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4 To Our Stakeholders
22 Business at a Glance
24 32 38 43 45 45
AVC Home Components MEW and JVC Other
Networks Appliances and Devices PanaHome
Millions of
U.S. dollars,
Millions of yen, Percentage of except per share
except per share information previous year information
2007 2006 2005 2007/2006 2007
Income before income taxes ................ ¥ 439,144 ¥ 371,312 ¥ 246,913 118.3% 3,722
Total assets (at year-end) ..................... ¥7,896,958 ¥7,964,640 ¥8,056,881 99.2% $66,923
Notes:
1. See Note 1 (n) to the consolidated financial statements with respect to the calculation of net income per share amounts.
2. Cash dividends per share reflect those paid during each fiscal year.
3. The figures for capital investment are for purchases of property, plant and equipment on an accrual basis, which reflects the effects of timing differences
between acquisition dates and payment dates.
4. U.S. dollar amounts are translated from yen at the rate of ¥118=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2007.
5. Matsushita’s consolidated financial statements as of March 31, 2007 comprise the accounts of 653 consolidated companies, with 71 companies reflected by
the equity method.
200 2.0
8,000 400 4.0
160 1.6
80 0.8
4,000 200 2.0
40 0.4
0 0 0 –40 –0.4
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Income before Income Taxes Net Income (Loss)
Income before Income Taxes/Sales Ratio Net Income (Loss)/Sales Ratio
400
200
0 0 100
–1,000 –2.0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Stockholders’ Equity
ROE
The fiscal year, ended March 31, 2007 (fiscal 2007), was a key year that brought our three-year
management plan Leap Ahead 21, launched in fiscal 2005, to a close. Amid a challenging operating
environment characterized by surging raw materials prices and intensifying global competition, we
worked to reinforce our manufacturing capabilities in plasma TVs and other product categories. And we
actively invested in growth fields to cultivate new businesses that will drive future earnings. In parallel, we
focused on strengthening the Company’s operations by raising management efficiency in a range of
areas and by pursuing further cost reductions. As a result of these efforts, we achieved our Leap Ahead
21 goals for fiscal 2007—operating profit*1 to sales ratio of 5% or more and a positive Capital Cost
Management (CCM*2) index on a consolidated basis.
Fiscal 2008 is the first year of our new three-year management plan, GP3*3. The plan incorporates a
host of measures to accelerate the Company’s growth. In terms of V-products, which are the core of
our growth strategies, we are targeting sales of approximately ¥2 trillion across a total of 73 product
categories. In overseas businesses, we aim to grow sales in emerging markets as well as the U.S. and
Europe. We are already building a framework to increase sales in Russia, Brazil and India, and our strategy
is to put greater emphasis on cutting-edge products in these markets. Another goal of the GP3 plan is to
use Groupwide innovation activities to transform Matsushita into a manufacturing-oriented company—
one that combines all the business activities of the Group toward the launch of products, thereby con-
tributing to the creation of customer value. To achieve this, we will extend our most successful initiatives
to every corner of the Company to generate even greater benefits. At the same time, we will promote
wider collaboration across business fields and operating regions in order to reinforce product design
and quality, procurement, logistics, overseas sales and other areas of our operations.
Supported by these initiatives, we will launch Matsushita into a new phase of growth, aiming to
achieve sales of ¥10 trillion and ROE of 10% in fiscal 2010 by achieving steady growth with profitability.
We will also continue our ongoing initiatives to achieve global excellence.
In addition, Matsushita will take further steps to realize shareholder-oriented management in the
years ahead. Through the GP3 plan, we will increase corporate value, and at the same time, actively
return profits generated by the plan’s initiatives to all shareholders.
We will also continue to take all possible measures to ensure the quality and safety of our products.
Matsushita is committed to the idea that safety and quality, as the cornerstones of a manufacturing-
oriented company, must begin from the product design stage. We will thus strengthen ongoing efforts in
areas such as the analysis of product age-related degradation and user environments.
June 2007
Question 1 ..........................
Fiscal 2007 was the final year of the mid-term manage-
ment plan Leap Ahead 21. What did Matsushita achieve
with this plan and what issues remain?
Answer..................................... During the term of the Leap Ahead 21 plan, we applied the finishing touches to
Matsushita’s business reorganization and restructuring. As a result, we achieved
our fiscal 2007 goals of an operating profit to sales ratio of 5% or more and a
positive Capital Cost Management (CCM) index on a consolidated basis.
In addition to these results, there were three major achievements of the Leap
Ahead 21 plan. First, we are now a leaner, more agile company. During the course
of the mid-term plan, we reduced total assets, used the Next Cell Production
System to cut factory inventories, and took advantage of IT innovations to reduce
product development and manufacturing lead times. We also implemented the
Cost Busters Project, a wide-ranging cost review that reduced Companywide
costs by more than ¥220 billion over the three years of the plan. The result of
these accomplishments is a more robust operating structure.
Question 2 .......................
Matsushita aims to achieve global excellence.
What does this mean in concrete terms?
Answer..................................... Matsushita aims to earn the support of all its stakeholders worldwide by sustain-
ing growth through continued innovation and ensuring sound business activities
on a global basis. This is what global excellence means at Matsushita. We have
set several specific targets to realize this vision: achieve at least ¥10 trillion in net
sales, with 60% or more of this figure generated overseas, an operating profit to
sales ratio of 10% or more, and return on equity (ROE), which enables a clear
comparison with companies worldwide, of at least 10%. We are also aiming to
ensure at least 30% of our products capture the top market share worldwide, as
well as gain a leading global reputation in terms of corporate social responsibility
(CSR) and a trusted brand.
Answer..................................... Through the GP3 plan, Matsushita will strengthen measures to accelerate growth.
The plan’s name is made up of three elements: Global Progress, evolving through
global sales expansion; Global Profit, enhancing profitability worldwide; and Global
Panasonic, building a globally trusted brand. These will be our overarching goals
during the course of the plan. We do not plan to achieve our objectives through
particularly ingenious means, rather we aim to generate steady growth with profit-
ability to put us in a position to challenge for global excellence by fiscal 2010. We
have set final-year targets for the plan of ¥10 trillion in sales and ROE of 10%.
The GP3 plan has three priority themes—double-digit growth in overseas
sales; four strategic businesses; and continuous selection and concentration.
First, we will aim for growth averaging at least 10% annually in overseas sales of
consumer products. In particular, we will reinforce initiatives in emerging markets.
Second, with regard to four strategic businesses, we will focus on our digital AV
business, automotive electronics business, businesses providing comfortable
living, and semiconductors and other devices businesses. Through collaboration
and vertical integration between these businesses, we will strive to maximize
Groupwide synergies, while making every effort to drive steady growth in each
business. Finally, under the third theme, we will concentrate management re-
sources on competitive and profitable business areas. Over the three years of the
plan, we intend to make capital investments of ¥1.5 trillion in projects such as a
fifth plasma display panel (PDP) plant in Japan. We have also earmarked ¥1.8
trillion for R&D investments, which will be focused on prioritized R&D themes and
the development of key devices such as semiconductors.
Moreover, in order to accelerate Groupwide innovation activities aimed at trans-
forming Matsushita into a manufacturing-oriented company, we established a
Corporate Division for Promoting “Manufacturing-oriented” Innovation on April 1,
2007, headed by myself. Matsushita defines a manufacturing-oriented company as
one that combines all the business activities of the Group toward the launch of prod-
ucts, thereby contributing to the creation of customer value. For example, in terms of
cost-cutting, a perennial theme for manufacturers, we have achieved varying levels of
success throughout the Group depending on the initiatives implemented at each
operating site. Going forward, by unifying these initiatives more effectively and draw-
ing on best practice, we expect to achieve substantial overall cost reductions. In order
to realize our growth strategies, it is essential that we implement qualitative manage-
ment reforms in pursuit of this vision of becoming a manufacturing-oriented company.
Question 4 .......................
ROE of 10% for fiscal 2010. Why have you adopted
ROE instead of the operating profit to sales ratio used
in the past?
Answer..................................... During the Leap Ahead 21 plan, we put priority on the operating profit to sales
ratio as an indicator that shows how profitable a company is, excluding the
impact of business restructuring costs. Now, as we move into a new growth
phase with the GP3 plan, we have decided to use sales to measure growth, and
ROE to measure capital efficiency. ROE is an international performance bench-
mark used widely in capital markets. Under the GP3 plan, we aim to improve net
income, which is the final word in measuring performance, and further enhance
shareholder-oriented management.
Question 5 .......................
intense. How then does Matsushita intend to grow its
business? Also, what is your outlook for prices and how
do you plan to raise profitability?
Answer..................................... In fiscal 2007, global demand for 37-inch or larger flat-panel TVs totaled approxi-
mately 20 million units. In fiscal 2010, this figure is expected to reach around 50
million units, split equally between plasma display and LCD models. Based on this
forecast, we are aiming to capture a 25% share of the global market for 37-inch
or larger flat-panel TVs in fiscal 2010. Matsushita plans to offer both plasma and
LCD models by using their respective advantages. However, in larger screen
models, we believe plasma TVs have the competitive edge in terms of cost and
other factors.
Matsushita is already one of the world’s biggest producers of PDPs. But we
plan to add to existing capacity with the construction of our fifth PDP plant in
Japan through total investment of ¥280 billion. We will begin construction in
November 2007 with mass production scheduled to start in May 2009. When
operating at full capacity, the plant will have a monthly output of 1 million units
based on 42-inch panels. Efficiency will also be improved with a manufacturing
process that yields more than ten 42-inch panels from a single sheet of glass,
the world’s highest yield.
In 42-inch flat-panel TVs, where competition with LCD TVs is the most
intense, prices in fiscal 2007 fell by around 30%. Although the pace of decline
* Full HD: 2.07 million pixels (1,920 horizontal x 1,080 vertical pixels)
Question 6 .......................
Overseas sales growth is a priority theme in the GP3
plan. What are the main points of your overseas
growth strategy?
Answer..................................... The U.S. and Europe will remain significant overseas markets for Matsushita.
However, we also plan to focus on emerging markets like BRICs*, where further
expansion is forecast. I have toured the BRICs countries and other similar markets.
What struck me in particular was the rapid rise in the number of wealthier con-
sumers, who I believe offer the potential for explosive growth in demand at any
time. Not only that, many of these consumers want the latest products, so we
need to implement marketing strategies that target this demand by actively
launching cutting-edge products. In this context, we established a Russia Division,
India Coordination Department and Brazil Coordination Department in April 2007 to
boost sales in these markets. Instead of waiting for demand to materialize, we
plan to steal a march on our rivals by taking active steps to generate demand
with new products in new markets. We believe that this approach will ultimately
boost sales.
Question 7 .......................
finished product divisions is one of Matsushita’s strengths.
What measures are you planning to implement in your
components and devices divisions in this regard?
Question 8 .......................
Matsushita currently has net cash reserves of more than
¥1.4 trillion. How do you plan to use these funds and
what is your policy on returning profits to shareholders?
Answer..................................... Holding net cash allows us to make rapid decisions in response to changes in the
operating environment. While maintaining a certain level of funds, we plan to use
this cash as effectively as possible. In particular, in order to sustain Matsushita’s
continued development, it is essential that we actively invest in R&D and facilities.
We must also look at investments that will generate greater returns than in the
past. We intend to invest in strengthening core businesses such as PDPs and
semiconductors, and in acquiring intellectual property and other assets to support
our operations.
Question 9 .......................
Corporate social responsibility (CSR) is increasingly
important. What is your basic approach to CSR?
Global
Generate Steady Growth With Profitability
With Leap Ahead 21, Global running until fiscal 2010, the
a
Matsushita’s previous mid-term
Global Profit Company will strive to generate
management plan completed steady growth with profitability
Progress
in fiscal 2007, the Company to put Matsushita in a position
put in place the foundations to
support sustained growth. GP3 Plan to challenge for global excel-
lence. In this feature section,
Now, through the GP3 Plan, we highlight the plan’s core
initiated on April 1, 2007 and mid-term growth strategies.
a
Global
Panasonic
Global Excellence
Marketing tailored to regional characteristics to grow its digital AV products business, which includes flat-
In North America and Europe, markets where there is strong panel TVs and digital cameras, by targeting the growing
interest in the latest technologies and products, Matsushita number of wealthier consumers.
aims to raise sales by ¥310 billion during the 3 years of the In the BRICs countries, Vietnam and other emerging
plan. Matsushita will strengthen ties with leading volume markets, which Matsushita has positioned as strategic
retailers to boost sales, mainly of flat-panel TVs and other markets to boost overseas sales, the Company is targeting an
digital AV products. Specifically, the Company will expand and increase in sales of consumer products of ¥200 billion over 3
strengthen XCS* activities in North America and reinforce its years by actively developing its business.
sales framework in Eastern Europe.
In growth markets like China and other parts of Asia, the
* Extreme Customer Satisfaction: high-quality services designed to
world’s most populous region, the Company plans to increase
make Matsushita products stand out in the marketplace. For ex-
sales by ¥340 billion during the plan. Concrete steps will ample, operators at our plasma TV call center in Virginia, U.S. (photo)
include continuing to actively target key markets for washing not only provide after-sales services, but also offer advice and re-
spond to queries from potential customers.
machines, refrigerators and other white goods, and beauty
and health-related home appliances. The Company also aims
China
• Overhaul sales framework and
strengthen product lineup
• Develop V-products that
reflect feedback from Chinese
consumers
The roadshow has already toured the U.S. and France, and
we plan to take it to the world’s main urban centers, including
around 80 cities in fiscal 2008. This will allow Matsushita to
highlight the advanced capabilities of its digital AV products Reinforce business infrastructure
and reinforce its brands.
Additionally, with an eye on a potential surge in demand in
the BRICs countries, Vietnam and other emerging markets, the
Company plans to aggressively lead the development of new
markets to strengthen its brands in the years ahead.
Digital AV Networks
Collaboration between Digital AV business Collaboration between
products and solutions Focus on five strategic products, products and solutions
including flat-panel TVs, to drive growth
Increasing sales of
More distinct products components and devices
with black box devices Black Box Devices Improving quality of
automotive electronics
Semiconductors/components
and devices business
Increase the sales ratio of
globally leading devices
Matsushita has selected five strategic product categories in its global market in fiscal 2010 to establish Matsushita as a major
digital AV business: plasma TVs, LCD TVs, digital cameras, camera manufacturer. To achieve this, the Company will ex-
Blu-ray (BD) recorders and drives, and HD camcorders. pand its product lineups, including SLR cameras, and leverage
Demand for flat-panel TVs is expanding worldwide. The its black box technologies to reinforce its key components and
Company plans to tap into this demand by highlighting the devices manufactured in-house.
strengths of its plasma TVs—superior moving image response Matsushita’s HD camcorders are compact, lightweight and
and picture contrast—while working to significantly improve sturdy, and also offer excellent picture quality, while its BD re-
power consumption and other areas of performance. By corders and drives incorporate advanced technologies and are
enhancing cost competitiveness and image resolution, cost-competitive. Using these strengths, the Company plans to
Matsushita will offer a wider range of full HD products. Our capture global market shares for these products in fiscal 2010
goal is to capture 25% of the global market for 37-inch or of at least 40% and 35%, respectively, as it looks to grow these
larger flat-panel TVs in fiscal 2010. products into the third and fourth key businesses after flat-panel
In digital cameras, the Company aims to win 15% of the TVs and digital cameras in its digital AV business.
¥1 trillion
Flat-panel
TVs
LCD TVs
Fiscal Fiscal
Digital cameras 2007 2010
HD camcorders
BD recorders/drives
Digital cameras
LCD TVs
BD recorders/drives Plasma TVs
HD camcorders
Drawing on the Matsushita Group’s wide range of advanced The environment and energy
technologies from digital AV equipment to key devices, and By providing Electronic Toll Collection (ETC) systems, the
focusing on the themes of automotive multimedia, the environ- Company helps to relieve congestion at toll booths, thereby
ment and energy, and safety and security, Matsushita will reducing vehicular emissions of CO2 and NOX. And by devel-
continue to contribute to the creation of automobiles and a oping fuel cells and electric double layer capacitors for hybrid
motoring society that are both safe and inspiring through its vehicles and providing more compact and lightweight devices,
outstanding technologies and meticulous approach to the Company will help to boost fuel efficiency. In these and
manufacturing. other ways, Matsushita will contribute to the realization of a
Automotive multimedia motoring society that can coexist with the global environment.
By leveraging Group-wide digital AV technologies, the Company Safety and security
will develop comfortable, convenient and easy-to-use prod- The Company will play a key role in making motoring more
ucts such as car audio equipment, car navigation systems and comfortable for customers. For example, Matsushita’s com-
rear-seat entertainment systems. Matsushita’s aim is to offer pact rear-view cameras give drivers better visibility when
more comfortable car interior spaces. reversing, while its automotive sensors support trouble-free
driving. The Company will also actively participate in efforts to
realize a society with Intelligent Transport Systems (ITS).
Automotive multimedia
Leverage Group-wide strengths ¥950 billion
¥750 billion
+¥200 billion
Fiscal Fiscal
2007 2010
Automotive multimedia
Safety and security
Environment and energy
By marshalling the collective strengths of the entire Matsushita lighting. In security for homes and offices, an area expected to
Group, the Company aims to propose more comfortable life- see growth, Matsushita will reinforce product and cost com-
styles by supplying various new equipment and systems tai- petitiveness. To develop this total solutions approach, the
lored to living environments. Company has set up a cross-Group project that will reinforce
In addition to the functional value of individual products, businesses providing comfortable living. This project will prima-
Matsushita will add value to lifestyles and living spaces based on rily focus on encouraging greater cooperation between pro-
collaboration between a wide range of products. Specifically, duction and sales divisions, combining technology assets, and
the Company will offer total solutions for homes and other boosting solution proposal capabilities.
buildings by bringing together equipment from diverse fields Through these initiatives, the Company aims to achieve
such as home appliances, air conditioning and purification, sales of approximately ¥3 trillion in fiscal 2010 in businesses
beauty and health, security, household facilities, AVC and providing comfortable living.
Sales increase
through synergies ¥3 trillion
+¥180 billion
¥2.6 trillion
Add value
Competitive to functions
individual products
Add value to
living spaces
In the semiconductor business, Matsushita will incorporate key In addition, Matsushita will reinforce its solution capabilities
devices founded on cutting-edge technologies into its finished to increase sales to customers outside the Matsushita Group
products to enhance distinctiveness and drive growth in its in order to ensure growth and boost profits in the semiconduc-
finished product divisions. tor business.
In October 2005, Matsushita became the first company In other device businesses, the Company will focus on
in the industry to begin full-scale mass production of 65- areas where it already has high market shares and margins,
nanometer process system LSIs using 300mm wafers. Now aiming to capture the leading global market positions in indi-
the Company plans to enhance its ability to respond to the vidual device fields.
increasing functionality and cost competitiveness of system Based on these initiatives, Matsushita is targeting a com-
LSIs by, among other steps, accelerating the shift to 45- bined increase in sales of around ¥240 billion in the semicon-
nanometer processes and raising the performance of its Inte- ductor and other device businesses over the next 3 years.
grated Platform, which is designed to meet needs for more
networked products.
¥1.68 trillion
ALIVH*
38%
Business Domain Companies and Business Domain Companies and Business Domain Companies and
Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007)
3 3 3
2 2 2
1 1 1
0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
70 3 70 3 70 3
0 0 0 0 0 0
Notes 1. Under the collaboration with MEW, the Company reorganized business and sales channels in such areas as electrical construction materials, building equipment and home appliances. Accordingly sales
results for fiscal 2005 for the Home Appliances and MEW and PanaHome categories have been reclassified to conform with fiscal 2006 sales results for those product categories.
2. Sales composition for each segment includes intersegment transactions.
3. The Healthcare Business Company was integrated with Panasonic Shikoku Electronics Co., Ltd. on April 1, 2007.
Business Domain Companies and Business Domain Companies and Business Domain Companies and
Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007) Group Companies (as of March 31, 2007)
Matsushita Electric Works, Ltd. Victor Company of Japan, Ltd. Panasonic Factory Solutions Co., Ltd.
PanaHome Corporation Matsushita Welding Systems Co., Ltd.
Others
3 3 3
2 2 2
1 1 1
0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
70 3 70 3 70 3
0 0 0 0 0 0
AVC NETWORKS
Incorporating Matsushita’s cutting-edge technologies, AVC Networks provides products, software, ser-
vices and solutions that contribute to the realization of a ubiquitous networking society. In fiscal 2007,
sales of digital AV products such as plasma TVs and digital cameras increased significantly thanks to a
vertical integrated business model that enhances product and cost competitiveness through the in-house
manufacturing of key components and devices. In information and communications equipment, although
sales of mobile phones remained sluggish, increased sales were recorded in automotive electronics. The
Company also implemented initiatives to strengthen its home networks business and security-related
systems business.
For the future, Matsushita will leverage core strengths in digital AV technologies to pursue enhanced
functionality, convenience and ease of use, with the goal of delivering products, services and systems that
contribute to the realization of a ubiquitous networking society.
AVC Business
In the AVC business, Matsushita is
currently promoting its “3D” value chain
strategy, which encompasses digital TV
(DTV), DVD and SD Memory Card
businesses. Based on this strategy, the
Company is working to expand its AVC
business globally by generating synergies
in technologies and products.
In fiscal 2007, Matsushita strengthened its lineup of plant came fully on stream in June 2006, realizing a global
products and led the industry in making AV equipment monthly production capacity of 460,000 units (based on 42-
easier to use with a function called the VIERA Link, centered inch panels). In order to meet rapidly expanding worldwide
on flat-panel VIERA TVs. In addition to using its existing SD demand for PDPs, Matsushita started operation of its fourth
Memory Card as a bridge media for music as well as still domestic PDP plant in June 2007, ahead of schedule. The
and moving images, Matsushita is proposing new ways of Company plans to begin construction of its fifth plant the
using AV equipment and providing new value by promoting following November. As a result, Matsushita will further
enhanced networking of equipment. increase its PDP production capacity, already one of the
Regarding flat-panel TVs, where the trend is toward largest in the world.
larger and higher-definition screens amid a global shift to In liquid crystal display (LCD) TVs, products which
digital broadcasting, the Company recorded a significant feature IPS*2 technology to realize vivid color even from a
increase in sales, particularly of plasma TVs. With the launch wide angle, have been well received in markets worldwide
of its 103-inch model, the world’s largest*1, and other full due to their high picture quality and performance. This
HD compatible products in Japan and overseas, Matsushita helped the Company to capture around 20% of the domes-
created a more extensive lineup. In addition, the Company tic market for LCD TVs in the 26- to 32-inch range.
offered more distinct high-value-added functions creating a Looking forward, the Company plans to expand its flat-
more user-friendly experience with products such as the panel TV business further with the aim of achieving a global
VIERA Link. These initiatives helped Matsushita to maintain market share of 25% in 37-inch or larger flat-panel TVs in
the leading market share in plasma TVs in Japan, the United fiscal 2010.
States and Europe in fiscal 2007. In terms of plasma display
panel (PDP) production, the Company’s third domestic PDP *1 As of July 19, 2006; Matsushita estimate.
*2 In-Plane-Switching mode system utilizes horizontally oriented liquid crystal
molecules to provide for wider viewing angles.
The LUMIX series of digital cameras steadily increased Sales of the DIGA series of DVD recorders, particularly
market share. This reflected the introduction, ahead of other HD-compatible models in the domestic market, were strong
companies, of models featuring an Optical Image Stabilizer, amid rising demand for high-quality video recording due to
and the effective use of Matsushita’s in-house key device the spread of digital HD broadcasting. The Company
manufacturing strengths to create more compact cameras introduced Blu-ray disc (BD) players in the U.S., Europe
with even higher picture quality. In fiscal 2007, cameras and other markets in September 2006, and BD recorders
featuring a 28mm wide-angle lens and compact models with in Japan in November 2006. In addition, Matsushita put
10x zoom capability were particularly well received in the particular emphasis on making AV equipment more user-
market. Moreover, with the launch of the Company’s first friendly with VIERA Link and other innovations. As a result
digital SLR camera, Matsushita has a stronger lineup to meet of these initiatives, Matsushita maintained its leading
a wider range of customer needs. As a result, the Company global share in the DVD recorder market. Looking forward,
recorded much higher sales of digital cameras in fiscal the Company will focus on accelerating compatibility with
2007, particularly in the U.S. and Europe. Going forward, HD formats and further pursuing user-friendliness.
Matsushita will continue to launch a steady stream of
attractive cameras worldwide by drawing on its unique
technologies to enhance picture quality and features.
Camera
PLC adapters readily allow the creation of
convenient communication networks
PC
WWW
Router
Fixed-line
Communications PLC adapter
Mobile Communications
In mobile communications, Matsushita offers a wide range
of products, from mobile phones, where the Company has
advanced technologies, to base stations and other commu-
nications infrastructure equipment.
In fiscal 2007, mobile number portability (MNP) was
introduced in Japan in October 2006, triggering more
intense competition among mobile phone handset manu-
facturers. In this environment, Matsushita resumed ship-
ments of handsets to SOFTBANK MOBILE Corporation and
KDDI CORPORATION. The Company also launched new 705P for Softbank Mobile W52P for KDDI
mobile phone handsets for NTT DoCoMo, Inc. such as the Thin but easy to open A polished metal body
thanks to a one-push with bright colors used for
P903iTV handset compatible with “one-segment” terrestrial
mechanism, packaged in a the inside and exchange-
digital TV broadcasts that combines Matsushita’s high smart, easy-to-carry body able covers that allow
picture quality, high reception and energy-saving technolo- users to customize
designs to their own taste
gies, and the P703iµ, the world’s thinnest handset at just
11.4mm*1.
Meanwhile, aiming to reduce the lead time and cost of
development, Matsushita formed a joint venture called Through these initiatives, Matsushita plans to boost the
ESTEEMO Co., Ltd. with NEC Corporation, and another efficiency of product development and enhance cost
joint venture called Adcore-Tech Co., Ltd. with NEC, NEC competitiveness by utilizing the Linux® OS platform and
Electronics Corporation and Texas Instruments Incorporated. sharing core technologies such as high-speed image and
Matsushita will use both of these new companies to voice transfer methods—one of the Company’s strengths.
accelerate the development of common software and Matsushita also aims to lead the industry in responding to
hardware platforms for mobile phone handsets. In another advances in more sophisticated, higher-speed communi-
move, Matsushita teamed up with companies such as NTT cations infrastructure and mobile services.
DoCoMo, the Vodafone Group, NEC and Motorola, Inc. to
set up the LiMo Foundation, which will work on developing *1 As of February 2007; clamshell-type 3G (W-CDMA) phones
*2 Linux® is a registered trademark of Linus Torvalds in the United States and
a Linux®*2-based OS for mobile phones. other regions.
22,995
Electricity
consumption
529.25
0 NA-V81 NA-VR1100 0
(Previous (Heat-pump drying
Matsushita model) system model)
*Based on a load of 6kg washed and dried everyday for one year.
Household Appliances/
Refrigeration,
Air Conditioning and Heating
In household appliances, Matsushita’s main business were strong. Matsushita’s IH cooking equipment that can
areas include washing machines, dishwasher/dryers, be used with aluminum pots remained popular in the
vacuum cleaners, IH cooking equipment, microwave market. The Company’s integrated production system
ovens, rice cookers and other products related to house- including IH coils realized high quality, helping Matsushita to
work and food preparation, as well as sanitary equipment maintain its dominant share in the Japanese market. Sales
and various key devices such as power supply inverters of steamer/microwave ovens also grew in Japan on the
for microwave ovens. back of popular products that offer new cooking methods
In fiscal 2007, Matsushita further upgraded its tilted-drum by combining three heat sources: microwave, super-heated
washer/dryers to respond to needs for greater speed, less steam, and a conventional heater.
energy usage and lower noise during washing and drying Overseas, Matsushita worked to expand its business in
cycles. By incorporating a high-speed, energy-saving heat- China, where demand for washing machines continues to
pump based on technologies developed for its air condi- grow, by starting full-scale local production and sales of
tioners and a new stainless steel drum, Matsushita achieved tilted-drum washing machines. In other Asian markets such
a significant reduction in water consumption and drying as Thailand, Malaysia and Indonesia, the Company
times. In addition, the Company’s tilted-drum washer/dryers launched the Aquabeat series of fully automatic washing
now lead the industry in terms of energy economy*. machines. Aquabeat realizes a significant improvement in
In dishwasher/dryers, where Matsushita has led the washing capability with a new powerful wash cycle that
market since it produced Japan’s first model 46 years ago, rapidly converts detergent into foam. Sales of this model
the Company’s aggregate production reached 5 million were particularly strong in Malaysia where Aquabeat
units in May 2006. This illustrated Matsushita’s consistent captured the leading market share. In cooking equipment,
efforts to help reduce housework time and offer more user- sales of microwave ovens increased in Europe, South
friendly products. Built-in dishwasher/dryer models sold America and Russia.
particularly well during the year under review, thereby
maintaining an approximate 60% share of the Japanese * As of September 28, 2006, for drum washer/dryer models.
0.0240
0.0080
0.0050
0.0012
0
Glass Toughened Silica- A-Vacua U-Vacua*2
wool polyurethane Vacua
foam
In refrigeration, air conditioning and heating, Matsushita direct and indirect refrigeration methods separately solved
manufactures a wide range of consumer- and industry-use the problems of drying and frosting, and also showed an
products. These include air conditioners and refrigerators, increase in sales in China.
vending machines, and natural-refrigerant water heating Looking forward, responding to growing demand for
systems, as well as compressors and other key devices used products used in all-electric homes such as IH cooking
in refrigeration and air conditioning products. equipment and natural-refrigerant water heating systems,
In fiscal 2007, sales of air conditioners, large-capacity Matsushita plans to enhance its product lineup and sales
refrigerators and natural-refrigerant water heating systems capabilities, and strengthen collaborative efforts with MEW.
remained strong. In particular, air conditioners that require Through these initiatives, Matsushita will continue develop-
less cleaning successfully tapped market needs. In this ing high-value-added products underpinned by environ-
area, Matsushita launched air conditioners featuring built-in mental technologies and universal design that customers
automatic cleaning technology used in its vacuum cleaners. can use easily and with confidence.
With this technology, internal filters and anti-bacterial and In 2005, Matsushita established the China Lifestyle
deodorizing filters do not require cleaning or changing for Research Center at Panasonic Corporation of China to
10 years. The product’s automatic airflow control mechanism identify the needs of Chinese consumers related to food,
that optimizes air currents for heating and cooling was also clothing and housing. Based on the data collected through
well received. As a result, air conditioners overall captured the center’s activities, the Company will continue to develop
the leading share in the domestic market. Meanwhile, products tailored to local needs and lifestyles centered on
leveraging its many years of experience in insulation and China and other Asian countries. In terms of manufacturing,
refrigeration technology, Matsushita developed the U- Matsushita will reorganize its production bases from the
Vacua series of high-performance vacuum insulation perspective of creating an optimal manufacturing framework
boasting the world’s highest level of thermal insulation. to further enhance the cost-competitiveness and attractive-
This material was used to develop new refrigerator models ness of its products. And by integrating research and
with thinner casings to boost storage space. This innova- development divisions and enhancing its ability to conduct
tion helped the Company’s refrigerators to secure the front-loaded product development, Matsushita aims to
leading market share in Japan. Overseas, models that use secure global growth and enhance profitability.
1,000 10w
0 0
Matsushita Silica Pa-look Ball
60 light bulb Premier D15 E26
socket-model
Healthcare Systems/
Lighting/
Environmental Systems
Matsushita’s healthcare systems business supplies health- The lighting business consists of general lighting products
care and medical equipment ranging from blood glucose including fluorescent and incandescent lamps, industrial-
monitoring systems and ultrasound diagnostic equipment, use light sources such as LCD backlights, electronic flash
to laser devices and hearing aids. units for cameras and related equipment.
In fiscal 2007, mainstay blood glucose monitoring In the year under review, amid rapidly rising demand for
systems maintained their leading share in the domestic light bulbs and lamps that save energy and need replacing
market with increased sales. A new in-the-ear, tailor-made less, Matsushita further enhanced its Premier series of
hearing aid, which can be adjusted with a maximum of 32 extended-life fluorescent lamps. In Japan, demand is
audio channels, also sold well after its launch in June 2006. continuing to grow for energy-saving ball-type fluorescent
The hearing aid fits comfortably into the user’s ear canal lamps that can be used in conventional light bulb sockets.
owing to a high level of technical craftsmanship, while audio Against this backdrop, in October 2006, Matsushita launched
quality can be optimized to the surrounding environment. its Pa-look Ball Premier series, which reduces electricity
Matsushita will continue to target growth in blood consumption by approximately 80%* and compares with
glucose monitoring systems and hearing aids, products that the best in the industry in terms of energy efficiency and
contribute to a better quality of life. At the same time, the product lifetime.
Company will strengthen its lineup of ultrasound diagnostic Looking forward, with an increasing number of elderly
devices, digital X-ray equipment and other products for people in Japanese society, Matsushita will focus on
medical institutions and specialists, ultimately aiming to developing light bulbs and lamps that require replacing less,
contribute to the realization of a society where patients can as well as products that help save energy and resources.
access reliable, high-quality healthcare services at reason- By striving to boost sales of its Premier series of fluorescent
able cost. lamps for home use, Matsushita aims to continue driving
growth in the lighting business.
The environmental systems business provides ventilating environmental engineering business, Matsushita’s strong
fans, air purifiers and other products, and operates an domestic track record and technologies enabled it to win an
environmental engineering business supplying dust collec- order for an electronic dust collection system for a road
tion and other systems, aiming to help create comfortable tunnel in Madrid, Spain. This order, as part of a highway
lifestyles that are in harmony with the environment and extension project, drove sales in the environmental engi-
realize a recycling-oriented society. neering business. Meanwhile, responding to growing
In fiscal 2007, in ventilation systems, micro-mist saunas demand for mobile phone base station cooling units, the
that employ nanometer-size water particles recorded strong Company completed construction of a new factory in
sales. In addition to its conventional model that relies on a Beijing, China, in January 2007.
boiler to create hot water that warms up the mist, Going forward, to enhance cost-competitiveness in
Matsushita launched a new model that warms up the mist global markets, Matsushita intends to actively utilize its
directly with an electrical heater in February 2007. In home overseas operating sites.
environment systems, the Company rolled out the industry’s
first dehumidifier with intelligent hybrid control, which
realizes optimal levels of humidity for any season. In the
Electronic Devices
The electronic devices business operates globally with a cameras. Furthermore, sales of electronic devices for
focus on seven priority areas: capacitors, tuners, printed mobile phones designed for “one-segment” terrestrial digital
circuit boards, power supply products, circuit components, TV broadcast function were strong during the year under
electromechanical components, and speakers. Aiming to review. Examples of products that recorded higher sales
meet customer needs for higher performance AV equipment, included high-frequency components, high-density printed
and more compact and thinner information devices, circuit boards (ALIVH: Any Layer Inner Via Hole), and chip
Matsushita strives to develop high-value-added compo- tuners that feature receiver sensitivity and low electricity
nents. The Company is also strengthening its position in the consumption. Favorable sales were also recorded in film
automotive electronics field which continues to grow as capacitors and electrical double layer capacitors used in
cars are fitted with more electronic components. hybrid vehicles.
In fiscal 2007, Matsushita continued to grow sales of Going forward, Matsushita will leverage its black-box
digital TV tuners that enable exceptional picture quality, and technologies to raise quality, increase the number of prod-
specialty polymer aluminum electrolytic capacitors that are ucts with leading global shares, and reinforce its position in
compact and have a high noise reduction function. The the automotive electronics field. Aiming to secure growth
Company’s angular rate sensors, which sustained a high and enhance profitability, the Company will also start up
market share as components that improve the accuracy of new overseas sites in Vietnam and other countries and
car navigation systems, were also incorporated in digital further implement rationalization in manufacturing.
More Power!
Power output
FA servo motor
High-power, long-lasting
Oxyride dry Oxyride dry batteries
batteries
Alkaline dry
batteries
1.0V
Polygon mirror-scannermotor
Duration
High-output, high-color
rendering LED unit for lighting
PanaHome
PanaHome’s operations are primarily focused on detached This was part of overall efforts to strengthen its rental
housing, asset and property management, and home property management support system. In the home
remodeling. In all these businesses, to provide living spaces remodeling business, the company offered living spaces
that are friendly to both people and the environment, the designed around its “Eco-life Reform” concept and took
company’s product strategies are guided by the basic other steps to enhance its consulting-based sales approach.
“Eco-life Home” concept, which emphasizes safety, security, Looking ahead, PanaHome will continue seeking to
health, comfort and high energy efficiency. offer homes that are kind to people and the planet by
In fiscal 2007 in the detached housing business, embracing technologies in harmony with the environment,
PanaHome enhanced its lineup of EL SOLANA homes, as well as comfortable living environments and spaces
aiming to realize environments where residents can live in tailored to the life stages of customers, thereby ensuring
health and comfort by offering a wider choice of equipment sustainable growth.
and fittings such as solar power generation systems and
photocatalytic external wall tiles. The company also
launched PanaHome Aging Home, a new type of residence
designed for at-home nursing care that emphasizes comfort
and makes caring for the elderly easier. In the asset and
property management business, PanaHome became the
first company in the industry to offer all-electric rental
apartment homes, which help to lower maintenance costs.
JVC OTHER
JVC Factory Automation
Victor Company of Japan, Ltd. (JVC) is involved in both In the factory automation (FA) business, Matsushita pro-
hardware and entertainment software businesses. Using its vides optimal solutions in electronic component mounting,
high-quality audio and visual technologies, JVC aims to semiconductor mounting and manufacturing processes with
deliver truly moving experiences and customer satisfaction. the aim of contributing to the development of client busi-
In fiscal 2007, a number of products saw higher sales, nesses through innovative manufacturing processes in
including the Everio series of compact HDD camcorders, circuit manufacturing technology.
which are capable of approximately five hours of full-HD In fiscal 2007, Matsushita enhanced its product lineup in
recording—a world first. However, overall sales at JVC the electronic component mounting business. This included
declined due to a reduction in the lineup of DVD recorders upgrading its high-speed modular placement machines,
and weak sales of such products as audio equipment in introducing new ultra-high-speed models and providing more
Japan, as well as CRT TVs overseas. products for small- and medium-scale manufacturing. In the
Looking ahead, JVC will strive to increase sales by semiconductor mounting business, the Company launched
supplying products incorporating its renowned technologies high-speed die bonders and other products that feature both
that deliver high-quality picture and sound. high precision and high productivity.
In the future, the Company aims to maintain its leading
share in the global electronic component mounting field,
as well as accelerate growth in the FA business overall by
supplying superior hardware, advanced manufacturing
process technologies and a wide range of solutions that
lead the industry.
In order to contribute to a ubiquitous networking society and coexistence with the global environment,
Matsushita engages in a broad range of R&D activities, including nanotechnologies and other advanced research;
digital network software technologies for AV equipment and next-generation mobile communications; component
and device technologies such as plasma displays and system LSIs; environmental technologies such as fuel cell
cogeneration systems; and various manufacturing technologies.
By coordinating business, technology and intellectual property strategies, the Company works to develop
distinct technologies—the source of Matsushita’s competitiveness—and secure intellectual property rights for
those technologies to ensure the strength and stability of its businesses. In this way, Matsushita is aiming to drive
further growth and become a manufacturing-oriented company.
groups in cross-licensing agreements—in order to reinforce Note: Each graph depicts the number of patents held by Matsushita and its principal
subsidiaries (excluding MEW, PanaHome and JVC) as of March 31 for each year.
competitiveness. Moreover, Matsushita took steps to
enhance the efficiency of its patent asset portfolio by
assessing the usability of patents in its portfolio and aban- Going forward, the Company’s intellectual property
doning unused patents. strategy must achieve the dual goals of securing quality
In addition to using patents, Matsushita also comprehen- intellectual property assets more efficiently and realizing an
sively utilizes a vast portfolio of designs and trademarks to even higher level of intellectual property management to
secure and maintain its competitive edge. Accordingly, the utilize these assets directly in business strategies. Based on
Company actively pursues the global patenting of designs these perspectives, in fiscal 2008, Matsushita will further
and the registration of trademarks, and has enhanced intensify efforts to enhance earnings by actively securing
initiatives to prevent counterfeiting. In China in particular, patent, design and trademark rights on a global basis, while
where around 70% of the world’s imitation products are improving the quality and promoting the strategic use of
made, Matsushita has accelerated local initiatives to intellectual property rights.
eliminate counterfeit products.
Corporate Governance Structure Corporate Auditors and the Board of Corporate Auditors
The Board of Directors and Executive Officer System Pursuant to the Company Law, Matsushita has appointed
Matsushita’s Board of Directors is composed of 19 directors, Corporate Auditors and established a Board of Corporate
two of whom are Outside Directors, as of June 27, 2007. In Auditors, made up of Corporate Auditors. The Corporate
accordance with the Company Law and relevant laws and Auditors and Board of Corporate Auditors monitor the
ordinances (collectively, the “Company Law”), the Board of status of corporate governance and keep abreast of the
Directors has ultimate responsibility for administration of the day-to-day activities of management, including the Board of
Company’s affairs and monitoring of the execution of busi- Directors. As of June 27, 2007, the Board of Corporate
ness by Directors. Under its basic philosophy of contributing Auditors comprised five members, including three Outside
to society as a public entity, Matsushita has long been com- Corporate Auditors.
mitted to enhancing corporate governance, and was one of Corporate Auditors participate in shareholder meetings
the first Japanese companies to invite Outside Directors to and Board of Directors meetings, and have legal authority to
serve on its Board of Directors. receive reports from Directors, employees and accounting
In fiscal 2004, Matsushita implemented reforms to estab- auditors. Full-time Senior Auditors also attend important
lish an optimum management and governance structure meetings and conduct checks in order to ensure effective
tailored to the Group’s business domain-based organiza- monitoring. To augment internal auditing functions in business
tional structure. Under this structure, Matsushita has em- domain companies, Matsushita has assigned seven non-
powered each of its business domain companies through statutory full-time senior auditors at each internal divisional
delegation of authority. At the same time, the Company company to assist in audits by Corporate Auditors. Matsushita
employs an Executive Officer System to provide for the also inaugurated regular Group Auditor Meetings (comprising
execution of business at various domestic and overseas 18 full-time senior auditors and non-statutory full-time senior
Matsushita Group companies. This system facilitates the auditors from 15 Matsushita Group companies including
development of optimum corporate strategies that integrate internal divisional companies) chaired by the Chairman of
the Group’s comprehensive strengths. the Board of Corporate Auditors of the Company to en-
In addition, Matsushita realigned the role and structure of hance collaboration between the Company’s Corporate
the Board of Directors to ensure swift and strategic decision- Auditors, non-statutory full-time senior auditors of internal
making, as well as the optimum monitoring of Groupwide divisional companies and Corporate Auditors of the
matters. Specifically, the Board of Directors concentrates on Company’s subsidiaries. In addition, as part of their audit
corporate strategies and the supervision of business domain duties, Corporate Auditors maintain a close working relation-
companies, while Executive Officers handle responsibilities ship with the Internal Audit Group to ensure effective audits.
relating to day-to-day operations. Taking into consideration Moreover, in order to enhance the effectiveness of audits
the diversified scope of its business operations, Matsushita conducted by Corporate Auditors and ensure the smooth
has opted to maintain a system where Executive Officers, implementation of audits, Matsushita has established a
who are most familiar with the specifics of their respective Corporate Auditor’s Office with a full-time staff of five under
operations, take an active part in the Board of Directors. the direct control of the Board of Corporate Auditors.
Furthermore, to clarify the responsibilities of Directors and
create a more dynamic organization, the Company has
limited the term of each Director to one year.
Supervision
Appointment
Corporate Strategy Decision-making Functions Subsidiaries (Business Domain Companies)
Integration of
Group’s Overseas Companies
Audit Comprehensive
Strengths Internal Divisional Companies (Business Domain Companies)
Board of Corporate Auditors
Sales Divisions
Appointment Auditing Functions Audit
Overseas Divisions
Policy on Control of Matsushita Electric Industrial 2) Measures based on the basic policy to prevent
Co., Ltd. control by inappropriate parties
Basic Policy On April 28, 2005, the Board of Directors resolved to adopt
Since its establishment, Matsushita has operated its busi- a policy related to a Large-scale Purchase of the
nesses under its basic management philosophy, which sets Company’s shares called the Enhancement of Shareholder
forth that the mission of a business enterprise is to contrib- Value (ESV) Plan. With respect to a Large-scale Purchaser
ute to the progress and development of society and the who intends to acquire 20% or more of all voting rights of
wellbeing of people through its business activities, thereby the Company, this policy requires that (i) a Large-scale
enhancing the quality of life throughout the world. Aiming for Purchaser provides sufficient information, such as its outline,
further growth to become a global excellent company, purposes or conditions, the basis for determination of the
Matsushita will work to deliver sustained growth in corporate purchase price and funds for purchase, and management
value to satisfy its shareholders, investors, customers, busi- policies and business plans which the Large-scale Purchaser
ness partners, employees and all other stakeholders. intends to adopt after the completion of the Large-scale
Matsushita has a basic policy that shareholders should Purchase, to the Board of Directors before a Large-scale
make final decisions in the event of a Large-scale Purchase Purchase is to be conducted and (ii) after all required
of the Company’s shares, regarding whether or not the information is provided, the Board of Directors should be
Large-scale Purchase should be accepted. However, there allowed a sufficient period of time (a sixty-day period or a
is the possibility that such Large-scale Purchaser may not ninety-day period) for consideration. The Board of Directors
provide shareholders with sufficient information for making intends to assess and examine any proposed Large-scale
appropriate decisions. There is also concern that any Purchase after the information on such purchase is provided,
Large-scale Purchase may damage corporate value and and subsequently to disclose the opinion of the Board of
shareholder interest. In this event, the Company may take Directors in order to assist shareholders in making their
countermeasures in order to protect the interests of all decisions. The Board of Directors may negotiate with the
shareholders. Large-scale Purchaser or suggest alternative plans to
shareholders, if it is deemed necessary.
Measures to Realize Basic Policy If a Large-scale Purchaser does not comply with the rules
1) Specific measures to realize basic policy laid out in the ESV Plan, Matsushita’s Board of Directors
Matsushita has announced a mid-term management plan may take countermeasures against the Large-scale
called GP3, which will run from fiscal 2008 to fiscal 2010. Purchaser to protect the interests of all shareholders.
Based on the plan’s fundamental concept of delivering Countermeasures include the implementation of stock splits,
steady growth with profitability, the Company will implement issuance of stock acquisition rights or any other measures
a range of measures to achieve the targets of ¥10 trillion in that the Board of Directors is permitted to take under the
sales, representing growth, and ROE of 10%, measuring Company Law in Japan, other laws and the Company’s
A NYSE-listed U.S. company must The Company Law does not require Japanese joint stock corporations with corporate auditors such
have a majority of directors meeting
as Matsushita to have any independent directors on its board of directors. The Company Law has
the independence requirements under
Section 303A of the NYSE Listed provisions for an “outside director,” whose definition is similar to, but not the same as, an indepen-
Company Manual. dent director under the NYSE Listed Company Manual. An “outside director” is defined as a director
of the company who does not engage or has not engaged in the execution of business of the com-
pany or its subsidiaries as a director of any of these corporations, and who does not serve or has
not served as an executive officer, manager or in any other capacity as an employee of the company
or its subsidiaries. A Japanese joint stock corporation with corporate auditors, such as Matsushita,
is not obliged under the Company Law to have any outside directors on its board of directors.
However, Matsushita had two (2) outside directors as of June 27, 2007. The tasks of supervising
the administration of the company’s affairs are assigned not only to the board of directors but also to
corporate auditors, as more fully described below.
A NYSE-listed U.S. company must A Japanese joint stock corporation is not required to have any audit, nominating and compensation
have an audit committee with responsi-
committees, except for a “joint stock corporation with specified committees,” which is a corporate
bilities described under Section 303A
of the NYSE Listed Company Manual, governance system that started in April 2003 and which may be adopted by Japanese joint stock
including those imposed by Rule 10A-3 corporations meeting certain criteria.
under the U.S. Securities Exchange Act
Most Japanese joint stock corporations, including Matsushita, employ a corporate governance
of 1934. The audit committee must be
composed entirely of independent system based on corporate auditors. With this system, the tasks of supervising the administration of
directors, and the audit committee the company’s affairs conducted by directors are assigned not only to the board of directors but
must have at least three members and
also to corporate auditors who are appointed at a general meeting of shareholders, and who are
satisfy the requirements of Rule 10A-3
under the U.S. Securities Exchange Act separate and independent from the board of directors. Under the Company Law, Matsushita is
of 1934. required to appoint at least three (3) corporate auditors, and at least half of Matsushita’s corporate
auditors are required to be “outside corporate auditors” who must meet additional independence
requirements. An “outside corporate auditor” is defined as a corporate auditor who does not serve
or has not served as a director, accounting counselor, executive officer, manager or in any other
capacity as an employee of the company or any of its subsidiaries prior to the appointment. Under
the Company Law, Matsushita is required to establish a board of corporate auditors, comprising all
the company’s corporate auditors.
As of June 27, 2007, Matsushita had five (5) corporate auditors, of which three (3) were outside
corporate auditors. Each Corporate Auditor of Matsushita has a four-year term. In contrast, the term
of each Director of Matsushita is one year. Corporate auditors are obliged to attend the meetings of
the board of directors and express their opinion at the meetings if necessary. The board of corporate
auditors and corporate auditors have a statutory duty to supervise the administration of the company’s
affairs by directors. Each corporate auditor is required to prepare respectively their audit report of
Matsushita each fiscal year and submit the reports to the directors. Copies of the audit reports are
included in the appendix to the convocation notice of the ordinary general meeting of shareholders.
A corporate auditor also has a statutory duty to examine the financial statements of Matsushita,
and receives auditors’ reports from an accounting auditor (a certified public accountant or an account-
ing firm). The board of corporate auditors has the power to request that Matsushita’s directors
submit a proposal for dismissal of an accounting auditor to a general meeting of shareholders. The
board of corporate auditors also has the power to directly dismiss an accounting auditor under
certain conditions. Matsushita’s directors must obtain the consent of its board of corporate auditors
in order to submit a proposal for election, dismissal and/or non-reelection of an accounting auditor
to a general meeting of shareholders.
With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934
relating to listed company audit committees, Matsushita relies on an exemption under that rule which is
available to foreign private issuers with a board of corporate auditors meeting certain requirements.
A NYSE-listed U.S. company must Under the Company Law, Matsushita’s directors must be elected and/or dismissed at a general
have a nominating/corporate gover-
meeting of shareholders. The board of directors nominates director candidates and submits a pro-
nance committee with responsibilities
described under Section 303A of the posal for election of directors to a general meeting of shareholders. The board of directors does not
NYSE Listed Company Manual. The have the power to fill vacancies thereon.
nominating/corporate governance
Matsushita’s corporate auditors must also be elected and/or dismissed at a general meeting of
committee must be composed entirely
of independent directors. shareholders. Matsushita’s directors must obtain the consent of the board of corporate auditors in
order to submit a proposal for election and/or dismissal of a corporate auditor to a general meeting
of shareholders. Each of the corporate auditors has the right to state his/her opinion concerning the
election, dismissal and/or resignation of any corporate auditor, including himself/herself, at a general
meeting of shareholders. The board of corporate auditors is also empowered to request directors to
submit a proposal for election of a specific person as a corporate auditor to a general meeting of
shareholders.
A NYSE-listed U.S. company must Under the Company Law, the maximum amounts of remunerations, including equity compensation
have a compensation committee with such as stock options, bonuses, and other financial benefits given in consideration of performance of
responsibilities described under
Section 303A of the NYSE Listed duties (collectively, the “remunerations”) of directors and corporate auditors of Japanese joint stock
Company Manual. The compensation corporations, except for a “joint stock corporation with specified committees,” must be approved at
committee must be composed entirely a general meeting of shareholders. Companies must also obtain the approval at a general meeting of
of independent directors.
shareholders to change such maximum amounts. Therefore, the remunerations of the directors and
corporate auditors are subject to the approval of shareholders.
The maximum total amounts of remunerations for Directors and Corporate Auditors of Matsushita
is therefore determined by a resolution at a general meeting of shareholders, and thus remunerations
of the Directors and Corporate Auditors of Matsushita are under the oversight of shareholders. The
remuneration amount for each Director is determined by Matsushita’s Representative Directors who
are delegated to make such determination by the Board of Directors, and the amount of remunera-
tion for each Corporate Auditor is determined upon discussions amongst the Corporate Auditors.
A NYSE-listed U.S. company must Pursuant to the Company Law, if a Japanese joint stock corporation, such as Matsushita, desires
generally obtain shareholder approval
to adopt an equity compensation plan under which stock acquisition rights are granted on spe-
with respect to any equity compensa-
tion plan. cially favorable conditions (except where such rights are granted to all shareholders on a pro rata
basis), such plan must be approved by a “special resolution” of a general meeting of shareholders
that satisfies the prescribed quorum. (In the case of Matsushita, such quorum is one-third of the
total number of voting rights and the approval of at least two-thirds of the voting rights repre-
sented at the meeting is required as provided by Matsushita’s Articles of Incorporation pursuant to
the Company Law.)
Since its establishment, Matsushita has sought to contribute reasoned that the true mission of a manufacturer was to
to society through its business activities. This is based on supply basic necessities at a price anybody could afford to
the idea that customers and the public at large are stake- help eliminate poverty worldwide. This idea that companies
holders in corporations, not just certain individuals and can contribute to the prosperity and well-being of mankind
shareholders. The Company’s founder, Konosuke remains an integral part of the Matsushita Group’s business
Matsushita, believed that raising both material and spiritual activities today.
wealth was the key to human happiness. Accordingly, he
Environment Society
Coexistence with the global environment Realizing a ubiquitous networking society
Create useful
Customers products and
services Government/Local
communities
NPOs/NGOs
Coexist Achieve GP3 plan targets and Contribute to
Business partners with the global the creation of
practice CSR management
environment a sound society
Employees
Realize
Shareholders/ better working
Other investors environments
Quality/
Global procurement Human rights/Occupational Customer satisfaction/ Corporate citizenship
health and safety Universal design activities
■ Support for schools in Thailand: Over the years, Matsushita has endowed the
construction of 75 elementary schools in Thailand. Every year, the Company
donates educational materials and AV products such as TVs and DVD recorders to
the schools.
■ Disabled person support group in Indonesia: 40 local Matsushita employees helped
with cleaning and the installation of signs, while the Company provided support in
the form of donations of electronic equipment, food and medicines.
■ Mobile phone recycling: Matsushita called on employees and local residents in North
America to return their old mobile phones, which the Company then gave to an NPO Use of the Astro Vision screen was
called Phones for Life*. donated to Gallaudet University to air
a public service announcement
* An NPO that collects old mobile phones, reconditions them as new, and then donates them to people
on lower incomes for communication during disasters and other emergencies.
to a group that supports disabled people. The Company then doubles the amount.
For more information about CSR
Creating Better Workplaces activities, please refer to the
following websites:
■ Corporate Diversity Promotion Division established: In April 2006, Matsushita set up
a Corporate Diversity Promotion Division headed by the Company’s president. The Corporate Social Responsibility (CSR)
http://panasonic.net/csr/
council’s aims are to promote greater participation by women in management, and
Environmental Activities
encourage the creation of a more diverse workforce regardless of age or nationality.
http://panasonic.net/eco/
■ Promoting e-work: leveraging the advantages of ICT, Matsushita is promoting more Corporate Citizenship Activities
flexible working styles unrestricted by time or place, and creating more diverse, http://panasonic.net/citizenship/
comfortable workplaces.
Takami Sano Susumu Koike Shunzo Ushimaru Koshi Kitadai Toshihiro Sakamoto
Representative in Tokyo/in charge of In charge of Technology and In charge of Domestic Consumer Marketing/ President, Panasonic Automotive Systems President, Panasonic AVC Networks
Automotive Electronics Business/Panasonic EV Semiconductor Company Electrical Supplies Sales, Project Sales and Company/in charge of Industrial Sales Company
Energy Co., Ltd./Panasonic System Solutions Building Products Sales/Advertising and
Company/Panasonic Mobile Communications Design/Chairman, Corporate Brand
Co., Ltd./Corporate eNet Business Division/ Committee
Corporate Construction Business Promotion
Division
■ Managing Directors
Yasuo Katsura Takahiro Mori Shinichi Fukushima Junji Esaka Hitoshi Otsuki Ikusaburo Kashima
Director, Tokyo Branch In charge of Corporate Planning/Associate In charge of Personnel, General Affairs and In charge of Home Appliances Business/ In charge of Overseas Operations In charge of Legal Affairs/Corporate Risk
Director, Corporate IT Innovation Division/ Social Relations/in charge of e-Work President of Matsushita Home Appliances Management, Corporate Information Security,
in charge of Panasonic Start-up Fund/ Promotion Office Company/in charge of Lighting Company and and Corporate Business Ethics/
Vice Chairman, Corporate Brand Committee Matsushita Refrigeration Company Legal Consultation & Solutions Center/
Corporate International Affairs
■ Directors ■ Honorary Chairman
of the Board and
Executive Advisor,
Member of the Board
Ikuo Uno Yoshifumi Nishikawa Hidetsugu Otsuru Makoto Uenoyama Masaharu Matsushita
In charge of Facility Management/Quality In charge of Accounting and Finance
Administration/Corporate FF Customer
Support & Management Division/Environmental
Affairs/Recycling Business Promotion
Corporate Auditors
■ Senior Corporate Auditors ■ Corporate Auditors
Yukio Furuta Kenichi Hamada Yasuo Yoshino Ikuo Hata Hiroyuki Takahashi
Chairman, Matsushita Group Auditors
Meeting
Executive Officers
■ Managing Executive Officers Fujio Nakajima Hideo Kawasaki Naoto Noguchi
Nobutane Yamamoto Senior Vice President, Panasonic AVC Networks Company/Director, President, Semiconductor Company Director, Corporate Environmental Affairs Division/in charge of
Technology Planning & Development Center, Panasonic AVC Corporate Quality Administration Division
In charge of Global Procurement/Global Logistics/Director, Corporate Shigeru Omori
Networks Company/General Manager, Digital Broadcasting Business
Procurement Division
Promotion Office Director, Corporate Industrial Marketing & Sales Division Osamu Waki
Yoshinobu Sato President, Panasonic Mobile Communications Co., Ltd.
Takae Makita Takumi Kajisha
Director, Corporate Marketing Division for Consumer Products/
In charge of Information Systems/Associate Director, Corporate IT In charge of Corporate Communications Division/Director, Corporate Toshiaki Kobayashi
in charge of Corporate CS Division and Showroom Strategic Planning
Innovation Division Communications Division/in charge of CSR Office, Corporate President, Panasonic Electronic Devices Co., Ltd.
Office/Chairman, Showroom Strategic Committee
Advertising Group, and Corporate Citizenship Group/Vice Chairman,
Yoshihiko Yamada Masashi Makino Showroom Strategic Committee Joseph Taylor
Director, Corporate Division for Promoting “Manufacturing-oriented” COO, Panasonic Corporation of North America
Director, Corporate Management Division for North America/
Innovation Masaaki Fujita
Chairman, Panasonic Corporation of North America Yoshiiku Miyata
Senior Vice President, Panasonic AVC Networks Company/Director,
Ken Morita Joachim Reinhart Visual Products and Display Devices Business Group, PDP TV Director, Corporate Management Division for Europe/
COO, Panasonic Europe Ltd. Business Unit, Panasonic AVC Networks Company CEO, Panasonic Europe Ltd.
Senior Vice President, Panasonic AVC Networks Company/Director,
Visual Products and Display Devices Business Group, Panasonic AVC Yutaka Mizuno Kazunori Takami Takashi Toyama
Networks Company
Vice President, Panasonic Automotive Systems Company/ In charge of Corporate Marketing Division for National Brand Home President, Panasonic System Solutions Company/Director,
in charge of Sales, Panasonic Automotive Systems Company Appliances and Corporate Marketing Division for National Brand Corporate Construction Business Promotion Division
■ Executive Officers Wellness Products/Director, Corporate Marketing Division for
Mikio Ito National Brand Home Appliances Jun Ishii
Yoshitaka Hayashi In charge of Public and Private Institutions Associate Director, Corporate Marketing Division for Consumer
Director, Corporate Management Division for China and Yoshihisa Fukushima Products
Northeast Asia/Chairman, Panasonic Corporation of China Kazuhiro Tsuga In charge of Intellectual Property/Director, Corporate Intellectual
In charge of Digital Network & Software Technology/Overseas R&D Property Division/ President, Intellectual Property Rights Operations Toshiro Kisaka
Centers/Digital Network Strategic Planning Office Company Director, Corporate Management Division for Asia and Oceania/
President, Panasonic Asia Pacific Pte. Ltd.
Ikuo Miyamoto Masatsugu Kondo
President, Motor Company President, Matsushita Battery Industrial Co., Ltd./President,
Rechargeable Battery Company, Matsushita Battery Industrial Co., Ltd.
58 Matsushita Electric Industrial Co., Ltd. 2007
Risk Factors
Once a year, Matsushita implements a Groupwide risk assessment survey to identify potential risks in an
integrated and comprehensive manner. By identifying, assessing and evaluating risks according to priority,
Matsushita specifies risks related to the Corporate Headquarters, business domain companies and Group
affiliates, takes countermeasures that correspond to the materiality of each risk, and seeks continuous improve-
ments through the monitoring of the progress of such countermeasures.
Primarily because of the business areas and geographical areas where it operates, and the highly competitive
nature of the industry to which it belongs, Matsushita is exposed to a variety of risks and uncertainties in con-
ducting its businesses, including, but not limited to, the following. These risks may adversely affect Matsushita’s
business, operating results and financial condition. This section includes forward-looking statements and future
expectations as of the date of this annual report.
Risks Related to Economic Conditions losses from valuation declines of investment securities. Such
decreases in the value of stocks may occur, causing adverse
Weakness in Japanese and global economies may cause effects to Matsushita’s operating results and financial condition.
reduced demand for Matsushita’s products The decrease in the value of Japanese stocks may also reduce
Demand for Matsushita’s products and services may be affected stockholders’ equity on the balance sheet, as unrealized hold-
by general economic trends in the countries or regions in which ing gains (losses) of available-for-sale securities are included as
Matsushita’s products and services are sold. Economic down- part of accumulated other comprehensive income (loss).
turns and resulting declines in demand in Matsushita’s major
markets worldwide may thus adversely affect the Company’s Risks Related to Matsushita’s Business
business, operating results and financial condition.
Competition in the industry may adversely affect
Currency exchange rate fluctuations could adversely affect Matsushita’s ability to maintain profitability
Matsushita’s operating results Matsushita develops, produces and sells a broad range of prod-
Foreign exchange rate fluctuations may adversely affect ucts and therefore faces many different types of competitors,
Matsushita’s business, operating results and financial condition, from large international companies to relatively small, rapidly
because its international business transactions and costs and growing, and highly specialized organizations. Matsushita may
prices of Matsushita’s products and services in overseas countries choose not to fund or invest in one or more of its businesses to
are affected by foreign exchange rate changes. In addition, the same degree as its competitors in those businesses do, or it
foreign exchange rate changes can also affect the yen value of may not be able to do so in a timely manner or even at all. These
Matsushita’s investments in overseas assets and liabilities because competitors may have greater financial, technological, and
Matsushita’s consolidated financial statements are presented in marketing resources than Matsushita in the respective busi-
Japanese yen. Generally, an appreciation of the yen against other nesses in which they compete.
major currencies such as the U.S. dollar and the euro may ad-
versely affect Matsushita’s operating results. Meanwhile, a depre- Rapid declines in product prices may adversely affect
ciation of the yen against the aforementioned major currencies Matsushita’s financial condition
may have a favorable impact on Matsushita’s operating results. Matsushita’s business is subject to intense price competition
worldwide, which makes it difficult for the Company to determine
Interest rate fluctuations may adversely affect Matsushita’s product prices and maintain adequate profits. Such intensified
financial condition, etc. price competition may adversely affect Matsushita’s profits,
Matsushita is exposed to interest rate fluctuation risks which especially in terms of possible decreases in demand. For the year
may affect the Company’s operational costs, interest expenses, ending March 31, 2008, Matsushita expects that its product prices
interest income and the value of financial assets and liabilities. in consumer digital electronics and many other business areas will
Accordingly, interest rate fluctuations may adversely affect the continue to decline, as has been the case in recent years.
Company’s business, operating results and financial condition.
Matsushita’s business is, and will continue to be, subject
Decreases in the value of Japanese stocks may adversely to risks generally associated with international business
affect Matsushita’s financial results operations
Matsushita holds mostly Japanese stocks as part of its invest- One of Matsushita’s business strategies is business expansion in
ment securities. The value of these stocks may drop substan- overseas markets. In many of these markets, Matsushita may
tially due to economic conditions or other factors, resulting in face risks generally associated with international manufacturing
Contents
Thousands of
U.S. dollars,
Millions of yen, except per share
except per share information information
2007 2006 2005 2004 2003 2007
For the year
Net sales ............................................ ¥9,108,170 ¥8,894,329 ¥8,713,636 ¥7,479,744 ¥7,401,714 $77,187,881
Operating profit .................................. 459,541 414,273 308,494 195,492 126,571 3,894,415
Income before income taxes .............. 439,144 371,312 246,913 170,822 68,916 3,721,559
Net income (loss) ............................... 217,185 154,410 58,481 42,145 (19,453) 1,840,551
Capital investment* ............................ ¥ 418,334 ¥ 345,819 ¥ 374,253 ¥ 271,291 ¥ 251,470 $ 3,545,203
Depreciation* ..................................... 280,177 275,213 287,400 253,762 283,434 2,374,381
R&D expenditures .............................. 578,087 564,781 615,524 579,230 551,019 4,899,042
At year-end
Long-term debt .................................. ¥ 226,780 ¥ 264,070 ¥ 477,143 ¥ 460,639 ¥ 588,202 $ 1,921,864
Total assets ........................................ 7,896,958 7,964,640 8,056,881 7,438,012 7,834,693 66,923,373
Stockholders’ equity .......................... 3,916,741 3,787,621 3,544,252 3,451,576 3,178,400 33,192,720
Number of shares issued
at year-end (thousands) .................... 2,453,053 2,453,053 2,453,053 2,453,053 2,447,923
Number of shareholders ..................... 250,858 252,239 275,413 282,190 275,266
Number of employees:
Domestic ........................................ 145,418 144,871 150,642 119,528 121,451
Overseas ........................................ 183,227 189,531 184,110 170,965 166,873
Total ............................................... 328,645 334,402 334,752 290,493 288,324
Ratios (%)
Operating profit/sales ......................... 5.0% 4.7% 3.5% 2.6% 1.7%
Income before income taxes/sales ..... 4.8 4.2 2.8 2.3 0.9
Net income (loss)/sales ...................... 2.4 1.7 0.7 0.6 (0.3)
Stockholders’ equity/total assets ........ 49.6 47.6 44.0 46.4 40.6
Notes: 1. See Note 1 (n) to the consolidated financial statements in respect to the calculation of net income (loss) per share amounts.
In computing cash dividends per share, the number of shares at the end of the applicable period has been used.
2. Cash dividends per share reflect those paid during each fiscal year.
3. U.S. dollar amounts are translated from yen at the rate of ¥118=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on
March 31, 2007.
4. In order to be consistent with financial reporting practices generally accepted in Japan, operating profit is presented as net sales less cost of
sales and selling, general and administrative expenses. Under U.S. generally accepted accounting principles, certain additional charges (such
as impairment losses and restructuring charges) are included as part of operating profit in the consolidated statements of income. See the
consolidated statements of income on pages 71 and 74, and Notes 8, 9 and 16 to the consolidated financial statements.
* Excluding intangibles
Domestic Sales
Overseas Sales
Net Income
200 As a result of all the factors stated in the preceding
paragraphs, the Company recorded a net income of
¥217.2 billion ($1,841 million) for fiscal 2007, an increase
100 of 41% from ¥154.4 billion in the previous year. Net
income per common share for the fiscal year was ¥99.50
($0.84), versus a net income per common share of
0
2003 2004 2005 2006 2007
¥69.48 a year ago.
* In order to be consistent with financial reporting practices generally
accepted in Japan, operating profit is presented as net sales less cost R&D Expenditures
of sales and selling, general and administrative expenses. Under U.S. R&D expenditures for fiscal 2007 increased 2% to
generally accepted accounting principles, certain additional charges ¥578.1 billion ($4,899 million), representing 6.3% of
(such as impairment losses and restructuring charges) are included as
part of operating profit in the consolidated statements of income. See
Matsushita’s consolidated net sales, as compared with
the consolidated statements of income on pages 71 and 74, and ¥564.8 billion in fiscal 2006.
Notes 8, 9 and 16 to the consolidated financial statements. In fiscal 2007, Matsushita executed initiatives to
accelerate R&D focused on key development themes,
Income before Income Taxes and to enhance R&D efficiency mainly by creating a
As a result of the afore-mentioned factors, as well as common platform for technologies in different product
increased operating profit, income before income taxes segments and categories. The key development themes
for fiscal 2007 increased 18% to ¥439.1 billion ($3,722 during the fiscal year were as follows:
million), compared with ¥371.3 billion in fiscal 2006, while (1) Full HD 42-inch plasma display panels
the ratio to net sales increased 0.6% to 4.8%, compared Matsushita realized a picture quality with definition over
with 4.2% in the previous year. 2.6 times as high as existing models while maintaining
the current high level of brightness, by miniaturizing the
Provision for Income Taxes partitions between illuminant cells to enlarge the illumi-
Provision for income taxes for fiscal 2007 amounted to nated area and utilizing a 1080p HD high-speed pixel
¥191.8 billion ($1,626 million), compared with ¥167.1 billion drive to ensure stable light emission from all pixels.
in the previous year. The effective tax rate to income before (2) World’s first dual-layer Blu-ray disc and recorder
income taxes declined to 43.7%, from 45.0% a year ago. Using a high-density recording technique of creating
This is due mainly to a decrease in valuation allowance to dual layers on each side of the disc, Matsushita realized
deferred tax assets compared with fiscal 2006. a large recording capacity of up to 6 hours of HD
digital terrestrial broadcasting and a high transfer
Minority Interests speed of approximately twice that of existing products.
Minority interests (earnings) amounted to ¥31.1 billion (3) Second-generation Integrated Platform
($264 million) for fiscal 2007, compared with minority Matsushita developed AV processing technology with
interests (losses) of ¥1.0 billion in fiscal 2006. This result low power consumption in a single system LSI,
was due mainly to increased profits in MEW and thereby realizing over 50 hours of music playback and
PanaHome, and the effect of a one-time charge incurred over 5 hours viewing of “One Segment” broadcasting
in fiscal 2006 at certain subsidiaries. on a mobile phone.
Earnings
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Operating profit* ................................................. ¥459,541 ¥414,273 ¥308,494 ¥195,492 ¥126,571 $3,894,415
Income before income taxes .............................. 439,144 371,312 246,913 170,822 68,916 3,721,559
Net income (loss) ............................................... 217,185 154,410 58,481 42,145 (19,453) 1,840,551
R&D expenditures .............................................. 578,087 564,781 615,524 579,230 551,019 4,899,042
* In order to be consistent with financial reporting practices generally accepted in Japan, operating profit is presented as net sales less cost of sales
and selling, general and administrative expenses. Under U.S. generally accepted accounting principles, certain additional charges (such as impair-
ment losses and restructuring charges) are included as part of operating profit in the consolidated statements of income. See the consolidated
statements of income on pages 71 and 74, and Notes 8, 9 and 16 to the consolidated financial statements.
Note: MEW, PanaHome and their respective subsidiaries became consolidated subsidiaries of the Company on April 1, 2004. Accordingly, a new
business segment, “MEW and PanaHome,” has been added from fiscal 2005.
Sales by Region
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2004 2003 2007
Domestic sales ................................... ¥4,616,520 ¥4,611,440 ¥4,580,555 ¥3,477,492 ¥3,453,836 $39,123,051
Overseas sales:
North and South America ............... 1,381,104 1,387,424 1,282,956 1,326,940 1,420,802 11,704,271
Europe ........................................... 1,217,931 1,113,556 1,122,493 1,080,143 999,637 10,321,449
Asia and Others .............................. 1,892,615 1,781,909 1,727,632 1,595,169 1,527,439 16,039,110
Total ........................................... 4,491,650 4,282,889 4,133,081 4,002,252 3,947,878 38,064,830
Total ................................................... ¥9,108,170 ¥8,894,329 ¥8,713,636 ¥7,479,744 ¥7,401,714 $77,187,881
10,000 500
8,000 400
6,000 300
4,000 200
2,000 100
0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Investments and advances (Notes 5, 6, 11 and 19) ................ 1,206,082 1,100,035 10,221,034
Other assets:
Goodwill (Notes 3 and 9) ........................................................ 379,324 413,137 3,214,610
Intangible assets (Notes 3 and 9) ............................................ 115,631 104,158 979,924
Other assets (Notes 11 and 12) .............................................. 354,779 308,418 3,006,602
Total other assets ............................................................ 849,734 825,713 7,201,136
Noncurrent liabilities:
Long-term debt (Notes 7, 10 and 19) ..................................... 226,780 264,070 1,921,864
Retirement and severance benefits (Note 11) .......................... 280,958 414,266 2,381,000
Other liabilities (Note 12) ......................................................... 179,458 112,024 1,520,831
Total noncurrent liabilities ................................................ 687,196 790,360 5,823,695
Stockholders’ equity:
Common stock (Note 13):
Authorized—4,950,000,000 shares
Issued—2,453,053,497 shares
(2,453,053,497 shares in 2006) ......................................... 258,740 258,740 2,192,712
Capital surplus (Note 13) ........................................................ 1,220,967 1,234,289 10,347,178
Legal reserve (Note 13) ........................................................... 88,588 87,526 750,746
Retained earnings (Note 13) ................................................... 2,737,024 2,575,890 23,195,118
Accumulated other comprehensive income (loss)
(Notes 6, 11, 14 and 18):
Cumulative translation adjustments ..................................... (99,538) (162,331) (843,542)
Unrealized holding gains of available-for-sale securities ....... 160,831 145,306 1,362,975
Unrealized gains of derivative instruments ........................... 862 1,326 7,305
Minimum pension liability adjustments ................................. — (10,420) —
Pension liability adjustments ................................................ 44,942 — 380,864
Total accumulated other comprehensive income (loss) .... 107,097 (26,119) 907,602
Treasury stock, at cost (Note 13):
306,769,039 shares (243,521,506 shares in 2006) ............. (495,675) (342,705) (4,200,636)
Total stockholders’ equity ................................................ 3,916,741 3,787,621 33,192,720
U.S. dollars
Yen (Note 2)
Net income per share of common stock
(Note 15):
Basic .................................................................... ¥ 99.50 ¥ 69.48 ¥ 25.49 $ 0.84
Diluted .................................................................. 99.50 69.48 25.49 0.84
See accompanying Notes to Consolidated Financial Statements.
3. Acquisition
On April 1, 2004, the Company acquired 19.2% of the based in Osaka, Japan. As a result of the acquisition, the
issued common shares of Matsushita Electric Works, Company is expected to provide a comprehensive range
Ltd. (MEW) through a tender offer to obtain its controlling of home electric and household equipment and systems
interest. Until then, the Company had a 31.8% equity in Japan. It also expects to reduce costs through econo-
ownership. mies of scale and sharing of research and development
This acquisition also resulted in another acquisition of resources and marketing channels. The aggregate pur-
a controlling interest of PanaHome Corporation chase cost of additional MEW shares was ¥147,187
(PanaHome) because both the Company and MEW had million and was paid in cash. The carrying value of the
27% equity ownerships, respectively. Company’s common shares of MEW immediately before
The results of operations of MEW and PanaHome are the acquisition was ¥200,174 million. The carrying value
included in the consolidated financial statements since of the Company’s existing common shares of PanaHome
that date. MEW is a manufacturer of household electric at April 1, 2004 was ¥22,861 million.
equipment, building products and related materials
In-process research and development represents the ¥20,005 million was assigned to assets subject to am-
estimated value of in-process research and development ortization, which have a weighted-average useful life of
projects that had not yet reached technical feasibility. approximately seven years and include technologies of
The related technology had no alternative use and ¥9,592 million with a 10-year weighted-average useful
required substantial additional development by the life, and software of ¥8,892 million with a 5-year
Company. In-process research and development was weighted-average useful life.
charged to operations during the year ended March 31, The total amount of goodwill is included in “MEW
2005 and included in selling, general and administrative and PanaHome” segment, and is not deductible for
expenses in the consolidated statements of income. tax purposes.
Of the ¥25,533 million of acquired intangible assets,
4. Inventories
Inventories at March 31, 2007 and 2006 are summarized as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Finished goods .......................................................................... ¥576,401 ¥534,766 $4,884,754
Work in process ......................................................................... 126,134 126,152 1,068,932
Raw materials ............................................................................ 246,864 254,344 2,092,068
¥949,399 ¥915,262 $8,045,754
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Net sales ........................................................... ¥1,352,107 ¥1,227,057 ¥1,187,975 $11,458,534
Gross profit ....................................................... 216,002 195,141 176,765 1,830,525
Net loss ............................................................ (7,595) (70,381) (11,178) (64,364)
Purchases and sales include the following transactions with associated companies for the three years ended
March 31, 2007:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Purchases from ................................................... ¥301,859 ¥261,458 ¥260,745 $2,558,127
Sales to ............................................................... 250,863 204,740 192,489 2,125,958
Dividends received from associated companies for the three years ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Dividends received .................................................. ¥3,365 ¥1,496 ¥1,480 $28,517
Retained earnings include undistributed earnings of the Company incurred a write-down of ¥30,681 million
associated companies in the amount of ¥30,557 million and ¥2,833 million, respectively, for other-than-temporary
($258,958 thousand) and ¥28,299 million, as of March impairment of investments and advances in associated
31, 2007 and 2006, respectively. companies. The write-down is included in other deduc-
During the years ended March 31, 2006 and 2005, tions in the consolidated statements of income.
Investments in associated companies include equity securities which have quoted market values at March 31,
2007 and 2006 compared with related carrying amounts as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Carrying amount ........................................................................... ¥3,311 ¥3,054 $28,059
Market value ................................................................................. 6,129 5,088 51,941
2006
Millions of yen
Gross Gross
unrealized unrealized
Fair holding holding
Cost value gains losses
Current:
Japanese and foreign
government bonds .... ¥ 30,028 ¥ 30,012 ¥ 3 ¥ 19
Convertible and
straight bonds ........... 1,500 1,500 — —
Other debt securities ... 25,241 25,241 — —
¥ 56,769 ¥ 56,753 ¥ 3 ¥ 19
Noncurrent:
Equity securities .......... ¥230,400 ¥527,705 ¥297,371 ¥ 66
Japanese and foreign
government bonds .... 90,214 89,678 — 536
Convertible and
straight bonds ........... 32,866 32,702 13 177
Other debt securities ... 18,580 18,654 104 30
¥372,060 ¥668,739 ¥297,488 ¥809
Proceeds from sale of available-for-sale securities for computing gross realized gains and losses is determined
the years ended March 31, 2007, 2006 and 2005 were by the average cost method.
¥84,806 million ($718,695 thousand), ¥135,907 million During the years ended March 31, 2007, 2006 and
and ¥74,719 million, respectively. The gross realized 2005, the Company incurred a write-down of ¥939
gains for the years ended March 31, 2007, 2006 and million ($7,958 thousand), ¥458 million and ¥2,661 million,
2005 were ¥12,452 million ($105,525 thousand), respectively, for other-than-temporary impairment of
¥63,757 million and ¥31,655 million, respectively. The available-for-sale securities, mainly reflecting the aggra-
gross realized losses on sale of available-for-sale securi- vated market condition of certain industries in Japan.
ties for the years ended March 31, 2007, 2006 and 2005 The write-down is included in other deductions in the
were ¥313 million ($2,653 thousand), ¥199 million and consolidated statements of income.
¥256 million, respectively. The cost of securities sold in
Gross unrealized holding losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, at
March 31, 2007 and 2006, are as follows:
2007
Millions of yen
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
value losses value losses value losses
Equity securities ............................................ ¥ 9,229 ¥ 531 ¥ — ¥ — ¥ 9,229 ¥ 531
Japanese and foreign government bonds ..... 19,977 6 — — 19,977 6
Convertible and straight bonds ..................... 1,839 13 — — 1,839 13
¥ 31,045 ¥ 550 ¥ — ¥ — ¥ 31,045 ¥ 550
2006
Millions of yen
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
value losses value losses value losses
Equity securities ............................................ ¥ 1,474 ¥ 66 ¥ — ¥ — ¥ 1,474 ¥ 66
Japanese and foreign government bonds ..... 114,558 555 — — 114,558 555
Convertible and straight bonds ..................... 30,623 177 — — 30,623 177
Other debt securities ..................................... 1,822 30 — — 1,822 30
¥148,477 ¥ 828 ¥ — ¥ — ¥148,477 ¥ 828
The gross unrealized loss position has been continuing for a relatively short period of time. Based on this and
other relevant factors, management has determined that these investments are not considered other-than-temporarily
impaired. The Company has not held unrealized losses for twelve months or more at March 31, 2007 and 2006.
The aggregate cost of the Company’s cost method 2006, respectively, the Company estimated that the fair
investments totaled ¥31,465 million ($266,653 thousand) value exceeded the cost of investments (that is, the
and ¥35,211 million at March 31, 2007 and 2006. The investments were not impaired). For the years ended
Company recognized the gross realized losses of ¥31,264 March 31, 2007, 2006 and 2005, the remaining invest-
million associated with the sale of a certain investment ments were considered other-than-temporarily impaired,
for the year ended March 31, 2006. For investments resulting in a write-down of ¥2,209 million ($18,720 thou-
with an aggregate cost of ¥29,639 million ($251,178 sand), ¥4,153 million and ¥10,692 million, respectively.
thousand) and ¥32,621 million at March 31, 2007 and
7. Leases
The Company has capital and operating leases for cer- resulting leases are being accounted for as operating
tain machinery and equipment with SMFC and other third leases. The resulting gains of these transactions, in-
parties. At March 31, 2007 and 2006, the gross book cluded in other income in the consolidated statements
value of machinery and equipment under capital leases of income, were not significant. The Company has
was ¥151,920 million ($1,287,458 thousand) and options to purchase the leased assets, or to terminate
¥168,374 million, and the related accumulated deprecia- the leases and guarantee a specified value of the leased
tion recorded was ¥93,488 million ($792,271 thousand) assets thereof, subject to certain conditions, during or at
and ¥101,025 million, respectively. the end of the lease term.
During the years ended March 31, 2007, 2006 and Rental expenses for operating leases, including the
2005, the Company sold and leased back certain above-mentioned sale-leaseback transactions were
machinery and equipment for ¥73,578 million ($623,542 ¥47,094 million ($399,102 thousand), ¥41,302 million
thousand), ¥115,326 million and ¥49,574 million, and ¥34,800 million for the years ended March 31, 2007,
respectively. The base lease term is 2 to 5 years. The 2006 and 2005, respectively.
8. Long-Lived Assets
The Company periodically reviews the recorded value of its “Home Appliances,” “Components and Devices,”
long-lived assets to determine if the future cash flows to “MEW and PanaHome,” “Other” and the remaining
be derived from these assets will be sufficient to recover segments, respectively.
the remaining recorded asset values. As discussed in The Company recognized impairment losses in the
Note 1 (q), the Company accounts for impairment of aggregate of ¥16,230 million of property, plant and
long-lived assets in accordance with SFAS No. 144. equipment during fiscal 2006.
Impairment losses are included in other deductions in the The Company decided to sell certain land and build-
consolidated statements of income, and are not charged ings, and classified those land and buildings as assets
to segment profit. held for sale. These assets are included in other current
The Company recognized impairment losses in the assets in the consolidated balance sheet and the
aggregate of ¥18,324 million ($155,288 thousand) of Company recognized an impairment loss. The fair value
property, plant and equipment during fiscal 2007. of the land and buildings was determined by using a
The Company closed a domestic factory that manufac- purchase price offered by a third party.
tured air conditioner devices and recorded an impairment The Company also recorded impairment losses
loss related to buildings, and machinery and equipment, related to write-down of land and buildings used in con-
as the Company estimated that the carrying amounts nection with the manufacture of certain information and
would not be recovered by the discounted estimated communications equipment at a domestic subsidiary. As
future cash flows expected to result from their eventual a result of plans to carry out selection and concentration
disposition. of businesses, the Company estimated the carrying
The Company also recorded impairment losses amounts would not be recovered by the future cash
related to buildings, and machinery and equipment used flows. The fair value of land was determined by specific
in building equipment, and electronic and plastic materi- appraisal. The fair value of buildings was determined
als of some domestic and overseas subsidiaries. The based on the discounted estimated future cash flows
profitability of each subsidiary was expected to be low in expected to result from the use of the buildings and their
the future and the Company estimated the carrying eventual disposition.
amounts would not be recovered by the future cash flows. Impairment losses of ¥4,260 million, ¥2,771 million,
Impairment losses of ¥1,416 million ($12,000 thou- ¥2,488 million, ¥2,754 million and ¥3,957 million were
sand), ¥3,901 million ($33,059 thousand), ¥10,163 million related to “AVC Networks,” “Components and Devices,”
($86,127 thousand), ¥1,571 million ($13,314 thousand) “MEW and PanaHome,” “Other” and the remaining
and ¥1,273 million ($10,788 thousand) were related to segments, respectively.
The Company recognized an impairment loss of value of the reporting unit caused by decreased profit
¥27,299 million ($231,348 thousand) during fiscal 2007 expectation and the intensification of competition in a
related to goodwill of a mobile communication subsidiary. domestic market which was unforeseeable in the prior year.
This impairment is due to a decrease in the estimated fair
Acquired intangible assets, excluding goodwill, at March 31, 2007 and 2006 are as follows:
Millions of yen Thousands of U.S. dollars
2007 2006 2007
Average
Gross carrying Accumulated Gross carrying Accumulated amortization Gross carrying Accumulated
amount amortization amount amortization period amount amortization
Amortizing intangible assets:
Patents ..................................... ¥ 53,339 ¥ 33,447 ¥ 39,245 ¥ 30,620 8 years $ 452,026 $ 283,449
Software ................................... 221,023 148,537 187,336 117,821 4 years 1,873,076 1,258,788
Other ........................................ 37,705 15,394 37,516 12,806 39 years 319,534 130,458
¥312,067 ¥197,378 ¥264,097 ¥161,247 $2,644,636 $1,672,695
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Non-amortizing intangible assets ................................................................... ¥942 ¥1,308 $7,983
Aggregate amortization expense for amortizing intangible assets for the years ended March 31, 2007, 2006 and 2005
was ¥37,337 million ($316,416 thousand), ¥33,918 million and ¥37,569 million, respectively. Estimated amortization
expense for the next five years is as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2008 ................................................................................................................. ¥32,711 $277,212
2009 ................................................................................................................. 23,724 201,051
2010 ................................................................................................................. 14,172 120,102
2011 ................................................................................................................. 9,125 77,331
2012 ................................................................................................................. 6,003 50,873
The Company recorded an impairment loss of ¥116 million ($983 thousand) and ¥349 million of amortizing intangible
assets in fiscal 2007 and 2005, respectively. The Company estimated the carrying amount would not be recovered by the
future cash flows, due to severe competition in the domestic market. The Company also recognized an impairment loss of
¥239 million ($2,025 thousand), ¥98 million and ¥905 million of non-amortizing intangible assets, in connection with the
decline of their market value during fiscal 2007, 2006 and 2005, respectively. The impairment loss is included in other
deductions in the consolidated statements of income.
The aggregate annual maturities of long-term debt after March 31, 2007 are as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2008 ................................................................................................................. ¥ 54,083 $458,331
2009 ................................................................................................................. 60,226 510,390
2010 ................................................................................................................. 34,279 290,500
2011 ................................................................................................................. 5,537 46,924
2012 ................................................................................................................. 102,155 865,720
As is customary in Japan, short-term and long-term loans from banks. At March 31, 2006, property, plant
bank loans are made under general agreements which and equipment with a book value of ¥6,645 million was
provide that security and guarantees for future and pledged as collateral by subsidiaries for secured yen
present indebtedness will be given upon request of the loans mainly from Development Bank of Japan. At March
bank, and that the bank shall have the right, as the obliga- 31, 2007 and 2006, short-term loans subject to such
tions become due, or in the event of their default, to offset general agreements amounted to ¥39,876 million
cash deposits against such obligations due to the bank. ($337,932 thousand) and ¥33,951 million, respectively.
Each of the loan agreements grants the lender the The balance of short-term loans also includes borrow-
right to request additional security or mortgages on ings under acceptances and short-term loans of foreign
certain assets. At March 31, 2007, investments and subsidiaries. The weighted-average interest rate on short-
advances, and property, plant and equipment with a term borrowings outstanding at March 31, 2007 and
book value of ¥6,061 million ($51,364 thousand) was 2006 was 5.1% and 4.4%, respectively.
pledged as collateral by subsidiaries for secured yen
Millions of yen
Before After
Application of Application of
SFAS No. 158 Adjustments SFAS No. 158
Investments and advances ..................................................... ¥1,206,704 ¥ (622) ¥1,206,082
Other assets .......................................................................... 325,895 28,884 354,779
Total other assets ............................................................... 820,850 28,884 849,734
Other current liabilities ............................................................ (426,298) (8,649) (434,947)
Total current liabilities ......................................................... (2,733,218) (8,649) (2,741,867)
Retirement and severance benefits ........................................ (324,124) 43,166 (280,958)
Total noncurrent liabilities ................................................... (730,362) 43,166 (687,196)
Minority interests .................................................................... (549,506) (1,648) (551,154)
Minimum pension liability adjustments .................................... 16,189 (16,189) —
Pension liability adjustments ................................................... — (44,942) (44,942)
Total accumulated other comprehensive income (loss) ....... (45,966) (61,131) (107,097)
Total stockholders’ equity ................................................... (3,855,610) (61,131) (3,916,741)
The accumulated benefit obligation for the pension plans was ¥1,945,020 million ($16,483,220 thousand) and
¥1,905,395 million at March 31, 2007 and 2006, respectively.
The projected benefit obligations and the fair value of plan assets for the pension plans with projected benefit obliga-
tions in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the pension
plans with accumulated benefit obligations in excess of plan assets at March 31, 2007 and 2006 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Plans with projected benefit obligations in excess of
plan assets:
Projected benefit obligations ................................................ ¥823,421 ¥972,446 $6,978,144
Fair value of plan assets ...................................................... 533,814 598,355 4,523,847
Plans with accumulated benefit obligations in excess of
plan assets:
Accumulated benefit obligations .......................................... 817,849 842,315 6,930,924
Fair value of plan assets ...................................................... 533,814 485,099 4,523,847
Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2007 consist of:
Thousands of
Millions of yen U.S. dollars
Prior service cost ............................................................................................ ¥(295,419) $(2,503,551)
Actuarial loss ................................................................................................... 206,106 1,746,661
¥ (89,313) $ (756,890)
The funded status at March 31, 2006, reconciled to the net amount recognized in the consolidated balance sheet
at that date, is summarized as follows:
Millions of yen
Amounts recognized in the consolidated balance sheet at March 31, 2006 consist of:
Millions of yen
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, 2007 consisted of
the following components:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Service cost—benefits earned during the year ..... ¥59,415 ¥ 63,787 ¥ 71,081 $503,517
Interest cost on projected benefit obligation ......... 52,659 51,131 54,417 446,263
Expected return on plan assets ............................ (50,069) (37,088) (35,101) (424,314)
Amortization of prior service benefit ...................... (25,201) (26,376) (23,533) (213,568)
Recognized actuarial loss ..................................... 18,407 43,145 48,641 155,992
Net periodic benefit cost ...................................... ¥55,211 ¥ 94,599 ¥115,505 $467,890
The estimated prior service cost and actuarial loss for the defined benefit pension plan that will be amortized from
accumulated other comprehensive income (loss) into net periodic cost for the year ended March 31, 2008 are gain of
¥26,994 million ($228,763 thousand) and loss of ¥19,187 million ($162,602 thousand), respectively.
Weighted-average assumptions used to determine net cost for the three years ended March 31, 2007 are as follows:
2007 2006 2005
The expected return on plan assets is determined based on the portfolio as a whole and not on the sum of the
returns on individual asset categories, considering long-term historical returns, asset allocation, and future estimates
of long-term investment returns.
The weighted-average asset allocations of the Company’s pension plans at March 31, 2007 and 2006 are as follows:
2007 2006
Asset category:
Equity securities .............................................................................. 45% 47%
Debt securities ................................................................................ 43 37
Life insurance company general accounts ....................................... 7 9
Other .............................................................................................. 5 7
Total ............................................................................................ 100% 100%
Each plan of the Company has a different investment considered necessary to achieve the expected long-term
policy, which is designed to ensure sufficient plan assets rate of return on plan assets.
are available to provide future payments of pension The Company expects to contribute ¥154,049 million
benefits to the eligible plan participants and is individually ($1,305,500 thousand) to its defined benefit plans in the
monitored for compliance and appropriateness on an year ending March 31, 2008.
on-going basis. Considering the expected long-term The benefits expected to be paid from the defined
rate of return on plan assets, each plan of the Company pension plans in each fiscal year 2008–2012 are
establishes a “basic” portfolio comprised of the optimal ¥85,914 million ($728,085 thousand), ¥90,352 million
combination of equity securities and debt securities. Plan ($765,695 thousand), ¥94,678 million ($802,356
assets are invested in individual equity and debt securities thousand), ¥99,030 million ($839,237 thousand), and
using the guidelines of the “basic” portfolio in order to ¥104,342 million ($884,254 thousand), respectively. The
generate a total return that will satisfy the expected aggregate benefits expected to be paid in the five years
return on a mid-term to long-term basis. The Company from fiscal 2013–2017 are ¥544,850 million ($4,617,373
evaluates the difference between expected return and thousand). The expected benefits are based on the
actual return of invested plan assets on an annual basis same assumptions used to measure the Company’s
to determine if such differences necessitate a revision in benefit obligation at December 31 and include estimated
the formulation of the “basic” portfolio. The Company future employee service.
revises the “basic” portfolio when and to the extent
The significant components of deferred income tax expenses for the three years ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Deferred tax expense (exclusive of the effects
of other components listed below) ...................... ¥114,132 ¥89,824 ¥78,649 $967,220
Benefits of net operating loss carryforwards ......... (41,734) (19,076) (21,844) (353,678)
¥ 72,398 ¥70,748 ¥56,805 $613,542
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities at March 31, 2007 and 2006 are presented below:
Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Deferred tax assets:
Inventory valuation .................................................................. ¥ 94,489 ¥ 76,463 $ 800,754
Expenses accrued for financial statement purposes
but not currently included in taxable income ......................... 251,194 294,984 2,128,763
Property, plant and equipment ............................................... 167,089 179,114 1,416,009
Retirement and severance benefits ......................................... 76,604 151,742 649,186
Tax loss carryforwards ........................................................... 249,356 242,180 2,113,186
Other ...................................................................................... 150,306 185,551 1,273,780
Total gross deferred tax assets ........................................... 989,038 1,130,034 8,381,678
Less valuation allowance .................................................... 438,837 464,100 3,718,958
Net deferred tax assets ....................................................... 550,201 665,934 4,662,720
The Company has not recognized a deferred tax taxable to the Company in the foreseeable future. A de-
liability for the undistributed earnings of its foreign ferred tax liability will be recognized when the Company
subsidiaries and foreign corporate joint ventures of no longer plans to permanently reinvest undistributed
¥770,701 million ($6,531,364 thousand) as of March 31, earnings. Calculation of related unrecognized deferred
2007, because the Company currently does not expect tax liability is not practicable.
those unremitted earnings to reverse and become
Treasury stock reserved for options at March 31, 2007 and 2006 was 30,000 shares and 86,000 shares, respectively.
Number of shares
Average common shares outstanding ............... 2,182,791,138 2,222,376,333 2,294,607,915
Dilutive effect:
Stock options ................................................ 13,858 11,909 —
Diluted common shares outstanding ................. 2,182,804,996 2,222,388,242 2,294,607,915
Stock options were outstanding for the year ended March 31, 2005, but were not included in the calculation of
diluted net income per share because the stock options’ effect would be antidilutive (see Note 13).
These restructuring charges are included in other deductions in the consolidated statements of income.
The Company has provided early retirement programs to those employees voluntarily leaving the Company. The
accrued early retirement programs are recognized when the employees accept the offer and the amount can be rea-
sonably estimated. Expenses associated with the closure and integration of locations include amounts such as mov-
ing expense of facilities and costs to terminate leasing contracts incurred at domestic and overseas manufacturing
plants and sales offices. An analysis of the accrued restructuring charges for the year ended March 31, 2007, 2006
and 2005 is as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Balance at beginning of the year ........................... ¥ 1,335 ¥ 3,407 ¥ — $ 11,314
New charges ......................................................... 19,574 48,975 110,568 165,881
Cash payments ..................................................... (10,889) (51,047) (107,161) (92,280)
Balance at end of the year .................................... ¥10,020 ¥ 1,335 ¥ 3,407 $ 84,915
Other
Other segment incurred restructuring charges in the
amount of ¥225 million ($1,906 thousand) mainly in
domestic sales companies.
The following represent significant restructuring activities for the year ended March 31, 2006 by business segment:
AVC Networks
AVC Networks segment restructured mainly to address MEW and PanaHome
price declines in digital AV products. The restructuring MEW and PanaHome segment restructured to strengthen
activities mainly consisted of the implementation of early its management structures by realigning its organization.
retirement programs. The restructuring activities mainly consisted of the imple-
Total restructuring charges amounted to ¥3,447 million. mentation of early retirement programs and closure and
integration of manufacturing plants and sales offices.
Home Appliances Total restructuring charges amounted to ¥9,385 mil-
Home Appliances segment restructured its operations. lion, including expenses associated with the implementa-
The restructuring activities mainly consisted of closure tion of early retirement programs of ¥4,832 million.
and integration of locations in Japan.
Total restructuring charges amounted to ¥2,655 million. JVC
JVC segment restructured to strengthen its company-
Components and Devices wide organizational and employment structure. The
Components and Devices segment restructured mainly restructuring activities mainly consisted of the imple-
to enhance cost competitiveness as well as to address mentation of early retirement programs.
sharp price declines. The restructuring activities mainly Total restructuring charges amounted to ¥8,891 million.
consisted of the implementation of early retirement pro-
grams in Japan for semiconductor business. Other
Total restructuring charges amounted to ¥21,510 Other segment incurred restructuring charges in the
million, including expenses associated with the implemen- amount of ¥3,087 million mainly in overseas sales
tation of early retirement programs of ¥20,183 million. companies.
Foreign exchange gains and losses included in other ¥69,261 million, and recorded losses on the sale of trade
deductions for the years ended March 31, 2007, 2006 and receivables of ¥208 million ($1,763 thousand) and ¥47
2005 are losses of ¥18,950 million ($160,593 thousand), million, respectively. Those losses are included in selling,
¥13,475 million and ¥7,542 million, respectively. general and administrative expenses. The Company is
Shipping and handling costs are included in selling, responsible for servicing the receivables. Included in trade
general and administrative expenses in the consolidated notes receivable and trade accounts receivable at March
statements of income. 31, 2007 are amounts of ¥34,744 million ($294,441 thou-
Included in other deductions for the year ended sand) without recourse and ¥34,382 million ($291,373
March 31, 2006 are claim expenses of ¥34,340 million. thousand) with recourse scheduled to be sold to
In fiscal 2007, 2006 and 2005, the Company sold, independent third parties.
without recourse, trade receivables of ¥315,329 million In fiscal 2005, the Company sold, without recourse,
($2,672,280 thousand), ¥193,974 million and ¥48,578 loans receivable of ¥96,339 million to independent third
million to independent third parties for proceeds of parties for proceeds of ¥106,779 million, and recorded
¥314,265 million ($2,663,263 thousand), ¥193,415 mil- gains on the sale of loans receivable of ¥10,440 million,
lion and ¥48,469 million, and recorded losses on the sale which is included in other income.
of trade receivables of ¥1,064 million ($9,017 thousand), The sale of the receivables was accounted for under
¥559 million and ¥109 million, respectively. In fiscal 2007 SFAS No. 140, “Accounting for Transfer and Servicing of
and 2006, the Company sold, with recourse, trade Financial Assets and Extinguishments of Liabilities.”
receivables of ¥303,769 million ($2,574,314 thousand) Interest expenses and income taxes paid, and non-
and ¥69,308 million to independent third parties for pro- cash investing and financing activities for the three years
ceeds of ¥303,561 million ($2,572,551 thousand) and ended March 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Cash paid:
Interest ............................................................ ¥ 22,202 ¥21,853 ¥25,513 $188,153
Income taxes ................................................... 109,692 92,469 99,951 929,593
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 judgements and therefore cannot be determined with precision. Changes in assumptions could signifi-
cantly affect the estimates.
At March 31, 2007, commitments outstanding for the by July 2016. The Company has accrued estimated total
purchase of property, plant and equipment approxi- cost of ¥10,627 million ($90,059 thousand) for necessary
mated ¥105,575 million ($894,703 thousand). actions such as investigating whether the PCB equip-
Contingent liabilities at March 31, 2007 for discounted ment is buried at the facilities, including excavations, main-
export bills of exchange amounted to ¥409 million taining and disposing the PCB equipment that is already
($3,466 thousand). discovered, and soil remediation, since it represents
Liabilities for environmental remediation costs are management’s best estimate or minimum of the cost,
recorded when it is probable that obligations have been but the payments are not considered to be fixed and
incurred and the amounts can be reasonably estimated. reliably determinable.
In January 2003, the Company announced that disposed There are a number of legal actions against the
electric equipment that contained polychlorinated biphe- Company and certain subsidiaries. Management is of
nyls (“PCB equipment”) might be buried in the ground of the opinion that damages, if any, resulting from these
its four manufacturing facilities and one former manufac- actions will not have a material effect on the Company’s
turing facility. The applicable laws require that PCB consolidated financial statements.
equipment be appropriately maintained and disposed of
By Business Segment:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Sales:
AVC Networks:
Customers ................................................ ¥3,948,720 ¥ 3,894,274 ¥ 3,745,339 $33,463,729
Intersegment ............................................. 98,451 91,814 113,442 834,330
Total ...................................................... 4,047,171 3,986,088 3,858,781 34,298,059
Home Appliances:
Customers ................................................ 1,119,318 1,069,282 1,102,795 9,485,745
Intersegment ............................................. 184,096 171,920 126,973 1,560,136
Total ...................................................... 1,303,414 1,241,202 1,229,768 11,045,881
Components and Devices:
Customers ................................................ 987,933 954,011 1,006,893 8,372,314
Intersegment ............................................. 389,824 414,247 462,114 3,303,593
Total ...................................................... 1,377,757 1,368,258 1,469,007 11,675,907
MEW and PanaHome:
Customers ................................................ 1,809,503 1,695,949 1,628,372 15,334,771
Intersegment ............................................. 49,210 51,258 57,885 417,034
Total ...................................................... 1,858,713 1,747,207 1,686,257 15,751,805
JVC:
Customers ................................................ 640,746 697,150 721,391 5,430,051
Intersegment ............................................. 5,833 5,966 8,818 49,432
Total ...................................................... 646,579 703,116 730,209 5,479,483
Other:
Customers ................................................ 601,950 583,663 508,846 5,101,271
Intersegment ............................................. 882,026 731,629 518,277 7,474,797
Total ...................................................... 1,483,976 1,315,292 1,027,123 12,576,068
Eliminations .................................................. (1,609,440) (1,466,834) (1,287,509) (13,639,322)
Consolidated total ..................................... ¥9,108,170 ¥ 8,894,329 ¥ 8,713,636 $77,187,881
Identifiable assets:
AVC Networks .............................................. ¥2,333,353 ¥2,276,573 ¥2,205,663 $19,774,178
Home Appliances ......................................... 724,914 637,935 618,156 6,143,339
Components and Devices ............................ 989,293 966,684 930,315 8,383,839
MEW and PanaHome ................................... 1,354,679 1,371,405 1,384,695 11,480,330
JVC .............................................................. 419,980 438,456 483,867 3,559,153
Other ............................................................ 461,884 503,798 883,706 3,914,271
Corporate and eliminations ........................... 1,612,855 1,769,789 1,550,479 13,668,263
Consolidated total ..................................... ¥7,896,958 ¥7,964,640 ¥8,056,881 $66,923,373
By Geographical Area:
Sales attributed to countries based upon the customer’s location and property, plant and equipment are as follows:
Thousands of
Millions of yen U.S. dollars
2007 2006 2005 2007
Sales:
Japan ............................................................ ¥4,616,520 ¥4,611,440 ¥4,580,555 $39,123,051
North and South America .............................. 1,381,104 1,387,424 1,282,956 11,704,271
Europe .......................................................... 1,217,931 1,113,556 1,122,493 10,321,449
Asia and Others ............................................. 1,892,615 1,781,909 1,727,632 16,039,110
Consolidated total ...................................... ¥9,108,170 ¥8,894,329 ¥8,713,636 $77,187,881
United States of America included in
North and South America ............................ ¥1,213,867 ¥1,206,357 ¥1,127,412 $10,287,008
There are no individually material countries which business segments or geographic segments are made
should be separately disclosed in North and South at arms-length prices. There are no sales to a single
America, Europe and Asia and Others, except for the external major customer for the three years ended
United States of America on sales. Transfers between March 31, 2007.
Geographical profit:
Japan ........................................................... ¥ 409,395 ¥ 374,129 ¥ 262,063 $ 3,469,449
North and South America ............................. 22,500 16,773 20,834 190,678
Europe ......................................................... 13,903 4,511 7,393 117,822
Asia and Others ............................................ 89,460 81,337 75,324 758,136
Corporate and eliminations ........................... (75,717) (62,477) (57,120) (641,670)
Consolidated total ..................................... ¥ 459,541 ¥ 414,273 ¥ 308,494 $ 3,894,415
Identifiable assets:
Japan ........................................................... ¥4,416,586 ¥ 4,442,776 ¥ 5,055,700 $37,428,695
North and South America ............................. 455,216 443,432 402,155 3,857,763
Europe ......................................................... 452,924 412,948 379,571 3,838,339
Asia and Others ............................................ 1,265,170 1,235,438 995,785 10,721,780
Corporate and eliminations ........................... 1,307,062 1,430,046 1,223,670 11,076,796
Consolidated total ..................................... ¥7,896,958 ¥ 7,964,640 ¥ 8,056,881 $66,923,373
The management of Matsushita Electric Industrial Co., Ltd. is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934.
The Company’s management evaluated the effectiveness of internal control over financial reporting
as of March 31, 2007. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-
Integrated Framework.
Based on its assessment, management concluded that, as of March 31, 2007, the Company’s
internal control over financial reporting was effective.
The Company’s independent registered public accounting firm, KPMG AZSA & Co. has issued an
audit report on our evaluation of internal control over financial reporting as of March 31, 2007.
Fumio Ohtsubo
President
Makoto Uenoyama
Director
(In charge of Accounting and Finance)
We have audited the accompanying consolidated balance sheets of Matsushita Electric Industrial Co., Ltd. and subsidiaries as
of March 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity, and cash flows for
each of the years in the three-year period ended March 31, 2007, all expressed in yen. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). 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 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, 2007 and 2006, and the results of their operations
and their cash flows for each of the years in the three-year period ended March 31, 2007, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the effectiveness of Matsushita Electric Industrial Co., Ltd. and subsidiaries’ internal control over financial
reporting as of March 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria), and our report dated June 27,
2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control
over financial reporting.
The accompanying consolidated financial statements as of and for the year ended March 31, 2007 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the
consolidated financial statements expressed in yen have been translated into United States dollars on the basis set forth in
Note 2 of the notes to the consolidated financial statements.
Osaka, Japan
June 27, 2007
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over
Financial Reporting, that Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained effective internal control over
financial reporting as of March 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an
opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained
effective internal control over financial reporting as of March 31, 2007, is fairly stated, in all material respects, based on
the COSO criteria. Also, in our opinion, Matsushita Electric Industrial Co., Ltd. and subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of March 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Matsushita Electric Industrial Co., Ltd. and subsidiaries as of March 31, 2007 and 2006,
and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended March 31, 2007, all expressed in yen, and our report dated June 27, 2007 expressed an unqualified opinion on
those consolidated financial statements.
Osaka, Japan
June 27, 2007
Corporate Bonds
1.64% Bonds due December 20, 2011
Fiscal Agent:
Sumitomo Mitsui Banking Corporation
6-5, 4-chome, Kitahama, Chuo-ku, Osaka-shi,
Osaka 541-0041, Japan
Phone: +81-6-6227-2120
2,000 2.0
1,900 1.0
1,800 0
1st quarter 2nd quarter 3rd quarter 4th quarter 1st quarter 2nd quarter 3rd quarter 4th quarter
2006 2007
(Millions of yen, except per share information)
Net sales ....................................... ¥2,048,161 ¥2,211,052 ¥2,398,420 ¥2,236,696 ¥2,136,934 ¥2,252,560 ¥2,436,828 ¥2,281,848
Income before income taxes ......... 66,194 87,917 126,089 91,112 75,392 157,082 144,394 62,276
Net income ................................... 33,443 30,964 49,269 40,734 35,830 79,293 78,673 23,389
Net income per share, diluted .......... ¥ 14.87 ¥ 13.94 ¥ 22.29 ¥ 18.43 ¥ 16.27 ¥ 36.16 ¥ 36.13 ¥ 10.84
Note: Quarterly financial data is unaudited and has not been reviewed under Statements on Auditing Standards No.100 “Interim Financial Information,” by
Matsushita’s independent registered public accounting firm.
3,000
2,500
2,000
1,500
1,000
500
2002 2003 2004 2005 2006 2007
High ................................ 1,826 ..................... 1,590 ...................... 1,694 ..................... 2,515 ...................... 2,870 .............. 2,495
Low ................................ 1,115 ........................ 860 ...................... 1,372 ..................... 1,485 ...................... 2,080 .............. 2,250
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