31, 2008, and (iii) 15% for dividends due and payable on or after April 1, 2008. Under the Treaty, as currently in force, the maximum rate of Japanese withholding tax which may be imposed on dividends paid by a Japanese corporation to Eligible U.S. Holders generally is limited to 15% or, if certain conditions (as provided in the Treaty) are fulfilled, 10% of the gross amount actually distributed.
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An Eligible U.S. Holder who is entitled, under the Treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law on payment of dividends on the Company’s shares of Common Stock is required to submit an Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax on Dividends in advance through the Company to the relevant tax authority before such payment of dividends. With respect to ADRs, the Depositary or its agent will apply for this reduced treaty rate, if it is below the rate otherwise applicable under Japanese tax law, on behalf of Eligible U.S. Holders by submitting two Application Forms (one before payment of dividends, the other within eight months after the Company’s fiscal year-end) to the Japanese tax authorities. To claim this reduced rate, any relevant Eligible U.S. Holder of ADRs will be required to file a proof of taxpayer status, residence and beneficial ownership (as applicable) and to provide other information or documents as may be required by the Depositary. An Eligible U.S. Holder who is entitled, under the Treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law, but fails to submit the required application in advance will be entitled to claim the refund of withholding taxes withheld in excess of the rate under the Treaty from the relevant Japanese tax authority. The Company does not assume any responsibility to ensure withholding at the reduced treaty rate for shareholders who would be eligible under the Treaty but do not follow the required procedures as stated above.
Gains derived from the sale of shares of Common Stock or ADRs outside Japan by an Eligible U.S. Holder holding such shares or ADRs are not subject to Japanese income or corporation tax with respect to such gains under the Treaty.
Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares of Common Stock or ADRs as a legatee, heir or donee even though neither the individual nor the deceased nor donor is a Japanese resident.
U.S. Holders of shares of Common Stock of the Company or ADRs should consult their tax advisors regarding the effect of these taxes as well as the possible application of the Estate and Gift Tax Treaty between the U.S. and Japan.
U.S. federal income taxation
The following is a summary of certain United States federal income tax consequences of the ownership of shares of Common Stock or ADSs by a U.S. Holder. This summary is based on United States tax laws, including the United States Internal Revenue Code of 1986, as amended, and on the Treaty all of which are subject to change possibly with retroactive effect.
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Taxation of dividends
Subject to the passive foreign investment company (PFIC) rules discussed below, the gross amount of any dividends received by a U.S. Holder (before reduction for Japanese withholding taxes) to the extent paid out of the Company’s current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be subject to U.S. federal taxation. Dividends paid to non-corporate U.S. Holders in taxable years beginning after December 31, 2002 and before January 1, 2009 that constitute qualified dividend income will be taxable at a maximum tax rate of 15% provided that the U.S. Holders held the shares of Common Stock or ADSs for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends the Company pays with respect to the shares of Common Stock or ADSs generally will be qualified dividend income. The dividend will not be eligible for the dividends-received deduction allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend will be the U.S. dollar value of the Japanese yen payments made, determined at the spot Japanese yen/U.S. dollar rate on the date the dividend is includible in the U.S. Holder’s income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes the dividend payment in income to the date the U.S. Holder converts the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s basis in the shares of Common Stock or ADSs and thereafter as capital gain.
Subject to certain limitations, the Japanese tax withheld in accordance with the Treaty will be creditable against the U.S. Holder’s United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate. For foreign tax credit limitation purposes, the dividend will be income from sources without the United States, but generally will be treated separately, together with other items of “passive income” or “financial services income.”
Taxation of capital gains
Subject to the PFIC rules discussed below, upon a sale or other disposition of shares of Common Stock or ADSs, a U.S. Holder will recognize gain or loss in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s tax basis (determined in U.S. dollars) in such shares of Common Stock or ADSs. Generally, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for such shares of Common Stock or ADSs exceeds 1 year. Long-term capital gain of a non-corporate U.S. Holder that is recognized on or after May 6, 2003 and before January 1, 2009 is generally taxed at a maximum rate of 15%. Any such gain or loss will be income or loss from sources within the United States for foreign tax credit limitation purposes.
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Transfers of retained earnings and sales of shares of Common Stock to the Company
A transfer of retained earnings or legal reserve to stated capital is generally treated as a dividend payment for Japanese tax purposes subject to withholding tax. A sale of shares of Common Stock or ADSs to the Company results in a deemed dividend to the selling shareholders to the extent that the sales price exceeds the aggregate of the stated capital and the capital surplus attributable to the shares sold. Transfers of retained earnings or legal reserves to stated capital and deemed dividends that may result from sales of shares of Common Stock to the Company are not generally taxable events for United States federal income tax purposes and therefore would not give rise to foreign source income and U.S. Holders would not be able to use the foreign tax credit arising from any Japanese withholding tax imposed on such transactions unless they can apply the credit (subject to limitations) against U.S. tax due or other foreign source income in the appropriate category for foreign tax credit purposes.
Passive foreign investment company considerations
The Company believes that shares of Common Stock and ADSs should not be treated as stock of a PFIC for United States federal income tax purposes, but this conclusion is a factual determination made annually and thus may be subject to change. If the Company were to be treated as a PFIC (unless a U.S. Holder elects to be taxed annually on a mark-to-market basis with respect to the shares of Common Stock or ADSs), gain realized on the sale or other disposition of shares of Common Stock or ADSs would in general not be treated as capital gain, and a U.S. Holder would be treated as if such holder had realized such gain and certain “excess distributions” ratably over the holder’s holding period for the shares of Common Stock or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, notwithstanding any election a U.S. Holder makes with regard to the shares of Common Stock or ADSs, dividends that a U.S. Holder receives from the Company will not constitute qualified dividend income if the Company is a PFIC either in the taxable year of the distribution or the preceding taxable year. Dividends that a U.S. Holder receives that do not constitute qualified dividend income are not eligible for taxation at the 15% maximum rate applicable to qualified dividend income. Instead, the U.S. Holder must include the gross amount of any such dividend paid by the Company out of its accumulated earnings and profits (as determined for United States federal income tax purposes) in the U.S. Holder’s gross income, and it will be subject to tax at rates applicable to ordinary income.
F. | Dividends and Paying Agents | |
Not applicable
G. | Statement by Experts | |
Not applicable
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H. | Documents on Display | |
According to the Securities Exchange Act of 1934, as amended, Matsushita is subject to the requirements of informational disclosure. Matsushita files various reports and other information, including this annual report on Form 20-F, to the U.S. Securities and Exchange Commission, the New York Stock Exchange and the Pacific Exchange. These reports may be inspected at the following sites.
U.S. Securities and Exchange Commission:
450 Fifth Street, N.W., Washington D.C. 20549
New York Stock Exchange:
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Pacific Exchange:
301 Pine Street, San Francisco, California 94104
Form 20-F is also available at the Electronic Data Gathering, Analysis, Retrieval system (EDGAR) website which is maintained by the U.S. Securities and Exchange Commission.
U.S. Securities and Exchange Commission Home Page:
http://www.sec.gov |
I. | Subsidiary Information |
Not applicable
Item 11. |
Item 11. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk, including changes of foreign exchange rates, interest rates and prices of marketable securities.securities and commodities. In order to hedge the risks of changes in foreign exchange rates, and interest rates and commodity prices, the Company uses derivative financial instruments. The Company does not hold or issue financial instruments for trading purposes. Although the use of derivative financial instruments exposes the Company to the risk of credit-related losses in the event of nonperformance by counterparties, the Company believes that such risk is minor because of the high credit rating of the counterparties.
Equity Price Risk
The Company holds available-for-sale securities included in short-term investments and investments and advances. In general, highly-liquid and low risk instruments are preferred in the portfolio. Available-for-sale securities included in investments and advances are held as longer term investments. The Company does not hold marketable securities for trading purposes.
82 Maturities, costs and fair values of available-for-sale securities were as follows at March 31, 20022003 and 2001:
Yen (millions) | ||||||||||||||||
2002 | 2001 | |||||||||||||||
Cost | Fair value | Cost | Fair value | |||||||||||||
Due within one year | 11,846 | 11,849 | 11,401 | 11,421 | ||||||||||||
Due after one year through five years | 105,613 | 103,476 | 173,167 | 172,050 | ||||||||||||
Equity securities | 288,816 | 411,621 | 369,972 | 533,421 | ||||||||||||
406,275 | 526,946 | 554,540 | 716,892 | |||||||||||||
Yen (millions) | ||||||||
2003 | 2002 | |||||||
Cost | Fair value | Cost | Fair value | |||||
Due within one year | 1,196 | 1,196 | 11,846 | 11,849 | ||||
Due after one year through five years | 34,514 | 33,584 | 105,616 | 103,479 | ||||
Equity securities | 242,946 | 254,032 | 290,785 | 413,360 | ||||
278,656 | 288,812 | 408,247 | 528,688 | |||||
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Foreign Exchange Risk
The primary purpose of the Company’s foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions. The Company primarily utilizes forward exchange contracts and options with a duration of less than a few months. The Company also enters into foreign exchange contracts from time to time to hedge the risk of fluctuation in foreign currency exchange rates associated with long-term debt that is denominated in foreign currencies. Foreign exchange contracts related to such long-term debt have the same maturity as the underlying debt.
The following table provides the contract amounts and fair values of foreign exchange contracts, primarily hedging U.S. dollar revenues, at March 31, 20022003 and 2001.2002. Amounts related to foreign exchange contracts entered into in connection with long-term debt denominated in foreign currencies which eliminate all foreign currency exposures, are shown in the table of “Interest Rate Risk.”
Yen (millions) | |||||||||||||||||
2002 | 2001 | ||||||||||||||||
Contract amount | Fair value | Contract amount | Fair value | ||||||||||||||
Forward: | |||||||||||||||||
To sell foreign currencies | 374,993 | (3,746 | ) | 350,087 | (4,997 | ) | |||||||||||
To buy foreign currencies | 173,546 | 2,470 | 109,523 | 2,283 | |||||||||||||
Options purchased to sell foreign currencies | 37,940 | (219 | ) | 16,430 | (334 | ) | |||||||||||
Options purchased to buy foreign currencies | — | — | 34,412 | 1,327 | |||||||||||||
Options written to buy foreign currencies | — | — | 24,956 | (1,483 | ) | ||||||||||||
Options written to sell foreign currencies | — | — | 40,080 | 246 |
Yen (millions) | ||||||||||
2003 | 2002 | |||||||||
Contract amount | Fair value | Contract amount | Fair value | |||||||
Forward: | ||||||||||
To sell foreign currencies | 387,605 | (1,383 | ) | 374,993 | (3,746 | ) | ||||
To buy foreign currencies | 214,075 | 1,664 | 173,546 | 2,234 | ||||||
Options purchased to sell foreign currencies | 50,883 | 127 | 37,940 | 236 |
Commodity Price Risk
The Company is exposed to market risk of changes in prices of commodities including various non-ferrous metals used in the manufacturing of electronic components and devices. The Company enters into commodity future contracts to offset such exposure.
83
The following table provides the contract amounts and fair values of commodity futures, at March 31, 2003 and 2002.
Yen (millions) | |||||||||
2003 | 2002 | ||||||||
Contract amount | Fair value | Contract amount | Fair value | ||||||
Commodity futures | |||||||||
To sell commodity | 13,341 | 672 | 16,658 | 427 | |||||
To buy commodity | 43,214 | (1,940 | ) | 34,998 | 2,699 |
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates principally to its debt obligations. The Company has long-term debt primarily with fixed rates. Fixed-rate debt obligations expose the Company to variability in their fair values due to changes in interest rates. To manage the variability in the fair values caused by interest rate changes, the Company enters into interest rate swaps when it is determined to be appropriate based on market conditions. Interest rate swaps may be enteredchange fixed-rate debt obligations to variable-rate debt obligations by entering into from time to time by the Company to hedge cash flows of interests and fair values of debt. However,fixed-receiving, variable -paying interest rate swap contracts. The hedging relationship between interest rate swaps utilized by the Company at March 31, 2001 and 2000 were not material.
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hedged debt obligations is highly effective in achieving offsetting changes in fair values resulting from interest rate risk. The following tables provide information about the Company’s derivative financial instruments and other financial instruments that are sensitive to changes in interest rates at March 31, 20022003 and 2001. The2002. For debt obligations, the table presents principal cash flows by expected maturity dates, related weighted average interest rates and fair values of financial instruments.
Yen (millions) | ||||||||||||||||||||||||||||||||||||||
Carrying amount and maturity date (as of March 31, 2002) | ||||||||||||||||||||||||||||||||||||||
Average | ||||||||||||||||||||||||||||||||||||||
interest | There- | |||||||||||||||||||||||||||||||||||||
rate | Total | 2003 | 2004 | 2005 | 2006 | 2007 | after | Fair value | ||||||||||||||||||||||||||||||
Long-term debt, including current portion: | ||||||||||||||||||||||||||||||||||||||
Japanese yen convertible bonds | 1.2 | % | 143,226 | 16,999 | 97,744 | 11,483 | 17,000 | 161,532 | ||||||||||||||||||||||||||||||
Straight bonds | 1.0 | % | 300,000 | 100,000 | 100,000 | 100,000 | 297,503 | |||||||||||||||||||||||||||||||
Straight bonds issued by a subsidiary | 1.8 | % | 45,000 | 5,000 | 10,000 | 20,000 | 10,000 | 45,954 | ||||||||||||||||||||||||||||||
U.S. dollar unsecured bonds | 5.8 | % | 133,340 | 133,340 | 135,219 | |||||||||||||||||||||||||||||||||
Unsecured yen loans from banks and insurance companies and others | 0.8 | % | 339,772 | 121,571 | 98,081 | 66,846 | 40,784 | 12,474 | 16 | 337,176 | ||||||||||||||||||||||||||||
Subtotal | 961,338 | 271,910 | 200,825 | 178,329 | 67,784 | 132,474 | 110,016 | 977,384 | ||||||||||||||||||||||||||||||
Foreign exchange contracts | (8,103 | ) | (8,103 | ) | (8,103 | ) | ||||||||||||||||||||||||||||||||
Total | 953,235 | 263,807 | 200,825 | 178,329 | 67,784 | 132,474 | 110,016 | 969,281 | ||||||||||||||||||||||||||||||
Yen (millions) | ||||||||||||||||||||||||||||||||||||||
Carrying amount and maturity date (as of March 31, 2001) | ||||||||||||||||||||||||||||||||||||||
Average | ||||||||||||||||||||||||||||||||||||||
interest | There- | Fair | ||||||||||||||||||||||||||||||||||||
rate | Total | 2002 | 2003 | 2004 | 2005 | 2006 | after | value | ||||||||||||||||||||||||||||||
Long-term debt, including current portion: | ||||||||||||||||||||||||||||||||||||||
Japanese yen convertible bonds | 1.2 | % | 241,934 | 98,708 | 16,999 | 97,744 | 11,483 | 17,000 | 332,641 | |||||||||||||||||||||||||||||
Straight bonds issued by a subsidiary | 1.8 | % | 50,000 | 5,000 | 5,000 | 10,000 | 30,000 | 51,535 | ||||||||||||||||||||||||||||||
U.S. dollar unsecured bonds | 5.8 | % | 123,785 | 123,785 | 126,874 | |||||||||||||||||||||||||||||||||
Unsecured yen loans from banks and insurance companies and others | 1.2 | % | 393,392 | 165,229 | 96,986 | 72,568 | 41,241 | 16,246 | 1,122 | 392,648 | ||||||||||||||||||||||||||||
Subtotal | 809,111 | 268,937 | 237,770 | 175,312 | 52,724 | 43,246 | 31,122 | 903,698 | ||||||||||||||||||||||||||||||
Foreign exchange contracts | 1,367 | 1,367 | 1,399 | |||||||||||||||||||||||||||||||||||
Total | 810,478 | 268,937 | 239,137 | 175,312 | 52,724 | 43,246 | 31,122 | 905,097 | ||||||||||||||||||||||||||||||
Long-term debt, including current portion:
Average interest | Yen (millions) | |||||||||||||||||
Carrying amount and maturity date (as of March 31, 2003) | Fair value | |||||||||||||||||
Total | 2004 | 2005 | 2006 | 2007 | 2008 | There- after | ||||||||||||
Japanese yen convertible bonds | 1.3% | 126,225 | 97,742 | 11,483 | 17,000 | 128,334 | ||||||||||||
Straight bonds | 1.0% | 300,272 | 100,120 | 100,152 | 100,000 | 308,407 | ||||||||||||
Straight bonds issued by a subsidiary | 1.8% | 52,206 | 5,000 | 17,206 | 20,000 | 10,000 | 54,192 | |||||||||||
Unsecured yen loans from banks and insurance companies | 0.5% | 322,630 | 115,680 | 86,259 | 80,331 | 31,107 | 8,850 | 403 | 321,975 | |||||||||
Total | 801,333 | 218,422 | 197,862 | 114,537 | 151,259 | 18,850 | 100,403 | 812,908 | ||||||||||
84
Interest rate swaps:
Yen (millions) | ||||||||||||||||
Notional amount and maturity date (as of March 31, 2003) | ||||||||||||||||
Average receive rate | Average pay rate | 2004 | 2005 | 2006 | 2007 | 2008 | There- after | Fair value | ||||||||
0.42% | JPY6M LIBOR + 0.21% | 100,000 | 120 | |||||||||||||
0.87% | JPY6M LIBOR + 0.40% | 15,000 | 152 |
Long-term debt, including current portion:
Average interest rate | Yen (millions) | ||||||||||||||||||||
Carrying amount and maturity date (as of March 31, 2002) | Fair value | ||||||||||||||||||||
Total | 2003 | 2004 | 2005 | 2006 | 2007 | There- after | |||||||||||||||
Japanese yen convertible bonds | 1.2% | 143,226 | 16,999 | 97,744 | 11,483 | 17,000 | 161,532 | ||||||||||||||
Straight bonds | 1.0% | 300,000 | 100,000 | 100,000 | 100,000 | 297,503 | |||||||||||||||
Straight bonds issued by a subsidiary | 1.7% | 59,315 | 5,432 | 5,000 | 18,883 | 20,000 | 10,000 | 60,330 | |||||||||||||
U.S. dollar unsecured bonds | 5.8% | 133,340 | 133,340 | 135,219 | |||||||||||||||||
Unsecured yen loans from banks and insurance companies | 0.8% | 346,016 | 123,309 | 98,081 | 66,846 | 40,784 | 12,474 | 4,522 | 343,420 | ||||||||||||
Subtotal | 981,897 | 279,080 | 200,825 | 178,329 | 76,667 | 132,474 | 114,522 | 998,004 | |||||||||||||
Foreign exchange contracts | (8,103 | ) | (8,103 | ) | (8,103 | ) | |||||||||||||||
Total | 973,794 | 270,977 | 200,825 | 178,329 | 76,667 | 132,474 | 114,522 | 989,901 | |||||||||||||
Item 12. |
Not applicable
85
PART II
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
None
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None
Item 15. | Controls and Procedures |
The Company’s management, with the participation of its principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15 (e) under the U.S. Securities Exchange Act of 1934) as of March 31, 2003. Based on that evaluation, the Company’s principal executive and principal financial officers concluded that the disclosure controls and procedures were effective as of that date.
No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15 (f) under the U.S. Securities Exchange Act of 1934) occurred during the year ended March 31, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 16A. | Audit Committee Financial Expert |
Not applicable
Item 16B. | Code of Ethics |
Not applicable
Item 16C. | Principal Accountant Fees and Services |
Not applicable
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Not applicable
86
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None
Item 15. [ Reserved ]
Item 16. [ Reserved ]III
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PART III
Item 17. Financial Statements
Index of Consolidated Financial Statements of Matsushita Electric Industrial Co., Ltd. and Subsidiaries:
Page | |||||||||
87 | |||||||||
Consolidated Balance Sheets as of March 31, | 88 | ||||||||
Consolidated Statements of Operations for the years ended | 90 | ||||||||
91 | |||||||||
Consolidated Statements of Cash Flows for the years ended | 93 | ||||||||
95 | |||||||||
Schedule for the years ended March 31, 2003, 2002 | 2001: | ||||||||
Schedule II Valuation and Qualifying Accounts and Reserves for | 141 |
All other schedules are omitted as permitted by the rules and regulations of the Securities and Exchange Commission as the required information is presented in the consolidated financial statements or notes thereto, or the schedules are not applicable.
- 79 -
87
The Board of Directors and Stockholders
Matsushita Electric Industrial Co., Ltd.:
We have audited the consolidated financial statements of Matsushita Electric Industrial Co., Ltd. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our report dated April 27, 2001, we expressed an opinion that the 2001 and 2000 consolidated financial statements of Matsushita Electric Industrial Co., Ltd. and subsidiaries presented fairly, in all material respects, the financial position, the results of their operations and their cash flows in conformity with accounting principles generally accepted in the United States of America except for the omission of segment information. Foreign issuers are presently exempted from such disclosure requirement. As described in Note 18 of the notes to the consolidated financial statements, Matsushita Electric Industrial Co., Ltd. and subsidiaries have included the required segment information and restated their 2001 and 2000 consolidated financial statements to conform with accounting principles generally accepted in the United States of America. Accordingly, our present opinion on the 2001 and 2000 consolidated financial statements, as presented herein, is different from that expressed in our previous report.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Matsushita Electric Industrial Co., Ltd. and subsidiaries as of March 31, 20022003 and 2001,2002, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2002,2003, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As described in Notes 1(i) and 9 of the notes to the consolidated financial statements, effective April 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets as a result of the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”
As described in Note 2 of the notes to the consolidated financial statements, the consolidated balance sheet as of March 31, 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended March 31, 2002 and 2001 have been restated.
KPMG
Osaka, Japan
April 26, 2002, except as to Note 10 and Note 19,which are as of June 27, 200228, 2003
88
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 20022003 and 20012002
Yen (millions) | |||||||||||
Assets | 2002 | 2001 | |||||||||
Current assets: | |||||||||||
Cash and cash equivalents (Note 7) | 899,769 | 848,878 | |||||||||
Time deposits (Note 7) | 521,333 | 527,145 | |||||||||
Short-term investments (Notes 4 and 16) | 11,849 | 11,421 | |||||||||
Trade receivables (Note 7): | |||||||||||
Related companies (Note 3) | 14,276 | 21,945 | |||||||||
Notes | 70,522 | 106,334 | |||||||||
Accounts | 1,042,437 | 1,310,329 | |||||||||
Allowance for doubtful receivables | (40,298 | ) | (42,530 | ) | |||||||
Net trade receivables | 1,086,937 | 1,396,078 | |||||||||
Inventories (Notes 2 and 7) | 834,608 | 1,047,615 | |||||||||
Other current assets (Note 9) | 487,535 | 486,812 | |||||||||
Total current assets | 3,842,031 | 4,317,949 | |||||||||
Noncurrent receivables (Note 5) | 316,230 | 246,419 | |||||||||
Investments and advances (Notes 4 and 16): | |||||||||||
Associated companies (Note 3) | 348,463 | 336,221 | |||||||||
Other investments and advances | 982,938 | 1,175,116 | |||||||||
Total investments and advances | 1,331,401 | 1,511,337 | |||||||||
Property, plant and equipment (Notes 5 and 6): | |||||||||||
Land | 221,823 | 223,910 | |||||||||
Buildings | 1,314,122 | 1,265,932 | |||||||||
Machinery and equipment | 3,148,408 | 3,188,884 | |||||||||
Construction in progress | 66,578 | 152,126 | |||||||||
4,750,931 | 4,830,852 | ||||||||||
Less accumulated depreciation | 3,310,660 | 3,252,791 | |||||||||
Net property, plant and equipment | 1,440,271 | 1,578,061 | |||||||||
Other assets (Note 9) | 697,226 | 502,522 | |||||||||
7,627,159 | 8,156,288 | ||||||||||
Yen (millions) | ||||||
2003 | 2002 (Restated - Note 2) | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents (Note 10) | 1,167,470 | 933,132 | ||||
Time deposits (Note 10) | 395,559 | 526,438 | ||||
Short-term investments (Notes 6 and 18) | 1,196 | 11,849 | ||||
Trade receivables (Notes 7 and 10): | ||||||
Related companies (Note 5) | 18,389 | 16,255 | ||||
Notes | 67,351 | 70,522 | ||||
Accounts | 1,114,208 | 1,095,781 | ||||
Allowance for doubtful receivables | (53,043 | ) | (43,265 | ) | ||
Net trade receivables | 1,146,905 | 1,139,293 | ||||
Inventories (Notes 4 and 10) | 783,262 | 903,377 | ||||
Other current assets (Notes 12 and 18) | 491,786 | 492,801 | ||||
Total current assets | 3,986,178 | 4,006,890 | ||||
Noncurrent receivables (Note 7) | 299,239 | 316,230 | ||||
Investments and advances (Notes 6 and 18): | ||||||
Associated companies (Note 5) | 427,189 | 349,834 | ||||
Other investments and advances | 592,948 | 901,961 | ||||
Total investments and advances | 1,020,137 | 1,251,795 | ||||
Property, plant and equipment (Notes 7 and 8): | ||||||
Land | 264,148 | 231,017 | ||||
Buildings | 1,280,448 | 1,359,246 | ||||
Machinery and equipment | 2,840,184 | 3,225,710 | ||||
Construction in progress | 64,792 | 67,128 | ||||
4,449,572 | 4,883,101 | |||||
Less accumulated depreciation | 3,150,677 | 3,389,393 | ||||
Net property, plant and equipment | 1,298,895 | 1,493,708 | ||||
Other assets: | ||||||
Goodwill (Notes 3 and 9) | 410,627 | 95,838 | ||||
Intangible assets (Note 9) | 74,810 | 58,119 | ||||
Other assets (Note 12) | 744,807 | 545,877 | ||||
Total other assets | 1,230,244 | 699,834 | ||||
7,834,693 | 7,768,457 | |||||
See accompanying Notes to Consolidated Financial Statements.
89
w
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 20022003 and 20012002
Yen (millions) | ||||||||||||
Liabilities and Stockholders’ Equity | 2002 | 2001 | ||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings, including current portion of long-term debt (Notes 5, 7 and 16) | 489,725 | 470,965 | ||||||||||
Commercial paper | 18,339 | 77,494 | ||||||||||
Trade payables: | ||||||||||||
Related companies (Note 3) | 18,064 | 18,860 | ||||||||||
Notes | 26,446 | 73,430 | ||||||||||
Accounts | 501,935 | 585,433 | ||||||||||
Total trade payables | 546,445 | 677,723 | ||||||||||
Accrued income taxes (Note 9) | 25,184 | 55,343 | ||||||||||
Accrued payroll | 147,897 | 158,697 | ||||||||||
Other accrued expenses | 647,237 | 663,541 | ||||||||||
Deposits and advances from customers | 109,263 | 114,179 | ||||||||||
Employees’ deposits | 136,387 | 153,147 | ||||||||||
Other current liabilities | 365,599 | 321,698 | ||||||||||
Total current liabilities | 2,486,076 | 2,692,787 | ||||||||||
Noncurrent liabilities: | ||||||||||||
Long-term debt (Notes 5, 7 and 16) | 691,892 | 541,541 | ||||||||||
Retirement and severance benefits (Note 8) | 718,501 | 558,396 | ||||||||||
Other liabilities (Note 9) | 21,375 | 23,075 | ||||||||||
Total noncurrent liabilities | 1,431,768 | 1,123,012 | ||||||||||
Minority interests | 466,231 | 567,809 | ||||||||||
Stockholders’ equity: | ||||||||||||
Common stock (Notes 7 and 10): | ||||||||||||
Authorized - 4,950,000,000 shares | ||||||||||||
Issued - 2,138,514,603 shares (2,079,572,737 shares in 2001) | 258,737 | 210,994 | ||||||||||
Capital surplus (Notes 7 and 10) | 682,848 | 621,267 | ||||||||||
Legal reserve (Note 10) | 82,354 | 88,251 | ||||||||||
Retained earnings (Note 10) | 2,461,963 | 2,924,071 | ||||||||||
Accumulated other comprehensive income (loss) (Notes 4, 8, 11 and 15): | ||||||||||||
Cumulative translation adjustments | (51,287 | ) | (150,027 | ) | ||||||||
Unrealized holding gains of available-for-sale securities | 50,888 | 78,863 | ||||||||||
Unrealized gains of derivative instruments | 128 | — | ||||||||||
Minimum pension liability adjustments | (150,362 | ) | — | |||||||||
Total accumulated other comprehensive income (loss) | (150,633 | ) | (71,164 | ) | ||||||||
Treasury stock, at cost (Note 10): | ||||||||||||
54,793,408 shares (295,000 shares in 2001) | (92,185 | ) | (739 | ) | ||||||||
Total stockholders’ equity | 3,243,084 | 3,772,680 | ||||||||||
Commitments and contingent liabilities (Note 17) | ||||||||||||
7,627,159 | 8,156,288 | |||||||||||
Yen (millions) | ||||||
2003 | 2002 (Restated - Note 2) | |||||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Short-term borrowings, including current portion of long-term debt | 333,686 | 535,312 | ||||
Commercial paper | — | 18,339 | ||||
Trade payables: | ||||||
Related companies (Note 5) | 32,104 | 24,299 | ||||
Notes | 29,615 | 26,446 | ||||
Accounts | 665,565 | 517,731 | ||||
Total trade payables | 727,284 | 568,476 | ||||
Accrued income taxes (Note 12) | 33,499 | 29,123 | ||||
Accrued payroll | 150,095 | 151,923 | ||||
Other accrued expenses (Note 19) | 683,569 | 674,460 | ||||
Deposits and advances from customers | 100,469 | 111,197 | ||||
Employees’ deposits | 125,024 | 136,387 | ||||
Other current liabilities (Notes 12 and 18) | 417,206 | 368,868 | ||||
Total current liabilities | 2,570,832 | 2,594,085 | ||||
Noncurrent liabilities: | ||||||
Long-term debt (Notes 7, 10 and 18) | 588,202 | 708,173 | ||||
Retirement and severance benefits (Note 11) | 1,375,143 | 722,857 | ||||
Other liabilities (Note 12) | 11,939 | 23,160 | ||||
Total noncurrent liabilities | 1,975,284 | 1,454,190 | ||||
Minority interests | 110,177 | 472,322 | ||||
Stockholders’ equity: | ||||||
Common stock (Notes 10 and 13): | ||||||
Authorized—4,950,000,000 shares Issued—2,447,923,088 shares (2,138,514,603 shares in 2002) | 258,738 | 258,737 | ||||
Capital surplus (Notes 10 and 13) | 1,219,686 | 682,848 | ||||
Legal reserve (Note 13) | 80,700 | 82,647 | ||||
Retained earnings (Note 13) | 2,432,052 | 2,470,356 | ||||
Accumulated other comprehensive income (loss) (Notes 6, 11, 14 and 17): | ||||||
Cumulative translation adjustments | (161,124 | ) | (55,121 | ) | ||
Unrealized holding gains (losses) of available-for-sale securities | (18,082 | ) | 50,812 | |||
Unrealized gains (losses) of derivative instruments | (1,090 | ) | 128 | |||
Minimum pension liability adjustments | (525,346 | ) | (150,362 | ) | ||
Total accumulated other comprehensive income (loss) | (705,642 | ) | (154,543 | ) | ||
Treasury stock, at cost (Note 13): | ||||||
88,606,377 shares (54,793,408 shares in 2002) | (107,134 | ) | (92,185 | ) | ||
Total stockholders’ equity | 3,178,400 | 3,247,860 | ||||
Commitments and contingent liabilities (Note 19) | ||||||
7,834,693 | 7,768,457 | |||||
See accompanying Notes to Consolidated Financial Statements.
90
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended March 31, 2003, 2002 2001 and 20002001
Yen (millions) | |||||||||||||||
2002 | 2001 | 2000 | |||||||||||||
Revenues: | |||||||||||||||
Net sales: | |||||||||||||||
Related companies (Note 3) | 115,603 | 171,756 | 168,774 | ||||||||||||
Other | 6,761,085 | 7,509,805 | 7,130,613 | ||||||||||||
Total net sales | 6,876,688 | 7,681,561 | 7,299,387 | ||||||||||||
Interest income | 33,556 | 43,712 | 42,949 | ||||||||||||
Dividends received | 9,162 | 12,237 | 14,674 | ||||||||||||
Other income (Notes 4, 5, 13 and 15) | 53,774 | 54,082 | 135,746 | ||||||||||||
Total revenues | 6,973,180 | 7,791,592 | 7,492,756 | ||||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales (Notes 3 and 13) | 5,134,077 | 5,481,314 | 5,190,791 | ||||||||||||
Selling, general and administrative expenses (Note 13) | 1,954,418 | 2,011,843 | 1,949,542 | ||||||||||||
Interest expense | 41,213 | 43,538 | 46,237 | ||||||||||||
Other deductions (Notes 4, 6, 13 and 15) | 391,481 | 154,162 | 87,581 | ||||||||||||
Total costs and expenses | 7,521,189 | 7,690,857 | 7,274,151 | ||||||||||||
Income (loss) before income taxes | (548,009 | ) | 100,735 | 218,605 | |||||||||||
Provision for income taxes (Note 9): | |||||||||||||||
Current | 30,035 | 117,855 | 178,445 | ||||||||||||
Deferred | (87,246 | ) | (67,994 | ) | (41,430 | ) | |||||||||
(57,211 | ) | 49,861 | 137,015 | ||||||||||||
Income (loss) before minority interests and equity in earnings of associated companies | (490,798 | ) | 50,874 | 81,590 | |||||||||||
Minority interests | (59,732 | ) | 22,125 | (941 | ) | ||||||||||
Equity in earnings of associated companies (Note 3) | 59 | 12,751 | 17,178 | ||||||||||||
Net income (loss) | (431,007 | ) | 41,500 | 99,709 | |||||||||||
Yen | |||||||||||||||
Net income (loss) per share of common stock (Note 12): | |||||||||||||||
Basic | (207.65 | ) | 19.96 | 48.35 | |||||||||||
Diluted | (207.65 | ) | 19.56 | 46.36 |
Yen (millions) | |||||||||
2003 | 2002 (Restated - Note 2) | 2001 (Restated - Note 2) | |||||||
Revenues: | |||||||||
Net sales: | |||||||||
Related companies (Note 5) | 150,920 | 116,354 | 173,110 | ||||||
Other | 7,250,794 | 6,957,483 | 7,607,409 | ||||||
Total net sales | 7,401,714 | 7,073,837 | 7,780,519 | ||||||
Interest income | 22,267 | 34,361 | 45,229 | ||||||
Dividends received | 4,506 | 8,219 | 6,884 | ||||||
Other income (Notes 6, 7, 16 and 17) | 64,677 | 54,146 | 51,809 | ||||||
Total revenues | 7,493,164 | 7,170,563 | 7,884,441 | ||||||
Costs and expenses: | |||||||||
Cost of sales (Notes 5 and 16) | 5,323,605 | 5,312,039 | 5,572,438 | ||||||
Selling, general and administrative expenses (Note 16) | 1,951,538 | 1,960,796 | 2,013,462 | ||||||
Interest expense | 32,805 | 45,088 | 48,038 | ||||||
Other deductions (Notes 6, 8, 16 and 17) | 116,300 | 390,419 | 145,006 | ||||||
Total costs and expenses | 7,424,248 | 7,708,342 | 7,778,944 | ||||||
Income (loss) before income taxes | 68,916 | (537,779 | ) | 105,497 | |||||
Provision for income taxes (Note 12): | |||||||||
Current | 51,704 | 33,902 | 127,089 | ||||||
Deferred | 19,572 | (87,177 | ) | (72,120 | ) | ||||
71,276 | (53,275 | ) | 54,969 | ||||||
Income (loss) before minority interests and equity in earnings (losses) of associated companies | (2,360 | ) | (484,504 | ) | 50,528 | ||||
Minority interests | 5,505 | (56,666 | ) | 21,839 | |||||
Equity in earnings (losses) of associated companies (Note 5) | (11,588 | ) | 59 | 12,814 | |||||
Net income (loss) | (19,453 | ) | (427,779 | ) | 41,503 | ||||
Yen | |||||||||
Net income (loss) per share of common stock (Note 15): | |||||||||
Basic | (8.70 | ) | (206.09 | ) | 19.96 | ||||
Diluted | (8.70 | ) | (206.09 | ) | 19.56 | ||||
See accompanying Notes to Consolidated Financial Statements. |
91
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended March 31, 2003, 2002 and 2001
Yen (millions) | |||||||||
2003 | 2002 (Restated - Note 2) | 2001 (Restated - Note 2) | |||||||
Common stock (Notes 13 and 16): | |||||||||
Balance at beginning of year | 258,737 | 210,994 | 209,708 | ||||||
Conversion of bonds | 1 | 47,743 | 470 | ||||||
Stock issued under exchange offering | — | — | 816 | ||||||
Balance at end of year | 258,738 | 258,737 | 210,994 | ||||||
Capital surplus (Notes 13 and 16): | |||||||||
Balance at beginning of year | 682,848 | 621,267 | 570,964 | ||||||
Conversion of bonds | 1 | 47,743 | 470 | ||||||
Stock issued under exchange offering (Note 3) | 537,487 | — | 49,291 | ||||||
Transfer from legal reserve and retained earnings due to merger of subsidiaries | — | 11,008 | 1,511 | ||||||
Capital transactions by consolidated and associated companies | (650 | ) | 2,830 | (969 | ) | ||||
Balance at end of year | 1,219,686 | 682,848 | 621,267 | ||||||
Legal reserve (Note 13): | |||||||||
Balance at beginning of year | 82,647 | 88,499 | 86,553 | ||||||
Restatement adjustments for years prior to 2001 (Note 2) | — | — | (970 | ) | |||||
Transfer from (to) retained earnings | (1,947 | ) | 816 | 2,916 | |||||
Transfer to capital surplus due to merger of subsidiaries | — | (6,668 | ) | — | |||||
Balance at end of year | 80,700 | 82,647 | 88,499 | ||||||
Retained earnings (Note 13): | |||||||||
Balance at beginning of year | 2,470,356 | 2,929,281 | 2,911,665 | ||||||
Restatement adjustments for years prior to 2001 (Note 2) | — | — | 6,425 | ||||||
Net income (loss) | (19,453 | ) | (427,779 | ) | 41,503 | ||||
Cash dividends | (20,798 | ) | (25,990 | ) | (25,885 | ) | |||
Transfer from (to) legal reserve | 1,947 | (816 | ) | (2,916 | ) | ||||
Transfer to capital surplus due to merger of subsidiaries | — | (4,340 | ) | (1,511 | ) | ||||
Balance at end of year | 2,432,052 | 2,470,356 | 2,929,281 | ||||||
(Continued)
92
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended March 31, 2003, 2002 and 2001
Yen (millions) | |||||||||
2003 | 2002 (Restated - Note 2) | 2001 (Restated - Note 2) | |||||||
Accumulated other comprehensive income (loss) (Note 14): | |||||||||
Balance at beginning of year | (154,543 | ) | (79,089 | ) | (94,021 | ) | |||
Restatement adjustments for years prior to 2001 (Note 2) | — | — | (12,230 | ) | |||||
Other comprehensive income (loss), net of tax | (551,099 | ) | (75,454 | ) | 27,162 | ||||
Balance at end of year | (705,642 | ) | (154,543 | ) | (79,089 | ) | |||
Treasury stock (Note 13): | |||||||||
Balance at beginning of year | (92,185 | ) | (739 | ) | (540 | ) | |||
Repurchase of common stock | (115,770 | ) | (91,969 | ) | (307 | ) | |||
Exercise of stock options | — | — | 83 | ||||||
Stock exchanged under exchange offering (Note 3) | 100,821 | — | — | ||||||
Sale of treasury stock | — | 523 | 25 | ||||||
Balance at end of year | (107,134 | ) | (92,185 | ) | (739 | ) | |||
Disclosure of comprehensive income (loss) (Note 14): | |||||||||
Net income (loss) | (19,453 | ) | (427,779 | ) | 41,503 | ||||
Other comprehensive income (loss), net of tax: | |||||||||
Translation adjustments | (106,003 | ) | 102,832 | 148,988 | |||||
Unrealized holding gains (losses) of available-for-sale securities | (68,894 | ) | (28,052 | ) | (121,826 | ) | |||
Unrealized gains (losses) of derivative instruments | (1,218 | ) | 128 | — | |||||
Minimum pension liability adjustments | (374,984 | ) | (150,362 | ) | — | ||||
Total comprehensive income (loss) | (570,552 | ) | (503,233 | ) | 68,665 | ||||
See accompanying Notes to Consolidated Financial Statements. |
93
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 2003, 2002 and 2001
Yen (millions) | |||||||||
2003 | 2002 (Restated - Note 2) | 2001 (Restated - Note 2) | |||||||
Cash flows from operating activities (Note 16): | |||||||||
Net income (loss) | (19,453 | ) | (427,779 | ) | 41,503 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 302,141 | 362,052 | 382,547 | ||||||
Net gain on sale of investments | (93 | ) | (6,160 | ) | (11,294 | ) | |||
Provision for doubtful receivables | 17,621 | 4,428 | 17,165 | ||||||
Deferred income taxes | 19,572 | (87,177 | ) | (72,120 | ) | ||||
Write-down of investment securities | 52,611 | 92,297 | 5,455 | ||||||
Impairment loss on long-lived assets (Note 8) | 2,375 | 24,420 | — | ||||||
Minority interests | 5,505 | (56,666 | ) | 21,839 | |||||
(Increase) decrease in trade receivables | (72,604 | ) | 200,966 | (73,867 | ) | ||||
(Increase) decrease in inventories | 82,573 | 270,360 | (74,123 | ) | |||||
(Increase) decrease in other current assets | 27,996 | (35,579 | ) | 34,231 | |||||
Increase (decrease) in trade payables | 162,378 | (130,275 | ) | (1,770 | ) | ||||
Increase (decrease) in accrued income taxes | 4,960 | (31,505 | ) | (29,122 | ) | ||||
Increase (decrease) in accrued expenses and other current liabilities | 79,252 | 9,199 | 96,710 | ||||||
Increase (decrease) in retirement and severance benefits | 16,622 | (86,144 | ) | 25,732 | |||||
Other | 16,861 | 10,509 | 3,894 | ||||||
Net cash provided by operating activities | 698,317 | 112,946 | 366,780 | ||||||
Cash flows from investing activities (Note 16): | |||||||||
Proceeds from sale of short-term investments | 10,523 | 36,976 | 156,944 | ||||||
Purchase of short-term investments | — | (27,509 | ) | (105,128 | ) | ||||
Proceeds from disposition of investments and advances | 121,001 | 172,763 | 111,326 | ||||||
Increase in investments and advances | (80,774 | ) | (123,330 | ) | (59,503 | ) | |||
Capital expenditures | (246,603 | ) | (342,107 | ) | (491,730 | ) | |||
Proceeds from disposals of property, plant and equipment | 58,270 | 142,924 | 35,941 | ||||||
(Increase) decrease in finance receivables | 29,158 | 60,731 | 9,754 | ||||||
(Increase) decrease in time deposits | 96,371 | 29,742 | (168,726 | ) | |||||
Other | 877 | (24,662 | ) | (64,902 | ) | ||||
Net cash used in investing activities | (11,177 | ) | (74,472 | ) | (576,024 | ) | |||
(Continued)
94
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 2003, 2002 and 2001
Yen (millions) | |||||||||
2003 | 2002 (Restated - Note 2) | 2001 (Restated - Note 2) | |||||||
Cash flows from financing activities (Note 16): | |||||||||
Decrease in short-term borrowings | (106,630 | ) | (83,703 | ) | (45,934 | ) | |||
Increase (decrease) in deposits and advances from customers and employees | (20,589 | ) | (22,739 | ) | 4,447 | ||||
Proceeds from long-term debt | 122,288 | 447,458 | 387,559 | ||||||
Repayments of long-term debt | (293,088 | ) | (218,159 | ) | (417,415 | ) | |||
Dividends paid | (20,798 | ) | (25,990 | ) | (25,885 | ) | |||
Dividends paid to minority interests | (8,267 | ) | (10,112 | ) | (8,282 | ) | |||
Repurchase of common stock (Note 13) | (115,770 | ) | (91,969 | ) | (307 | ) | |||
Decrease of treasury stock (Note 13) | — | 523 | 108 | ||||||
Other | — | 5,107 | (2,214 | ) | |||||
Net cash provided by (used in) financing activities | (442,854 | ) | 416 | (107,923 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (9,948 | ) | 16,541 | 42,153 | |||||
Net increase (decrease) in cash and cash equivalents | 234,338 | 55,431 | (275,014 | ) | |||||
Cash and cash equivalents at beginning of year | 933,132 | 877,701 | 1,152,715 | ||||||
Cash and cash equivalents at end of year | 1,167,470 | 933,132 | 877,701 | ||||||
See accompanying Notes to Consolidated Financial Statements.
95
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended Notes to Consolidated Financial Statements
March 31, 2003, 2002 2001 and 20002001
Yen (millions) | |||||||||||||
2002 | 2001 | 2000 | |||||||||||
Common stock (Notes 10 and 13): | |||||||||||||
Balance at beginning of year | 210,994 | 209,708 | 209,444 | ||||||||||
Conversion of bonds | 47,743 | 470 | 264 | ||||||||||
Stock issued under exchange offering | — | 816 | — | ||||||||||
Balance at end of year | 258,737 | 210,994 | 209,708 | ||||||||||
Capital surplus (Notes 10 and 13): | |||||||||||||
Balance at beginning of year | 621,267 | 570,964 | 567,696 | ||||||||||
Conversion of bonds | 47,743 | 470 | 264 | ||||||||||
Stock issued under exchange offering | — | 49,291 | — | ||||||||||
Transfer from legal reserve and retained earnings due to merger of subsidiaries | 11,008 | 1,511 | — | ||||||||||
Capital transactions by consolidated and associated companies | 2,830 | (969 | ) | 3,004 | |||||||||
Balance at end of year | 682,848 | 621,267 | 570,964 | ||||||||||
Legal reserve (Note 10): | |||||||||||||
Balance at beginning of year | 88,251 | 86,553 | 86,112 | ||||||||||
Transfer from retained earnings | 771 | 1,698 | 441 | ||||||||||
Transfer to capital surplus due to merger of subsidiaries | (6,668 | ) | — | — | |||||||||
Balance at end of year | 82,354 | 88,251 | 86,553 | ||||||||||
Retained earnings (Note 10): | |||||||||||||
Balance at beginning of year | 2,924,071 | 2,911,665 | 2,841,268 | ||||||||||
Net income (loss) | (431,007 | ) | 41,500 | 99,709 | |||||||||
Cash dividends | (25,990 | ) | (25,885 | ) | (28,871 | ) | |||||||
Transfer to legal reserve | (771 | ) | (1,698 | ) | (441 | ) | |||||||
Transfer to capital surplus due to merger of subsidiaries | (4,340 | ) | (1,511 | ) | — | ||||||||
Balance at end of year | 2,461,963 | 2,924,071 | 2,911,665 | ||||||||||
(Continued)
(1) Summary of Significant Accounting Policies
(a) Description of Business
Matsushita Electric Industrial Co., Ltd. (hereinafter, the “Company,” including consolidated subsidiaries, unless the context otherwise requires) is one of the world’s leading producers of electronic and electric products. The Company currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology. Most of the Company’s products are marketed under “Panasonic” and several other trade names, including “National,” “Technics,” “Quasar,” “Victor” and “JVC.”
Sales in fiscal 2003 were categorized as follows: AVC Networks—59%, Home Appliances—16%, Industrial Equipment—4%, and Components and Devices—21%. A sales breakdown in fiscal 2003 by geographical market was as follows: Japan—47%, North and South America—19%, Europe—13%, and Asia and Others—21%.
The Company is not dependent on a single supplier, and has no significant difficulty in obtaining raw materials from suppliers.
(b) Basis of Presentation of Consolidated Financial Statements
The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.
The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments which are necessary to conform with accounting principles generally accepted in the United States of America.
(c) Principles of Consolidation (See Note 5)
The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated on consolidation.
Investments in associated companies, including the companies in which the Company’s ownership is 20% to 50% and corporate joint ventures, are stated at their underlying net equity value after elimination of intercompany profits.
96
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended March 31, 2002, 2001 and 2000
Yen (millions) | ||||||||||||||
2002 | 2001 | 2000 | ||||||||||||
Accumulated other comprehensive income (loss) (Note 11): | ||||||||||||||
Balance at beginning of year | (71,164 | ) | (94,021 | ) | (62,117 | ) | ||||||||
Other comprehensive income (loss), net of tax | (79,469 | ) | 22,857 | (31,904 | ) | |||||||||
Balance at end of year | (150,633 | ) | (71,164 | ) | (94,021 | ) | ||||||||
Treasury stock (Note 10): | ||||||||||||||
Balance at beginning of year | (739 | ) | (540 | ) | (252 | ) | ||||||||
Repurchase of common stock | (91,969 | ) | (307 | ) | (288 | ) | ||||||||
Exercise of stock options | — | 83 | — | |||||||||||
Sale of treasury stock | 523 | 25 | — | |||||||||||
Balance at end of year | (92,185 | ) | (739 | ) | (540 | ) | ||||||||
Disclosure of comprehensive income (loss) (Note 11): | ||||||||||||||
Net income (loss) | (431,007 | ) | 41,500 | 99,709 | ||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||
Translation adjustments | 98,740 | 144,684 | (139,946 | ) | ||||||||||
Unrealized holding gains of available-for-sale securities | (27,975 | ) | (121,827 | ) | 108,042 | |||||||||
Unrealized gains of derivative instruments | 128 | — | — | |||||||||||
Minimum pension liability adjustments | (150,362 | ) | — | — | ||||||||||
Total comprehensive income (loss) | (510,476 | ) | 64,357 | 67,805 | ||||||||||
See accompanying Notes to Consolidated Financial Statements.
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 2002, 2001 and 2000
Yen (millions) | |||||||||||||||
2002 | 2001 | 2000 | |||||||||||||
Cash flows from operating activities (Note 13): | |||||||||||||||
Net income (loss) | (431,007 | ) | 41,500 | 99,709 | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 352,890 | 374,102 | 364,966 | ||||||||||||
Net gain on sale of investments | (6,160 | ) | (13,706 | ) | (98,278 | ) | |||||||||
Provision for doubtful receivables | 4,170 | 16,449 | 11,980 | ||||||||||||
Deferred income taxes | (87,246 | ) | (67,994 | ) | (41,430 | ) | |||||||||
Write-down of investment securities | 92,806 | 5,330 | 15,325 | ||||||||||||
Impairment loss on long-lived assets (Note 6) | 24,420 | — | 19,565 | ||||||||||||
Minority interests | (59,732 | ) | 22,125 | (941 | ) | ||||||||||
(Increase) decrease in trade receivables | 199,266 | (69,146 | ) | (28,889 | ) | ||||||||||
(Increase) decrease in inventories | 248,601 | (56,335 | ) | 17,564 | |||||||||||
(Increase) decrease in other current assets | (30,694 | ) | 27,682 | (14,274 | ) | ||||||||||
Increase (decrease) in trade payables | (127,978 | ) | (4,284 | ) | 30,042 | ||||||||||
Increase (decrease) in accrued income taxes | (32,379 | ) | (28,839 | ) | 261 | ||||||||||
Increase (decrease) in accrued expenses and other current liabilities | 4,230 | 101,747 | 65,995 | ||||||||||||
Increase (decrease) in retirement and severance benefits | (86,345 | ) | 26,789 | 34,625 | |||||||||||
Other | 12,022 | 17,032 | (84 | ) | |||||||||||
Net cash provided by operating activities | 76,864 | 392,452 | 476,136 | ||||||||||||
Cash flows from investing activities (Note 13): | |||||||||||||||
Proceeds from sale of short-term investments | 21,103 | 145,870 | 259,485 | ||||||||||||
Purchase of short-term investments | (14,503 | ) | (105,127 | ) | (278,243 | ) | |||||||||
Proceeds from disposition of investments and advances | 172,588 | 110,405 | 146,885 | ||||||||||||
Increase in investments and advances | (123,037 | ) | (71,203 | ) | (71,186 | ) | |||||||||
Capital expenditures | (335,695 | ) | (480,844 | ) | (331,475 | ) | |||||||||
Proceeds from disposals of property, plant and equipment | 142,072 | 35,407 | 25,349 | ||||||||||||
(Increase) decrease in finance receivables | 60,731 | 9,754 | 18,562 | ||||||||||||
(Increase) decrease in time deposits | 29,742 | (160,576 | ) | (340,000 | ) | ||||||||||
Other | (22,767 | ) | (66,274 | ) | (33,731 | ) | |||||||||
Net cash used in investing activities | (69,766 | ) | (582,588 | ) | (604,354 | ) | |||||||||
(Continued)
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 2002, 2001 and 2000
Yen (millions) | ||||||||||||||
2002 | 2001 | 2000 | ||||||||||||
Cash flows from financing activities (Note 13): | ||||||||||||||
Decrease in short-term borrowings | (62,969 | ) | (44,573 | ) | (156,619 | ) | ||||||||
Increase (decrease) in deposits and advances from customers and employees | (22,768 | ) | 3,822 | 7,576 | ||||||||||
Proceeds from long-term debt | 446,228 | 380,185 | 240,485 | |||||||||||
Repayments of long-term debt | (208,804 | ) | (415,838 | ) | (269,915 | ) | ||||||||
Dividends paid | (25,990 | ) | (25,885 | ) | (28,871 | ) | ||||||||
Dividends paid to minority interests | (9,905 | ) | (8,027 | ) | (8,377 | ) | ||||||||
Repurchase of common stock (Note 10) | (91,969 | ) | (307 | ) | (288 | ) | ||||||||
Decrease of treasury stock (Note 10) | 523 | 108 | — | |||||||||||
Other | 5,115 | (2,211 | ) | — | ||||||||||
Net cash provided by (used in) financing activities | 29,461 | (112,726 | ) | (216,009 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 14,332 | 35,478 | (73,096 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 50,891 | (267,384 | ) | (417,323 | ) | |||||||||
Cash and cash equivalents at beginning of year | 848,878 | 1,116,262 | 1,533,585 | |||||||||||
Cash and cash equivalents at end of year | 899,769 | 848,878 | 1,116,262 | |||||||||||
See accompanying Notes to Consolidated Financial Statements.
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002, 2001
The difference between the acquisition cost and 2000the Company’s equity in net assets of associated companies at acquisition was being amortized on a straight-line basis over periods ranging from ten to forty years prior to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” Subsequent to the adoption of SFAS No. 142, the unamortized balance of such equity method goodwill is not amortized and is instead tested for impairment.
(d) Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectibility is reasonably assured.
(e) Leases (See Note 7)
A subsidiary of the Company leases machinery and equipment. Leases of such assets are principally accounted for as direct financing leases and included in “Trade receivables—Accounts” and “Noncurrent receivables” in the accompanying consolidated balance sheets.
(f) Inventories (See Note 4)
Finished goods and work in process are stated at the lower of cost (average) or market. Raw materials are stated at cost, principally on a first-in, first-out basis, not in excess of current replacement cost.
(g) Foreign Currency Translation (See Note 14)
Foreign currency financial statements are translated in accordance with SFAS No. 52, “Foreign Currency Translation,” under which all assets and liabilities are translated into yen at year-end rates and income and expense accounts are translated at weighted average rates. Adjustments resulting from the translation of financial statements are reflected under the caption, “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity.
(h) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed primarily using the declining balance method based on the following estimated useful lives:
Buildings .............................................................................................................
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
5 to 50 years | ||||
Machinery and equipment ................................................................................. | 2 to 10 years |
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- 91 -
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||
2002 | 2001 | |||||||
Finished goods | 422,582 | 516,972 | ||||||
Work in process | 157,116 | 187,309 | ||||||
Raw materials | 254,910 | 343,334 | ||||||
834,608 | 1,047,615 | |||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||
2002 | 2001 | ||||||||
Current assets | 884,729 | 851,026 | |||||||
Other assets | 1,376,341 | 1,552,170 | |||||||
2,261,070 | 2,403,196 | ||||||||
Current liabilities | 674,512 | 585,769 | |||||||
Other liabilities | 657,753 | 869,257 | |||||||
Net assets | 928,805 | 948,170 | |||||||
Company’s equity in net assets | 290,753 | 279,266 | |||||||
Yen (millions) | ||||||||||||
2002 | 2001 | 2000 | ||||||||||
Net sales | 1,562,422 | 1,807,373 | 1,835,138 | |||||||||
Gross profit | 423,583 | 492,107 | 500,373 | |||||||||
Net income | 4,345 | 8,399 | 47,651 |
Yen (millions) | ||||||||||||
2002 | 2001 | 2000 | ||||||||||
Purchases from | 152,234 | 177,865 | 235,599 | |||||||||
Dividends received | 5,693 | 5,089 | 7,935 |
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||
2002 | 2001 | |||||||
Carrying amount | 274,389 | 278,199 | ||||||
Market value | 275,174 | 355,851 |
Yen (millions) | |||||||||||||||||
2002 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
unrealized | unrealized | ||||||||||||||||
Fair | holding | holding | |||||||||||||||
Cost | value | gains | losses | ||||||||||||||
Current: | |||||||||||||||||
Japanese and foreign government bonds | 3,804 | 3,807 | 4 | 1 | |||||||||||||
Convertible and straight bonds | 709 | 709 | — | — | |||||||||||||
Other debt securities | 7,333 | 7,333 | — | — | |||||||||||||
11,846 | 11,849 | 4 | 1 | ||||||||||||||
Noncurrent: | |||||||||||||||||
Equity securities | 288,816 | 411,621 | 125,778 | 2,973 | |||||||||||||
Japanese and foreign government bonds | 46,645 | 43,966 | — | 2,679 | |||||||||||||
Convertible and straight bonds | 3,537 | 3,576 | 47 | 8 | |||||||||||||
Investment trusts | 13,662 | 13,609 | 15 | 68 | |||||||||||||
Other debt securities | 41,769 | 42,325 | 556 | — | |||||||||||||
394,429 | 515,097 | 126,396 | 5,728 | ||||||||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||||||||||
2001 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
unrealized | unrealized | ||||||||||||||||
Fair | holding | holding | |||||||||||||||
Cost | value | gains | losses | ||||||||||||||
Current: | |||||||||||||||||
Japanese and foreign government bonds | 3,288 | 3,299 | 21 | 10 | |||||||||||||
Convertible and straight bonds | 3,042 | 3,046 | 5 | 1 | |||||||||||||
Investment trusts | 77 | 77 | — | — | |||||||||||||
Other debt securities | 4,994 | 4,999 | 5 | — | |||||||||||||
11,401 | 11,421 | 31 | 11 | ||||||||||||||
Noncurrent: | |||||||||||||||||
Equity securities | 369,972 | 533,421 | 179,305 | 15,856 | |||||||||||||
Japanese and foreign government bonds | 58,441 | 57,056 | 70 | 1,455 | |||||||||||||
Convertible and straight bonds | 6,973 | 6,953 | 17 | 37 | |||||||||||||
Investment trusts | 68,418 | 67,889 | 48 | 577 | |||||||||||||
Other debt securities | 39,335 | 40,152 | 817 | — | |||||||||||||
543,139 | 705,471 | 180,257 | 17,925 | ||||||||||||||
Yen (millions) | ||||||||||||||||
2002 | 2001 | |||||||||||||||
Fair | Fair | |||||||||||||||
Cost | value | Cost | value | |||||||||||||
Due within one year | 11,846 | 11,849 | 11,401 | 11,421 | ||||||||||||
Due after one year through five years | 105,613 | 103,476 | 173,167 | 172,050 | ||||||||||||
Equity securities | 288,816 | 411,621 | 369,972 | 533,421 | ||||||||||||
406,275 | 526,946 | 554,540 | 716,892 | |||||||||||||
(i) Goodwill and Other Intangible assets (See Note 9)
Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. The Company adopted the provisions of SFAS No. 142 for the fiscal year beginning April 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, and are instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.” SFAS No. 142 required the Company to perform an assessment of whether there was an indication that goodwill is impaired as of the date of adoption. The results of this assessment did not require the Company to recognize an impairment loss. Prior to the adoption of SFAS No. 142, goodwill was being amortized on a straight-line basis over periods ranging from ten to forty years.
(j) Investments in Available-for-Sale Securities (See Notes 6 and 14)
The Company accounts for debt and equity securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”
SFAS No. 115 requires that certain investments in debt and equity securities be classified as held-to-maturity, trading, or available-for-sale securities. The Company classifies its existing marketable equity securities other than investments in associated companies and all debt securities as available-for-sale. Available-for-sale securities are carried at fair value with unrealized holding gains or losses included as a component of accumulated other comprehensive income (loss), net of applicable taxes.
Individual securities classified as available-for-sale are reduced to net realizable value by a charge to earnings for other than temporary declines in fair value. Realized gains and losses are determined on the average cost method and reflected in earnings.
(k) Income Taxes (See Note 12)
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
(l) Advertising (See Note 16)
Advertising costs are expensed as incurred.
98
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||
Capital | Operating | |||||||
Year ending March 31: | leases | leases | ||||||
2003 | 1,774 | 14,483 | ||||||
2004 | 1,295 | 20,430 | ||||||
2005 | 756 | 20,362 | ||||||
2006 | 404 | 24,164 | ||||||
2007 | 100 | 18,719 | ||||||
Thereafter | 21 | — | ||||||
Total minimum lease payments | 4,350 | 98,158 | ||||||
Less amount representing interest | 222 | |||||||
Present value of net minimum lease payments | 4,128 | |||||||
Less current portion | 1,664 | |||||||
Long-term capital lease obligations | 2,464 | |||||||
Yen (millions) | ||||||||
2002 | 2001 | |||||||
Total minimum lease payments to be received | 433,516 | 480,122 | ||||||
Less amounts representing estimated executory cost | 16,436 | 16,995 | ||||||
Less unearned income | 28,692 | 36,209 | ||||||
388,388 | 426,918 | |||||||
Less allowance for doubtful receivables | 4,112 | 5,104 | ||||||
Net investment in financing leases | 384,276 | 421,814 | ||||||
Less current portion | 137,118 | 178,629 | ||||||
Long-term investment in financing leases | 247,158 | 243,185 | ||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||
Year ending March 31: | ||||
2003 | 145,520 | |||
2004 | 120,470 | |||
2005 | 85,517 | |||
2006 | 51,426 | |||
2007 | 22,669 | |||
Thereafter | 7,914 | |||
Total minimum lease payments to be received | 433,516 | |||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||
2002 | 2001 | |||||||
Convertible bonds, due 2002, interest 1.3% | — | 98,708 | ||||||
Convertible bonds, due 2004, interest 1.4% | 97,744 | 97,744 | ||||||
Convertible bonds issued by subsidiaries, due 2002 and 2005, interest 0.35%—1.5% | 45,482 | 45,482 | ||||||
U.S. dollar unsecured bonds, due 2002, effective interest 5.8% | 125,237 | 125,152 | ||||||
Straight bonds, due 2005, interest 0.42% | 100,000 | — | ||||||
Straight bonds, due 2007, interest 0.87% | 100,000 | — | ||||||
Straight bonds, due 2011, interest 1.64% | 100,000 | — | ||||||
Straight bonds issued by a subsidiary, due 2003—2007, interest 1.68%—2.15% | 45,000 | 50,000 | ||||||
Unsecured yen loans from banks and insurance companies, principally by financial subsidiaries, due 2001—2007, effective interest 0.8% in 2002 and 1.2% in 2001 | 339,772 | 393,392 | ||||||
Capital lease obligation | 4,128 | — | ||||||
957,363 | 810,478 | |||||||
Less current portion | 265,471 | 268,937 | ||||||
691,892 | 541,541 | |||||||
Yen (millions) | |||||
Year ending March 31: | |||||
2003 | 265,471 | ||||
2004 | 202,064 | ||||
2005 | 179,052 | ||||
2006 | 68,170 | ||||
2007 | 132,570 |
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||
2002 | 2001 | 2000 | ||||||||||
Service cost – benefits earned during the year | 85,009 | 89,737 | 86,391 | |||||||||
Interest cost on projected benefit obligation | 84,846 | 84,665 | 84,619 | |||||||||
Expected return on plan assets | (51,459 | ) | (57,415 | ) | (49,389 | ) | ||||||
Amortization of net transition obligation | 9,972 | 9,972 | 9,972 | |||||||||
Amortization of prior service cost (benefit) | (3,965 | ) | — | — | ||||||||
Recognized actuarial loss | 17,208 | 11,054 | 15,561 | |||||||||
Net periodic benefit cost | 141,611 | 138,013 | 147,154 | |||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||
2002 | 2001 | ||||||||
Change in benefit obligations: | |||||||||
Benefit obligations at beginning of year | 2,235,210 | 2,136,223 | |||||||
Service cost | 85,009 | 89,737 | |||||||
Interest cost | 84,846 | 84,665 | |||||||
Plan participants’ contributions | 13,676 | 13,902 | |||||||
Prior service cost (benefit) | (36,802 | ) | (64,171 | ) | |||||
Actuarial loss | 289,768 | 39,341 | |||||||
Benefits paid | (196,980 | ) | (68,965 | ) | |||||
Foreign currency exchange impact | 2,214 | 4,478 | |||||||
Benefit obligations at end of year | 2,476,941 | 2,235,210 | |||||||
Change in plan assets: | |||||||||
Fair value of plan assets at beginning of year | 1,340,637 | 1,410,872 | |||||||
Actual return on plan assets | (75,208 | ) | (134,692 | ) | |||||
Employer contributions | 73,238 | 78,084 | |||||||
Plan participants’ contributions | 13,676 | 13,902 | |||||||
Benefits paid | (44,535 | ) | (31,260 | ) | |||||
Foreign currency exchange impact | 1,733 | 3,731 | |||||||
Fair value of plan assets at end of year | 1,309,541 | 1,340,637 | |||||||
Funded status | (1,167,400 | ) | (894,573 | ) | |||||
Unrecognized net transition obligation | 3,298 | 13,270 | |||||||
Unrecognized prior service cost (benefit) | (97,008 | ) | (64,171 | ) | |||||
Unrecognized actuarial loss | 786,786 | 387,078 | |||||||
Net amount recognized | (474,324 | ) | (558,396 | ) | |||||
Amounts recognized in the consolidated balance sheets consist of: | |||||||||
Retirement and severance benefits | (718,501 | ) | (558,396 | ) | |||||
Accumulated other comprehensive income (loss), gross of tax | 244,177 | — | |||||||
Net amount recognized | (474,324 | ) | (558,396 | ) | |||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
2002 | 2001 | 2000 | |||||||||||
Actuarial assumptions: | |||||||||||||
Discount rate | 3.2 | % | 4.0 | % | 4.0 | % | |||||||
Expected return on plan assets | 4.0 | % | 4.0 | % | 4.0 | % | |||||||
Rate of compensation increase | 2.6 | % | 2.6 | % | 2.6 | % |
Yen (millions) | |||||||||||||||
Domestic | Foreign | Total | |||||||||||||
2002: | |||||||||||||||
Loss before income taxes | (543,624 | ) | (4,385 | ) | (548,009 | ) | |||||||||
Income taxes: | |||||||||||||||
Current | 10,904 | 19,131 | 30,035 | ||||||||||||
Deferred | (78,398 | ) | (8,848 | ) | (87,246 | ) | |||||||||
Total income taxes | (67,494 | ) | 10,283 | (57,211 | ) | ||||||||||
2001: | |||||||||||||||
Income before income taxes | 49,542 | 51,193 | 100,735 | ||||||||||||
Income taxes: | |||||||||||||||
Current | 95,820 | 22,035 | 117,855 | ||||||||||||
Deferred | (68,585 | ) | 591 | (67,994 | ) | ||||||||||
Total income taxes | 27,235 | 22,626 | 49,861 | ||||||||||||
2000: | |||||||||||||||
Income before income taxes | 99,538 | 119,067 | 218,605 | ||||||||||||
Income taxes: | |||||||||||||||
Current | 125,155 | 53,290 | 178,445 | ||||||||||||
Deferred | (33,251 | ) | (8,179 | ) | (41,430 | ) | |||||||||
Total income taxes | 91,904 | 45,111 | 137,015 | ||||||||||||
(m) Net Income (Loss) per Share (See Notes 10, 13 and 15)
The Company accounts for net income (loss) per share in accordance with SFAS No. 128, “Earnings per Share.” This Statement establishes standards for computing net income (loss) per share and requires dual presentation of basic and diluted net income (loss) per share on the face of the statements of operations for all entities with complex capital structures.
Under SFAS No. 128, basic net income (loss) per share is computed based on the weighted average number of common shares outstanding during each period, and diluted net income per share assumes the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.
(n) Cash Equivalents
Cash equivalents include all highly liquid debt instruments purchased with a maturity of three months or less.
(o) Derivative Financial Instruments (See Notes 17 and 18)
Derivative financial instruments utilized by the Company and its subsidiaries are comprised principally of foreign exchange contracts, interest rate swaps and commodity futures used to hedge currency risk, interest rate risk and commodity price risk.
Prior to the adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB statement No. 133,” on April 1, 2001, gains and losses on derivatives used to hedge existing assets or liabilities were recognized in earnings currently, as were the offsetting foreign exchange gains and losses on the items hedged. Gains and losses related to qualifying hedges of firm commitments were deferred and recognized in earnings when the transaction occurred. Derivative financial instruments that did not meet the criteria for hedge accounting were marked to market.
99
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
2002 | 2001 | 2000 | |||||||||||
Normal tax rate | (41.9 | )% | 41.9 | % | 41.9 | % | |||||||
Tax credit for increased research expenses | (0.2 | ) | (2.8 | ) | (1.3 | ) | |||||||
Lower tax rates of overseas subsidiaries | (0.7 | ) | (7.5 | ) | (3.2 | ) | |||||||
Expenses not deductible for tax purposes | 1.8 | 11.2 | 6.6 | ||||||||||
Change in valuation allowance allocated to income tax expenses | 25.1 | 5.4 | 18.7 | ||||||||||
Other | 5.5 | 1.3 | — | ||||||||||
Effective tax rate | (10.4 | )% | 49.5 | % | 62.7 | % | |||||||
Yen (millions) | |||||||||||||
2002 | 2001 | 2000 | |||||||||||
Deferred tax expense (exclusive of the effects of another component listed below) | (225,008 | ) | (73,447 | ) | (82,267 | ) | |||||||
Increase in the balance of valuation allowance for deferred tax assets | 137,762 | 5,453 | 40,837 | ||||||||||
(87,246 | ) | (67,994 | ) | (41,430 | ) | ||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||
2002 | 2001 | |||||||||
Deferred tax assets: | ||||||||||
Inventory valuation | 82,320 | 98,749 | ||||||||
Expenses accrued for financial statement purposes but not currently included in taxable income | 176,020 | 180,465 | ||||||||
Depreciation | 145,490 | 135,719 | ||||||||
Retirement and severance benefits | 217,568 | 149,540 | ||||||||
Tax loss carryforwards | 270,292 | 76,920 | ||||||||
Other | 142,885 | 103,613 | ||||||||
Total gross deferred tax assets | 1,034,575 | 745,006 | ||||||||
Less valuation allowance | 221,968 | 80,807 | ||||||||
Net deferred tax assets | 812,607 | 664,199 | ||||||||
Deferred tax liabilities: | ||||||||||
Purchase accounting step-up of identifiable assets | (4,677 | ) | (3,971 | ) | ||||||
Net unrealized holding gains of available-for-sale securities | (48,850 | ) | (65,968 | ) | ||||||
Other | (29,512 | ) | (25,345 | ) | ||||||
Total gross deferred tax liabilities | (83,039 | ) | (95,284 | ) | ||||||
Net deferred tax assets | 729,568 | 568,915 | ||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||
2002 | 2001 | |||||||||
Other current assets | 267,420 | 309,432 | ||||||||
Other assets | 483,523 | 282,558 | ||||||||
Other liabilities | (21,375 | ) | (23,075 | ) | ||||||
Net deferred tax assets | 729,568 | 568,915 | ||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Number | Weighted average | ||||||||
of shares | exercise price (Yen) | ||||||||
Balance at March 31, 1999 | 113,000 | 2,291 | |||||||
Granted | 116,000 | 2,476 | |||||||
Balance at March 31, 2000 | 229,000 | 2,385 | |||||||
Granted | 109,000 | 2,815 | |||||||
Exercised | (33,000 | ) | 2,291 | ||||||
Forfeited | (10,000 | ) | 2,291 | ||||||
Balance at March 31, 2001 | 295,000 | 2,557 | |||||||
Granted | 128,000 | 2,163 | |||||||
Forfeited | (28,000 | ) | 2,490 | ||||||
Balance at March 31, 2002, | |||||||||
weighted average remaining life – 3.99 years | 395,000 | 2,434 | |||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||||
Pre-tax | Tax | Net-of-tax | ||||||||||||
amount | expense | amount | ||||||||||||
For the year ended March 31, 2002 | ||||||||||||||
Translation adjustments | 98,740 | — | 98,740 | |||||||||||
Unrealized holding gains of available-for-sale securities: | ||||||||||||||
Unrealized holding gains (losses) arising during the period | (133,472 | ) | 53,472 | (80,000 | ) | |||||||||
Less: Reclassification adjustment for losses included in net loss | 85,846 | (33,821 | ) | 52,025 | ||||||||||
Net unrealized gains (losses) | (47,626 | ) | 19,651 | (27,975 | ) | |||||||||
Unrealized holding gains of derivative instruments: | ||||||||||||||
Unrealized holding gains (losses) arising during the period | (28,241 | ) | 11,821 | (16,420 | ) | |||||||||
Less: Reclassification adjustment for losses included in net loss | 28,482 | (11,934 | ) | 16,548 | ||||||||||
Net unrealized gains (losses) | 241 | (113 | ) | 128 | ||||||||||
Minimum pension liability adjustments | (199,175 | ) | 48,813 | (150,362 | ) | |||||||||
Other comprehensive income (loss) | (147,820 | ) | 68,351 | (79,469 | ) | |||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||||
Pre-tax | Tax | Net-of-tax | ||||||||||||
amount | expense | amount | ||||||||||||
For the year ended March 31, 2001 | ||||||||||||||
Translation adjustments | 144,684 | — | 144,684 | |||||||||||
Unrealized holding gains of available-for-sale securities: | ||||||||||||||
Unrealized holding gains (losses) arising during the period | (192,578 | ) | 78,714 | (113,864 | ) | |||||||||
Less: Reclassification adjustment for gains included in net income | (13,706 | ) | 5,743 | (7,963 | ) | |||||||||
Net unrealized gains (losses) | (206,284 | ) | 84,457 | (121,827 | ) | |||||||||
Other comprehensive income (loss) | (61,600 | ) | 84,457 | 22,857 | ||||||||||
For the year ended March 31, 2000 | ||||||||||||||
Translation adjustments | (139,946 | ) | — | (139,946 | ) | |||||||||
Unrealized holding gains of available-for-sale securities: | ||||||||||||||
Unrealized holding gains (losses) arising during the period | 225,671 | (94,556 | ) | 131,115 | ||||||||||
Less: Reclassification adjustment for gains included in net income | (39,712 | ) | 16,639 | (23,073 | ) | |||||||||
Net unrealized gains (losses) | 185,959 | (77,917 | ) | 108,042 | ||||||||||
Other comprehensive income (loss) | 46,013 | (77,917 | ) | (31,904 | ) | |||||||||
The Company adopted SFAS No. 133, as amended, for the fiscal year beginning April 1, 2001. The cumulative effect upon adoption was not significant. After the adoption of SFAS No. 133, as amended, the Company recognizes derivatives in the consolidated balance sheets at their fair value in “Other current assets,” “Other assets,” “Other current liabilities” or “Other liabilities.” On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair-value” hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash-flow” hedge), or a foreign-currency fair-value or cash-flow hedge (“foreign-currency” hedge). The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income (loss), until earnings are affected by the variability in cash flows of the designated hedged item. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign-currency hedges are recorded in either earnings or other comprehensive income (loss), depending on whether the hedge transaction is a fair-value hedge or a cash-flow hedge. Changes in the fair value of derivative instruments that are not designated as part of a hedging relationship are reported in current period earnings.
(p) Impairment of Long-Lived Assets (See Note 8)
The Company adopted SFAS No. 144 for the fiscal year beginning April 1, 2002. The adoption of SFAS No. 144 did not affect the Company’s consolidated financial statements. SFAS No. 144 provides a single accounting model for long-lived assets to be disposed of. SFAS No. 144 also changes the criteria for classifying an asset as held for sale; and broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations.
100
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||||||
2002 | 2001 | 2000 | |||||||||||
Net income (loss) available to common stockholders | (431,007 | ) | 41,500 | 99,709 | |||||||||
Effect of assumed conversions: | |||||||||||||
Convertible bonds, due 2002, interest 1.3% | — | 747 | 747 | ||||||||||
Convertible bonds, due 2004, interest 1.4% | — | 795 | 802 | ||||||||||
Diluted net income (loss) | (431,007 | ) | 43,042 | 101,258 | |||||||||
Number of shares | |||||||||||||
2002 | 2001 | 2000 | |||||||||||
Average common shares outstanding | 2,075,667,943 | 2,079,235,871 | 2,062,295,743 | ||||||||||
Dilutive effect of assumed conversions: | |||||||||||||
Convertible bonds, due 2002, interest 1.3% | — | 60,941,152 | 61,090,690 | ||||||||||
Convertible bonds, due 2004, interest 1.4% | — | 60,376,132 | 60,941,462 | ||||||||||
Stock options | — | 23,848 | 15,403 | ||||||||||
Diluted common shares outstanding | 2,075,667,943 | 2,200,577,003 | 2,184,343,298 | ||||||||||
Yen | |||||||||||||
2002 | 2001 | 2000 | |||||||||||
Net income (loss) per share: | |||||||||||||
Basic | (207.65 | ) | 19.96 | 48.35 | |||||||||
Diluted | (207.65 | ) | 19.56 | 46.36 |
Prior to the adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”
- 112 -
(q) Stock-Based Compensation (See Note 13)
The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans described in Note 13.
As the option price at the date of grant exceeded the fair market value of common stock, no compensation costs have been recognized in connection with the plans. If the accounting provision of SFAS No. 123, “Accounting for Stock-Based Compensation,” had been adopted, the impact on the Company’s net income (loss) for the three years ended March 31, 2003 would not be material.
(r) Product Warranties (See Note 19)
A liability for the estimated product warranty related cost is established at the time revenue is recognized and is included in “Other accrued expenses.” Estimates for accrued warranty cost are primarily based on historical experience and current information on repair costs.
(s) Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.
(t) Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform with the presentation used for the year ended March 31, 2003.
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||
2002 | 2001 | 2000 | ||||||||||
Research and development costs | 565,530 | 543,804 | 525,557 | |||||||||
Advertising costs | 114,760 | 112,139 | 114,587 | |||||||||
Shipping and handling costs | 129,158 | 149,563 | 152,387 |
In June 2002, Financial Accounting Standards Board (FASB) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company’s consolidated financial statements.
- 113 -
In November 2002, FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34.” This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and did not have a material effect on the Company’s consolidated financial statements.
In November 2002, FASB reached consensuses on EITF 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF 00-21 addresses certain aspects of the accounting by a vender for arrangements under which it will perform revenue-generating activities and requires revenue be recognized separately for separate units of accounting. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company is currently in the process of assessing the impact of the adoption of EITF 00-21.
In January 2003, FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. For public enterprises, such as the Company, with a variable interest in a variable interest entity created before February 1, 2003, the Interpretation is applicable no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003. The application of this Interpretation did not have a material effect on the Company’s consolidated financial statements in fiscal 2003 and is not expected to have a material effect in fiscal 2004.
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Restatement of Consolidated Financial Statements
During the year ended March 31, 2003, the Company began consolidating certain previously unconsolidated subsidiaries, primarily overseas subsidiaries of Victor Company of Japan, Ltd., a consolidated subsidiary of the Company, due to the increased materiality of these subsidiaries. The decision to consolidate these subsidiaries was also consistent with the Company’s new domain-based global consolidated management policy implemented through the groupwide business and organizational restructuring in January 2003. As a result of the consolidation of these subsidiaries in the current year, the consolidated financial statements of all prior periods presented have been restated.
As a result of the restatement, net loss for the year ended March 31, 2002 decreased by 3,228 million yen and net income for the year ended March 31, 2001 increased by 3 million yen. Net loss per share for the year ended March 31, 2002 decreased by 1.56 yen. Net income per share for the year ended March 31, 2001 did not change. Stockholders’ equity as of April 1, 2000 decreased by 6,775 million yen. The effect of the restatement on the consolidated balance sheet as of March 31, 2002 is as follows:
103
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | Yen (millions) | |||||||||||||
2002 | 2002 | |||||||||||||
Previously reported | Restated | Previously reported | Restated | |||||||||||
Assets | Liabilities and Stockholders’ Equity | |||||||||||||
Current assets: | Current liabilities: | |||||||||||||
Cash and cash equivalents | 899,769 | 933,132 | Short-term borrowings, including current portion of long-term debt | 489,725 | 535,312 | |||||||||
Time deposits | 521,333 | 526,438 | Commercial paper | 18,339 | 18,339 | |||||||||
Short-term investments | 11,849 | 11,849 | Trade payables: | |||||||||||
Trade receivables: | Related companies | 18,064 | 24,299 | |||||||||||
Related companies | 14,276 | 16,255 | Notes | 26,446 | 26,446 | |||||||||
Notes | 70,522 | 70,522 | Accounts | 501,935 | 517,731 | |||||||||
Accounts | 1,042,437 | 1,095,781 | Total trade payables | 546,445 | 568,476 | |||||||||
Allowance for doubtful receivables | (40,298 | ) | (43,265 | ) | Accrued income taxes | 25,184 | 29,123 | |||||||
Net trade receivables | 1,086,937 | 1,139,293 | Accrued payroll | 147,897 | 151,923 | |||||||||
Inventories | 834,608 | 903,377 | Other accrued expenses | 647,237 | 674,460 | |||||||||
Other current assets | 487,535 | 492,801 | Deposits and advances from customers | 109,263 | 111,197 | |||||||||
Total current assets | 3,842,031 | 4,006,890 | Employees’ deposits | 136,387 | 136,387 | |||||||||
Noncurrent receivables | 316,230 | 316,230 | Other current liabilities | 365,599 | 368,868 | |||||||||
Investments and advances: | Total current liabilities | 2,486,076 | 2,594,085 | |||||||||||
Associated companies | 348,463 | 349,834 | Noncurrent liabilities: | |||||||||||
Other investments and advances | 982,938 | 901,961 | Long-term debt | 691,892 | 708,173 | |||||||||
Total investments and advances | 1,331,401 | 1,251,795 | Retirement and severance benefits | 718,501 | 722,857 | |||||||||
Property, plant and equipment: | Other liabilities | 21,375 | 23,160 | |||||||||||
Land | 221,823 | 231,017 | Total noncurrent liabilities | 1,431,768 | 1,454,190 | |||||||||
Buildings | 1,314,122 | 1,359,246 | Minority interests | 466,231 | 472,322 | |||||||||
Machinery and equipment | 3,148,408 | 3,225,710 | Stockholders’ equity: | |||||||||||
Construction in progress | 66,578 | 67,128 | Common stock | 258,737 | 258,737 | |||||||||
4,750,931 | 4,883,101 | Capital surplus | 682,848 | 682,848 | ||||||||||
Less accumulated depreciation | 3,310,660 | 3,389,393 | Legal reserve | 82,354 | 82,647 | |||||||||
Net property, plant and equipment | 1,440,271 | 1,493,708 | Retained earnings | 2,461,963 | 2,470,356 | |||||||||
Other assets: | Accumulated other comprehensive income (loss): | |||||||||||||
Goodwill | 95,802 | 95,838 | Cumulative translation adjustments | (51,287 | ) | (55,121 | ) | |||||||
Intangible assets | 56,341 | 58,119 | Unrealized holding gains of available-for-sale securities | 50,888 | 50,812 | |||||||||
Other assets | 545,083 | 545,877 | Unrealized gains of derivative Instruments | 128 | 128 | |||||||||
Total other assets | 697,226 | 699,834 | Minimum pension liability adjustments | (150,362 | ) | (150,362 | ) | |||||||
Total accumulated other comprehensive income (loss) | (150,633 | ) | (154,543 | ) | ||||||||||
Treasury stock, at cost | (92,185 | ) | (92,185 | ) | ||||||||||
Total stockholders’ equity | 3,243,084 | 3,247,860 | ||||||||||||
7,627,159 | 7,768,457 | 7,627,159 | 7,768,457 | |||||||||||
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The effect of the restatement on the consolidated statements of operations for the years ended March 31, 2002 and 2001 is as follows:
Yen (millions) | Yen (millions) | |||||||||||||
2002 | 2001 | |||||||||||||
Previously reported | Restated | Previously reported | Restated | |||||||||||
Revenues: | Revenues: | |||||||||||||
Net sales: | Net sales: | |||||||||||||
Related companies | 115,603 | 116,354 | Related companies | 171,756 | 173,110 | |||||||||
Other | 6,761,085 | 6,957,483 | Other | 7,509,805 | 7,607,409 | |||||||||
Total net sales | 6,876,688 | 7,073,837 | Total net sales | 7,681,561 | 7,780,519 | |||||||||
Interest income | 33,556 | 34,361 | Interest income | 43,712 | 45,229 | |||||||||
Dividends received | 9,162 | 8,219 | Dividends received | 12,237 | 6,884 | |||||||||
Other income | 53,774 | 54,146 | Other income | 54,082 | 51,809 | |||||||||
Total revenues | 6,973,180 | 7,170,563 | Total revenues | 7,791,592 | 7,884,441 | |||||||||
Costs and expenses: | Costs and expenses: | |||||||||||||
Cost of sales | 5,134,077 | 5,312,039 | Cost of sales | 5,481,314 | 5,572,438 | |||||||||
Selling, general and administrative expenses | 1,954,418 | 1,960,796 | Selling, general and administrative expenses | 2,011,843 | 2,013,462 | |||||||||
Interest expense | 41,213 | 45,088 | Interest expense | 43,538 | 48,038 | |||||||||
Other deductions | 391,481 | 390,419 | Other deductions | 154,162 | 145,006 | |||||||||
Total costs and expenses | 7,521,189 | 7,708,342 | Total costs and expenses | 7,690,857 | 7,778,944 | |||||||||
Loss before income taxes | (548,009 | ) | (537,779 | ) | Income before income taxes | 100,735 | 105,497 | |||||||
Provision for income taxes: | Provision for income taxes: | |||||||||||||
Current | 30,035 | 33,902 | Current | 117,855 | 127,089 | |||||||||
Deferred | (87,246 | ) | (87,177 | ) | Deferred | (67,994 | ) | (72,120 | ) | |||||
(57,211 | ) | (53,275 | ) | 49,861 | 54,969 | |||||||||
Loss before minority interests and equity in earnings of associated companies | (490,798 | ) | (484,504 | ) | Income before minority interests and equity in earnings of associated companies | 50,874 | 50,528 | |||||||
Minority interests | (59,732 | ) | (56,666 | ) | Minority interests | 22,125 | 21,839 | |||||||
Equity in earnings of associated companies | 59 | 59 | Equity in earnings of associated companies | 12,751 | 12,814 | |||||||||
Net loss | (431,007 | ) | (427,779 | ) | Net income | 41,500 | 41,503 | |||||||
Yen | Yen | |||||||||||||
Net loss per share of common stock: | Net income per share of common stock: | |||||||||||||
Basic | (207.65 | ) | (206.09 | ) | Basic | 19.96 | 19.96 | |||||||
Diluted | (207.65 | ) | (206.09 | ) | Diluted | 19.56 | 19.56 |
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The effect of the restatement on the consolidated statements of cash flows for the years ended March 31, 2002 and 2001 is as follows:
Yen (millions) | ||||||
2002 | ||||||
Previously reported | Restated | |||||
Net cash provided by operating activities | 76,864 | 112,946 | ||||
Net cash used in investing activities | (69,766 | ) | (74,472 | ) | ||
Net cash provided by financing activities | 29,461 | 416 | ||||
Yen (millions) | ||||||
2001 | ||||||
Previously reported | Restated | |||||
Net cash provided by operating activities | 392,452 | 366,780 | ||||
Net cash used in investing activities | (582,588 | ) | (576,024 | ) | ||
Net cash used in financing activities | (112,726 | ) | (107,923 | ) |
(3) Acquisition
On October 1, 2002, Matsushita Electric Industrial Co., Ltd. (MEI) transformed Matsushita Communication Industrial Co., Ltd. (MCI), Kyushu Matsushita Electric Co., Ltd. (KME), Matsushita Seiko Co., Ltd. (MSC), Matsushita Kotobuki Electric Industries, Ltd. (MKEI) and Matsushita Graphic Communication Systems, Inc. (MGCS) into wholly owned subsidiaries, through share exchange transactions. As a result of these transactions, the Company expects to facilitate optimum groupwide allocation of management resources, as well as enhance management speed. Prior to these transactions, MEI owned 56.3%, 51.5%, 57.6%, 57.6% and 67.8% of common stock of MCI, KME, MSC, MKEI and MGCS, respectively. The share exchange ratios were one share of MCI, KME, MSC, MKEI and MGCS for 2.884, 0.576, 0.332, 0.833 and 0.538 shares of MEI, respectively. MEI provided 309,407,251 shares of newly issued common stock and 59,984,408 shares of its treasury stock to the minority shareholders.
These transactions were accounted for using the purchase method of accounting. The fair value of the acquired minority interests was determined based on the weighted average quoted market price of 1,728 yen per share of MEI for a few days before and after January 10, 2002 when the terms of the share exchanges were agreed to and announced.
106
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Effects of the transactions to the consolidated balance sheet at October 1, 2002 are as follows:
Yen (millions) | ||||||||
2002 | 2001 | 2000 | ||||||
a) | Cash paid: | |||||||
Interest | 49,180 | 48,985 | 47,729 | |||||
Income taxes | 62,414 | 146,694 | 178,184 | |||||
b) | Noncash investing and financing activities: | |||||||
Conversion of bonds | 95,486 | 940 | 528 | |||||
Capital transactions by consolidated and associated companies | 2,830 | 969 | 3,004 | |||||
Stock issued under exchange offering | — | 50,107 | — |
Acquisition costs: | |||||
Fair value of shares provided to minority interests | 638,308 | ||||
Direct costs | 424 | ||||
Total acquisition costs | 638,732 | ||||
Book value of acquired minority interests | 336,763 | ||||
Excess costs over the book value of minority interests | 301,969 | ||||
Excess of costs allocated to: | |||||
Current assets | 1,216 | ||||
Property, plant and equipment | 38,343 | ||||
Other assets: | |||||
Goodwill | 314,436 | ||||
Intangible assets | 610 | ||||
Other assets | 8,386 | ||||
Noncurrent liabilities | (61,022 | ) | |||
301,969 | |||||
The amount of goodwill by reportable segment recognized through the above
transactions is as follows:
Yen (millions) | |||||
AVC Networks | 305,780 | ||||
Home Appliances | 7,562 | ||||
Industrial Equipment | 1,094 | ||||
The total amount of goodwill is not deductible for tax purposes.
107
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following unaudited pro forma information shows the results of the Company’s consolidated operations for the years ended March 31, 2003 and 2002 as though the transactions had been completed at the beginning of each fiscal year presented.
Unaudited | ||||||
Yen (millions) | ||||||
2003 | 2002 | |||||
Net loss | (18,995 | ) | (465,479 | ) | ||
Yen | ||||||
2003 | 2002 | |||||
Net loss per share: | ||||||
Basic | (7.85 | ) | (190.38 | ) | ||
Diluted | (7.85 | ) | (190.38 | ) |
(4) Inventories
Inventories at March 31, 2003 and 2002 are summarized as follows:
Yen (millions) | ||||
2003 | 2002 | |||
Finished goods | 426,834 | 470,716 | ||
Work in process | 129,180 | 161,951 | ||
Raw materials | 227,248 | 270,710 | ||
783,262 | 903,377 | |||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Investments in and Advances to, and Transactions with Associated Companies
Certain financial information in respect of associated companies at March 31, 2003 and 2002 and for the three years ended March 31, 2003 is shown below. The most significant of these associated companies is Matsushita Electric Works, Ltd. (MEW). At March 31, 2003, the Company has a 31.8% equity ownership in MEW.
Yen (millions) | ||||
2003 | 2002 | |||
Current assets | 887,752 | 896,409 | ||
Other assets | 1,489,617 | 1,376,803 | ||
2,377,369 | 2,273,212 | |||
Current liabilities | 907,947 | 684,372 | ||
Other liabilities | 628,438 | 657,786 | ||
Net assets | 840,984 | 931,054 | ||
Company’s equity in net assets | 312,682 | 290,753 | ||
Yen (millions) | |||||||
2003 | 2002 | 2001 | |||||
Net sales | 1,969,387 | 1,629,396 | 1,867,086 | ||||
Gross profit | 479,985 | 436,936 | 502,987 | ||||
Net income | (57,088 | ) | 4,495 | 8,720 | |||
Purchases and dividends received from associated companies for the three years ended March 31, 2003 are as follows: | |||||||
Yen (millions) | |||||||
2003 | 2002 | 2001 | |||||
Purchases from | 234,608 | 212,577 | 229,018 | ||||
Dividends received | 7,927 | 5,693 | 5,089 |
Retained earnings include undistributed earnings of associated companies in the amount of 91,355 million yen and 86,031 million yen, as of March 31, 2003 and 2002, respectively.
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Investments in associated companies include equity securities which have quoted market values at March 31, 2003 and 2002 compared with related carrying amounts as follows:
Yen (millions) | ||||
2003 | 2002 | |||
Carrying amount | 255,352 | 274,389 | ||
Market value | 165,918 | 275,174 |
(6) Investments in Available-for-Sale Securities
The Company classifies its existing marketable equity securities other than investments in associated companies and all debt securities as available-for-sale.
The cost, fair value, gross unrealized holding gains, and gross unrealized holding losses of available-for-sale securities included in short-term investments and investments and advances at March 31, 2003 and 2002 are as follows:
Yen (millions) | ||||||||
2003 | ||||||||
Cost | Fair value | Gross unrealized holding gains | Gross unrealized holding losses | |||||
Current: | ||||||||
Convertible and straight bonds | 4 | 4 | — | — | ||||
Other debt securities | 1,192 | 1,192 | — | — | ||||
1,196 | 1,196 | — | — | |||||
Noncurrent: | ||||||||
Equity securities | 242,946 | 254,032 | 37,913 | 26,827 | ||||
Japanese and foreign government bonds | 21,138 | 20,372 | 1 | 767 | ||||
Convertible and straight bonds | 2,525 | 2,542 | 35 | 18 | ||||
Investment trusts | 605 | 557 | — | 48 | ||||
Other debt securities | 10,246 | 10,113 | 1 | 134 | ||||
277,460 | 287,616 | 37,950 | 27,794 | |||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||
2002 | ||||||||
Cost | Fair value | Gross unrealized holding gains | Gross unrealized holding losses | |||||
Current: | ||||||||
Japanese and foreign government bonds | 3,804 | 3,807 | 4 | 1 | ||||
Convertible and straight bonds | 709 | 709 | — | — | ||||
Other debt securities | 7,333 | 7,333 | — | — | ||||
11,846 | 11,849 | 4 | 1 | |||||
Noncurrent: | ||||||||
Equity securities | 290,785 | 413,360 | 125,778 | 3,203 | ||||
Japanese and foreign government bonds | 46,648 | 43,969 | — | 2,679 | ||||
Convertible and straight bonds | 3,537 | 3,576 | 47 | 8 | ||||
Investment trusts | 13,662 | 13,609 | 15 | 68 | ||||
Other debt securities | 41,769 | 42,325 | 556 | — | ||||
396,401 | 516,839 | 126,396 | 5,958 | |||||
Maturities of investments in available-for-sale securities at March 31, 2003 and 2002 are as follows: | ||||||||
Yen (millions) | ||||||||
2003 | 2002 | |||||||
Cost | Fair value | Cost | Fair value | |||||
Due within one year | 1,196 | 1,196 | 11,846 | 11,849 | ||||
Due after one year through five years | 34,514 | 33,584 | 105,616 | 103,479 | ||||
Equity securities | 242,946 | 254,032 | 290,785 | 413,360 | ||||
278,656 | 288,812 | 408,247 | 528,688 | |||||
111
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Proceeds from sale of available-for-sale securities for the years ended March 31, 2003, 2002 and 2001 were 94,864 million yen, 174,396 million yen and 227,793 million yen, respectively. The gross realized gains for the years ended March 31, 2003, 2002 and 2001 were 4,839 million yen, 10,582 million yen and 14,226 million yen, respectively. The gross realized losses on sale of available-for-sale securities for the years ended March 31, 2003, 2002 and 2001 were 4,746 million yen, 4,422 million yen and 2,932 million yen, respectively. The cost of securities sold in computing gross realized gains and losses is determined by the average cost method.
During the years ended March 31, 2003 and 2002, the Company incurred a write-down of 52,611 million yen and 92,297 million yen, respectively, on investment securities, reflecting the aggravated condition of the Japanese stock market. The write-down is included in other deductions of costs and expenses in the consolidated statements of operations.
(7) Leases
The Company and its subsidiaries have capital and operating leases for certain machinery and equipment. At March 31, 2003 and 2002, the gross amount of machinery and equipment was 15,753 million yen and 19,362 million yen, and the related accumulated depreciation recorded under capital leases was 8,239 million yen and 10,971 million yen, respectively.
During the years ended March 31, 2003 and 2002, the Company and its subsidiary sold and leased back certain machinery and equipment for 21,083 million yen and 108,024 million yen, respectively. The lease base term is 4 to 5 years. The resulting leases are being accounted for as operating leases. The resulting gains of these transactions, included in other income, were not significant. The Company has options to purchase the leased assets, or to terminate the leases and guarantee a specified value of the leased assets thereof, subject to certain conditions, during or at the end of the lease term.
Rental expenses for operating leases, including the above-mentioned sale-leaseback transactions were 25,323 million yen and 6,811 million yen for the years ended March 31, 2003 and 2002, respectively. Rental expense for operating leases for the year ended March 31, 2001 was not significant.
112
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Future minimum lease payments under non-cancelable capital leases and operating leases at March 31, 2003 are as follows:
Yen (millions) | ||||
Capital leases | Operating leases | |||
Year ending March 31 | ||||
2004 | 3,706 | 25,588 | ||
2005 | 2,665 | 25,080 | ||
2006 | 1,685 | 28,798 | ||
2007 | 515 | 25,901 | ||
2008 | 174 | 1,985 | ||
Thereafter | 324 | 57 | ||
Total minimum lease payments | 9,069 | 107,409 | ||
Less amount representing interest | 596 | |||
Present value of net minimum lease payments | 8,473 | |||
Less current portion | 3,182 | |||
Long-term capital lease obligations | 5,291 | |||
A subsidiary of the Company leases machinery and equipment. Leases of such assets are principally accounted for as direct financing leases. Investments in non-cancelable financing leases at March 31, 2003 and 2002 are as follows:
Yen (millions) | ||||
2003 | 2002 | |||
Total minimum lease payments to be received | 421,913 | 433,516 | ||
Less amounts representing estimated executory cost | 17,908 | 16,436 | ||
Less unearned income | 37,106 | 28,692 | ||
366,899 | 388,388 | |||
Less allowance for doubtful receivables | 4,536 | 4,112 | ||
Net investment in financing leases | 362,363 | 384,276 | ||
Less current portion | 124,795 | 137,118 | ||
Long-term investment in financing leases | 237,568 | 247,158 | ||
113
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The aggregate annual maturities of the investments in non-cancelable financing leases after March 31, 2003 are as follows:
Yen (millions) | ||
Year ending March 31 | ||
2004 | 137,928 | |
2005 | 118,181 | |
2006 | 83,337 | |
2007 | 50,573 | |
2008 | 22,792 | |
Thereafter | 9,102 | |
Total minimum lease payments to be received | 421,913 | |
(8) Long-Lived Assets
The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from these properties will be sufficient to recover the remaining recorded asset values. As discussed in Note 1 (p), the Company accounts for impairment of long-lived assets in accordance with SFAS No. 144 and SFAS No. 121 (prior to the adoption of SFAS No. 144).
Due to the sale of certain assets and liabilities that consisted of a portion of the entertainment media disc manufacturing business at Panasonic Disc Services Corporation, the Company estimated that the carrying value of the remaining assets is impaired in accordance with SFAS No. 144. As a result, the Company recognized an impairment loss of 2,375 million yen during fiscal 2003 related to write-down of the carrying value of machinery and equipment to manufacture entertainment media discs to their estimated fair values.
The Company recognized an impairment loss of 24,420 million yen during fiscal 2002 related to the write-down of machinery and equipment to manufacture display devices and other components. As the prices of these products significantly decreased due to highly competitive market conditions, the Company projected that the future business of those products would result in operating losses.
Impairment losses recorded in fiscal 2003 and 2002 are included in other deductions of costs and expenses in the consolidated statements of operations.
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by business segment for the year ended March 31, 2003 are as follows:
Yen (millions) | ||||||||||||
AVC Networks | Home Appliances | Industrial Equipment | Components and Devices | Total | ||||||||
Balance at March 31, 2002 | 4,099 | 20,906 | — | 70,833 | 95,838 | |||||||
Goodwill acquired during the year | 307,731 | 8,828 | 1,094 | 1,313 | 318,966 | |||||||
Goodwill transferred to investments in associated companies | — | — | — | (4,177 | ) | (4,177 | ) | |||||
Balance at March 31, 2003 | 311,830 | 29,734 | 1,094 | 67,969 | 410,627 | |||||||
The following table reconciles previously reported net income (loss) and basic and diluted net income (loss) per share as provisions of SFAS No. 142 were in effect for the years ended March 31, 2002 and 2001.
Yen (millions) | |||||
2002 | 2001 | ||||
Reported net income (loss) | (427,779 | ) | 41,503 | ||
Add back: goodwill amortization | 7,190 | 7,399 | |||
Adjusted net income (loss) | (420,589 | ) | 48,902 | ||
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Notes to Consolidated Financial Statements
Yen | |||||
2002 | 2001 | ||||
Basic net income (loss) per share: | |||||
Reported net income (loss) per share | (206.09 | ) | 19.96 | ||
Add back: goodwill amortization | 3.46 | 3.56 | |||
Adjusted basic net income (loss) per share | (202.63 | ) | 23.52 | ||
Diluted net income (loss) per share: | |||||
Reported diluted net income (loss) per share | (206.09 | ) | 19.56 | ||
Add back: goodwill amortization | 3.46 | 3.36 | |||
Adjusted diluted net income (loss) per share | (202.63 | ) | 22.92 | ||
Acquired intangible assets, excluding goodwill, at March 31, 2003 and 2002 are as follows:
Yen (millions) | Average | |||||||||
2003 | 2002 | |||||||||
Gross carrying amount | Accumulated amortization | Gross carrying amount | Accumulated amortization | |||||||
Amortizing intangible assets: | ||||||||||
Patents | 31,827 | 22,757 | 41,661 | 29,984 | 8 years | |||||
Software | 97,243 | 40,233 | 54,755 | 25,632 | 3 years | |||||
Other | 9,822 | 6,402 | 11,175 | 6,338 | 15 years | |||||
138,892 | 69,392 | 107,591 | 61,954 | |||||||
Yen (millions) | ||||
2003 | 2002 | |||
Non-amortizing intangible assets: | ||||
Leasehold | 1,407 | 9,620 | ||
Other | 3,903 | 2,862 | ||
5,310 | 12,482 | |||
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Notes to Consolidated Financial Statements
Aggregate amortization expense for amortizing intangible assets for the year ended March 31, 2003 was 17,499 million yen. Estimated amortization expense for the next five years is: 19,506 million yen in fiscal 2004, 15,305 million yen in fiscal 2005, 10,646 million yen in fiscal 2006, 2,909 million yen in fiscal 2007 and 1,599 million yen in fiscal 2008.
(10) Long-term Debt and Short-term Borrowings
Long-term debt at March 31, 2003 and 2002 is set forth below:
Yen (millions) | ||||
2003 | 2002 | |||
Convertible bonds, due 2004, interest 1.4% | 97,742 | 97,744 | ||
Convertible bonds issued by subsidiaries, due 2002 and 2005, interest 0.35% -1.5% | 28,483 | 45,482 | ||
U.S. dollar unsecured bonds, due 2002, effective interest 5.8% | — | 125,237 | ||
Straight bonds, due 2005, interest 0.42% | 100,120 | 100,000 | ||
Straight bonds, due 2007, interest 0.87% | 100,152 | 100,000 | ||
Straight bonds, due 2011, interest 1.64% | 100,000 | 100,000 | ||
Straight bonds issued by a subsidiary, due 2003 - 2007, interest 1.50% - 2.15% | 52,206 | 59,315 | ||
Unsecured yen loans from banks and insurance companies, principally by financial subsidiaries, due 2002-2007, effective interest 0.5% in 2003 and 0.8% in 2002 | 322,630 | 346,016 | ||
Capital lease obligations | 8,473 | 8,651 | ||
809,806 | 982,445 | |||
Less current portion | 221,604 | 274,272 | ||
588,202 | 708,173 | |||
The aggregate annual maturities of long-term debt after March 31, 2003 are as follows:
Yen (millions) | ||
Year ending March 31 | ||
2004 | 221,604 | |
2005 | 200,491 | |
2006 | 116,199 | |
2007 | 151,767 | |
2008 | 19,022 |
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Notes to Consolidated Financial Statements
As is customary in Japan, short-term and long-term bank loans are made under general agreements which provide that security and guarantees for future and present indebtedness will be given upon request of the bank, and that the bank shall have the right, as the obligations become due, or in the event of their default, to offset cash deposits against such obligations due to the bank.
Each of the loan agreements grants the lender the right to request additional security or mortgages on property, plant and equipment. At March 31, 2003 and 2002, short-term loans subject to such general agreements amounted to 27,062 million yen and 108,386 million yen, respectively. The balance of short-term loans represents borrowings under commercial paper, acceptances and short-term loans of foreign subsidiaries. The weighted average interest rate on short-term borrowings outstanding at March 31, 2003 and 2002 was 4.8% and 4.2%, respectively.
Acceptances payable by foreign subsidiaries, in the amount of 54 million yen and 108 million yen at March 31, 2003 and 2002, respectively, are secured by a portion of the cash, accounts receivable and inventories of such subsidiaries. The amount of assets pledged is not calculable.
The 1.4% convertible bonds maturing in 2004 were redeemable from 2001 at the option of the Company at prices ranging from 102% of principal to 100% of principal, and are currently convertible into approximately 60,336,000 shares of common stock at 1,620 yen per share.
The convertible bonds maturing through 2005 issued by subsidiaries are redeemable at the option of the subsidiaries at prices ranging from 103% of principal to 100% of principal near maturity.
The Company set up a shelf registration in Japan for issuance of straight bonds within two years from December 29, 2001 with the maximum aggregate principal amount of 500,000 million yen. In February 2002, straight bonds in the aggregate principal amount of 300,000 million yen were issued.
(11) Retirement and Severance Benefits
The Company and certain subsidiaries have contributory, funded benefit pension plans covering substantially all employees who meet eligibility requirements. Benefits under the plans are primarily based on the combination of years of service and compensation.
Effective April 1, 2002, the Company and certain of its subsidiaries amended their benefit pension plans by introducing a “point-based benefits system,” under which benefits are calculated based on accumulated points allocated to employees each year according to their job classification and years of service.
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Notes to Consolidated Financial Statements
The contributory, funded benefit pension plans include those under Employees Pension Funds (EPF) as is stipulated by the Welfare Pension Insurance Law (the “Law”). The pension plans under the EPF are composed of the substitutional portion of Japanese Welfare Pension Insurance that the Company and certain of its subsidiaries operate on behalf of the Government and the corporate portion which is the contributory defined benefit pension plan covering substantially all of their employees and provides benefits in addition to the substitutional portion.
In fiscal 2003, following the enactment of changes to the Law, the Company and certain of its subsidiaries obtained approval from Japan’s Ministry of Health, Labour and Welfare for exemption from the future benefit obligation with respect to the substitutional portion. The Company will recognize the relevant gain or loss in accordance with EITF 03-2, “Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities,” when the past benefit obligation is transferred to the Government, which the Company currently expects to occur during the year ending March 31, 2004.
In addition to the plans described above, upon retirement or termination of employment for reasons other than dismissal, employees are entitled to lump-sum payments based on the current rate of pay and length of service. If the termination is involuntary or caused by death, the severance payment is greater than in the case of voluntary termination. The lump-sum payment plans are not funded.
Effective April 1, 2002, the Company and certain of its subsidiaries amended their lump-sum payment plans to cash balance pension plans. Under the cash balance pension plans, each participant has an account which is credited yearly based on the current rate of pay and market-related interest rate.
Net periodic benefit cost for the contributory, funded benefit pension plans, the unfunded lump-sum payment plans, and the cash balance pension plans of the Company for the three years ended March 31, 2003 consisted of the following components:
Yen (millions) | |||||||||
2003 | 2002 | 2001 | |||||||
Service cost—benefits earned during the year | 73,536 | 86,465 | 89,842 | ||||||
Interest cost on projected benefit obligation | 78,909 | 84,846 | 84,665 | ||||||
Expected return on plan assets | (46,496 | ) | (51,458 | ) | (57,414 | ) | |||
Amortization of net transition obligation | 3,298 | 9,974 | 9,974 | ||||||
Amortization of prior service benefit | (6,442 | ) | (3,965 | ) | — | ||||
Recognized actuarial loss | 45,347 | 17,215 | 11,054 | ||||||
Net periodic benefit cost | 148,152 | 143,077 | 138,121 | ||||||
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Notes to Consolidated Financial Statements
Reconciliation of beginning and ending balances of the benefit obligations of the contributory, funded benefit pension plans, the unfunded lump-sum payment plans, and the cash balance pension plans, and the fair value of the plan assets at March 31, 2003 and 2002, and actuarial assumptions used as of March 31, 2003, 2002 and 2001 are as follows:
Yen (millions) | ||||||
2003 | 2002 | |||||
Change in benefit obligations: | ||||||
Benefit obligations at beginning of year | 2,481,297 | 2,239,364 | ||||
Service cost | 73,536 | 86,465 | ||||
Interest cost | 78,909 | 84,846 | ||||
Plan participants’ contributions | 3,442 | 13,676 | ||||
Prior service benefit | (6,570 | ) | (36,802 | ) | ||
Actuarial loss | 213,564 | 290,672 | ||||
Benefits paid | (53,261 | ) | (199,138 | ) | ||
Foreign currency exchange impact | (3,229 | ) | 2,214 | |||
Benefit obligations at end of year | 2,787,688 | 2,481,297 | ||||
Change in plan assets: | ||||||
Fair value of plan assets at beginning of year | 1,310,040 | 1,341,212 | ||||
Actual return on plan assets | (163,296 | ) | (75,284 | ) | ||
Employer contributions | 137,273 | 73,238 | ||||
Plan participants’ contributions | 3,442 | 13,676 | ||||
Benefits paid | (28,089 | ) | (44,535 | ) | ||
Foreign currency exchange impact | (2,448 | ) | 1,733 | |||
Fair value of plan assets at end of year | 1,256,922 | 1,310,040 | ||||
Funded status | (1,530,766 | ) | (1,171,257 | ) | ||
Unrecognized net transition obligation | — | 3,298 | ||||
Unrecognized prior service benefit | (97,136 | ) | (97,008 | ) | ||
Unrecognized actuarial loss | 1,103,917 | 786,287 | ||||
Net amount recognized | (523,985 | ) | (478,680 | ) | ||
Amounts recognized in the consolidated balance sheets consist of: | ||||||
Retirement and severance benefits | (1,375,143 | ) | (722,857 | ) | ||
Accumulated other comprehensive income (loss), gross of tax | 851,158 | 244,177 | ||||
Net amount recognized | (523,985 | ) | (478,680 | ) | ||
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2003 | 2002 | 2001 | |||||||
Weighted average actuarial assumptions: | |||||||||
Discount rate | 2.7 | % | 3.2 | % | 4.0 | % | |||
Expected return on plan assets | 3.5 | % | 4.0 | % | 4.0 | % | |||
Rate of compensation increase | 2.0 | % | 2.6 | % | 2.6 | % |
During the year ended March 31, 2003, the balance of “Retirement and severance benefits” increased, as a result of the recognition of an additional minimum pension liability, due to the decrease of discount rate, negative return on plan assets, and the aforementioned plan amendments. The plan amendments increased accumulated benefit obligations mainly as a result of the introduction of the point-based benefits system thereby ensuring future benefits of a similar level under the old plans to current employees.
(12) Income Taxes
Income (loss) before income taxes and income taxes for the three years ended March 31, 2003 are summarized as follows:
Yen (millions) | |||||||||
Domestic | Foreign | Total | |||||||
For the year ended March 31, 2003 | |||||||||
Income (loss) before income taxes | (46,634 | ) | 115,550 | 68,916 | |||||
Income taxes: | |||||||||
Current | 27,224 | 24,480 | 51,704 | ||||||
Deferred | 18,162 | 1,410 | 19,572 | ||||||
Total income taxes | 45,386 | 25,890 | 71,276 | ||||||
For the year ended March 31, 2002 | |||||||||
Loss before income taxes | (537,387 | ) | (392 | ) | (537,779 | ) | |||
Income taxes: | |||||||||
Current | 12,450 | 21,452 | 33,902 | ||||||
Deferred | (77,619 | ) | (9,558 | ) | (87,177 | ) | |||
Total income taxes | (65,169 | ) | 11,894 | (53,275 | ) | ||||
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Yen (millions) | |||||||||
Domestic | Foreign | Total | |||||||
For the year ended March 31, 2001 | |||||||||
Income before income taxes | 39,164 | 66,333 | 105,497 | ||||||
Income taxes: | |||||||||
Current | 97,813 | 29,276 | 127,089 | ||||||
Deferred | (68,800 | ) | (3,320 | ) | (72,120 | ) | |||
Total income taxes | 29,013 | 25,956 | 54,969 | ||||||
For the year ended March 31, 2003, domestic income taxes—deferred include the impact of 22,317 million yen attributable to adjustments of net deferred tax assets to reflect the reduction in the statutory income tax rate due to revisions to local enterprise income tax law on introduction of a new pro-forma standard taxation system.
The Company and its subsidiaries in Japan are subject to a National tax of 30%, an Inhabitant tax of approximately 20.5%, and a deductible Enterprise tax of approximately 9.9% varying by local jurisdiction, which, in aggregate, resulted in a combined statutory tax rate in Japan of approximately 41.9% for the year ended March 31, 2003, (41.9)% for the year ended March 31, 2002 and 41.9% for the year ended March 31, 2001.
The effective tax rates for the years differ from the combined statutory tax rates for the following reasons:
2003 | 2002 | 2001 | |||||||
Combined statutory tax rate | 41.9 | % | (41.9 | )% | 41.9 | % | |||
Tax credit for increased research expenses | (2.3 | ) | (0.2 | ) | (2.7 | ) | |||
Lower tax rates of overseas subsidiaries | (18.7 | ) | (0.8 | ) | (8.1 | ) | |||
Expenses not deductible for tax purposes | 4.9 | 1.8 | 10.8 | ||||||
Change in valuation allowance allocated to income tax expenses | 46.5 | 25.8 | 8.0 | ||||||
Adjustments of deferred tax assets and liabilities for enacted changes in tax laws and rates | 32.4 | — | — | ||||||
Other | (1.3 | ) | 5.4 | 2.2 | |||||
Effective tax rate | 103.4 | % | (9.9 | )% | 52.1 | % | |||
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Notes to Consolidated Financial Statements
The significant components of deferred income tax expenses for the three years ended March 31, 2003 are as follows:
Yen (millions) | |||||||||
2003 | 2002 | 2001 | |||||||
Deferred tax expense (exclusive of the effects of other components listed below) | 27,608 | (31,402 | ) | (62,054 | ) | ||||
Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and regulations | 22,317 | — | — | ||||||
Benefits of net operating loss carryforwards | (30,353 | ) | (55,775 | ) | (10,066 | ) | |||
19,572 | (87,177 | ) | (72,120 | ) | |||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2003 and 2002 are presented below:
Yen (millions) | ||||||
2003 | 2002 | |||||
Deferred tax assets: | ||||||
Inventory valuation | 81,552 | 82,706 | ||||
Expenses accrued for financial statement purposes but not currently included in taxable income | 201,835 | 176,020 | ||||
Property, plant and equipment | 160,076 | 146,261 | ||||
Retirement and severance benefits | 410,816 | 217,991 | ||||
Tax loss carryforwards | 254,189 | 273,310 | ||||
Other | 139,861 | 142,885 | ||||
Total gross deferred tax assets | 1,248,329 | 1,039,173 | ||||
Less valuation allowance | 241,209 | 225,950 | ||||
Net deferred tax assets | 1,007,120 | 813,223 | ||||
Deferred tax liabilities: | ||||||
Net unrealized holding gains of available-for-sale securities | (3,175 | ) | (48,709 | ) | ||
Other | (35,888 | ) | (36,596 | ) | ||
Total gross deferred tax liabilities | (39,063 | ) | (85,305 | ) | ||
Net deferred tax assets | 968,057 | 727,918 | ||||
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Notes to Consolidated Financial Statements
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at March 31, 2003.
The net change in total valuation allowance for the years ended March 31, 2003 and 2002 was an increase of 15,259 million yen and 142,438 million yen, respectively.
At March 31, 2003, the Company and certain of its subsidiaries had, for income tax purposes, net operating loss carryforwards of approximately 645,268 million yen, substantial majority of which expire by fiscal 2007.
Net deferred tax assets and liabilities at March 31, 2003 and 2002 are reflected in the accompanying consolidated balance sheets under the following captions:
Yen (millions) | ||||||
2003 | 2002 | |||||
Other current assets | 293,653 | 269,947 | ||||
Other assets | 688,384 | 485,080 | ||||
Other current liabilities | (4,518 | ) | (4,831 | ) | ||
Other liabilities | (9,462 | ) | (22,278 | ) | ||
Net deferred tax assets | 968,057 | 727,918 | ||||
The Company has not recognized a deferred tax liability for the undistributed earnings of its foreign subsidiaries and foreign corporate joint ventures because the Company currently does not expect those unremitted earnings to reverse and become taxable to the Company in the foreseeable future. A deferred tax liability will be recognized when the Company no longer plans to permanently reinvest undistributed earnings. Calculation of related unrecognized deferred tax liability is not practicable.
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Notes to Consolidated Financial Statements
(13) Stockholders’ Equity
In accordance with the Japanese Commercial Code, at least 50% of the amount of converted debt must be credited to the common stock account. The Company issued 1,234 shares, 58,941,866 shares and 580,241 shares in connection with the conversion of bonds for the years ended March 31, 2003, 2002 and 2001, respectively.
On October 1, 2002, the Company issued 309,407,251 shares for the share exchange transactions described in Note 3. On April 1, 2000, the Company issued 16,321,187 shares under an exchange offering in connection with the integration of two subsidiaries.
The Company may repurchase its common stock from the market pursuant to a revision in the Japanese Commercial Code. For the year ended March 31, 2003, 93,797,377 shares were repurchased for the aggregate cost of approximately 115,770 million yen, primarily with the intention to hold as treasury stock to improve capital efficiency. For the year ended March 31, 2002, 54,000,000 shares were repurchased for the aggregate cost of approximately 90,598 million yen, primarily with the intention to hold as treasury stock to improve capital efficiency, and to use for the share exchange transactions described in Note 3.
As discussed in Note 3, MEI transformed MCI, KME, MSC, MKEI and MGCS into wholly owned subsidiaries through share exchange transactions on October 1, 2002. MEI provided 309,407,251 shares of newly issued common stock and 59,984,408 shares of its treasury stock to the minority shareholders.
The Japanese Commercial Code, amended effective October 1, 2001, provides that an amount equal to at least 10% of appropriations paid in cash be appropriated as a legal reserve until the aggregated amount of capital surplus and legal reserve equals 25% of stated capital. The capital surplus and legal reserve, up to 25% of stated capital, are not available for dividends but may be used to reduce a deficit or may be transferred to stated capital. The capital surplus and legal reserve, exceeding 25% of stated capital, are available for distribution upon approval of the shareholders’ meeting.
Cash dividends and transfers to the legal reserve charged to retained earnings during the three years ended March 31, 2003 represent dividends paid out during the periods and related appropriation to the legal reserve. The accompanying consolidated financial statements do not include any provision for the semi-annual dividend of 6.25 yen per share, totaling approximately 14,745 million yen, planned to be proposed in June 2003 in respect of the year ended March 31, 2003 or for the related appropriation.
In accordance with the Japanese Commercial Code, there are certain restrictions on payment of dividends in connection with the treasury stock repurchased. As a result of restrictions on the treasury stock repurchased, retained earnings of approximately 107,134 million yen at March 31, 2003 were restricted as to the payment of cash dividends.
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Notes to Consolidated Financial Statements
The Company’s directors and certain senior executives may be granted options to purchase the Company’s common stock. All stock options have a four-year term and become fully exercisable two years from the date of grant. Information with respect to stock options is as follows:
Number of shares | Weighted average exercise price (Yen) | ||||
Balance at March 31, 2000 | 229,000 | 2,385 | |||
Granted | 109,000 | 2,815 | |||
Exercised | (33,000 | ) | 2,291 | ||
Forfeited | (10,000 | ) | 2,291 | ||
Balance at March 31, 2001 | 295,000 | 2,557 | |||
Granted | 128,000 | 2,163 | |||
Forfeited | (28,000 | ) | 2,490 | ||
Balance at March 31, 2002 | 395,000 | 2,434 | |||
Granted | 116,000 | 1,734 | |||
Forfeited | (40,000 | ) | 2,398 | ||
Balance at March 31, 2003, weighted average remaining life – 3.61 years | 471,000 | 2,265 | |||
Treasury stock reserved for options at March 31, 2003 and 2002 was 355,000 shares and 395,000 shares, respectively.
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Notes to Consolidated Financial Statements
(14) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for the three years ended March 31, 2003 are as follows:
Yen (millions) | |||||||||
Pre-tax amount | Tax expense | Net-of-tax amount | |||||||
For the year ended March 31, 2003 | |||||||||
Translation adjustments | (106,003 | ) | — | (106,003 | ) | ||||
Unrealized holding gains of available-for-sale securities: | |||||||||
Unrealized holding gains (losses) arising during the period | (166,295 | ) | 63,963 | (102,332 | ) | ||||
Less: Reclassification adjustment for losses included in net loss | 52,518 | (19,080 | ) | 33,438 | |||||
Net unrealized gains (losses) | (113,777 | ) | 44,883 | (68,894 | ) | ||||
Unrealized holding gains of derivative instruments: | |||||||||
Unrealized holding gains (losses) arising during the period | (7,315 | ) | 3,077 | (4,238 | ) | ||||
Less: Reclassification adjustment for losses included in net loss | 5,198 | (2,178 | ) | 3,020 | |||||
Net unrealized gains (losses) | (2,117 | ) | 899 | (1,218 | ) | ||||
Minimum pension liability adjustments | (605,507 | ) | 230,523 | (374,984 | ) | ||||
Other comprehensive income (loss) | (827,404 | ) | 276,305 | (551,099 | ) | ||||
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Notes to Consolidated Financial Statements
Yen (millions) | |||||||||
Pre-tax amount | Tax expense | Net-of-tax amount | |||||||
For the year ended March 31, 2002 | |||||||||
Translation adjustments | 102,832 | — | 102,832 | ||||||
Unrealized holding gains of available-for-sale securities: | |||||||||
Unrealized holding gains (losses) arising during the period | (133,095 | ) | 53,314 | (79,781 | ) | ||||
Less: Reclassification adjustment for losses included in net loss | 85,337 | (33,608 | ) | 51,729 | |||||
Net unrealized gains (losses) | (47,758 | ) | 19,706 | (28,052 | ) | ||||
Unrealized holding gains of derivative instruments: | |||||||||
Unrealized holding gains (losses) arising during the period | (28,241 | ) | 11,821 | (16,420 | ) | ||||
Less: Reclassification adjustment for losses included in net loss | 28,482 | (11,934 | ) | 16,548 | |||||
Net unrealized gains (losses) | 241 | (113 | ) | 128 | |||||
Minimum pension liability adjustments | (199,175 | ) | 48,813 | (150,362 | ) | ||||
Other comprehensive income (loss) | (143,860 | ) | 68,406 | (75,454 | ) | ||||
For the year ended March 31, 2001 | |||||||||
Translation adjustments | 148,988 | — | 148,988 | ||||||
Unrealized holding gains of available-for-sale securities: | |||||||||
Unrealized holding gains (losses) arising during the period | (194,989 | ) | 79,725 | (115,264 | ) | ||||
Less: Reclassification adjustment for gains included in net income | (11,294 | ) | 4,732 | (6,562 | ) | ||||
Net unrealized gains (losses) | (206,283 | ) | 84,457 | (121,826 | ) | ||||
Other comprehensive income (loss) | (57,295 | ) | 84,457 | 27,162 | |||||
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Notes to Consolidated Financial Statements
(15) Net Income (Loss) per Share
A reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computation for the three years ended March 31, 2003 is as follows:
Yen (millions) | ||||||||
2003 | 2002 | 2001 | ||||||
Net income (loss) available to common stockholders | (19,453 | ) | (427,779 | ) | 41,503 | |||
Effect of assumed conversions: | ||||||||
Convertible bonds, due 2002, interest 1.3% | — | — | 747 | |||||
Convertible bonds, due 2004, interest 1.4% | — | — | 795 | |||||
Diluted net income (loss) | (19,453 | ) | (427,779 | ) | 43,045 | |||
Number of shares | ||||||
2003 | 2002 | 2001 | ||||
Average common shares outstanding | 2,234,968,907 | 2,075,667,943 | 2,079,235,871 | |||
Dilutive effect of assumed conversions: | ||||||
Convertible bonds, due 2002, interest 1.3% | — | — | 60,941,152 | |||
Convertible bonds, due 2004, interest 1.4% | — | — | 60,376,132 | |||
Stock options | — | — | 23,848 | |||
Diluted common shares outstanding | 2,234,968,907 | 2,075,667,943 | 2,200,577,003 | |||
Yen | ||||||||
2003 | 2002 | 2001 | ||||||
Net income (loss) per share: | ||||||||
Basic | (8.70 | ) | (206.09 | ) | 19.96 | |||
Diluted | (8.70 | ) | (206.09 | ) | 19.56 |
The effect of potentially dilutive securities was not included in the calculation of diluted net loss per share for the years ended March 31, 2003 and 2002 as their effect would be antidilutive due to the net loss incurred for the respective year.
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Notes to Consolidated Financial Statements
(16) Supplementary Information to the Statements of Operations and Cash Flows
Research and development costs, advertising costs, shipping and handling costs and depreciation charged to operations for the three years ended March 31, 2003 are as follows:
Yen (millions) | ||||||
2003 | 2002 | 2001 | ||||
Research and development costs | 551,019 | 566,567 | 545,216 | |||
Advertising costs | 130,426 | 116,867 | 113,586 | |||
Shipping and handling costs | 140,498 | 137,681 | 156,395 | |||
Depreciation | 283,434 | 341,549 | 363,452 |
Included in other deductions of costs and expenses for the year ended March 31, 2003 is a loss of 12,476 million yen, associated with the implementation of the early retirement programs in a domestic company, and for the years ended March 31, 2002 and 2001 is a loss of 164,056 million yen and 100,195 million yen, respectively, associated with the implementation of the early retirement programs and the regional-based employee remuneration system in some domestic companies.
Included in other deductions of costs and expenses for the year ended March 31, 2002 is a loss of 61,622 million yen associated with the closure or integration of several manufacturing facilities, of which a total of 6,660 million yen was accrued at March 31, 2002 and paid during fiscal 2003.
Included in other income of revenues for the year ended March 31, 2003 is a gain of 10,805 million yen from the sale of Panasonic Disc Services Corporation.
Foreign exchange gains and losses included in other deductions of costs and expenses for the years ended March 31, 2003, 2002 and 2001 is a loss of 7,962 million yen, 13,209 million yen and 7,537 million yen, respectively.
Shipping and handling costs are included in selling, general and administrative expenses in the consolidated statements of operations.
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income taxes and interest expenses paid and noncash investing and financing activities for the three years ended March 31, 2003 are as follows:
Yen (millions) | ||||||
2003 | 2002 | 2001 | ||||
a) Cash paid: | ||||||
Interest | 32,587 | 53,055 | 53,485 | |||
Income taxes | 46,744 | 65,407 | 156,211 | |||
b) Noncash investing and financing activities: | ||||||
Conversion of bonds | 2 | 95,486 | 940 | |||
Capital transactions by consolidated and associated companies | 650 | 2,830 | 969 | |||
Stock provided under exchange offering | 638,308 | — | 50,107 | |||
Contribution of assets and liabilities to associated companies | 31,740 | — | — |
(17) Derivatives and Hedging Activities
The Company and its subsidiaries operate internationally, giving rise to significant exposure to market risks arising from changes in foreign exchange rates, interest rates and commodity prices. The Company assesses these risks by continually monitoring changes in these exposures and by evaluating hedging opportunities. Derivative financial instruments utilized by the Company and some of its subsidiaries to hedge these risks are comprised principally of foreign exchange contracts, interest rate swaps and commodity derivatives. The Company does not hold or issue derivative financial instruments for any purposes other than hedging.
Gains and losses related to derivative instruments are classified in other income (deductions) in the consolidated statements of operations. The amount of the hedging ineffectiveness and net gain or loss excluded from the assessment of hedge effectiveness is not material for the years ended March 31, 2003 and 2002. Amounts included in accumulated other comprehensive income (loss) at March 31, 2003 are expected to be recognized in earnings principally over the next twelve months. The maximum term over which the Company is hedging exposures to the variability of cash flows for foreign currency exchange risk is approximately five months.
The Company and its subsidiaries are exposed to credit risk in the event of non-performance by counterparties to the derivative contracts, but such risk is considered mitigated by the high credit rating of the counterparties.
131
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The contract amounts of foreign exchange contracts, interest rate swaps and commodity futures at March 31, 2003 and 2002 are as follows:
Yen (millions) | ||||
2003 | 2002 | |||
Forward: | ||||
To sell foreign currencies | 387,605 | 374,993 | ||
To buy foreign currencies | 214,075 | 173,546 | ||
Options purchased to sell foreign currencies | 50,883 | 37,940 | ||
Variable-paying interest rate swaps | 115,000 | — | ||
Commodity futures: | ||||
To sell commodity | 13,341 | 16,658 | ||
To buy commodity | 43,214 | 34,998 |
(18) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents, Time deposits, Trade receivables, Short-term borrowings, Trade payables and Accrued expenses
The carrying amount approximates fair value because of the short maturity of these instruments.
Short-term investments
The fair value of short-term investments is estimated based on quoted market prices.
Noncurrent receivables
The carrying amount which is generally stated at the net realizable value approximates fair value.
Investments and advances
The fair value of investments and advances is estimated based on quoted market prices or the present value of future cash flows using appropriate current discount rates.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using appropriate current discount rates.
Derivative financial instruments
The fair value of derivative financial instruments, all of which are used for hedging purposes, are estimated by obtaining quotes from brokers.
132
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The estimated fair values of financial instruments, all of which are held or issued for purposes other than trading, at March 31, 2003 and 2002 are as follows:
Yen (millions) | ||||||||||||
2003 | 2002 | |||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||
Non-derivatives: | ||||||||||||
Assets: | ||||||||||||
Short-term investments | 1,196 | 1,196 | 11,849 | 11,849 | ||||||||
Investments and advances | 544,544 | 545,194 | 815,047 | 815,061 | ||||||||
Liabilities: | ||||||||||||
Long-term debt, including current portion | (809,806 | ) | (821,381 | ) | (990,548 | ) | (1,006,655 | ) | ||||
Derivatives relating to: | ||||||||||||
Forecasted transactions | 495 | 495 | 3,914 | 3,914 | ||||||||
Trade receivables | (1,211 | ) | (1,211 | ) | (3,117 | ) | (3,117 | ) | ||||
Trade payables | (144 | ) | (144 | ) | 1,053 | 1,053 | ||||||
long-term debt, including current portion | 272 | 272 | 8,103 | 8,103 |
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
(19) Commitments and Contingent Liabilities
The Company provides guarantees to third parties on bank loans provided to its employees, associated companies and customers. The guarantees for the employees are principally made for their housing loans. The guarantees for the associated companies and customers are made to enhance the credit of these companies. For each guarantee provided, the Company would have to perform under the guarantee if the guaranteed party defaults on a payment. The maximum amount of undiscounted payments the Company would have to make in the event of default is 9,169 million yen. The carrying amount of the liabilities recognized for the Company’s obligations as a guarantor under those guarantees at March 31, 2003 was insignificant.
133
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A financial subsidiary of the Company provides guarantees to third parties on certain consumer loans of its customers. For each guarantee provided, the subsidiary would have to perform under the guarantee if the guaranteed party defaults on a payment. The maximum amount of undiscounted payments the subsidiary would have to make in the event of default is 27,917 million yen. The carrying amount of the liabilities recognized for the subsidiary’s obligations as a guarantor under those guarantees at March 31, 2003 was insignificant.
The Company and certain subsidiaries provide guarantees to third parties on certain obligations of their consolidated subsidiaries. At March 31, 2003, these guarantees amounted to 9,849 million yen.
The Company issues contractual product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. The change in accrued warranty costs for the year ended March 31, 2003 is summarized as follows:
2003 | |||||
Balance at beginning of year | 20,202 | ||||
Liabilities accrued for warranties issued during the period | 38,102 | ||||
Warranty claims paid during the period | (33,293 | ) | |||
Changes in liabilities for pre-existing warranties during the period, including expirations | (177 | ) | |||
Balance at end of year | 24,834 | ||||
At March 31, 2003, commitments outstanding for the purchase of property, plant and equipment approximated 10,695 million yen.
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||||||||
2002 | 2001 | |||||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||||
amount | value | amount | value | |||||||||||||||
Non-derivatives: | ||||||||||||||||||
Assets: | ||||||||||||||||||
Short-term investments | 11,849 | 11,849 | 11,421 | 11,421 | ||||||||||||||
Investments and advances | 813,104 | 813,118 | 1,008,170 | 1,009,122 | ||||||||||||||
Liabilities: | ||||||||||||||||||
Long-term debt, including current portion | (965,466 | ) | (981,512 | ) | (809,111 | ) | (903,698 | ) | ||||||||||
Derivatives relating to long-term debt, including current portion | 8,103 | 8,103 | (1,367 | ) | (1,399 | ) |
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||||||||
2002 | 2001 | 2000 | |||||||||||||
Sales: | |||||||||||||||
AVC Networks: | |||||||||||||||
Customers | 4,051,846 | 4,280,021 | 4,081,435 | ||||||||||||
Intersegment | 65 | 119 | 124 | ||||||||||||
Total | 4,051,911 | 4,280,140 | 4,081,559 | ||||||||||||
Home Appliances: | |||||||||||||||
Customers | 1,178,185 | 1,316,254 | 1,305,978 | ||||||||||||
Intersegment | 998 | 13 | 25 | ||||||||||||
Total | 1,179,183 | 1,316,267 | 1,306,003 | ||||||||||||
Industrial Equipment: | |||||||||||||||
Customers | 288,702 | 467,518 | 381,492 | ||||||||||||
Intersegment | 7,065 | 6,995 | 9,595 | ||||||||||||
Total | 295,767 | 474,513 | 391,087 | ||||||||||||
Components and Devices: | |||||||||||||||
Customers | 1,357,955 | 1,617,768 | 1,530,482 | ||||||||||||
Intersegment | 614,832 | 859,973 | 827,805 | ||||||||||||
Total | 1,972,787 | 2,477,741 | 2,358,287 | ||||||||||||
Eliminations | (622,960 | ) | (867,100 | ) | (837,549 | ) | |||||||||
Consolidated total | 6,876,688 | 7,681,561 | 7,299,387 | ||||||||||||
Segment profit (loss): | |||||||||||||||
AVC Networks | (51,687 | ) | 104,158 | 101,155 | |||||||||||
Home Appliances | 38,063 | 54,655 | 42,474 | ||||||||||||
Industrial Equipment | (44,493 | ) | 18,050 | 20,471 | |||||||||||
Components and Devices | (95,938 | ) | 88,685 | 66,110 | |||||||||||
Corporate and eliminations | (57,752 | ) | (77,144 | ) | (71,156 | ) | |||||||||
Total segment profit (loss) | (211,807 | ) | 188,404 | 159,054 | |||||||||||
Interest income | 33,556 | 43,712 | 42,949 | ||||||||||||
Dividends received | 9,162 | 12,237 | 14,674 | ||||||||||||
Other income | 53,774 | 54,082 | 135,746 | ||||||||||||
Interest expense | (41,213 | ) | (43,538 | ) | (46,237 | ) | |||||||||
Other deductions | (391,481 | ) | (154,162 | ) | (87,581 | ) | |||||||||
Consolidated income (loss) before income taxes | (548,009 | ) | 100,735 | 218,605 | |||||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||||
2002 | 2001 | 2000 | ||||||||||||
Identifiable assets: | ||||||||||||||
AVC Networks | 2,513,877 | 2,689,343 | 2,627,626 | |||||||||||
Home Appliances | 1,137,909 | 1,233,308 | 1,226,741 | |||||||||||
Industrial Equipment | 221,195 | 297,396 | 320,861 | |||||||||||
Components and Devices | 1,706,920 | 1,960,950 | 1,790,492 | |||||||||||
Corporate and eliminations | 2,047,258 | 1,975,291 | 1,989,355 | |||||||||||
Consolidated total | 7,627,159 | 8,156,288 | 7,955,075 | |||||||||||
Depreciation (including intangibles other than goodwill): | ||||||||||||||
AVC Networks | 110,669 | 116,696 | 123,484 | |||||||||||
Home Appliances | 30,435 | 28,398 | 31,116 | |||||||||||
Industrial Equipment | 9,187 | 8,356 | 7,426 | |||||||||||
Components and Devices | 174,790 | 189,633 | 177,099 | |||||||||||
Corporate and eliminations | 9,639 | 9,749 | 10,072 | |||||||||||
Consolidated total | 334,720 | 352,832 | 349,197 | |||||||||||
Capital investment (including intangibles other than goodwill): | ||||||||||||||
AVC Networks | 99,064 | 137,354 | 133,747 | |||||||||||
Home Appliances | 22,046 | 30,759 | 22,120 | |||||||||||
Industrial Equipment | 6,438 | 11,489 | 7,866 | |||||||||||
Components and Devices | 191,704 | 337,406 | 179,355 | |||||||||||
Corporate and eliminations | 13,814 | 14,192 | 11,583 | |||||||||||
Consolidated total | 333,066 | 531,200 | 354,671 | |||||||||||
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
NotesLiabilities for environmental remediation costs are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. In January 2003, the Company announced that disposed electric equipment that contained polychlorinated biphenyls (“PCB equipment”) might be buried in the ground of its 4 manufacturing facilities and 1 former manufacturing facility. The applicable laws require that PCB equipment be appropriately maintained and disposed of by July 2016. The Company estimated the total cost of 4,388 million yen for necessary actions such as investigating whether the PCB equipment is buried at the facilities, including excavations, which amount has been accrued since it represents management’s best estimate of the cost, but the payments are not considered to Consolidated Financial Statements
Yen (millions) | ||||||||||||||
2002 | 2001 | 2000 | ||||||||||||
Sales: | ||||||||||||||
Japan | 3,348,353 | 4,033,785 | 3,698,181 | |||||||||||
North and South America | 1,358,689 | 1,379,959 | 1,384,550 | |||||||||||
Europe | 774,820 | 849,205 | 905,620 | |||||||||||
Asia and Others | 1,394,826 | 1,418,612 | 1,311,036 | |||||||||||
Consolidated total | 6,876,688 | 7,681,561 | 7,299,387 | |||||||||||
United States of America included in North and South America | 1,217,241 | 1,245,280 | 1,274,024 | |||||||||||
Long-lived assets: | ||||||||||||||
Japan | 1,147,295 | 1,284,744 | 1,145,057 | |||||||||||
North and South America | 121,784 | 135,767 | 120,933 | |||||||||||
Europe | 61,644 | 62,433 | 57,630 | |||||||||||
Asia and Others | 251,039 | 236,351 | 189,839 | |||||||||||
Consolidated total | 1,581,762 | 1,719,295 | 1,513,459 | |||||||||||
United States of America included in North and South America | 115,971 | 128,815 | 115,431 |
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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | |||||||||||||||
2002 | 2001 | 2000 | |||||||||||||
Sales: | |||||||||||||||
Japan: | |||||||||||||||
Customers | 4,140,314 | 4,981,666 | 4,706,534 | ||||||||||||
Intersegment | 903,876 | 1,204,963 | 1,057,828 | ||||||||||||
Total | 5,044,190 | 6,186,629 | 5,764,362 | ||||||||||||
North and South America: | |||||||||||||||
Customers | 1,177,512 | 1,148,909 | 1,084,157 | ||||||||||||
Intersegment | 36,662 | 30,326 | 30,968 | ||||||||||||
Total | 1,214,174 | 1,179,235 | 1,115,125 | ||||||||||||
Europe: | |||||||||||||||
Customers | 598,390 | 622,938 | 669,595 | ||||||||||||
Intersegment | 14,872 | 30,667 | 25,945 | ||||||||||||
Total | 613,262 | 653,605 | 695,540 | ||||||||||||
Asia and Others: | |||||||||||||||
Customers | 960,472 | 928,048 | 839,101 | ||||||||||||
Intersegment | 636,625 | 580,183 | 461,938 | ||||||||||||
Total | 1,597,097 | 1,508,231 | 1,301,039 | ||||||||||||
Eliminations | (1,592,035 | ) | (1,846,139 | ) | (1,576,679 | ) | |||||||||
Consolidated total | 6,876,688 | 7,681,561 | 7,299,387 | ||||||||||||
Geographical profit (loss): | |||||||||||||||
Japan | (172,197 | ) | 214,521 | 165,721 | |||||||||||
North and South America | (6,923 | ) | 11,569 | 15,334 | |||||||||||
Europe | (18,281 | ) | (5,910 | ) | (2,487 | ) | |||||||||
Asia and Others | 44,957 | 43,632 | 44,334 | ||||||||||||
Corporate and eliminations | (59,363 | ) | (75,408 | ) | (63,848 | ) | |||||||||
Consolidated total | (211,807 | ) | 188,404 | 159,054 | |||||||||||
The Company adopted SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” in the fiscal year beginning April 1, 2001, and accordingly, prior year figures have been restated to reflect this change. These segments reported below are the components of the Company for which separate financial information is available that is evaluated regularly by the chief operating decision maker of the Company in deciding how to allocate resources and in assessing performance. Business segments correspond to categories of activity classified primarily by markets and products. “AVC Networks” includes video and audio equipment and information and communications equipment. “Home Appliances” includes home appliances and household equipment. “Industrial Equipment” includes electronic-parts-mounting machines, industrial robots and industrial equipment. “Components and Devices” includes electronic components, semiconductors, electric motors and batteries.
- 121 -
135
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AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||||||||||
2002 | 2001 | 2000 | ||||||||||||
Identifiable assets: | ||||||||||||||
Japan | 4,135,167 | 4,686,994 | 4,645,975 | |||||||||||
North and South America | 509,153 | 546,560 | 479,095 | |||||||||||
Europe | 329,976 | 344,792 | 400,581 | |||||||||||
Asia and Others | 796,670 | 749,007 | 638,495 | |||||||||||
Corporate and eliminations | 1,856,193 | 1,828,935 | 1,790,929 | |||||||||||
Consolidated total | 7,627,159 | 8,156,288 | 7,955,075 | |||||||||||
By Business Segment:
- 122 -
Yen (millions) | |||||||||
2003 | 2002 | 2001 | |||||||
Sales: | |||||||||
AVC Networks: | |||||||||
Customers | 4,396,064 | 4,236,399 | 4,373,993 | ||||||
Intersegment | 11 | 65 | 119 | ||||||
Total | 4,396,075 | 4,236,464 | 4,374,112 | ||||||
Home Appliances: | |||||||||
Customers | 1,210,238 | 1,178,185 | 1,316,254 | ||||||
Intersegment | 962 | 998 | 13 | ||||||
Total | 1,211,200 | 1,179,183 | 1,316,267 | ||||||
Industrial Equipment: | |||||||||
Customers | 285,232 | 288,702 | 467,518 | ||||||
Intersegment | 4,787 | 7,065 | 6,995 | ||||||
Total | 290,019 | 295,767 | 474,513 | ||||||
Components and Devices: | |||||||||
Customers | 1,510,180 | 1,370,551 | 1,622,754 | ||||||
Intersegment | 742,541 | 630,368 | 877,244 | ||||||
Total | 2,252,721 | 2,000,919 | 2,499,998 | ||||||
Eliminations | (748,301 | ) | (638,496 | ) | (884,371 | ) | |||
Consolidated total | 7,401,714 | 7,073,837 | 7,780,519 | ||||||
Segment profit (loss): | |||||||||
AVC Networks | 105,187 | (37,590 | ) | 110,520 | |||||
Home Appliances | 54,267 | 38,063 | 54,655 | ||||||
Industrial Equipment | 2,298 | (44,493 | ) | 18,050 | |||||
Components and Devices | 37,657 | (95,598 | ) | 89,312 | |||||
Corporate and eliminations | (72,838 | ) | (59,380 | ) | (77,918 | ) | |||
Total segment profit (loss) | 126,571 | (198,998 | ) | 194,619 | |||||
Interest income | 22,267 | 34,361 | 45,229 | ||||||
Dividends received | 4,506 | 8,219 | 6,884 | ||||||
Other income | 64,677 | 54,146 | 51,809 | ||||||
Interest expense | (32,805 | ) | (45,088 | ) | (48,038 | ) | |||
Other deductions | (116,300 | ) | (390,419 | ) | (145,006 | ) | |||
Consolidated income (loss) before income taxes | 68,916 | (537,779 | ) | 105,497 | |||||
136
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions), except per share information | ||||||||||||||||
2002 | ||||||||||||||||
Net | Net income | Net income | ||||||||||||||
Net | income | (loss) per share: | (loss) per share: | |||||||||||||
sales | (loss) | basic (yen) | diluted (yen) | |||||||||||||
Quarter ended | ||||||||||||||||
June 30 | 1,674,784 | (19,373 | ) | (9.32 | ) | (9.32 | ) | |||||||||
September 30 | 1,710,825 | (50,100 | ) | (24.10 | ) | (24.10 | ) | |||||||||
December 31 | 1,737,235 | (172,025 | ) | (82.74 | ) | (82.74 | ) | |||||||||
March 31 | 1,753,844 | (189,509 | ) | (91.76 | ) | (91.76 | ) |
Yen (millions), except per share information | ||||||||||||||||
2001 | ||||||||||||||||
Net | Net income | Net income | ||||||||||||||
Net | income | (loss) per share: | (loss) per share: | |||||||||||||
sales | (loss) | basic (yen) | diluted (yen) | |||||||||||||
Quarter ended | ||||||||||||||||
June 30 | 1,772,375 | 9,399 | 4.52 | 4.45 | ||||||||||||
September 30 | 1,964,666 | 41,973 | 20.19 | 19.25 | ||||||||||||
December 31 | 1,992,628 | 22,782 | 10.96 | 10.53 | ||||||||||||
March 31 | 1,951,892 | (32,654 | ) | (15.70 | ) | (15.70 | ) |
Yen (millions) | ||||||
2003 | 2002 | 2001 | ||||
Identifiable assets: | ||||||
AVC Networks | 2,837,976 | 2,672,270 | 2,843,510 | |||
Home Appliances | 1,104,572 | 1,137,909 | 1,233,308 | |||
Industrial Equipment | 204,811 | 221,195 | 297,396 | |||
Components and Devices | 1,632,813 | 1,714,229 | 1,962,326 | |||
Corporate and eliminations | 2,054,521 | 2,022,854 | 1,958,504 | |||
Consolidated total | 7,834,693 | 7,768,457 | 8,295,044 | |||
Depreciation (including intangibles other than goodwill): | ||||||
AVC Networks | 105,964 | 128,615 | 133,682 | |||
Home Appliances | 28,704 | 30,435 | 28,398 | |||
Industrial Equipment | 8,016 | 9,187 | 8,356 | |||
Components and Devices | 148,294 | 175,776 | 190,831 | |||
Corporate and eliminations | 9,955 | 9,639 | 9,749 | |||
Consolidated total | 300,933 | 353,652 | 371,016 | |||
Capital investment (including intangibles other than goodwill): | ||||||
AVC Networks | 100,751 | 109,477 | 151,408 | |||
Home Appliances | 28,266 | 22,046 | 30,759 | |||
Industrial Equipment | 6,680 | 6,438 | 11,489 | |||
Components and Devices | 130,904 | 192,927 | 338,306 | |||
Corporate and eliminations | 21,213 | 13,814 | 14,192 | |||
Consolidated total | 287,814 | 344,702 | 546,154 | |||
Corporate expenses include certain corporate R&D expenditures and general corporate expenses.
137
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Schedule II
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Intangibles mainly represent patents and software.
By Geographical Area:
Sales attributed to countries based upon the customer’s location and long-lived assets are as follows:
Yen (millions) | ||||||
2003 | 2002 | 2001 | ||||
Sales: | ||||||
Japan | 3,453,836 | 3,313,912 | 3,998,466 | |||
North and South America | 1,420,802 | 1,495,258 | 1,467,411 | |||
Europe | 999,637 | 839,248 | 873,935 | |||
Asia and Others | 1,527,439 | 1,425,419 | 1,440,707 | |||
Consolidated total | 7,401,714 | 7,073,837 | 7,780,519 | |||
United States of America included in North and South America | 1,282,861 | 1,353,502 | 1,332,732 | |||
Long-lived assets: | ||||||
Japan | 1,412,415 | 1,171,115 | 1,303,812 | |||
North and South America | 80,104 | 137,981 | 152,309 | |||
Europe | 68,216 | 68,155 | 68,634 | |||
Asia and Others | 223,597 | 270,414 | 255,066 | |||
Consolidated total | 1,784,332 | 1,647,665 | 1,779,821 | |||
United States of America included in North and South America | 71,554 | 129,439 | 142,643 |
There are no individually material countries of which sales and long-lived assets should be separately disclosed in North and South America, Europe and Asia and Others, except for the United States of America.
Transfers between business segments or geographic segments are made at arms-length prices. There are no sales to a single external major customer for the three years ended March 31, 2003.
138
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following information shows sales, geographical profit (loss) and identifiable assets which are attributed to geographic areas based on the country location of the Company or its subsidiaries for the three years ended March 31, 2003. In addition to the disclosure requirements under SFAS No. 131, the Company discloses this information as supplemental information in light of the disclosure requirements of the Japanese Securities and Exchange Law, which a Japanese public company is subject to:
Yen (millions) | |||||||||
2003 | 2002 | 2001 | |||||||
Sales: | |||||||||
Japan: | |||||||||
Customers | 4,032,432 | 3,866,575 | 4,687,026 | ||||||
Intersegment | 1,107,962 | 1,150,530 | 1,468,436 | ||||||
Total | 5,140,394 | 5,017,105 | 6,155,462 | ||||||
North and South America: | |||||||||
Customers | 1,364,283 | 1,408,838 | 1,363,286 | ||||||
Intersegment | 26,116 | 36,910 | 30,508 | ||||||
Total | 1,390,399 | 1,445,748 | 1,393,794 | ||||||
Europe: | |||||||||
Customers | 922,312 | 770,886 | 754,247 | ||||||
Intersegment | 16,938 | 15,907 | 31,540 | ||||||
Total | 939,250 | 786,793 | 785,787 | ||||||
Asia and Others: | |||||||||
Customers | 1,082,687 | 1,027,538 | 975,960 | ||||||
Intersegment | 754,725 | 802,986 | 750,415 | ||||||
Total | 1,837,412 | 1,830,524 | 1,726,375 | ||||||
Eliminations | (1,905,741 | ) | (2,006,333 | ) | (2,280,899 | ) | |||
Consolidated total | 7,401,714 | 7,073,837 | 7,780,519 | ||||||
Geographical profit (loss): | |||||||||
Japan | 88,152 | (166,134 | ) | 216,613 | |||||
North and South America | 22,449 | (4,092 | ) | 14,664 | |||||
Europe | 21,741 | (14,600 | ) | (4,070 | ) | ||||
Asia and Others | 71,016 | 48,530 | 44,896 | ||||||
Corporate and eliminations | (76,787 | ) | (62,702 | ) | (77,484 | ) | |||
Consolidated total | 126,571 | (198,998 | ) | 194,619 | |||||
139
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions) | ||||||
2003 | 2002 | 2001 | ||||
Identifiable assets: | ||||||
Japan | 4,445,983 | 4,170,989 | 4,715,868 | |||
North and South America | 526,918 | 602,427 | 645,664 | |||
Europe | 335,813 | 402,238 | 412,135 | |||
Asia and Others | 831,289 | 872,628 | 824,661 | |||
Corporate and eliminations | 1,694,690 | 1,720,175 | 1,696,716 | |||
Consolidated total | 7,834,693 | 7,768,457 | 8,295,044 | |||
(21) Quarterly Financial Data (Unaudited)
Quarterly net sales, net income (loss) and net income (loss) per share for the two years ended March 31, 2003 and 2002 are set forth in the following table. As described in Note 2, the Company began consolidating certain previously unconsolidated subsidiaries during the year ended March 31, 2003 and has restated prior year amounts as shown in the following table:
Yen (millions), except per share information | |||||||||||
2003 | |||||||||||
Net sales | Net income (loss) | Net income (loss) per share: basic (yen) | Net income (loss) per share: diluted (yen) | ||||||||
Quarter ended | |||||||||||
June 30 | 1,793,387 | 3,467 | 1.67 | 1.67 | |||||||
September 30 | 1,827,582 | 14,132 | 6.80 | 6.70 | |||||||
December 31 | 1,935,015 | 22,359 | 9.26 | 9.12 | |||||||
March 31 | 1,845,730 | (59,411 | ) | (25.07 | ) | (25.07 | ) |
140
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Yen (millions), except per share information | |||||||||||
2002 | |||||||||||
Net sales (Restated) | Net income (loss) (Restated) | Net income (loss) per share: basic (yen) (Restated) | Net income (loss) per share: diluted (yen) (Restated) | ||||||||
Quarter ended | |||||||||||
June 30 | 1,717,732 | (19,760 | ) | (9.50 | ) | (9.50 | ) | ||||
September 30 | 1,748,067 | (48,726 | ) | (23.44 | ) | (23.44 | ) | ||||
December 31 | 1,810,013 | (170,099 | ) | (81.81 | ) | (81.81 | ) | ||||
March 31 | 1,798,025 | (189,194 | ) | (91.61 | ) | (91.61 | ) |
Yen (millions), except per share information | |||||||||||
2002 | |||||||||||
Net sales (Previously | Net income (Previously | Net income (Previously | Net income (Previously | ||||||||
Quarter ended | |||||||||||
June 30 | 1,674,784 | (19,373 | ) | (9.32 | ) | (9.32 | ) | ||||
September 30 | 1,710,825 | (50,100 | ) | (24.10 | ) | (24.10 | ) | ||||
December 31 | 1,737,235 | (172,025 | ) | (82.74 | ) | (82.74 | ) | ||||
March 31 | 1,753,844 | (189,509 | ) | (91.76 | ) | (91.76 | ) |
141
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(In millions of yen)
Years ended March 31, 2003, 2002 2001 and 20002001
Deduct | |||||||||||||||||||||||||
Balance | |||||||||||||||||||||||||
at | Add | Bad | Add (deduct) | ||||||||||||||||||||||
beginning | -charged | debts | -cumulative | Balance | |||||||||||||||||||||
of | to | written | translation | at end of | |||||||||||||||||||||
period | income | off | Reversal | adjustments | period | ||||||||||||||||||||
Allowance for doubtful trade receivables: | |||||||||||||||||||||||||
2002 | 42,530 | 4,249 | 3,729 | 4,013 | 1,261 | 40,298 | |||||||||||||||||||
2001 | 42,098 | 13,289 | 12,460 | 1,929 | 1,532 | 42,530 | |||||||||||||||||||
2000 | 63,649 | 10,252 | 28,670 | 1,473 | (1,660 | ) | 42,098 | ||||||||||||||||||
Allowance for doubtful noncurrent receivables: | |||||||||||||||||||||||||
2002 | 98 | 1,514 | 1,562 | — | — | 50 | |||||||||||||||||||
2001 | 144 | 3,160 | 3,206 | — | — | 98 | |||||||||||||||||||
2000 | 304 | 1,728 | 1,888 | — | — | 144 |
Deduct | |||||||||||||
Balance period | Add- charged | Bad debts written off | Reversal | Add (deduct)- cumulative | Balance at end of period | ||||||||
Allowance for doubtful trade receivables: | |||||||||||||
2003 | 43,265 | 17,621 | 2,919 | 3,011 | (1,913 | ) | 53,043 | ||||||
2002 | 45,239 | 4,507 | 3,729 | 4,013 | 1,261 | 43,265 | |||||||
2001 | 44,091 | 14,005 | 12,460 | 1,929 | 1,532 | 45,239 | |||||||
Allowance for doubtful noncurrent receivables: | |||||||||||||
2003 | 50 | — | — | 50 | — | — | |||||||
2002 | 98 | 1,514 | 1,562 | — | — | 50 | |||||||
2001 | 144 | 3,160 | 3,206 | — | — | 98 |
142
- 124 -
Item 18. Financial Statements
Not applicable
Documents filed as exhibits to this annual report are as follows:
1.1 | Articles of Incorporation of the Registrant (English translation) | |
1.2 | Share Handling Regulations of the Registrant (English translation) | |
1.3 | Regulations of the Board of Directors of the Registrant (English translation) | |
1.4 | Regulations of the Board of Corporate Auditors of the Registrant (English translation) |
1.5 | |
Liability Limitation Agreement (English translation) [Matsushita and each of Josei Ito and Toshio Morikawa, entered into a Liability Limitation Agreement, each dated June 27, 2003, in the form of this Exhibit.] |
2.1 | Specimen common stock certificates of the Registrant (English translation) | |
2.2 | Form of Amended and Restated Deposit Agreement among the Registrant, Morgan Guaranty Trust Company of New York (now JP Morgan Chase Bank) as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt [incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000] | |
8.1 | Subsidiaries of the Registrant [List of significant subsidiaries (see Section C of Item 4)] |
12.1 | Certification of the principal executive officer of the Company required by Rule 13a-14(a) |
12.2 | Certification of the principal financial officer of the Company required by Rule 13a-14(a) |
13.1 | Certification required by Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code |
The Company has not included as exhibits certain instruments with respect to its long-term debt, the amount of debt authorized under each of which does not exceed 10% of its total assets, and it agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.
143
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. | ||||||
(Registrant) | ||||||
Date: | By | /s/ | ||||
Yukitoshi Onda | ||||||
President of | ||||||
Panasonic Finance (America), Inc. | ||||||
1 Rockefeller Plaza, Suite 1001, | ||||||
New York, N.Y. 10020-2002 |
Index to Exhibits
Documents filed as exhibits to this annual report are as follows:
1.1 | Articles of Incorporation of the Registrant (English translation) |
1.2 | Share Handling Regulations of the Registrant (English translation) |
1.3 | Regulations of the Board of Directors of the Registrant (English translation) |
1.4 | Regulations of the Board of Corporate Auditors of the Registrant (English translation) |
1.5 | Liability Limitation Agreement (English translation) [Matsushita and each of Josei Ito and Toshio Morikawa, entered into a Liability Limitation Agreement, each dated June 27, 2003, in the form of this Exhibit.] |
2.1 | Specimen common stock certificates of the Registrant (English translation) |
2.2 | Form of Amended and Restated Deposit Agreement among the Registrant, Morgan Guaranty Trust Company of New York (now JP Morgan Chase Bank) as Depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt [incorporated by reference to the Registration Statement on Form F-6 (File No. 333-12694) filed on October 4, 2000] |
8.1 | Subsidiaries of the Registrant [List of significant subsidiaries (see Section C of Item 4)] |
12.1 | Certification of the principal executive officer of the Company required by Rule 13a-14(a) |
12.2 | Certification of the principal financial officer of the Company required by Rule 13a-14(a) |
13.1 | Certification required by Rule 13a-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code |