2018

Annual Report

7-7-1 Nakagaito, Daito, Osaka 574-0013, Japan
Phone +81-72-870-4303 Fax +81-72-871-1112

http://www2.funai.co.jp/en/index.html

Corporate Philosophy

Contents
Corporate Philosophy
Message from the President & CEO
Business Description

Fundamental
Principle

Dream with Conviction,
and Act on Information

Core Competencies
TopicsMid-term Business Plan
History
Company’s Outline

Management
Philosophy

Challenge the company to growby becoming helpful
in the community

Funai creates products that are the choice ofpeople around the world

Group Vision“Around the world,” as a global company“The choice,” aiming for top share in the industry“Creates products,” that people will love

Corporate Logo
Our Corporate Logo, which shows a stylized “F” breaking out of its
circular boundaries, expresses our focus on breaking away fromstereotypes, while at the same time symbolizing our vigorous growth.
The shape of the “F” resembles a human hand, connoting production andmanufacturing. This shape is meant to convey our high productivity andoutstanding quality, with sharp angles to express simplicity.

1

Annual Report 20182

Message from the President & CEO

Aiming to Be “FUNAI Strong” andthe Choice of Customers Worldwide

Aiming to Move Past Losses Undera New Management Policy
Funai has revised its management policy on the steps thatshould be taken based on this perspective. We will use FPS (theFunai Production System), which is one of our core

Funai Electric (hereafter, “Funai”) has handed down the aspirations of its founder, Tetsuro Funai, in its management
philosophy of “Dream with Conviction, and Act on Information.” We have restructured our profit structure based on our new
management policy and aim to make the company “FUNAI strong” again. By “FUNAI strong,” we mean utilizing Funai’s
unique core competencies to demonstrate earning power, competitive edge, productivity, and organizational strength. Ourcompetencies, to our greatest advantage, and are formulating
the Management Policy for Fiscal Year 2018 to successfullyreform the profit structure and achieve sustainable growth. The
details of the management policy will be explained below, but
we will work to strengthen profitability for the group as a wholegoal is to develop products that are loved by customers to secure the top market share in the industry as a global company

by advancing a business strategy that explicitly states theand realize the group vision of creating products that are the choice of customers around the world.

positioning of our businesses and by reforming governance andmanagement. These efforts will be based on three basic
strategies in each business: Expanding market share, ensuring

Hideaki Funakoshi
Representative Director
President & CEO

penetration of the FUNAI brand, and developing new
businesses. There has been no change in the policy of working
to make the company “FUNAI strong” once again, which was
the goal in place at the time I became president. During fiscal

Reflecting on Fiscal Year 2017
(Fiscal Year Ended March 31, 2018)
Funai improves productivity through the originality and ingenuity
demonstrated in its research and development capabilities andBased on our mid-term management plan, New Policy &the Funai Production System (FPS). By doing so it provides

Strategy for FY2017 - FY2019, we have worked to improve

simple, high-quality digital consumer electronics products withprofitability, mainly in the AV business to accomplish thesuperior cost-performance to the global market. However, Funai

essential goal of moving past the losses, and have madehas faced an unstable supply of components and stiffening

progress on building a strong business base. However, we werecompetition among manufacturers in the digital consumer

unable to mount an adequate response to the unprecedented

electronics market in recent years and this has had a greaterchanges in the market such as the inventory held by all LCD

than expected impact on business profitability. During fiscal

television manufacturers and, as I stated above, this resulted in2017 (fiscal year ended March 31, 2018), volume growth inextremely poor performance in fiscal 2017. It is our view thathigh-priced large-screen LCD televisions and the

LCD television demand in the North American market in fiscal

commencement of FUNAI-brand product sales in the Japanese2018 (fiscal year ending March 31, 2019) will remain flat or

market led to growth in sales for Funai’s main display business.

decline slightly from the level in fiscal 2017. The business

Meanwhile, the rapid rise in the price of LCD panels at theenvironment is also expected to remain severe due to stiffening

beginning of last year also halted the decline in the price of LCD

price competition, persistently high prices for semiconductor

televisions, and market demand for LCD televisions in North

components and other elements of uncertainty. In order to move

America and China shrunk. The shipment of a large volume of

Funai past losses without the benefit of an improving market

LCD televisions, mainly large models, to the North American

environment, we must improve our competitiveness bymarket by Chinese manufacturers also caused a state of

introducing attractive products that utilize Funai’s strengths andoversupply, leaving Funai and other LCD television

which cannot be imitated by other competitors. We also need to

manufacturers with high inventories. The sales promotions

position the company to make maximal use of Funai’s

required to sell this inventory cost more than expected and had

capabilities, reorganize the profit structure to eliminate

a substantial adverse impact on profitability. This resulted in

unprofitable businesses, and aggressively roll out a new

substantial underperformance in business results, including net

competitive strategy of actively entering new businesses.

losses for three consecutive periods.

3

Changing the Profit Structure to Better
Insulate Profits from the Market
Environment

2018, we will return to Funai’s original strengths of expanding
sales and earning reasonable profits, dedicated pursuit of costcompetitiveness, improving productivity through technologicalstrengths, and strengthening solidarity and the mindset ofworking as one team, based on the new management policy. We
will make steady progress on moving past losses to reach thestage of sustainable growth.

Handing Down the Aspirations of
Our Founder to Make the Company“FUNAI Strong” Once Again
Our founder, Tetsuro Funai, passed away on July 4, 2017. We arevery grateful for the many people who came to his memorialservice to pay their respects. As the head of the company, I willpass on the aspirations of our founder and continue to take on
the challenge of implementing various reforms swiftly andProfiledecisively. I am firm in my resolve to be bold in reforming thePresident and CEO

profit structure. All employees of the Funai Group will continue to

Hideaki Funakoshi DOB: September 30, 1965, in Osaka

work as one team to produce products that are loved bycustomers around the world and strive to achieve top market
share in the industry. We will make the company “FUNAI strong”
once again through these efforts, as we also take on thechallenge of entering the EV business and other new businesses
to achieve sustainable growth.

January 1993
April 2006
February 2008
June 2010

Joined Funai Electric Co., Ltd.
Manager, DVD Project Div.
Executive General Manager in charge of DVD Business Div.
Company Director
Officer and General Manager in charge of DVD Business Div.
July 2011
Officer and Deputy General Manager in charge of AV Headquarters
May 2012
Officer and Deputy General Manager in charge of AV System Business Div.
and General Manager of Digital Media Business Div.
April 2013
Officer and General Manager in charge of AV System Business Div.
and General Manager of Display Business Div.
November 2014 Officer and General Manager in charge of AV System Business Div.
April 2016
Officer and General Manager in charge of AV System Business Div.
and General Manager of Display Business Div.
June 2016
President and CEO
May 2017
President and CEO (Current position: General Manager of AV System Business Div.
and General Manager of Display Business Div.)
July 2017
General Manager of Business Development Headquarters and General Manager of
Product Reliability Headquarters

Annual Report 2018

4

Business Description

Supplying simple, high-quality products
to the world
Funai Electric supplies simple, high-quality products under a broad range of brands in four business segments—Display,
Digital Media, Office Solution, and Development and New Businesses—and has established a solid position in the global
consumer electronics market.
Since our company was established, Funai Electric has

our top-ranked share among Japanese manufacturers indemonstrated the ability to develop and supply products offlat-panel televisions in the North American market.

superior quality and cost-performance, and has built a

we developed ourselves in our Office Solution business and theelectronics market.

strong partnerships with our OEM (consignment manufacturing)

Today we are engaged in a broad range of businesses in four

We are entering a severe period of shakeout in the global
digital consumer electronics industry as competition on function,business, which carries printer-related equipment, anddesign, and price stiffens with the rise of Chinese, Taiwanese,

Development and New Businesses, which develops andand Korean manufacturers.

In our main Display business, we supply four brands of

14.2% of total sales

18.5

In the North American market, we have carried 4K Ultra HD Blu-ray
Disk players since 2016. We also launched exclusive sales of abn yenFUNAI-brand 4K Ultra-HD Blu-ray Disc recorder in Yamada Denki
stores in July 2018, and are continuing to expand overall sales with

(FY 2017)

flat-panel televisions.

develop, manufacture, and sell high value-added products.

DVD and BD (Blu-ray Disc) related products, the Office Solutions

vehicles, and other high-quality products.

Enticing AV users with a high-definition simultaneousrecording function

customers in our Development and New Businesses segment toflat-screen televisions, the Digital Media business, which carries

manufactures dental CT scanners, products for installation in

DVD/BD-related Products

Funai Electric utilizes the ink cartridges and printer products

reputation of solid reliability in the global digital consumer

business segments: The Display business, which carries

Digital Media Business

Office Solutions Business

Printer-related Products

However, it is precisely in this sort of severe environment

Capitalizing on the diverse range of business needs
to achieve expansion of the printer businessthat we are seizing the opportunity to manifest the true value of
Funai Electric, with our advanced in-house developmentflat-panel televisions in a variety of sizes from small to large. In

capacity and our formidable production system. We will work to

our Digital Media business, we supply DVD and BD (Blu-ray

increase our brand value and expand our market share byDisc) related products to Japan and North America, respectively.

rapidly developing and manufacturing products that match the

We are recognized for our price competitiveness and capacity toneeds of consumers and supplying products of superior quality

supply these audiovisual products and are particularly proud ofand cost-performance to the global market.

2.6% of total sales

3.3

Funai Electric is utilizing the expertise it has cultivated in OEM for
inkjet printer products since 1997 to expand the businessbn yensubstantially. We are manufacturing printer-related products for awide variety of purposes in the B-to-B and OEM segments,(FY 2017)

beginning with commercial inkjet cartridges we developed in-houseusing thermal inkjet technology.

Display Business

Flat-panel Televisions
Development and New Businesses

Dental CT Scanning Devices, Products
for Installation in Vehicles, and Other Products

80.0% of total sales

104.1

bn yen(FY 2017)

Globally recognized high-definition imaging,a new option in organic light-emitting diode TVs in Japan

Meeting a wide range of OEM needs with optimal
technology and optimal manufacturing
3.2% of total sales

4.2

Funai Electric is manufacturing dental CT scanning devices on
consignment for the U.S. market. We are also manufacturing

bn yenproducts for installation in vehicles and precision machinery in thehealthcare sector, and are meeting a wide range of needs with

(FY 2017)

superior technology.

Funai Electric is maintaining top-ranked share among Japanesemanufacturers in the North American market where we sell threebrands (Philips, SANYO, and Magnavox). We also achieved asmooth start during the first year of exclusive sales of FUNAI-brandproducts at Yamada Denki stores in Japan from June 2017 with

Brands sold globallysales that outperformed the goal. During fiscal 2018, the second
year of sales, we are working to expand sales further by introducing
a broad line-up that includes the industry’s first OLED TVs equippedwith an internal hard disk drive.

5

Brands sold in North America

Brands carried

Kodak

Kodak

Philips

Magnavox
Annual Report 2018

6

Core Competence

DesignWorld-Class Price Competitiveness

Capturing the Needs of Markets around the World
Funai Electric deploys a sales strategy based on the unique characteristics of each market in many locations around theworld. In the North American market, which is the largest market in the world, Funai has strengthened its relationship withleading mass retailers to develop an accurate assessment of market needs, and maintains top share in the market. We alsobegan exclusive sales of the FUNAI brand through Yamada Denki, the largest mass retailer of consumer electronics in Japan,
from 2017.
Utilizing our close ties with sales channels to accurately

development and sales strategies that meet the needs of theascertain the latest trends and market needs, and providing

market. These efforts are steadily raising our presence in the

products that offer high quality and superior market

market.
In printer-related products, we are working on development

performance--that is the sales strategy of Funai Electric.
Funai proudly claims the top share in LCD televisions, one ofof a product that applies our thermal inkjet technology, and are

our core products, among Japanese manufacturers in the Northplanning a market launch during fiscal 2018. In new business,

American market, in terms of volume sales. Moreover, volume

we are pursuing development and production of nursing caresales of the FUNAI-brand televisions that we began sellingand medical devices and are beginning development of compact

exclusively through Yamada Denki stores in Japan from Juneelectric vehicles based on our capital and business alliance and2017 far outperformed the goal for the initial year. We also

joint development agreement with FOMM Corporation, to meetlaunched sales of organic light-emitting diode TVs in Japan fromcurrent and future needs.

Produce core components in-house, reduce the number ofcomponents, and design locally overseas.
Pursuit of cost-performance from the design stage onward
has given Funai Electric world-class price competitiveness.
Funai Electric’s peerless price competitiveness was achieved

Three strengths
in design

Produce corecomponents
in-housethrough our unique design concept of producing corecomponents in-house, reducing the number of components, andlocal design overseas.
We brought the production of core components in-house

Improve costcompetitivenessand reduced the number of parts. Design work is performed atdevelopment sites in Malaysia, China, and other locations, andstrengthening communication among these locations has
shortened development time, reduced labor hours, andReducethe number ofcomponents

improved efficiency in local parts procurement. A design flowthat takes productivity into consideration and focuses on therelentless pursuit of optimal cost-performance for the entire

Design locallyoverseascompany helps Funai Electric products to emerge winners amid
stiff price competition.

July 2018 and are pursuing other productProduction

Taking on the Challenge of Ceaseless Improvements in Productivity

Global sales locations
Global production locations
Sales locations

Funai Electric continuously pursues improvements in productivity through its unique Funai Production System (FPS). FPS
enables Funai to provide high quality products with superior cost performance.

Production locations

Worldwide

North America

Sold under
the
brand

Sold underthePhilips
Magnavox &Japan
Sold underthe

PolandUSA

TVs, DVDs, BDs

Japan

China*
ThailandThailandJapan

Philippines (Luzon)

OLED TVs,
othersTVs

Philippines(Luzon)DVDs,
BDs, Printerswith the current production system and fosters a mindset amongproduction process through intentional stress testing of theteam members to take the initiative on improvement. This

production line (reducing the number of line workers, speeding

enables continual improvements in productivity. Funai sees FPS

up the belt conveyor), and taking steps to improve productivity

as the driver for achieving sustainable growth, and will restore

that encourage voluntary efforts to improve.

Funai Electric to strength by pursuing this even more ardently.

Repeatedly working through this cycle detects problems

brands

brand

China

FPS, Funai’s unique production system, detects problems in thePhilippines (Cebu)

MexicoPerform
an intentionalline stress test

Continual improvement inproductivity through FPS

MexicoTVs

Resolvethe problems

FPS

Detectproblems

Philippines(Cebu)
Ink
cartridges

Take steps
to improve*Subcontractor plant

7

Annual Report 20188

Topics

2017–2018
Topic 1

Topic 2

Broad Expansion of the FUNAI-brand line-up for Exclusive Saleby Yamada Denki I July 2018 I

Full-scale Launch of New EV-related Businesses

Funai has expanded the line-up of FUNAI-brand products soldIn Blu-ray Disc recorders, we installed an AI-based video

I May 2018 I
Funai concluded a basic joint development agreement withvehicles and related components based on the basic joint

exclusively at Yamada Denki stores, Japan’s largest mass

recording function in all models of the top-of-the-line UT series,

FOMM Corporation, a venture firm involved in compact electric

development agreement. Funai will produce products that the tworetailer of home electronics. New additions include 14 models inwhich meets the new 4K Ultra HD Blu-ray standard for next-gen-vehicles (EV), in May 2018. This agreement marked Funai’s

companies have agreed to mass produce and supply them tosix series of televisions, from a 4K LCD model to a simple 2K

eration Blu-ray. When connected to a 4K television, it enables

full-fledged entrance into the EV-related business. The demand

FOMM. We are also exploring alliances with various othermodel, which were added to the 7010 series of organic

viewers to enjoy high-resolution 4K images with a maximum

for electric vehicles, which do not produce CO2 or NOx

companies that are anchored to FOMM’s platform. We willlight-emitting diode TVs, which is the flagship model; and 6 new

resolution of 100 Mbps.

emissions is expected to expand in the future. The EVs

successfully take on the challenge of becoming a company thatdeveloped by FOMM are expected to make a particularly highaspires to becoming an even more useful contributor to society bymodels in three series of 4K Blu-ray Disc recorders.

The synergistic benefits achieved since June 2017 fromThe 7010 series of OLED TVs uses a minimal design in an

exclusive sale of FUNAI-brand products at Yamada Denki

contribution to reducing the burden on the environment due toexpanding our business domain into various areas such as

ultra-thin frame and is equipped with Clear Pix Engine 4K HDR

stores, which were derived from the combined strengths of

their compact specifications. This is a new business for Funai

automotive electronics,

OLED, an image processing engine that Funai developed for theFunai’s brand power and cost competitiveness and Yamada

and we are focusing on EV-related business that adds a highsharing services, andlatest panels. This series displays high-resolution images, from

Denki’s formidable sales network, resulted in market share ofdegree of value by combining the technical capabilities that Funai

other areas related to thepitch black to bright images consisting of a multitude of colors,

7%, outperforming our initial goal of 5%. We intend to launch a

has developed for a wide range of electronic products in the past

EV business, andand offers a recording function that automatically records theset top box that enables reception of 4K broadcasts during fiscal

and our proprietary FPS with FOMM’s strengths in research andpartnering with otherprograms you like, based on the HDD internal specs that Funai

2018, the second year of exclusive sales. We will work todevelopment. Funai concluded a capital partnership agreementcompanies.

developed itself. It also provides a “recommended replay”

achieve further market penetration of the FUNAI brand by rollingwith FOMM Corporation in November of last year. We continuefunction that classifies and saves recorded programs. This adds

out a product line-up that meets the needs of a wide range of

to engage in discussions aimed at identifying joint development

a new option to OLED TVs in Japan.

users in Japan and by increasing online sales in addition toplans that will bear fruit.

in-store sales.

In the future, we will work to develop compact electric“FOMM ONE,” from FOMM Corporation

Topic 3

Penetration of the FUNAI Brand via a Partnershipwith the LA Angels I February 2018 I
Funai, which operates its business in both Japan and the U.S.,

hitter. This powerful advantage

has entered into a partnership agreement with the Los Angeles

was only awarded to Funai. An

Angels, a major league baseball team in the U.S., to improve

ad featuring only FUNAI-brand

brand recognition of the FUNAI brand.

products is played on the

Shohei Ohtani, a Japanese “Babe Ruth” who is known for

scrolling advertising board

both his pitching and hitting, joined the Los Angeles Angels inright behind the back net when

December 2017 and his impressive success has drawn the

Ohtani appears in a game inattention of many people in both Japan and the U.S.

Angel Stadium or in Diablo“Sho-time,” a word coined to signify Ohtani’s astounding

Stadium. We will also actively

accomplishments, has also been a hit in Japan.

deploy ads based on this partnership in the future to achieve

Ohtani is currently participating in many interviews in front

Angels oﬃcial backboard

even greater penetration of the FUNAI brand.

of a backboard in Angel Stadium that is emblazoned with thelogos of FUNAI and the Angels. Ohtani also participates inpress conferences in this location after games in which heputs in a strong performance, as a pitcher or as a designated9

Annual Report 2018 10

Mid-term Business Plan

Moving Past the Losses to
the Stage of Sustainable Growth
The Funai Group is rolling out a new competitive strategy that uses our unique technical capabilities and FPS to achievesustainable growth. By focusing efforts on building a profit structure that utilizes Funai’s superiority, rather than relying on
temporary measures to expand sales, we will make steady progress on moving past the losses.
Our goal is to achieve 103 billion yen in net sales and 400 million yen in operating income in fiscal 2018 and 130 billion
yen in net sales and 1,100 million yen in operating income in fiscal 2020, the final year of the plan, by implementing
measures aimed at generating market competitiveness and reforming the profit structure of each business.

Trend in Net Sales (JPY Billions)

233.8

216.5

191.0

170.0
133.8

Fiscal 2020 Goals
Net sales

Fiscal 2018 Plan
Net sales

103

130

bn yenOperating income

400

130.0
103.0

bn yenOperating income

1,100

mn yen2012

mn yen

2013

2014

2015

2016

2017

2018

2020
(Fiscal year)

Display Business

Digital Media Business

Office Solutions Business

Development and New Businesses

Progress on Initiatives to Restore Profitability● Expand market share

Introducing Products that Will be the Choice ofCustomers to Survive

Using the B-to-B Business to Turn the Office
Solutions Business into a Highly Profitable Business

Developing New Businesses that Utilize the Technical
Capabilities of Funai● Implement strict PSI and supply chain management● Japan: Strengthen FUNAI brand line-up● Strengthen FUNAI brand and OEM products● North America: Capture new customers● Optimize production structure● Launch printer equipped with large capacity ink
cartridges● Capture new customers for inkjet cartridges forcommercial use● Stabilize the profit base by expanding OEM business

Net Sales (JPY Billions)

102.0

88.0

Net Sales (JPY Billions)

15.0

81.0

Net Sales (JPY Billions)

15.5

8.0

14.0

FY 2018

FY 2019

FY 2020(Goal)FY 2018

FY 2019

FY 2020(Goal)FY 2018● Pursue commercialization of AV equipment forbusiness use● Expand business in healthcare and medical products● Pursue commercialization of electric vehicles andcomponents installed in vehicles

Net Sales (JPY Billions)

9.0

3.5
3.0
2.0

5.0

11

130.1

FY 2019

FY 2020(Goal)FY 2018

FY 2019

FY 2020(Goal)

Annual Report 2018 12

Mid-term Business Plan

Fiscal 2018 Management Policy

Moving Past the Losses and Developing
a Competitive Strategy Unique to FUNAIThe highest priority goal in the medium-term management plan of the Funai Electric Group is to move past the losses.
We will work to steadily implement the basic strategy formulated for each fiscal year to achieve this.
Here, we introduce the basic strategy for fiscal 2018, which is a period of progress, and the concrete steps we willtake to achieve that strategy in each business.

13

Basic Strategies

1
2
3

North America: Market share expansion
Japan: FUNAI brand penetration
New business development

Display Business

Digital Media Business

Office Solutions Business

Development and New Businesses

Progress on Initiatives to Restore Profitability

Introducing Products that Will be the Choiceof Customers to Survive

Using the B-to-B Business to Turn the Office
Solutions Business into a Highly Profitable Business

Developing New Businesses that Utilizes
the Technical Capabilities of Funai

In the North American market, one of Funai’s main markets, wewill target expansion of business with other major mass retailers
while maintaining our strong relationship with Walmart. We will
make a fresh effort to expand the amount of regular display spaceat major mass retail stores and use the online sales channels ofeach of the mass retailers to expand sales. We will also enhance
our product line-up by introducing AI televisions equipped with avoice activation function and smart televisions equipped with
Internet functions, as well as other high value-added products. To
outperform the emerging Chinese manufacturers in the North
American market, we intend to do everything we can to improve
cost competitiveness and further expand market share throughwork on specific projects.
In the Japanese market, Funai began exclusive sales of
FUNAI-brand products at Yamada Denki stores from June 2017
and sales are outperforming our initial goal. In fiscal 2018, we will
use our alliance with Yamada Denki to accelerate development of
products that capture the needs of customers, and will strive toachieve even greater penetration of the FUNAI brand with astronger product line-up. In July 2018, we updated our flagship7010 series line-up of 4K organic light-emitting diode TVs with a
total of 14 models in six series of LCD televisions. The deploymentof advertising based on our partnership agreement with the Los
Angeles Angels has also been effective in achieving penetration of
the FUNAI brand.
We will also work to improve profitability through the concentration of management resources in the development of OEM
products, and enter alliances with panel manufacturers to enable
the supply of panels at a reasonable price. We will work to
improve the profit structure by optimizing the production structure
and reducing service costs through PSI management and strict
management of the supply chain.

In recent years, only a few manufacturers, including Funai, haveproduced products related to DVD and Blu-ray Discs for the North
American market as video streaming services through the Internet
or cable television has proliferated rapidly. Funai is aiming tocapture top share and, with this, the victor’s profits by developing
products that will be the choice of customers, in a bid to survive inthis market. Our strategy for accelerating the capture of market
share from our competitors in the North American market is
two-fold: Pursue development of a product line-up that is limited
to products in the DVD and Blu-ray disc markets in order toreduce the cost of development, and simultaneously expand
market share by acquiring new customers and using their online
sales channels.
In the Japanese market, we began exclusive sale of high-performance Blu-ray disc recorders at Yamada Denki stores under
the FUNAI brand from June 2017 onward, and sales are performing strongly. We will continue to expand the FUNAI-brand line-up
as we work to expand market share, and will also improve thequality of product development and software, and enhance
after-sales service to meet the needs of customers and increasecustomer satisfaction. We are also working to achieve penetrationof the FUNAI brand through a partnership agreement with the Los
Angeles Angels and will work to gain a foothold for entering theASEAN market in the future.
Our digital media products are currently being produced in
China and the Philippines, but we plan to drastically reform our
profit structure by consolidating this to one production location to
maximize productivity and reduce costs.

During fiscal 2017, we undertook a comprehensive review of
unprofitable products and restructured our research and development subsidiary in the U.S. This shrank the level of losses in theoffice solutions business.
From fiscal 2018 onward, we will utilize the inkjet technology
we have developed in printer cartridge heads to actively launchhigh value-added printer products that are unique to Funai anddemonstrate a superiority that cannot be imitated by othercompanies. We will work to improve profitability and grow thebusiness by taking another step away from development andtoward reaping the benefits of our efforts.
We are aiming to stabilize the profit base through expansion of
OEM business and are making steady progress on negotiations withthe customers to whom we supply CISS printers with high-capacity
ink cartridges. In C&I (commercial/industrial ink cartridges) andmultipurpose printers, a business we have already developed into ahighly profitable B-to-B business, we are accelerating efforts toacquire new customers to whom we will be able to supply a stable
volume. We planning to begin mass production of our nail printerduring fiscal 2018. We are currently working to expand the salechannels for this product and expect it to be a product that appeals
to a broad market, including beauty salons and individuals. We havealready begun mass production of coupon printers that are being
installed in GMS (general supermarkets) and other retail stores, andexpect these to gradually replace older competitor products atthese stores in the future.
Funai also plans to launch multiple products in the new nichefield of microfluidics (microfluid control) in the future, using the
microfluidics technology we have developed thus far as aresource. Our goal is to stabilize the profit base and move thebusiness past the losses while also developing new businesses.
Our work on stabilizing profits will also include lateral expansion
into the OEM business.

Funai will embark on the development of new businesses that will
become the cornerstones of our company in the future by utilizing
our technological capabilities in the AV businesses (display
business and digital media business) to launch businesses related
to electric vehicles in collaboration with partnering companies andexpand the applications of microfluidics technology.
We will utilize the technology in our display business to pursue
commercialization of commercial AV equipment such as
televisions for hospitals and hotels and digital signage foradvertising. During fiscal 2018, we also expect to begin mass
production of equipment that uses the microfluidics technology wedeveloped in our office solutions business. We are also making
progress on consignment production of dental CT scanners andthe mass production of components for electric beds for the U.S.
market, and are also developing new businesses in the healthcare
and medical fields.
It is electric vehicle-related business that we can expect togrow into a cornerstone as a next-generation business. Funai
concluded a basic agreement on joint development with FOMM
Corporation in May 2018, a joint venture for the development ofcompact electric vehicles that we invested capital in last year.
Joint development is now fully underway. As we supply components, modules, and other products to FOMM in the future, we will
explore alliances with various other partners, and will expand ourbusiness domain to a wide range of components installed in
vehicles in the car electronics sector, including AV devices, meter
panels, direct back lights, inverters, and control units. We are
already involved in the OEM business for some of these in-vehicle
AV devices. We are also considering supplying products such as
interior plastic products and formed exterior body and bumper
parts, and will expand our business into sharing services andother areas related to the EV business in the future.

Annual Report 2018 14

2020

History

2018FUNAI organic light-emitting diode TVs

2018 ● FUNAI COEPORATION, INC. and P&F USA, INC. are merged (under the name of FUNAI CORPORATION, INC.)
2017 ● Exclusive sale of FUNAI-brand televisions and Blu-ray Disc recorders at Yamada Denki began.
● Hideaki Funakoshi becomes President & CEO.
● Tetsuro Funai, the company founder passed away.

A parallel chronology of
product development andthe history of Funai Electric2016 ● FUNAI MANUFACTURING, S.A. DE C.V. established as a manufacturing subsidiary in Mexico.
2015 ● FUNAI NORTH AMERICA, INC. established in the United States as a holding company.

2009-

Blu-ray Disc Recorders
2013 ● FUNAI ELECTRIC CEBU, INC. (formerly, Lexmark International (Philippines), Inc.)
acquired from Lexmark.
● FUNAI ELECTRIC PHILIPPINES INC. established in the Philippines as a production subsidiary.
● FUNAI LEXINGTON TECHNOLOGY CORPORATION established in the United States as
2008a research and development center.
Blu-ray Disc2011 ● FUNAI ELECTRIC R&D (SHENZHEN) CO., LTD. established in China as a research
Players
and development center.
2004-2008
Digital Still
Cameras2010

2004DVD Recorders

2009 ● P&F MEXICANA, S.A. DE C.V. established in Mexico as a sales subsidiary for
Philips-brand products.

2002-

2008 ● P&F USA, INC. established in the United States as a sales subsidiary for
Philips-brand products.

2002-2007

2007 ● BROADTEC TV R&D CENTER SDN. BHD. (now FUNAI MALAYSIA R&D SDN. BHD.)
established in Malaysia as a research and development center.

2000

LCD TVs

2006 ● FUNAI SERVICE CORPORATION established in the United States
as a service subsidiary.

Projectors

2000Laser Beam Printers

1999-

DVD Players

2003 ● FUNAI (THAILAND) CO., LTD. established as a production
subsidiary in Thailand.
● Huang Jiang Plant (Dongguan City, Guangdong Province) started
operation as a consignment production plant in China.

1997Inkjet Printers2000 ● Listed on the First Section of the Tokyo Stock Exchange andOsaka Securities Exchange.

1990

1999 ● Listed on the Second Section of the Osaka
Securities Exchange.

1987-1995

1996 ● FUNAI SERVICE CO., LTD. established as a domestic
service subsidiary.

Auto Bakeries

1986-2009

1994-2002
1985-1995

1985-2007

CRT TVs

1992 ● HIGHSONIC INDUSTRIAL LTD. (now FUNAI ELECTRIC (H.K.), LTD.) established in Hong Kong.

1988-2003
Faxes

Air Conditioners

Microwave Ovens

TV/VCR Combos

1983-1995

1991 ● FUNAI CORPORATION, INC. established in the United States as a sales subsidiary.

Cordless
Telephones

1983 ● Tokyo Branch Office opened.

1980

1983-2013
VHS Videos

1969 ● Construction of new headquarters building completed in Daito City, Osaka Prefecture.

1969-1981

15

8-Track Car
Stereos

1964 ● CHUGOKU FUNAI ELECTRIC CO., LTD. established as a production subsidiary in Hiroshima Prefecture.

1961 ● FUNAI ELECTRIC CO., LTD. established in Ikuno Ward, Osaka City.

1968-1979

Home Stereos

1968 ● FUNAI ELECTRIC COMPANY OF TAIWAN established as a production subsidiary in Taiwan.

1960

CVC VCRs

Cassette
Car Stereos

1970 ● FUNAI AMERICA ELECTRIC SERVICE CORP. established in the United States as a sales subsidiary.

1962 ● Representative office established in Chicago, the United States.

1980-1982

1971-1995

1977 ● Training started which formed the basis for establishing the Funai Production System (FPS).

1959-1970
Transistor
Radios1963-1966
Open
Reel-to-reelTape Recorders

Annual Report 2018 16

Company’s Outline

FUNAI CORPORATION, INC. (NJ Office)

FUNAI ELECTRIC (H.K.), LTD.

FUNAI SERVICE CORPORATIONHUANG JIANG PLANT*FUNAI LEXINGTONTECHNOLOGY CORPORATIONFUNAI ELECTRIC R&D (SHENZHEN) CO., LTD.
FUNAI ELECTRIC EUROPE Sp. z o.o.

FUNAI ELECTRIC CO., LTD.
headquarters
FUNAI SERVICE CO., LTD.
FUNAI GENERAL SERVICE CO., LTD.
P&F MEXICANA, S.A. DE C.V.
FUNAI (THAILAND) CO., LTD.

TOKYO
BRANCHOFFICEFUNAI MALAYSIA R&D SDN. BHD.

CHUGOKU FUNAIELECTRIC CO., LTD.

FUNAI ELECTRIC PHILIPPINES INC.

Name

FUNAI ELECTRIC CO., LTD.

Established

August 1961

Head office

7-7-1 Nakagaito, Daito, Osaka 574-0013

FUNAI CORPORATION, INC. (LA Office)Executives
Members of the Board

Hideaki Funakoshi

TEL +81-72-870-4303 FAX +81-72-871-1112

Representative
Director andPresident and CEO

Offices and subsidiaries

Offices

URL http://www2.funai.co.jp/en/index.html

Takeshi Ito

Director and Officer

FUNAI ELECTRIC CO., LTD. headquarters

Capital¥31,307 million (as of March 31, 2018)

Motoyoshi Adachi

Director and Officer

TOKYO BRANCH OFFICE

Net sales¥130,130 million(Fiscal year ended March 31, 2018)

Makoto Ueshima

Director and Officer

Mitsuo Yonemoto

Outside Director

Outside Director(Audit and Supervisory
Committee Members)

Fumiaki Kidera

Director

Officers

No. of employees:
2,324 (consolidated basis, as of March 31, 2018)

Business category Electrical equipment
Principal
businesses

FUNAI TRADING CORP.

FUNAI ELECTRIC CEBU, INC.

*Consignment production plant

Employees

FUNAI MANUFACTURING, S.A. DE C.V.

Display Business

LCD TVs

Digital Media BusinessDVD players/recorders
Blu-ray Disc players/
recorders

Office Solutions
Business

Printers

Development andNew Businesses

Other devices

Sales subsidiaries

Production subsidiaries

FUNAI ELECTRIC R&D (SHENZHEN) CO., LTD.

FUNAI MANUFACTURING, S.A. DE C.V.

FUNAI MALAYSIA R&D SDN. BHD.

FUNAI ELECTRIC (H.K.), LTD.

FUNAI LEXINGTON TECHNOLOGYCORPORATIONHUANG JIANG PLANT*FUNAI CORPORATION, INC. (NJ Office)

FUNAI (THAILAND) CO., LTD.

Masahide Morimoto Outside Director

FUNAI CORPORATION, INC. (LA Office)

FUNAI ELECTRIC CEBU, INC.

Masakazu Funaishi

Outside Director

Katsuo Tokuhara

Officer

FUNAI TRADING CORP.

FUNAI ELECTRIC PHILIPPINES INC.

Hisaharu Oura

Officer

P&F MEXICANA, S.A. DE C.V.
FUNAI ELECTRIC EUROPE Sp. z o.o.

Development subsidiaries

CHUGOKU FUNAI ELECTRIC CO., LTD.

Other subsidiaries
FUNAI SERVICE CO., LTD.
FUNAI GENERAL SERVICE CO., LTD.
FUNAI SERVICE CORPORATION

Ink cartridges

Annual Report 2018

Corporate Governance1) Basic Philosophy on Corporate Governance
The Funai Electric Group’s basic philosophy on corporate governance is to continuously increase corporate value by increasing
the transparency of management to shareholders, consumers, vendors, local communities, employees, and other internal andexternal stakeholders and by responding to changes in the business environment by ensuring management soundness andefficiency and striving for prompt decision-making.
On the basis of this philosophy, the Group has introduced an executive officer system to ensure expeditious decisionmaking and establish a system for prompt business execution. The Group is also strengthening CSR activities. We haveformulated the Funai Group Code of Conduct, which regulates the conduct of all officers and employees of the Funai Group,and the Funai Group Procurement Policy, which is based upon the Code of Conduct, and established the CSR Committee as anorganization to promote corporate social responsibility.

2) Description of the Management Organization in the Fiscal Year under Review
The Group adopts an audit and supervisory committee governance structure, establish the Board of Directors, Audit andSupervisory Committee and Accounting Auditor as corporate governance system. The purpose is to further strengthen the
supervisory function of the Board of Directors and enhance corporate governance by auditing of Directors who are Audit andSupervisory Committee members having voting rights on the Board of Directors. The Group has also introduced an executive
officer system to establish a system for prompt business execution. We have also ensured objectivity and transparency inimportant decision-making processes by establishing the Nomination Committee, Compensation Committee, and Internal
Investment and Loan Committee as discretionary advisory bodies to the Board of Directors other than the Audit andSupervisory Committee.
Corporate Governance Organization

The Audit and Supervisory Committee consists of three directors, including two, who are outside directors. No special interest
exists between these outside directors and the Funai Electric Group. In principle, the Audit and Supervisory Committee meetsonce a month.

The Company has appointed Deloitte Touche Tohmatsu LLC as independent auditors.
Nominate/Dismiss/Non-reappointment

Nominate/Dismiss

Nominate/Dismiss
Accounting audit report

Account Auditor

Coordination

Account audit(Optional Committees)

Deliberations/Report

Audit and Supervisory Committee
Coordinationb. Audit and Supervisory Committeec. Independent Auditors
Ordinary General Meeting of Shareholders

ReportAdvisory Bodies• Nomination Committee
The Nomination Committee consists of directors who are not Audit and Supervisory Committee members appointed by
the Board of Directors. As an advisory body to the Board of Directors, it ensures the transparency and objectiveness of thecandidate selection process by recommending candidates for director to the Board of Directors.
• Compensation Committee
The Compensation Committee consists of directors who are not Audit and Supervisory Committee members appointed by
the Board of Directors. It ensures the transparency and objectiveness of the compensation decision process by deciding
compensation and other payments for directors who are not Audit and Supervisory Committee members and executive officers
under authority delegated by the Board of Directors. Compensation and other payments for corporate auditors are determinedby consultation among the corporate auditors.
• Internal Investment and Loan Committee
The Internal Investment and Loan Committee consist of directors and executive officers appointed by the president. It ensures
the transparency and objectiveness of the decision-making process regarding major investment and loan projects by discussing
the details of individual projects from a group-wide perspective.

Audit/
Direction

Nomination Committee

Board of Directors
ReportCompensation Committee

Nominate/Dismiss/Direction

Internal Investment and Loan Committee

President and Representative Director

Internal Control Committee

Director Responsible for Business/Executive Director
ReportReportAudit OfficeInternal Audit

Command/Order

Respective business divisions/subsidiaries
Coordination

a. Board of Directors
The Funai Electric Group Board of Directors consists of eight members: five directors who are not Audit and Supervisory
Committee members (including one outside director) and three directors who are Audit and Supervisory Committee members(two of whom are outside directors). At the same time as the Group strives for prompt decision-making by inside directors
knowledgeable about the Group’s business matters, participation in Board of Directors decision-making by outside directors
with no special interest in the Group ensures management soundness and transparency. Meetings of the Board of Directors
are held, in principle, at least once every three months, and extraordinary meetings are held as necessary.

19

Annual Report 201820

Management Discussion and Analysis
Business Performance in the Fiscal Year ended March 31, 2018
In the United States, the Group’s mainstay market, the economy has slowed
down moderately. This was because the growth of wages was modest,causing personal consumption to stagnate, although employment in the U.S.
continued to be strong, supported by solid business performance. However,corporate sentiment is expected to remain solid. In Europe, the economic
expansion has lost momentum due to the shortage of facilities and labor, witha general weakness in production, export and consumer spending. In China,
the economy grew steadily, supported by the improvement in employment
while consumer spending slowed down moderately.
In Japan, the economy continued its modest recovery with strong
employment and incomes, while exports and production activities declined.

Net Sales
Under these circumstances, the Group reported net sales of ¥130,130 million,
a 2.8% decrease from the previous fiscal year. This was attributable to thefollowing reasons: (i) sales of LCD TVs substantially fell short of its initial budget
because demand for LCD TVs in the U.S. decreased from the previous fiscal
year, which resulted in an oversupply causing further cut-throat competition
with the decline in sales prices and the sales volume; (ii) sales of DVD-related
products fell from the previous fiscal year due to the shrinkage of the market;
and (iii) sales of the electronic reception devices of DX Antenna Co., Ltd. were
not included in the consolidated sales results of the current year as the Grouptransferred all shares in DX Antenna, which was a consolidated subsidiary of
the Group in the previous fiscal year, to ELECOM Co., Ltd.

Net Sales

133.8

130.1

2016

2017

2018

Operating Income (Loss)(¥ million)

21

0.1%

0.7%

27.8%

Asia
71.4%

Japan
EuropeEuropeInk-jet printers and ink-cartridge decreased. As a result, net sales ended at ¥127
million (down 79.3% year on year), segment loss (operating loss) amounted to¥83 million (a segment profit of ¥45 million in the previous fiscal year).

Audiovisual Equipment
DVD related products decreased. However, LCD TVs and BD-recorder increased
due to good sales. As a result, net sales of this sector were ¥122,569 million, an
increase of 6.3% from the previous fiscal year.

Americas*
Asia*Including sales of Central and South America

Sales by Region(¥ billion)

0.6

2018

Information Equipment(10,885)
2017

101.8

31.2 133.8
0.1

0.3

92.9

AmericasInk-jet printers and ink-cartridge decreased. As a result, net sales of this sector
were ¥3,334 million, a decrease of 34.3% from the previous fiscal year.

(10,539)
2016

2017

36.2 130.1
0.9(6,775)2018

Net Income (Loss) Attributable to
Owners of the Parent(¥ million)

Europe

Japan

Asia

Sales Composition by Products

Others(Year ended March 31, 2018)

3.2%

2.6%

Electronic reception devices decreased due to excluding the DX Antenna Co.,
Ltd. from the scope of consolidation by transfer of this all shares held by theCompany. As a result, net sales of other were ¥4,225 million, a decrease of
68.7% from the previous fiscal year.

Financial Position

94.2%

Current Assets(6,745)(24,709)

Total current assets as of March 31, 2018 decreased by ¥17,724 million from theend of the previous fiscal year to ¥67,779 million.
The change is mainly attributable to decreases of ¥8,321 million cash andcash equivalents and ¥5,617 million trade receivables due to a decrease ofsales.

Audiovisual equipment
Information equipment
othersSales by Products(33,839)

Electronic reception devices decreased due to excluding the DX Antenna Co.,
Ltd. from the scope of consolidation by transfer of this all shares held by theCompany. However, LCD TVs and BD-recorder increased due to good sales. As
a result, net sales were ¥36,199 million (up 16.0% year on year) and segment
loss (operating loss) resulted in ¥5,634 million (the previous fiscal year:
segment loss of ¥8,219 million).

(Year ended March 31, 2018)

Net Sales by Product GroupNet loss attributable to owners of the parent ended at ¥24,709 million (a net
loss attributable to owners of the parent of ¥6,745 million in the previous fiscal
year) because we reported the impairment loss and the foreign exchange loss.

Japan

Sales Composition by Region

Net sales were ¥853 million (up 211.5% year on year), due to increase on LCD
TVs and other parts. Segment loss (operating loss) amounted to ¥3,948million(segment loss of ¥630 million in the previous fiscal year).

Net loss attributable to owners of the parent

Net Sales by Geographical Area

Americas
LCD TVs, DVD related products and ink cartridges sales decreased. As a result,net sales ended at ¥92,949 million (down 8.7% year on year) and segment loss
(operating loss) amounted to ¥965 million (a segment loss of ¥131 million in theprevious fiscal year).

170.0

Operating loss
The Group reported an operating loss of ¥10,885 million (operating loss of¥6,775 million in the previous fiscal year). This was due to the following
reasons: (i) sales of LCD TVs decreased; (ii) sales promotion expenses
increased to sell away inventory of LCD panels procured for the year-end sales
season before their prices declined and LCD TVs produced by using theseLCD panels; (iii) we failed to provide price-competitive products to the market
in a timely manner at a time when LCD panel prices were declining; and (iv)component prices, including memory, remained at a high level.

(Years ended March 31)(¥ billion)

2016

2017

2018

Property, Plant, and Equipment(¥ billion)

Net property, plant, and equipment as of March 31, 2018 decreased by ¥4,770
million from the end of the previous fiscal year to ¥8,193 million.
The decrease is due to losses on impairment.

2016

Current Liabilities

2017

Total current liabilities as of March 31, 2018 decreased by ¥2,732 million fromthe end of the previous fiscal year to ¥26,842 million.
The change is mainly attributable to a decrease of ¥6,794 million in trade
payables and an increase of ¥3,091 million in other payables. The main reason
for the decrease in trade payables was a decrease of purchase of raw materials
and the increase in other payables was a license fee.

5.0
147.7

170.0
17.2

5.1
115.2

133.8
3.3

2018

13.5

122.6

130.1
4.2

Audiovisual equipment
Information equipment
othersAnnual Report 201822

Management Discussion and Analysis
Long-Term Liabilities
Long-term liabilities as of March 31, 2018 increased by ¥257 million from theend of the previous fiscal year to ¥2,711 million.
The change is mainly attributable to an increase of ¥463 million in longterm payable - other.

Total Assets(Years ended March 31)(¥ billion)

154.1
108.6

Total Equity
Total equity as of March 31, 2018 decreased by ¥25,939 million from the end of
the previous fiscal year to ¥50,717 million.
The change is mainly attributable to a decrease of ¥1,099 million in foreign
currency translation adjustments and a decrease of ¥25,050 million in retained
earnings.

80.2

2016

Cash Flows
Cash and cash equivalents on a consolidated basis as of March 31, 2018
decreased by ¥8,320 million from the end of the previous fiscal year to ¥30,650
million. The change is mainly attributable to loss before income taxes and adecrease in trade payables.
Cash flows during the fiscal year under review and factors affecting cash
flows are as follows.

(¥ billion)

69.7

2016

2017

29.5

2018

(¥ billion)(2) Impact of overseas market trends

76.7

Cash Flows from Financing Activities
Net cash used in financing activities was ¥584 million in the fiscal year underreview. (Net cash used in financing activities was ¥11,150 million in the previous
fiscal year.) The primary reason of this is mainly attributable to dividends paid.

50.7

Business and Other Risks
Risks that may have a significant impact on the Group’s financial situation andoperating results are outlined below.

2016

2017

2018

Shareholders’ Equity Ratio(1) The Funai Group’s Management Policy
The Group has adopted a policy of providing high-quality, low-cost products to
consumers based upon optimized production and sales systems on a global
scale. We manufacture and sell our principal products, such as audiovisualequipment (LCD TVs, DVD-related products, etc.) and information equipment(printers, etc.), in addition to other products (In-vehicle backlight, etc.). Pricecompetition in these product areas is intense. Additionally, the life cycle ofdigital products is short and the competition to develop new technologies andfunctions is also growing more intense. Accordingly, these factors may affect
the Group’s financial condition and business results.

23

(%)

70.4

2017

i) Dependence on the Americas (the United States, Mexico and other) market
A high proportion of the Group’s net sales comes from overseas markets. In particular, the Americas market accounted for
72.5% of net sales in this fiscal year, and Walmart group alone accounted for 59.9% of these net sales.
If economies in the Americas suddenly enter recession, this may affect the Group’s financial condition and business results.
ii) Dependence on Chinese production
The Group is working to improve the cost competitiveness of its products by concentrating production in cost-advantaged
regions and purchasing parts in bulk. In this fiscal year, 98.0% of our products were produced overseas, with 58.6% producedin China (consignment manufacturing and in-house production). The Group has undertaken production site decentralization
to reduce the ratio of Chinese production. Nevertheless, as we continue to engage in production in China, rising labor cost,changes in the government system, the outbreak of conflict, natural disasters and other unforeseen circumstances may affect
the Group’s financial condition and business results.

63.2

54.0

2016

iv) Intellectual property rights
So-called “patent trolls” have been very active in recent years. They have no products of their own, but attempt to generate
income from patent royalties by filing lawsuits using intellectual property rights acquired from third parties. This is a worrisome
trend for all companies in manufacturing and sales industries. As a result of these activities, we may need to make highcompensatory payments that may affect the Group’s financial condition and business results.
v) Corporate acquisitions and Business alliances
The Group may pursue corporate acquisitions and business alliances to improve its profit and efficiently boost sales. However
for various reasons, in the event that the synergies fall short of initial expectations, we fail to reach agreement on an acquisition,
or affiliate relationships cannot be maintained, this may affect the Group’s financial position, business results and growthforecasts.

Total Equity

84.4ii) New technologies
In the consumer electronics business, market needs are becoming more diverse; the Group needs to improve the quality,
volume, and speed of its new product development.
To address these issues, the Group will improve its technical capabilities, focusing mainly on new business fields, throughpartnerships with other companies and universities, and personnel development. The Company also may consider mergers
and acquisitions depending on the situation. However, a diversification of market needs or technological innovation beyond our
expectations may affect the Group’s financial condition and business results.
iii) Defects relating to products and services
The Group’s departments responsible for quality management and technologies play the primary role in the effort to maintainand improve quality. In addition, the Group has established service companies in Japan and overseas. However, if there aretroubles with repair or replacement of our products, the impact of the warranty costs and/or the decrease of social credibility
may have negative impacts for the Group’s financial condition and business results.

32.0

Net cash used in operating activities was ¥5,369 million in the fiscal year
under review. (Net cash used in operating activities was ¥13,329 million in theprevious fiscal year.) The primary reason of this is mainly attributable to loss
before income taxes and a decrease of trade payables, while a decrease intrade receivables and an increase in other payables.

Net cash used in investing activities was ¥2,174 million in the fiscal year underreview. (Net cash provided by investing activities was ¥13,266 million in theprevious fiscal year.) The primary reason of this is mainly attributable to anincrease in time deposits and purchases of property, plant and equipment, while
a decrease in time deposits and a collection of loans receivable.

2018

Total Liabilities

Cash Flows from Operating Activities

Cash Flows from Investing Activities

2017i) Product cost and market prices
The Group’s primary target is customers of mass merchandisers such as Walmart, and therefore we must deliver low prices.
Consequently, the Group is working to reduce costs through measures such as establishing production systems in optimal
locations, pursuing further application of the Funai Production System (FPS), the unique productivity improvement systemdeveloped by the Company, and utilizing internal production of parts and centralized purchasing. However, the consumer
electronics business is intensely competitive and when parts and raw materials prices rise, cost pressures may affect theGroup’s financial condition and business results.

2018iii) Foreign currency risk
The Group determines production sites for its principal products upon consideration of optimal production location and sales
systems. LCD TVs and other are produced in China; LCD TVs are produced in Thailand and Mexico and Ink cartridges, Ink-jet
printers and DVD-related products are produced in the Philippines.
The Group purchases products from overseas production subsidiaries and sells them to overseas sales subsidiaries mainly
in North America. Domestic sales are sells directly to OEM supply partners.
Although the majority of the Group’s sales are conducted in U.S. dollars, some transactions are conducted in Mexican

Annual Report 201824

Management Discussion and Analysis
pesos and yen. In addition, the majority of the Group’s purchasing transactions are conducted in U.S. dollars. Although sales andpurchase transactions conducted in U.S. dollars are not affected by currency fluctuations, expenses denominated in U.S. dollars
relating to sales transactions conducted in Mexican pesos or yen are affected by currency fluctuations.
Since foreign currency-denominated assets and liabilities are converted to yen using the exchange rates on the settlement
date, significant currency fluctuations may affect the Groups financial condition and business results.

Five-Year Summary
Millions of
U.S. dollars(Notes 1 and 2)

Millions of Japanese yen (Note 1)
Years ended March 31

2014

2015

2016

2017

2018

2018

Net Sales

233,802

216,553

170,041

133,838

130,130$1,227.64(3) Other risks

Operating Income (Loss)(6,071)(659)(10,539)(6,775)(10,885)$(102.69)

i) Legal regulations
In each country, the Group is subject to a variety of local legal regulations, concerning commercial transactions, importing andexporting, intellectual property rights, product liability, environmental protection, consumer protection, financial transactions,and corporate taxation. Changes to these legal regulations, or the ways in which they are interpreted by the authorities, could
affect the Group’s financial position and business performance.

Net Income (Loss)(7,400)31(33,839)(6,745)(24,709)$(233.10)

Total Equity

114,743

123,218

84,43976,65650,717$478.46

Total Assets

180,729

188,902

154,191

108,685

80,270$757.27

Shareholders’ Equity

113,568

122,014

83,32876,50750,699$478.29

Net Cash Provided by (Used in)Operating Activities(1,251)

16,897(7,549)(13,329)(5,369)$(50.65)

Net Cash (Used in) Provided by
Investing Activities(2,730)(17,360)

11,805

13,266(2,174)$(20.51)

Free Cash Flow*(3,981)

(463)

4,256

(63)

(7,543)$(71.16)

Capital Investment

5,094

3,275

2,462

3,070

2,155

$20.33

Depreciation Expense

6,479

5,855

4,498

4,098

2,258

$21.30Return on Assets (%)(3.95)

0.02(19.73)(5.13)(26.15)Return on Equity (%)(6.39)

0.03(32.96)(8.44)(38.85)

Debt/Equity Ratio (%)

9.51

9.11

14.54

0.99

1.02

ii) Litigation
There are litigation risks relating to the Group’s business. A major lawsuit or other legal action could affect the Group’s financial
position and business performance.
iii) Information control
The Group has internal systems to prevent information leaks and protect itself against viruses. However, factors such as
operational mistakes or new viruses may preclude the complete avoidance of information leaks and system shutdowns
completely. Such events could affect the Group’s financial position and business results.
iv) Retirement benefit obligations
The Group and its consolidated domestic subsidiaries have defined benefit corporate pension systems, which are based on actuarial
assumptions on the pension assets, such as rates of return and discount rates. The Group’s financial position and business results
could be affected if there are any changes in these assumptions, if the pension assets decrease due to the deterioration in theinvestment environment, or if changes in the pension system cause future retirement benefit expenses to increase.
v) Financing
If the Group’s financing is limited due to deteriorating business performance, the cost of finance could increase. This could
affect the Group’s financial position and business performance.
vi) Important information about going concern assumption
Since the Group recorded a significant operating loss, ordinary loss, net loss attributable to owners of the parent, and negative
operating cash flow during the fiscal year and the previous fiscal year under review, events or circumstances that castsignificant doubt on the going concern assumption exist at the present time.
Since the Group’s balance of cash and deposits is sufficient to cover working capital and other requirements for sometime, there is no significant concern about financing.
Since the Group reviewed the medium-term management strategies formulated in the previous fiscal year in this fiscal
year and implemented following countermeasures gradually on the basis of the strategies, the Group believes that a resolutionof the matter can be achieved.

Japanese yen

U.S. dollars

2014

2015

2016

2017

2018

2018

Shareholders’ Equity per Share

3,328.58

3,576.14

2,442.28

2,242.38

1,485.96$14.02Net Income (Loss) per Share(216.89)0.92(991.81)(197.70)(724.21)$(6.83)

35

35

30

10

0

$0.00

Cash Dividends per Share

Notes: 1. From the current fiscal year, the Company rounded down Japanese yen figures less than a million to the nearest million yen and U.S.
dollar figures less than a thousand to the nearest thousand dollars, except for per share data.
2. The exchange rate of ¥106=U.S.$1.00 (the approximate rate of exchange at March 31, 2018) is used for the above calculations.
*Net cash provided by operating activities plus net cash provided by investment activities.

(a) Display business- Increase sales at existing customers and exploit new customers in the North American market.
- Concentration of management resources in developing FUNAI brand products and OEM products in the Japanese market.
(b) Digital media business- Development of product-focused niche strategy in the North American market.
- Enhancement of FUNAI brand products and development of new OEMs in the Japanese market.
(c) Office solution business- Improve profit margin by increasing sales of high value-added printer products.
- Derivative business development utilizing microfluidics (micro fluid control technology).
(d) New business- Increase sales by developing and launching new products related to health care, medical and the automotive market.

25

Annual Report 201826

Consolidated Balance Sheet
FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
March 31, 2018
Thousands of U.S.
dollars (Note 1)

Millions of Japanese yen

ASSETS

2017

2018

LIABILITIES AND EQUITY

2018

Time deposits (Note 15)

2017

2018

2018

CURRENT LIABILITIES:CURRENT ASSETS:
Cash and cash equivalents (Note 15)

Thousands of U.S.
dollars (Note 1)

Millions of Japanese yen¥30,650¥38,971$289,157

1,739

1,165

16,412

Receivables:

Current portion of long-term debt (Note 8)

¥236

¥242

$2,230		 Trade (Note 15)

11,80818,603111,399

		 Other (Note 15)

10,372

7,280

97,849

664

813

6,264

Payables:		 Trade (Note 15)

9,953

15,571

93,905		Other

1,583

2,400

14,941

		 Allowance for doubtful accounts(1,021)(847)(9,640)

Other current liabilities

3,761

2,635

35,485

26,842

29,575

253,230

282

514

2,660

1,029

1,062

9,712

Long-term payables – other

744

281

7,021

Deferred tax liabilities (Note 14)

655

595

6,183

2,711

2,453

25,57731,30731,307295,354

33,60333,603

317,011

17

149

166

21,97047,020207,269(24,341)(24,341)(229,636)

13

11

127

(12,305)(11,206)(116,091)

451

111

4,261

		Total equity

50,71776,656478,463

TOTAL¥80,270¥108,685$757,271

Income taxes payable

23,60926,253

222,728

		Total current liabilities

Deferred tax assets (Note 14)

468

489

4,422

LONG-TERM LIABILITIES:

Prepaid expenses and other current assets

795

1,500

7,503

Long-term debt (Note 8)

67,77985,503

639,431

Inventories (Note 5)

		Total current assets
PROPERTY, PLANT AND EQUIPMENT:

Liability for retirement benefits (Note 9)

Land (Note 6)

3,479

3,592

32,824

		Total long-term liabilities

Buildings and structures (Note 6)

13,012

14,832

122,757

COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)

Machinery, equipment and other (Note 6)

21,992

28,203

207,477

EQUITY (Notes 10, 11 and 18):

Lease assets (Notes 6 and 13)

595

597

5,617

Construction in progress

17

187

165

39,09747,413368,841(30,903)(34,449)(291,542)

8,193

12,96377,298

		Total property, plant and equipment
Accumulated depreciation
		Net property, plant and equipment

Investments in and advances to unconsolidated subsidiaries and		associated companies

Stock acquisition rights
Retained earnings

132

2,748

Accumulated other comprehensive income:

994

1,841

9,383

		 Unrealized gain on available-for-sale securities
		 Foreign currency translation adjustments

2,576

Long-term loans

196

244

1,856

Long-term prepaid expenses (Note 6)

502

2,620

4,741

Assets for retirement benefits (Note 9)

1,840

1,543

17,362

Deferred tax assets (Note 14)

225

454

2,130

Other assets (Note 6)

484

1,056

4,575

Allowance for doubtful accounts

(239)

(252)

(2,257)

4,297

10,21740,541¥80,270¥108,685$757,271

TOTAL

Capital surplus

291

Patents (Note 6)

		Total investments and other assets

		 Authorized, 80,000,000 shares; issued,
			 36,130,796 shares in 2018 and 2017

Treasury stock – at cost		 2,011,829 shares in 2018 and 2,011,765 shares in 2017

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 7 and 15)

Common stock:

		 Defined retirement benefit plans

See notes to consolidated financial statements.

See notes to consolidated financial statements.

27

Annual Report 201828

Consolidated Statement of Operations

Consolidated Statement of Comprehensive Income

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2018

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2018
Thousands of U.S.
dollars (Note 1)

Millions of Japanese yen

2018

2017

NET SALES¥130,130¥133,838$1,227,643

COST OF SALES (Note 12)

121,529

114,795

1,146,509

8,600

19,043

81,134

19,48525,818183,825(10,885)(6,775)(102,691)

Interest and dividend income

248

253

2,342

Interest expense

(67)

(152)

(637)

(1,107)(1,122)(10,446)

Income from rental of property, plant and equipment

62

119

585

(Loss) gain on sales or disposal of property, plant and equipment – net

(9)

1,325

(89)

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12)
Operating loss

2018

OTHER INCOME (EXPENSES):

Foreign exchange loss – net

Compensation expenses(225)

Equity in losses of an unconsolidated subsidiary and an
associated company(2)

Loss on sale of an investment in a consolidated subsidiary (Note 3)
Gain on sales of investments in unconsolidated subsidiaries andassociated companies
Loss on impairment of long-lived assets (Note 6)(2,123)

Unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans2017¥ (24,709)¥ (6,742)$ (233,105)

1

(148)

15

(1,099)954(10,373)

340

(207)

3,209

Share of other comprehensive income in associates
Total other comprehensive (loss) income
COMPREHENSIVE LOSS

2018

44
(757)

643

(7,149)¥ (25,467)¥ (6,098)$ (240,254)¥ (25,467)¥ (6,098)$ (240,254)

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

(0)

(704)
29

274
(339)

(118,741)

Gain on reversal of stock acquisition rights

146

0

1,380

Other – net

60

89

569

(13,450)(531)(126,887)(24,335)(7,307)(229,579)

Current

257

67

2,424

Deferred

116

(632)

1,101

373

(565)

3,526

(24,709)(6,742)(233,105)

LOSS BEFORE INCOME TAXESNET LOSS
OTHER COMPREHENSIVE INCOME (LOSS) (Note 16):2018

See notes to consolidated financial statements.

(12,586)

Other expenses- net

Thousands of U.S.
dollars (Note 1)

Millions of Japanese yen

INCOME TAXES (Note 14):

Total income taxes
NET LOSSNET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS
NET LOSS ATTRIBUTABLE TO OWNERS OF THE PARENT3¥ (24,709)¥ (6,745)

Japanese yen$ (233,105)
U.S. dollars

PER SHARE OF COMMON STOCK (Notes 2.w and 17):
Basic net loss
Cash dividends applicable to the year

¥ (724.21)¥ (197.70)$ (6.83)

10.00

See notes to consolidated financial statements.

29

Annual Report 201830

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2018

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2018

Thousands

Millions of Japanese yen

Number ofshares ofcommonstock
outstanding

Commonstock

34,119¥31,307

BALANCE, APRIL 1, 2016

CapitalsurplusStockacquisitionrightsRetainedearnings

Treasurystock¥33,301¥145¥54,789¥(24,341)

Net loss attributable toowners of the parent¥314(1,023)(0)
301

Net change in the year3
34,11931,30733,603

149

47,020(24,341)

Noncontrollinginterests

Total¥83,473

¥965

Total
equity¥84,439(6,745)(6,745)(1,023)(1,023)

(0)

(0)

301

301

(0)

Change in a parent’s ownershipinterest in a subsidiaryarising from transactions
with noncontrolling interests
BALANCE, MARCH 31, 2017¥160 ¥ (12,204)(6,745)

Cash dividends, ¥30.00 per share
Purchase of treasury stock

Unrealized
ForeignDefinedgain oncurrency
retirement
availabletranslation
benefitfor-saleadjustments
plans
securities

(149)

998

(202)

650

11

(11,206)

111

76,656(965)

76,656(314)

Net loss attributable toowners of the parent(24,709)(24,709)(24,709)

Cash dividends, ¥10.00 per
share

(341)

(341)

(341)

(0)

(0)

Purchase of treasury stock

(0)

(0)

Net change in the year
BALANCE, MARCH 31, 2018(131)
34,119¥31,307¥33,603¥17¥21,970¥(24,341)

1(1,099)

340

(889)

(889)

¥13

¥(12,305)¥451¥50,717¥50,717

Thousands of U.S. dollars (Note 1)
Accumulated
other comprehensive income

BALANCE, MARCH 31, 2017

Commonstock

Capitalsurplus$295,354$317,011

Stockacquisitionrights(233,105)

Cash dividends, $0.09 per share(3,218)

Unrealized
ForeignDefinedgain oncurrency
retirement
availabletranslation
benefitfor-saleadjustments
plans
securities$112 $ (105,717)(1,241)$295,354

See notes to consolidated financial statements.

$317,011$166

15$207,269 $ (229,636)(10,373)$127 $ (116,091)

Noncontrollinginterests

Total

Total
equity$1,052 $723,178$723,178(233,105)(233,105)(3,218)(3,218)(0)

Net change in the year
BALANCE, MARCH 31, 2018

Treasurystock$1,407 $443,593 $ (229,636)

Net loss attributable to ownersof the parent
Purchase of treasury stock

31

Retainedearnings(0)(0)(8,390)(8,390)$4,261 $478,463$478,463

3,209

Thousands of U.S.
dollars (Note 1)

Millions of Japanese yen

Accumulated
other comprehensive income

OPERATING ACTIVITIES:
Loss before income taxes
Adjustments for:
Income taxes – paid
Income taxes – refund
Depreciation and amortization
Loss (gain) on sales or disposal of property, plant and equipment
Loss on impairment of long-lived assets
Equity in losses of an unconsolidated subsidiary and an
associated company
Gain on sales of investment securities
Gain on sales of investment securities in unconsolidated
subsidiaries and associated companies
Loss on sale of an investment in a consolidated subsidiary
Changes in assets and liabilities:
Decrease in trade receivables
Decrease in inventories(Decrease) increase in trade payables
Increase (decrease) in other payables
Decrease in liability for retirement benefits
Increase in allowance for doubtful accounts
Other - net
Total adjustments
Net cash used in operating activities
INVESTING ACTIVITIES:Payments for time deposits
Proceeds from time deposits
Proceeds from sales of property, plant and equipment
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from sales of investment securities
Proceeds from sales of investment in unconsolidated
subsidiaries and associated companies
Proceeds from sales of investment in a subsidiary resulting inchanges in consolidation scope
Payments for loans receivable
Purchases of investment securities
Payments for loans receivable
Proceeds from collection of loans receivable
Other – net
Net cash (used in) provided by investing activities
FINANCING ACTIVITIES:
Decrease in short-term bank borrowings - net
Repayment of long-term debt
Dividends paid
Other – net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

2018

2017

¥ (24,335)¥ (7,307)$ (229,579)

(320)
411
2,258
9
12,586

(69)
49
4,098
(1,325)339(3,026)
3,885
21,306
89
118,741

2018

2
(127)
(29)

(274)
704

5,386
1,421
(6,214)
3,368
(2)
212
(122)
18,966(5,369)

4,601
8,379
3,470
(25,539)
(147)
451
(910)
(6,022)(13,329)

50,816
13,409(58,622)
31,778(27)
2,008(1,159)178,926(50,652)(1,364)737
167(2,100)(299)(6,205)
10,392
3,977(3,042)(117)
178(12,877)
6,961
1,575
(19,818)(2,822)

336

3,670
7,899

(157)
(0)
568
(61)
(2,174)

(10)
(4)
25
174
13,266(1,981)
(2)
5,363
(579)
(20,511)

(341)
(243)
(584)

(6,510)(3,192)(1,023)(424)(11,150)(3,218)(2,298)(5,517)

(192)

3,069

(1,812)(8,320)38,971¥30,650(8,145)
47,116¥38,971(78,493)367,651$289,157

Annual Report 201832

Notes to Consolidated Financial Statements
gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized
development costs of R&D; and (d) cancellation of the fair value model accounting for property, plant, and equipment andinvestment properties and incorporation of the cost model of accounting.

FUNAI ELECTRIC CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2018

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards (“IFRS”).
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2017 consolidated financial statements to conform to theclassifications used in 2018.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Funai Electric Co.,
Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥106 to $1, the approximate
rate of exchange at March 31, 2018. Such translations should not be construed as representations that the Japanese yenamounts could be converted into U.S. dollars at that or any other rate.
Additionally, the Company rounded down Japanese yen figures to the nearest million and U.S. dollar figures to the nearest
thousand, except for per share data.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as of March 31, 2018, include the accounts of the Company and its
20 (20 in 2017) significant subsidiaries (collectively, the “Group”).
		
Under the control and influence concepts, those companies over whose operations the Company, directly or indirectly,
is able to exercise control are fully consolidated and those companies over which the Group has the ability to exercise
significant influence are accounted for using the equity method.
		
There are no unconsolidated subsidiaries which are accounted for using the equity method as of March 31, 2018 and2017. One subsidiary, which was accounted for using the equity method, was liquidated during the fiscal year ended March
31, 2017. Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If theequity method of accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
		All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within the Group is also eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements —Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting
policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar
circumstances should, in principle, be unified for the preparation of the consolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordance with either IFRS or the generally accepted accounting principles
in the United States of America (Financial Accounting Standards Board Accounting Standards Codification or “FASBASC”) tentatively may be used for the consolidation process, except for the following items that should be adjusted in the
consolidation process, so that net income is accounted for in accordance with Japanese GAAP, unless they are not material:(a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in theequity through other comprehensive income; (c) expensing capitalized development costs of research and development(R&D); and (d) cancellation of the fair value model accounting for property, plant, and equipment and investment properties
and incorporation of the cost model accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method — ASBJ
Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” requires adjustments to bemade to conform the associate’s accounting policies for similar transactions and events under similar circumstances tothose of the parent company when the associate’s financial statements are used in applying the equity method, unless it isimpracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies inaccordance with either IFRS or generally accepted accounting principles in the United States of America tentatively may be
used in applying the equity method if the following items are adjusted, so that net income is accounted for in accordancewith Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial

33

d. Business Combinations — Business combinations are accounted for using the purchase method. Acquisition related
costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are
incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items
for which the accounting is incomplete. During the measurement period, which shall not exceed one year from theacquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new
information obtained about facts and circumstances that existed as of the acquisition date and that would have affected
the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting forthe business combination had been completed at the acquisition date. A parent’s ownership interest in a subsidiary mightchange if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interestis adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controllinginterest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount bywhich the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its
subsidiary.
e. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and exposed toinsignificant risk of changes in value.
		Cash equivalents include time deposits, certificates of deposit, commercial paper, and bond funds, all of which matureor become due within three months of the date of acquisition.
f.

Allowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts considered to beappropriate based on the companies’ past credit loss experience and an evaluation of potential losses in the receivables
outstanding.

g. Inventories — Inventories of the Company and its consolidated domestic subsidiaries are mainly stated at the lower ofcost, determined using the average method for merchandise, finished products and work in process and using the first-in,
first-out method for raw materials, or net selling value.
		Inventories of consolidated foreign subsidiaries are mainly stated at the lower of cost, determined using the first-in,
first-out method, or net selling value.
h. Investment Securities — Investment securities are classified and accounted for depending on management’s intent. All
investment securities are classified as available-for-sale securities. Marketable available-for-sale securities are reported at fairvalue, with unrealized gains and losses, net of applicable taxes, reported as a separate component of equity.
		
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For otherthan-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
Property, Plant and Equipment — Property, plant and equipment are stated at cost. Depreciation of property, plant, andequipment of the Company and its consolidated domestic subsidiaries is computed substantially using the declining-balancemethod, while the straight-line method is applied to buildings acquired after April 1, 1998, and building improvements andstructures acquired after April 1, 2016 at rates based on the estimated useful lives of the assets. Depreciation of property,
plant, and equipment of consolidated foreign subsidiaries is principally computed using the straight-line method at rates
based on the estimated useful lives of the assets. The range of useful lives is principally from three to 50 years for buildings
and structures and from one to 20 years for machinery, equipment, and other.
		
Lease assets are depreciated using the straight-line method over the respective lease periods.
i.

j.

Patents — Patents are carried at cost, less accumulated amortization, which is computed using the straight-line method
over the estimated useful lives.

k. Other Intangible Assets — Intangible assets are stated at cost. Amortization of intangible assets of the Company and its
consolidated subsidiaries is computed using the straight-line method. Amortization of software for internal use is computed
using the straight-line method over the estimated useful life (five years).

Annual Report 201834

Notes to Consolidated Financial Statementsl.

Long-Lived Assets — The Group reviews its long-lived assets for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the sum of the
discounted cash flows from the continued use and eventual disposition of the asset, or the net selling price at disposition.

m. Retirement and Pension Plans — The Company and certain consolidated subsidiaries have noncontributory funded defined
benefit pension plans and unfunded retirement benefit plans for employees. Certain consolidated foreign subsidiaries also
have defined contribution pension plans.
		
The Group accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the consolidated balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis.
Actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjusting for tax effects and are recognized in profit or loss. Actuarial
gains and losses are amortized using the straight-line method over a period within the average remaining years of serviceof the employees (10 years) starting from the following period. Past service cost is amortized using the straight-line method
over a period within the average remaining years of service of the employees (10 years).
		Retirement allowances for Directors and Executive Officers are recorded as a liability at the amount that would be
required if all Directors and Executive Officers retired at each consolidated balance sheet date.
n. Asset Retirement Obligations — An asset retirement obligation is recorded for a legal obligation imposed either by law orcontract that results from the acquisition, construction, development, and normal operation of a tangible fixed asset and isassociated with the retirement of such tangible fixed asset.
		
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If areasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon
initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing thecarrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocatedto expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present
value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash
flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset
retirement cost.
o. Stock Options — The Company measures the cost of stock options granted to Directors, Executive Officers and employeesof the Company, Executive Officers and employees of the subsidiaries based on the fair value at the date of grant andrecognizes the compensation expense over the vesting period as consideration for receiving goods or services. In the
consolidated balance sheet, stock options are presented as stock acquisition rights as a separate component of equity until
exercised.
p. Research and Development Costs — Research and development costs are charged to income as incurred.
q. Leases — All finance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance
sheet.
r.

35

Construction Contracts — Construction revenue and construction costs are recognized by the percentage-of -completion
method if the outcome of a construction contract can be estimated reliably. When total construction revenue, total
construction costs, and the stage of completion of the contract at the balance sheet date can be reliably measured, theoutcome of a construction contract is deemed to be estimated reliably. If the outcome of a construction contract cannot be
reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs
will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing fora loss on construction contracts.

s. Income Taxes — The provision for income taxes is computed based on pretax income and included in the consolidated
statements of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets andliabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.
t. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains andlosses from translation are recognized in the consolidated statements of operations to the extent that they are not hedged
by forward exchange contracts.
u. Foreign Currency Financial Statements — The balance sheet accounts of the consolidated foreign subsidiaries aretranslated into Japanese yen at the current exchange rate as of the balance sheet date, except for equity, which is translated
at the historical rate.
		
Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated
other comprehensive income as a separate component of equity.
		
Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the averageexchange rate.
v. Derivatives and Hedging Activities — The Group uses derivative financial instruments to manage its exposures tofluctuations in foreign currency exchange rates and interest rates. Foreign exchange forward contracts and interest rate
swaps are utilized by the Group to reduce foreign currency exchange and interest rate risks. The Group does not enter into
derivatives for trading or speculative purposes.
		
Derivative financial instruments are recognized as either assets or liabilities and measured at fair value, and gains andlosses on derivative transactions are recognized in the consolidated statements of operations.
w. Per Share Information — Basic net loss per share (“EPS”) is computed by dividing net loss attributable to commonshareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per shareis not disclosed as the Company recognizes net loss per share and the effect of including potential common shares is antidilutive.
		
Cash dividends per share presented in the accompanying consolidated statements of operations are dividends
applicable to the respective years, including dividends to be paid after the end of the year.
x. New Accounting Pronouncementsa) Leases — In January 2016, IFRS 16 Leases was issued. For lessees, IFRS 16 requires most leases to be recognized on
the balance sheet (under a single model), eliminating the distinction between operating and finance leases. On the other
hand, it remains largely unchanged for lessors and the distinction between operating and finance leases is retained. IFRS 16
supersedes IAS 17 Leases and related interpretations.
		
Under IFRS 16, a lessee recognizes a right-of-use asset and a lease liability. The right-of-use asset is treated similarly toother non-financial assets and is depreciated accordingly. The lease liability is initially measured at the present value of thelease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined,
and the liability accrues interest. Under IFRS 16, lessors classify leases as operating or finance in nature, as under current
IAS 17.
		IFRS 16 must be applied for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15
Revenue from Contracts with Customers has also been applied.
		
In February 2016, the FASB issued an accounting standards update which requires lessees to recognize most leaseson their balance sheets, but recognize expenses on their income statements in a manner similar to current guidance. For
lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This
guidance is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted.
		
The foreign subsidiaries expect to apply the new standards on leases effective April 1, 2019, and are in the process ofmeasuring the effects of applying the new standards in future applicable periods.

Annual Report 201836

Notes to Consolidated Financial Statementsb) Revenue recognition — On March 30, 2018, the ASBJ issued ASBJ Statement No. 29, “Accounting Standard for
Revenue Recognition,” and ASBJ Guidance No. 30, “Implementation Guidance on Accounting Standard for Revenue
Recognition.” The core principle of the standard and guidance is that an entity should recognize revenue to depict thetransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity should recognize revenue in accordance with thatcore principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The accounting standard and guidance are effective for annual periods beginning on or after April 1, 2021. Earlier applicationis permitted for annual periods beginning on or after April 1, 2018.
The foreign subsidiaries expect to apply the new standards on revenue recognition effective April 1, 2018 and thereafter,
and the Company expects to apply the accounting standard and guidance for annual periods beginning on or after April 1, 2021.
The Company is in the process of measuring the effects of applying the accounting standard and guidance in future applicable
periods.

3. BUSINESS COMBINATION(Year Ended March 31, 2017)
Sale of an investment in a consolidated subsidiary
The Company decided to enter into a basic agreement for the sale of an investment in a subsidiary (share ratio of stock issued:96%) at the Board of Directors’ Meeting held on November 7, 2016, and reached a basic agreement on the same day. After
negotiations, the Board of Directors reached a resolution to sell the investments, entered into a final agreement on February 21,
2017 and sold the investments on March 30, 2017.
[Overview of Business Combination](1) Name of the divested company and its main business
Name of the company: DX ANTENNA CO., LTD. (“DX ANTENNA”)
Main business: Sales of receiving, communication and security related devices(2) Name of transferee: ELECOM CO., LTD (“ELECOM”)(3) Reason for the divestiture
The business combination was conducted to focus management resources on the Group’s core business in face of thedecrease in sales of the LED TV business due to severe competition in the Group’s main market, North America.
		Considering the similarity of products between DX ANTENNA and ELECOM, the Company resolved to transfer theshares of DX ANTENNA to ELECOM.

4. ADDITIONAL INFORMATION OF CASH FLOWSOn March 30, 2017, the Company sold its shares in DX ANTENNA, with changes of consolidation scope.
Assets and liabilities of the divested company and net cash provided by the sales were as follows:
Millions of Japanese yen

5. INVENTORIESInventories at March 31, 2018 and 2017, consisted of the following:[Overview of accounting treatment]
The difference between the consolidated carrying amount and the sales amounts of DX ANTENNA wasrecognized as transfer profit (loss).
The Company recorded a transfer loss of ¥704 million under “Loss on sales of an investment in a consolidated subsidiary”
in “Other income (expenses)”.

37

Thousands of U.S.
dollars

Millions of Japanese yen

2018¥13,251516
9,841¥23,609

Merchandise and finished products
Work in process
Raw materials and supplies
Total

2017
¥15,459
1,149
9,644¥26,2532018$125,012
4,869
92,846$222,728

6. LONG-LIVED ASSETSIn principle, when the Group conducts an impairment test, the Group categorizes business assets on the basis of each legal
entity whose cash inflows and outflows are continuously recorded. Idle assets are evaluated individually.
During the fiscal year ended March 31, 2018, the Group recorded losses on impairment in the following asset groups:
Use

Location(4) Date of the business combination : March 30, 2017(5) Legal form of business combination
Share transfer in which consideration is limited to cash

2017
¥12,006
3,826(3,178)
(821)
(128)
(3)
(290)
(470)
(704)
132
10,367(132)(2,336)¥7,899Current assets
Noncurrent assets
Current liabilities
Long-term liabilities
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Noncontrolling interests
Loss on sales of investment in a consolidated subsidiary
Related expenses to sales of the investment
Total sales amounts
Related expenses to sales of the investment
Cash and cash equivalents
Proceeds from sales of investment in a subsidiaryBusiness
assetsBusiness
assetsBusiness
assetsFUNAI ELECTRIC CO.,LTD.
(Daito City, Osaka)

FUNAI ELECTRIC (H.K.) LTD.
(New Territories, Hong Kong)

FUNAI THAILAND CO., LTD.
(Nakhon Ratchasima, Thailand)Millions ofJapanese yen

Thousands of U.S.
dollars

¥148
4
2,451
4,883

$1,405
47
23,13046,06775

716

Buildings and structures

42

402

Machinery, equipment and other

650

6,133

Land
Buildings and structures
Machinery, equipment and other

56
596
594

532
5,627
5,610

1

12

Type

Machinery, equipment and other
Lease assets
Patents
Long-term prepaid expenses
Software (included in “Other assets”
in “Investment and other assets”)

Software (included in “Other assets”
in “Investment and other assets”)

Annual Report 201838

Notes to Consolidated Financial Statements
Use

Business
assetsFUNAI ELECTRIC PHILIPPINES
INC.
(Batangas, the Philippines)

Business
assetsFUNAI ELECTRIC CEBU, INC.
(Cebu, the Philippines)

Business
assetsFEP REAL ESTATE, INC.
(Makati, the Philippines)

Business
assetsFUNAI CORPORATION, INC.
(New Jersey, USA)

Business
assetsFUNAI TRADING CORP.
(California, USA)

Business
assetsFUNAI LEXINGTONTECHNOLOGY CORPORATION(Kentucky, USA)

Business
assetsFUNAI MANUFACTURING, S.A.
DE C.V.
(Tijuana, Mexico)

Business
assetsMillions ofJapanese yen

Thousands of U.S.
dollars

Buildings and structures
Machinery, equipment and other

474
549

4,474
5,181

Software (included in “Other assets”
in “Investment and other assets”)

34

324

Buildings and structures
Machinery, equipment and other

539
661

5,088
6,240

Software (included in “Other assets”
in “Investment and other assets”)

33

316

Land

42

398

Buildings and structures
Machinery, equipment and other
Lease assets (included in “Other assets”
in “Investment and other assets”)
Buildings and structures
Machinery, equipment and other

8
5

83
50

293

2,769

5
61

49
582

Location

P&F MEXICANA, S.A. DE C.V.
(Mexico, Mexico)

Type

Software (included in “Other assets”
in “Investment and other assets”)

55

521

Buildings and structures
Machinery, equipment and other
Software (included in “Other assets”
in “Investment and other assets”)

59
202

563
1,910

3

36

Buildings and structures

13

125

Machinery, equipment and other
Software (included in “Other assets”
in “Investment and other assets”)

9

91

8

77

Machinery, equipment and other
Software (included in “Other assets”
in “Investment and other assets”)

4

42

13

127

¥12,586$118,741

Total

The Company reduced the book values of the business assets on which the profitability had declined significantly to theirrecoverable amounts and recorded a loss on impairment of long-lived assets of ¥12,586 million ($118,741 thousand) as otherincome (expenses).
The recoverable amounts of the assets were determined at their net selling price. The net selling amounts of buildings,
structures and land were based on the appraised value which were reasonably calculated by real estate appraisers. The net
selling amounts of other assets were considered as zero.
During the fiscal year ended March 31, 2017, the Group recorded loss on impairment in the following asset groups:
Use

Location

Type

Assets planned to be retired

FUNAI ELECTRIC CEBU, INC.
(Cebu, the Philippines)

Machinery, equipment and other assets

Since acquiring the shares of a manufacturing subsidiary of Lexmark International, Inc. (now Funai Electric Cebu, Inc.), theGroup has engaged in contract production of inkjet cartridges from Lexmark International, Inc. Although the Group previously
categorized the assets as business assets, the production of certain models was discontinued, so the Group reduced the bookvalues of the related manufacturing equipment to their recoverable amounts and recorded a loss on impairment of long-lived
assets of ¥339 million in other income (expenses).
The recoverable amounts of the assets were calculated using net selling price based on disposal value.

39

7. INVESTMENT SECURITIESThe costs and aggregate fair values of investment securities at March 31, 2018 and 2017 were as follows:
Millions of Japanese yen
Cost

Unrealized gains

Unrealized losses

Fair value

2018
Securities classified as:
Available-for-sale:
Equity securities

¥35

¥13

¥49

¥35

¥11

¥47

2017
Securities classified as:
Available-for-sale:
Equity securities

Thousands of U.S. dollars
Cost

Unrealized gains

Unrealized losses

Fair value

2018
Securities classified as:
Available-for-sale:
Equity securities

$336

$127

$463

Available-for-sale securities whose fair values are not readily determinable as of March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

Millions of Japanese yen

2018
Available-for-sale:
Equity securities

2017

2018
¥84

¥242

$2,284

There are no sales transactions of available-for-sale securities during the year ended March 31, 2018.
The information on available-for-sale securities which were sold during the year ended March 31, 2017 is as follows:
Millions of Japanese yen
Proceeds

Realized gains

Realized losses

2017
Available-for-sale:
Equity securities

¥178

¥127

8. LONG-TERM DEBT
Long-term debt at March 31, 2018 and 2017, consisted of the following:
Millions of Japanese yen

Obligations under finance leases
Less current portionLong-term debt, less current portion

2018
¥518
(236)
¥282

2017
¥756
(242)
¥514

Thousands of
U.S. dollars

2018$4,891(2,230)$2,660

Annual Report 201840

Notes to Consolidated Financial Statements
Annual maturities of obligations under finance leases at March 31, 2018, were as follows:Year Ending March 31

Millions ofJapanese yen

Thousands of
U.S. dollars

2019
2020
2021
2022
2023 and thereafter
Total

¥236
205
68
6
1
¥ 518

$2,230
1,942
642
58
16
$ 4,891

9. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees, Directors, and Executive
Officers. Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at the time of termination, years of service, and certain other factors. Such retirement benefits are
made in the form of a lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity
payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the
mandatory retirement age, by death, or by voluntary retirement at certain specific ages prior to the mandatory retirement age.
The Company and certain consolidated subsidiaries have noncontributory funded defined benefit pension plans for
employees. Certain consolidated foreign subsidiaries also have defined contribution pension plans. Some consolidated
subsidiaries use the simplified method to calculate retirement benefit obligations.
The liability for retirement benefits at March 31, 2018 and 2017 for Directors and Executive Officers is ¥1,025 million($9,675 thousand) and ¥1,047 million, respectively. The retirement benefits for Directors are paid subject to the approval by theshareholders.
(1) The changes in defined benefit obligation for the year ended March 31, 2018 and 2017, were as follows:
Millions of Japanese yen

Balance at beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial (gains) losses
Decrease in exclusion from consolidation scope
OthersBalance at end of year2018
¥6,588
399
87
(641)
(148)
14
¥6,3002017¥8,468
480
92
(494)
47
(1,896)(109)¥6,588

Thousands of
U.S. dollars

2018$62,156
3,773
822(6,052)(1,399)135$59,436(2) The changes in plan assets for the year ended March 31, 2018 and 2017, were as follows:
Millions of Japanese yen

Balance at beginning of year
Expected return on plan assets
Benefits paid
Contributions from the employer
Actuarial losses (gains)
Decrease exclusion from consolidation scope
OthersBalance at end of year

41

2018
¥8,117
107
(641)
396
186
(29)
¥8,1362017¥9,629
106
(494)
592
(2)
(1,589)(124)¥8,117

Thousands of
U.S. dollars

2018$76,577
1,015(6,052)
3,743
1,758

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligationand plan assets was as follows:
Millions of Japanese yen

Thousands of
U.S. dollars

Plan assets
Funded defined benefit obligation
Net asset arising from defined benefit obligation2018¥8,022(6,181)¥1,8402017¥7,975(6,431)¥1,543

2018$75,681(58,318)$17,362

Funded defined benefit obligation
Plan assets
Net liability arising from defined benefit obligation¥ (118)114¥(3)¥ (156)141¥ (15)$ (1,117)
1,080
$
(37)

(4) The components of net periodic benefit costs for the year ended March 31, 2018 and 2017, were as follows:
Millions of Japanese yen

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Amortization of prior service cost
Amortization of transitional obligation
OthersNet periodic benefit costs

2018
¥399
87
(107)
163
(1)
40
¥582

2017
¥480
92
(106)
158
(40)
58
9
¥652

Thousands of
U.S. dollars

2018$3,773822(1,015)
1,544
(13)
383
$5,494(5)	Amounts recognized in other comprehensive income (loss) (before income tax effect) in respect of defined retirement
benefit plans for the years ended March 31, 2018 and 2017, were as follows:
Millions of Japanese yen

Actuarial gains (losses)
Prior service cost
Others
Total

2018
¥498
(1)
¥496

2017
¥(177)(222)
58¥(340)

Thousands of
U.S. dollars

2018$4,701(13)$4,688(6)	Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2018 and 2017, were as follows:
Millions of Japanese yen

Unrecognized actuarial gains
Unrecognized prior service cost
Total

2018
¥608
4
¥612

2017
¥109
5
¥115

Thousands of
U.S. dollars

2018$5,73741$5,778(280)$76,761Annual Report 201842

Notes to Consolidated Financial Statements(7) Plan assets(a) Components of plan assets
		 Plan assets as of March 31, 2018 and 2017, consisted of the following:
Debt investments
Equity investments
Loans receivable / short-term fund
Others
Total

2018
59%
20%
0%
21%
100%

2017
61%
18%
2%
19%
100%

(b) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return that are expectedcurrently and in the future from the various components of the plan assets.
(8) Assumptions used for the year ended March 31, 2018 and 2017, were set forth as follows:
Discount rate
Expected rate of return on plan assets
Expected rates of pay raises
Lump sum election rate

2018
1.4%
1.3%
5.6%
75.5%

2017
1.4%
1.3%
5.6%
86.5%

10. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria, such as (1) having a Boardof Directors, (2) having the independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of
the Directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Boardof Directors may declare dividends (except for dividends–in-kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. With respect to the third condition above, the Board of Directors of companies
with (a) board committees (namely, an appointment committee, compensation committee and audit committee), or (b)an audit and supervisory committee (as implemented under the Companies Act effective May 1, 2015) may also declare
dividends at any time because such companies, by their nature, meet the criteria under the Companies Act. The Company
is organized as a company with an audit and supervisory committee, effective June 25, 2015. The Company meets all theabove criteria, and accordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during
the fiscal year.
		Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles
of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available
for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity
account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus, and retained earnings can be transferred among the accounts within equity undercertain conditions upon resolution by the shareholders.

43(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution
to the shareholders, which is determined using a specific formula. Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

11. STOCK OPTIONS(1) The stock options outstanding for the fiscal year ended March 31, 2018, are as follows:
Stock option

Persons granted

Number ofoptions granted

Date of grant

Exercise price

Exercise period

2008 stock option

One Director Officer
10 Executive Officers
315 employees

431,700 shares

November 20,
2008¥1,609($15)

From August 1, 2010
to July 31, 20172014 stock option

Three Directors
Two Executive Officers
Two Executive Officers of a subsidiary
One employee of a subsidiary

120,000 shares

October 10,
2014¥1,296($12)

From September 1,
2016 to August 31,
2023

2016 stock option

Four Directors
One Executive Officer
50 employees
Two employees of a subsidiary

174,000 shares

January 30,
2017¥1,019($10)

From September 1,
2018 to August 31,
2023

2017 stock option

Two Directors
Two Executive Officers
122 employees

170,000 shares

November 29,
2017

¥947
($9)

From September 1,
2019 to August 31,
2024

2016
Stock option(Shares)2017
Stock option(Shares)(2) The stock option activity is as follows:
The number of stock options
2008
stock option(Shares)Year ended March 31, 2017
Nonvested
March 31, 2016 – Outstanding
GrantedCanceled
VestedMarch 31, 2017 – Outstanding
VestedMarch 31, 2016 – Outstanding
VestedExercised
Canceled
March 31, 2017 – Outstanding
Year ended March 31, 2018
Nonvested
March 31, 2017 – Outstanding
GrantedCanceled
VestedMarch 31, 2018 – Outstanding

2014
stock option(Shares)

174,000

174,000
252,700
31,000(24,100)
228,600(4,600)26,400174,000(41,000)

170,000(9,500)133,000

160,500

Annual Report 201844

Notes to Consolidated Financial Statements

VestedMarch 31, 2017 – Outstanding
VestedExercised
Canceled
March 31, 2018 – Outstanding

2008
stock option(Shares)

2014
stock option(Shares)

228,600

26,400(228,600)(10,800)
15,6002016
Stock option(Shares)2017
Stock option(Shares)

¥1019
($10)

Exercise price
Average stock price at exercise
Fair value price at grant date

¥188
($2)
¥199
($2)
¥206
($2)
¥212
($2)
¥216
($2)

a. From September 1, 2018 to August 31, 2023
b. From September 1, 2019 to August 31, 2023
c. From September 1, 2020 to August 31, 2023

The price information of the stock option is as follows:
2008
stock option

Exercise price2016
stock option¥1,609($15)

d. From September 1, 2021 to August 31, 2023
e. From September 1, 2022 to August 31, 2023

Average stock price at exercise
Fair value price at grant datea. From August 1, 2010 to July 31, 2017b. From August 1, 2011 to July 31, 2017c. From August 1, 2012 to July 31, 2017d. From August 1, 2013 to July 31, 2017
e. From August 1, 2014 to July 31, 2017
f. From August 1, 2015 to July 31, 2017
g. From August 1, 2016 to July 31, 2017

¥440
($4)
¥447
($4)
¥454
($4)
¥458
($4)
¥475
($4)
¥487
($5)
¥510
($5)
2014
stock option

Exercise price¥1,296($12)

b. From September 1, 2017 to August 31, 2023
c. From September 1, 2018 to August 31, 2023
d. From September 1, 2019 to August 31, 2023
e. From September 1, 2020 to August 31, 2023
f. From September 1, 2021 to August 31, 2023
g. From September 1, 2022 to August 31, 2023

45

¥236
($2)
¥280
($3)
¥330
($3)
¥353
($3)
¥359
($3)
¥359
($3)
¥356
($3)

¥947
($9)

Exercise price
Average stock price at exercise
Fair value price at grant date

¥199
($2)
¥213
($2)
¥233
($2)
¥246
($2)
¥258
($2)

a. From September 1, 2019 to August 31, 2024
b. From September 1, 2020 to August 31, 2024
c. From September 1, 2021 to August 31, 2024
d. From September 1, 2022 to August 31, 2024
e. From September 1, 2023 to August 31, 2024

(3) The Assumption Used to Measure the Fair Value of the 2017 Stock Option
Estimate method: Black-Sholes option-pricing model2017 stock option

Average stock price at exercise
Fair value price at grant datea. From September 1, 2016 to August 31, 2023

2017
stock option

Volatility of stock price
Estimated remaining
outstanding period
Estimated dividend
Risk free interest rate

a

b

c

d

e

37.39%

37.78%

39.14%

39.55%

39.87%

4.255years

4.756years

5.257years

5.755years

6.256years¥10($0.09)-0.135%¥10($0.09)-0.128%¥10($0.09)-0.118%¥10($0.09)-0.104%¥10($0.09)-0.095%* Volatility of stock price is calculated based on the actual stock price during the below periods;
a: From August 28, 2013 to November 29, 2017b: From February 26, 2013 to November 29, 2017
c: From August 27, 2012 to November 29, 2017
d: From February 27, 2012 to November 29, 2017
e: From August 28, 2011 to November 29, 2017(4) Estimated method of number of vested options
Since it is difficult to estimate the number of canceled options reasonably, the Company estimates the number of canceled
options as zero.

Annual Report 201846

Notes to Consolidated Financial Statements
12. R&D COSTS
R&D costs charged to income were ¥6,242 million ($58,896 thousand) and ¥7,248 million for the years ended March 31, 2018and 2017, respectively.

13. LEASESThe Group leases certain machinery and vehicles.
The minimum rental commitments under noncancelable operating leases at March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

Millions of Japanese yen

Due within 1 year
Due after 1 year
Total

2018
¥454
899
¥1,354

2017
¥ 581
579
¥1,1602018$4,2908,489$12,780

14. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately 30.6% and 30.9% for the years ended March 31, 2018 and2017, respectively.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax assets andliabilities at March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

Millions of Japanese yen

2017

2018
Deferred tax assets:
Liability for retirement benefits
Accounts payable – other
Allowance for doubtful accounts
Accrued employees’ bonuses
Impairment loss on investment securities
Inventories
Loss on impairment of long-lived assets
Transfer pricing adjustment
Tax loss carryforwards
Other
Less valuation allowance
Total
Deferred tax liabilities:
Reserve for reduction entry of property assets
Prepaid pension cost
Other
Total
Net deferred tax assets

¥320
1,499
361
146
20
351
2,622
18,953
1,441(24,966)
749

¥321
969
479
165
20
233
51
699
17,7001,435(21,053)
1,025

2018
$3,02014,143
3,406
1,385
194
3,313
24,738178,804
13,597(235,537)
7,066

15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
1. Status of Financial Instruments(1) Group Policy for Financial Instruments
The Group obtains financing from banks and invests funds in short-term deposits. The Group has a policy of not using
derivatives for speculation purposes.
(2) Nature and Extent of Risks Arising from Financial Instruments and Risk Management for Financial Instruments
Trade receivables, such as trade notes and trade accounts, are exposed to customer credit risk.
		
To avoid such risk, the Group has stipulated sales management rules and manages trading terms and credit lines by
each customer.
		Investment securities, mainly equity instruments, are exposed to market risk. With regard to the risks, the market
values and the financial positions of the issuers are reviewed periodically and reported to the Internal Investment and Loan
Committee.
		
Most payables, such as trade notes and trade accounts, become due and payable within one year.
		
The Group has a policy of not using derivatives. However, as floating-rate loans are exposed to interest rate risk, theGroup may utilize derivatives (interest rate swap agreements) as hedging instruments according to individual loan contracts.
To trade in derivatives, such derivatives are executed and managed in accordance with Group internal rules. To mitigate
credit risk, the Group enters into transactions solely with financial institutions with high ratings.
		Trade receivables and loans are exposed to liquidity risks. The Group manages these risks by having each company
perform monthly financial planning.
2. Fair Value of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, anotherrational valuation technique is used instead. The list below does not contain financial instruments whose fair values are notreadily determinable.
(a) Fair Value of financial instruments
Millions of Japanese yen
Carrying amount

53
561
95
709
¥39

56
471
148
676
¥349

503
5,293
900
6,697
$369

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying
consolidated statements of operations was not presented because of the net loss for the periods.
On June 29, 2011, the Company received notice from the Osaka Regional Taxation Bureau suggesting that a subsidiaryin Hong Kong did not satisfy the conditions for exclusion from incorporating of income generated by the subsidiary into theincome of the Company for the duration of three years from April 1, 2007 to March 31, 2010, for taxation purposes. Because
the Company objected to this corrective action, the Company applied for assessments by the Osaka National Tax Tribunal on
August 25, 2011. On July 18, 2012, the Company received a written verdict on this case indicating that our assertions had been
dismissed. The Company, unable to accept the verdict, filed an appeal to have the action canceled with the Tokyo District Court
on January 17, 2013, however the Court rejected the Company’s claim on September 28, 2016. The Company unable to accept
the judgment, so filed the appeal to the Tokyo High Court on October 12, 2016, however the Court rejected the Company’s

47

claim on October 26, 2017. In response to this decision, the Company did not file a final appeal and petition for acceptance of
final appeal, so the appeal court’s final decision was made on November 10, 2017.
The additional tax, including corporate income taxes, inhabitant taxes, and enterprise taxes, amounted to ¥825 million (¥935
million, including incidental taxes). This amount has been processed as expenses under the category of “Income taxes – prioryears” in the fiscal year ended March 31, 2012, in accordance with Japanese Institute of Certified Public Accountants Audit andAssurance Practice Committee Report No. 63, “Treatment of Accounting and Presentation of Taxes for the purpose of Audits.”
The Company has recorded the amount that would be affected if the taxation were applied from the fiscal year ended March
31, 2011, which is the fiscal year following the fiscal year to which the assessment was applied.

2018
Cash and cash equivalents
Time deposits
Receivables-trade
Investment securities
Total
Payables-trade
Payables-otherTotal¥30,650
1,739
9,953
49
¥42,393¥11,808
10,372¥22,180

Fair value

Unrealized gain/loss¥30,650
1,739
9,953
49
¥42,393¥11,808
10,372¥22,180

Annual Report 201848

Notes to Consolidated Financial Statements(c) Maturity analysis for financial assets and securities with contractual maturities

Millions of Japanese yen
Carrying amount2017
Cash and cash equivalents
Time deposits
Receivables-trade
Investment securities
Total
Payables-trade
Payables-otherTotal¥38,971
1,165
15,571
47¥55,754¥18,603
7,280¥25,883

Fair value

Unrealized gain/loss¥38,971
1,165
15,571
47¥55,754¥18,603
7,280¥25,883
Thousands of U.S. dollars

Carrying amount2018
Cash and cash equivalents
Time deposits
Receivables-trade
Investment securities
Total
Payables-trade
Payables-otherTotal$289,157
16,412
93,905463$399,939$111,399
97,849$209,249

Fair value

Unrealized gain/loss$289,157
16,412
93,905463$399,939$111,399
97,849$209,249¥1,236¥1,377¥38,971
1,165
15,571¥55,707

Due after 10 years

Due after 1 year
through 5 years

Due after 5 years
through 10 years$289,157
16,412
93,905$399,475

16. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

2017

2018
Unrealized loss on available-for-sale securities:
Gain (loss) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

Thousands of
U.S. dollars

2018$11,668

Due after 10 years

Please see Note 8 for annual maturities of obligations under finance leases.

Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

49

Due after 5 years
through 10 years

Millions of Japanese yen(b) Financial instruments whose fair value cannot be reliably determined

2017

2017
Cash and cash equivalents
Time deposits
Receivables-trade
Total

2018
Cash and cash equivalents
Time deposits
Receivables-trade
Total

Liabilities
Payables – trade, and payables – other
The carrying value of payables approximates fair value because of their short maturities.

2018¥30,650
1,739
9,953¥42,344

Due after 1 year
through 5 years

Thousands of U.S. dollars

Investment securities
Investment securities are measured at the quoted market prices on a stock exchange for the equity instruments.
Fair value information for investment securities is included in Note 7.

Investments in equity instruments that do not have a quoted
market price in an active market

2018
Cash and cash equivalents
Time deposits
Receivables-trade
Total

Due in 1 year
or less

AssetsCash and cash equivalents, time deposits, and receivables – trade
The carrying values of cash and cash equivalents, time deposits, and receivables – trade approximate fair value because of theirshort maturities.

Millions of Japanese yen

Millions of Japanese yen
Due in 1 year
or less

2018

¥93
(255)
(162)
13
¥ (148)$15$ (10,373)(1,099)

¥971
(16)
954

¥ (1,099)¥954$ (10,373)

¥334
162
496
(156)
¥340

¥ (50)
(290)
(340)
133
¥ (207)$3,157
1,530
4,688(1,478)$3,209¥1
1¥1¥ (1,099)

15$15(10,373)

Annual Report 201850

Notes to Consolidated Financial Statements
Thousands of
U.S. dollars

Millions of Japanese yen

2017

2018
Share of other comprehensive income (loss) in associates:
Loss arising during the year
Reclassification adjustments to profit or loss
Total
Total other comprehensive (loss) income¥ (757)2018

19. SEGMENT INFORMATION

¥ (6)
50
¥44
¥ 643

$ (7,149)

17.		 NET LOSS PER SHARE
Information on basic net EPS for the years ended March 31, 2018 and 2017, was as follows:
Millions ofJapanese yen

Thousands ofsharesJapanese yen

Net loss attributable to Weighted-average
Owners of the Parent
SharesFor the year ended March 31, 2018:
Basic EPS
Net loss available to common Shareholders
For the year ended March 31, 2017:
Basic EPS
Net loss available to common shareholders

U.S dollars
EPS¥ (24,709)

34,119¥ (724.21)¥ (6,745)

34,119¥ (197.70)$ (6.83)

Diluted net income per share is not disclosed due to the net loss for the years ended March 31, 2018 and 2017.

18. SUBSEQUENT EVENTSReduction of capital reserve and legal reserve and appropriation of the surplus
The Company resolved to reduce its capital reserve (component of capital surplus) and legal reserve (component ofretained earnings) and appropriate the surplus at the Board of Directors’ Meeting held on May 21, 2018, in accordance with theprovisions of the Company’s Articles of Incorporation pursuant to Article 459, Paragraph 1 of the Companies Act.
1. Purpose of reduction of capital reserve and legal reserve and appropriation the surplus
By supplementing the deficit, the Company improves the financial structure to enable the distribution of the dividends when the
Company makes a profit and ensures flexibility and mobility in future financial strategies.
2. Outline of reduction of capital reserve and legal reserve
In accordance with Article 448, Paragraph 1 of the Companies Act, the capital reserve was reduced and transferred to othercapital surplus and the legal reserve was reduced and transferred to other retained earnings.
(1) Reduced reserve
Capital reserve
Legal reserve(2) Increased surplus
Other capital surplus
Other retained earnings

¥
¥

¥
¥

4. Effective date of reduction in capital reserve and appropriation of surplus(1) Date of the Resolution of the Board of Directors’ Meeting May 21, 2018
(2) Effective date
May 21, 201812,810 million ($ 120,852 thousand)
209 million ($ 1,975 thousand)

12,810 million ($ 120,852 thousand)
209 million ($ 1,975 thousand)Under ASBJ Statement No.17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20,“Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial anddescriptive information about its reportable segments. Reportable segments are operating segments or aggregations ofoperating segments that meet specified criteria. Operating segments are components of an entity about which separate
financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Generally, segment information is required to be reported on thesame basis as is used internally for evaluating operating segment performance and deciding how to allocate resources tooperating segments.
(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by theCompany’s management is being performed in order to decide how resources are allocated among the Group. The Groupis engaged in the manufacture and sale of consumer electronics products. Mainly, the Company operates in Japan, FUNAICORPORATION, INC. and P&F USA, INC. operates in the Americas, FUNAI ELECTRIC (H.K.) LTD. and FUNAI (THAILAND) Co.,
LTD. operate in Asia, and FUNAI ELECTRIC EUROPE Sp.zo.o. operates in Europe. Each overseas subsidiary is an independent
management unit, which develops product strategies and business activities in its respective region. Therefore, the Groupconsists of four geographic segments based on the manufacturing and sales structures: “Japan,” “Americas,” “Asia,” and“Europe.”(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant
Accounting Policies.” Sales prices between the segments are set on an arm’s-length basis.
(3) Information about Sales, Profit (Loss), Assets, and Other Items
Millions of Japanese yen

2018

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment loss (Note B)
Segment assets
Other
Depreciation
Increase in property, plant andequipment and intangible
assetsImpairment losses of assets

Japan

Americas

Asia

Europe¥36,199
83,389¥119,589¥ (5,634)
76,263¥92,949
2,293¥95,243¥ (965)24,892¥853
98,355¥99,209¥ (3,948)
28,038

706

110

1,442

2,258

815

164

1,445

2,425

¥7,564¥745¥4,276¥12,586¥127¥127¥ (83)¥1,407

Total

Reconciliations Consolidated(Note A)
(Note B)

¥130,130184,038(184,038)¥314,169 ¥ (184,038)¥ (10,631)¥ (253)
130,600(50,330)¥130,130¥130,130¥ (10,885)
80,2702,258¥ (16)

2,408¥12,586

3. Outline of appropriation of surplus
In accordance with Article 452 of the Companies Act, the amount of General reserve has been reduced and transferred to otherretained earnings.

51(1) Reduced reserve
General reserve¥ 12,428 million ($ 117,249 thousand)(2) Increased surplus
Other retained earnings¥ 12,428 million ($ 117,249 thousand)Annual Report 201852

Notes to Consolidated Financial Statements
Millions of Japanese yen

2017
Japan

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment (loss) profit (Note B)
Segment assets
Other
Depreciation
Increase in property, plant andequipment and intangible
assetsImpairment losses of assets

Americas

Asia

Millions of Japanese yen

Europe¥612

Reconciliations Consolidated(Note A)
(Note B)

Total

¥31,200
83,776¥114,977¥ (8,219)
88,400¥101,751
1,194¥102,945¥ (131)
34,976¥274
87,607¥87,881¥ (630)42,110

¥612
¥ 45
1,868

¥133,838
172,577¥306,416¥ (8,935)
167,355

1,589

171

2,337

¥0

4,098

¥654

¥332

2,250

3,237

¥339

¥339

¥133,838¥(172,577)¥(172,577)¥ 2,160(58,669)¥133,838¥ (6,775)
108,685
4,098

¥

(0)

3,237
¥339

Segment assets
Corporate assets(*2)
Adjustment of inventory
Elimination of intersegment assets and liabilities, etc.
Total

Thousands of
U.S. dollars

2018

2017

2018

¥20,635(44)(70,921)¥(50,330)¥22,762(1,298)(80,133)¥(58,669)$194,676(419)(669,070)$(474,813)(*1) Corporate expenses are mainly general and administrative expenses not attributable to any reportable segment.
(*2) Corporate assets mainly consist of cash surpluses (cash and cash equivalents and time deposits) and long-terminvestments (investments securities, etc.) that are not attributable to any reportable segment.
Note B Segment (loss) profit is adjusted to operating loss in the consolidated statements of operations.
(4) Related Information
1. Information about each product and service
Millions of Japanese yen

Thousands of U.S. dollars

2018

2018
Japan

Sales:
Sales to external customers$341,508
Intersegment sales or transfers
786,691
Total$1,128,200
Segment loss (Note B)$ (53,156)
Segment assets
719,465
Other
Depreciation
6,661
Increase in property, plant andequipment and intangible
7,690
assetsImpairment losses of assets$71,367

EuropeReconciliations Consolidated(Note A)
(Note B)

Americas

Asia

Total

$876,880
21,638$898,519$ (9,110)
234,835$8,055927,884$935,940$ (37,247)
264,509

1,038

13,606

21,306

1,552

13,63722,879$7,031$40,343$118,741$1,199 $1,227,643$1,227,643(1,736,215)
1,736,215$1,199 $2,963,858 $ (1,736,215) $1,227,643$ (787) $ (100,301)$ (2,390) $ (102,691)$13,273
1,232,084(474,813)
757,271

Sales to external customers

Audiovisualequipment

Informationequipment¥122,569¥3,334¥130,130

2017

Sales to external customers

Audiovisualequipment

Informationequipment¥115,262¥5,075

Other

Total

¥13,500¥133,838

Thousands of U.S. dollars

2018

22,723$118,741¥4,225

Total

Millions of Japanese yen

21,306$ (156)

Other

Sales to external customers

Audiovisualequipment

Informationequipment$1,156,319$31,458

Other$39,864

Total$1,227,643

Note A Components of reconciliations are as follows:
Millions of Japanese yen

2018
Segment (loss) profit
Elimination of intersegment transactions
Corporate expenses(*1)
Adjustment of inventory
Total

2017

Thousands of
U.S. dollars

2. Information about geographical areasa. SalesNote: Sales are classified by country or region based on the location of customers.

2018

Millions of Japanese yen
2018¥ (735)(772)
1,254¥ (253)¥2,705(767)
222¥2,160$ (6,938)(7,283)
11,831$ (2,390)

Americas
Japan

USA

Mexico

Other

Asia

EuropeTotal¥33,897¥89,020¥2,844¥2,438¥1,391¥538¥130,130

Millions of Japanese yen
2017
Americas
Japan

USA

Mexico

Other

Asia

EuropeTotal¥29,521¥93,384¥6,895¥2,588¥424¥1,023¥133,838

Thousands of U.S. dollars
2018
Americas

53

Japan

USA

Mexico

Other

Asia

EuropeTotal$319,789$839,813$26,831$23,007$13,125$5,075$1,227,643
Annual Report 201854

Notes to Consolidated Financial Statements

Independent Auditors’ Reportb. Property, plant and equipment
Millions of Japanese yen
2018
Asia
Japan

AmericasPhilippines

Thailand

Other

Total

¥4,528¥2¥3,097¥564¥0¥8,193

Millions of Japanese yen
2017
Asia
Japan

AmericasPhilippines

Thailand

Other

Total

¥4,544¥263¥5,922¥1,697¥535¥12,963

Thousands of U.S. dollars
2018
Asia
Japan

AmericasPhilippines

Thailand

Other

Total

$42,724$21$29,223$5,325$4$77,298

3. Information about major customers
Sales
Millions of Japanese yen
Name of Customer

WAL-MART STORES, INC.
YAMADA DENKI CO., LTD.

55

2018
¥77,979¥17,115

2017¥78,530¥997

Thousands of
U.S. dollars

2018$735,657$161,464

Related segment nameAmericas
Japan

Annual Report 201856