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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

The Securities Exchange Act of 1934

For the Month of August 2012

Commission File Number: 1-6784

Panasonic Corporation

Kadoma, Osaka, Japan

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  x    Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1):     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7):     

 

 

 

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This Form 6-K consists of:

 

1.

Quarterly report for the three months ended June 30, 2012, filed on August  6, 2012 with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan. (English translation)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: August 21, 2012

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[English summary with full translation of consolidated financial information]

 

 

 

 

 

Quarterly Report filed with the Japanese government

pursuant to the Financial Instruments and Exchange

Law of Japan

 

 

 

For the three months ended

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Panasonic Corporation

Osaka, Japan

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CONTENTS

 

				Page
Disclaimer Regarding Forward-Looking Statements					1
I		Corporate Information			2
		(1)     Consolidated Financial Summary			2
		(2)     Principal Businesses			3
II		The Business			4
		(1)     Operating Results			4
		(2)     Operating Results by Segment			4
		(3)     Assets, Liabilities and Equity			5
		(4)     Cash Flows			5
		(5)     Research and Development			6
		(6)     Major Property, Plant and Equipment			6
		(7)     Depreciation			6
		(8)     Number of Employees			6
		(9)     Risk Factors			6
III		Shares and Shareholders			6
		(1)     Shares of Common Stock Issued			6
		(2)     Amount of Common Stock (Stated Capital)			6
IV		Financial Statements			7

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Disclaimer Regarding Forward-Looking Statements

 

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about Panasonic and its Group companies (the Panasonic Group). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the U.S. Securities Exchange Act of 1934 and its other filings.

 

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency rate fluctuations, notably between the yen, the U.S. dollar, the euro, the Chinese yuan, Asian currencies and other currencies in which the Panasonic Group operates businesses, or in which assets and liabilities of the Panasonic Group are denominated; the possibility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment; the ability of the Panasonic Group to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results on the alliances or mergers and acquisitions including the business reorganization after the acquisition of all shares of Panasonic Electric Works Co., Ltd. and SANYO Electric Co., Ltd.; the ability of the Panasonic Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of Panasonic to achieve its midterm management plan; the ability of the Panasonic Group to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which the Panasonic Group has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in Panasonic’s latest annual reports, Form 20-F, and any other reports and documents which are on file with the U.S. Securities and Exchange Commission.

 

 

 

 

 

Note:

Certain information previously filed with the SEC in other reports is not included in this English translation.

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I	Corporate Information

 

(1)	Consolidated Financial Summary

 

		Yen (millions), except per share amounts
		Three months ended June  30, 2012				Three months ended June  30, 2011				Year ended March 31, 2012
Net sales			1,814,498				1,929,548				7,846,216
Income (loss) before income taxes			37,825				(17,433	)			(812,844	)
Net income (loss)			11,075				(32,624	)			(816,144	)
Net income (loss) attributable to Panasonic Corporation			12,809				(30,351	)			(772,172	)
Comprehensive income (loss) attributable to Panasonic Corporation			(50,962	)			(54,915	)			(881,189	)
Total Panasonic Corporation shareholders’ equity			1,867,175				2,766,180				1,929,786
Total equity			1,904,449				2,866,220				1,977,566
Total assets			6,432,717				7,665,004				6,601,055
Net income (loss) per share attributable to Panasonic Corporation common shareholders, basic (yen)			5.54				(13.13	)			(333.96	)
Net income (loss) per share attributable to Panasonic Corporation common shareholders, diluted (yen)			—				—				—
Panasonic Corporation shareholders’ equity / total assets (%)			29.0				36.1				29.2
Net cash provided by (used in) operating activities			53,769				(34,592	)			1,983
Net cash provided by (used in) investing activities			1,317				(56,367	)			(341,876	)
Net cash used in financing activities			(73,815	)			(35,885	)			(53,094	)
Cash and cash equivalents at end of period			536,651				837,041				574,411

 

Notes:		1.		The Company’s consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP).
		2.		Diluted net income (loss) per share attributable to Panasonic Corporation common shareholders has been omitted because the Company did not have potential common shares that were outstanding for the period.
		3.		Effective from the beginning of fiscal 2013, investments in molding dies are included in capital investment. Accordingly, the amounts of the net cash provided by (used in) operating activities and net cash provided by (used in) investing activities for fiscal 2012 (including quarterly period) are changed.

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(2)	Principal Businesses

 

The Panasonic Group is comprised primarily of the parent Panasonic Corporation and 564 consolidated subsidiaries in and outside of Japan, operating in close cooperation with each other. As a comprehensive electronics manufacturer, Panasonic is engaged in production, sales and service activities in a broad array of business areas.

 

The Company strengthens the unity of all employees throughout the group and ultimately enhances the value of the “Panasonic” brand globally. The Company will continue its tireless efforts to generate ideas that brighten the lives of people everywhere in order to contribute to a better future both for the Earth and for the further development of society.

 

Panasonic changed the Group organizational structure in January 2012, resulting in eight reportable segments. “AVC Networks” provides imaging equipment such as flat-panel TVs, AVC network equipment including Blu-ray Disc recorders, digital cameras and PCs as well as in-flight entertainment systems and other business-use AV equipment; “Appliances” delivers the homemaking, cooking, beauty and grooming, health, air-conditioning equipment, and cooling and heating equipment; “Systems

& Communications” delivers products and services of the system networks and mobile communications; “Eco Solutions” is comprised of four business groups, which are the lighting business, the energy systems business, the housing systems business, and the environmental systems business; “Automotive Systems” operates car-use-multimedia-related equipment, eco-car-related equipment and electrical component; “Industrial Devices” covers a wide range of products such as electronic components, semiconductors and optical devices; “Energy” develops a broad energy-based business including solar photovoltaic systems and lithium-ion batteries; and “Other” consists of Healthcare Company, Manufacturing Solutions Company, PanaHome Corporation and others.

 

For production, Panasonic adopts a management system that takes charge of each product in the Company or its affiliates. In recent years, the Company has been enhancing production capacity at its overseas affiliates to further develop global business. Meanwhile, in Japan, Panasonic’s products are sold through sales channels at its domestic locations, each established according to products or customers. The Company also sells directly to large-scale consumers, such as the government and corporations. For exports, sales are handled mainly through sales subsidiaries and agents located in their respective countries. Certain products produced at domestic affiliates are purchased by the Company and sold through the same sales channels as products produced by the Company itself. Additionally, products produced at overseas affiliates are sold mainly through sales subsidiaries in respective countries. Meanwhile, most import operations are carried out internally, and the Company aims to expand them to promote international economic cooperation.

 

During the three months ended June 30, 2012, there were no major changes in principal businesses.

 

During the three months ended June 30, 2012, there were changes in major affiliated companies as follows.

 

The Company absorbed Panasonic Electronic Devices Co., Ltd. (Industrial Devices segment) and other on April 1, 2012.

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II	The Business

 

(1)	Operating Results

 

During the first quarter under review, the Japanese market showed a slow recovery with an increasing number of housing starts due to growing reconstruction demand following the Great East Japan Earthquake, and the government’s eco-housing subsidy. Another factor is automobile sales growth due to the eco-car subsidy. However, the home electronics market, especially flat-panel TVs, continued to be very difficult. In the meantime, the global economy as a whole slowed down caused by the economic turmoil re-triggered by the European financial crisis, despite signs of economic recovery in some regions.

 

Under such business circumstances, Panasonic has been working towards establishing new profit-making business models and recovering business performance with the united efforts of all Panasonic under the new business structure which enables the Company to strengthen a more direct relationship with consumers globally.

 

In such an environment, consolidated group sales for the first quarter decreased by 6% to 1,814.5 billion yen due mainly to weak demand for AV products in Japan, compared with 1,929.5 billion yen for the first quarter of the year ended March 31, 2012 (fiscal 2012).

 

Operating profit* increased by 592% to 38.6 billion yen from 5.6 billion yen a year ago, while pre-tax income, net income and net income attributable to Panasonic Corporation increased to 37.8 billion yen, 11.1 billion yen and 12.8 billion yen from a loss of 17.4 billion yen, 32.6 billion yen and 30.4 billion yen, respectively. Despite sales decline and yen appreciation, these results were due mainly to fixed cost reductions and streamlining of material costs.

 

*		In order to be consistent with generally accepted financial reporting practices in Japan, operating profit, a non-GAAP measure, is presented as net sales less cost of sales and selling, general and administrative expenses. The Company believes that this is useful to investors in comparing the Company’s financial results with those of other Japanese companies.

 

(2)	Operating Results by Segment

 

The Company restructured its Group organization on January 1, 2012, resulting in the number of reportable segments from six to eight. Accordingly, segment information for the first quarter of fiscal 2012 has been reclassified to conform to the presentation for the same period of fiscal 2013.

 

AVC Networks

 

Sales decreased by 20% to 359.7 billion yen from 449.9 billion yen a year ago. Despite favorable sales of PCs and others, this result was due mainly to significant sales decline in flat-panel TVs and BD recorders in Japan. Segment profit significantly improved to 7.4 billion yen, compared with a loss of 3.8 billion yen a year ago due mainly to fixed cost reduction and restructuring effects.

 

Appliances

 

Sales increased by 3% to 431.4 billion yen, compared with 417.7 billion yen a year ago. Despite sales decreases in compressors and motors, this result was due mainly to sales increases in refrigerators and washing machines. Segment profit increased by 7% to 37.4 billion yen, compared with 34.9 billion yen a year ago due mainly to fixed cost reduction.

 

Systems & Communications

 

Sales decreased by 9% to 164.5 billion yen from 181.6 billion yen a year ago due mainly to sales decreases in system-related equipment such as compact multifunction printers and private branch exchange (PBX) products. Segment loss amounted to 8.3 billion yen compared with a loss of 9.9 billion yen a year ago.

 

Eco Solutions

 

Overall sales remained stable at 355.2 billion yen compared with 356.5 billion yen a year ago. Despite sales increases in the lighting and environmental system businesses, this result was due mainly to sales decreases in the energy system business especially home use fire prevention devices in Japan. Segment profit decreased by 37% to 3.9 billion yen from 6.1 billion yen a year ago.

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Automotive Systems

 

Sales significantly increased by 71% to 190.7 billion yen from 111.7 billion yen a year ago due mainly to strong sales in car AVC equipment and car navigation systems compared with the fiscal 2012 results affected by the Great East Japan Earthquake. Segment profit significantly improved to 4.2 billion yen compared with a loss of 3.7 billion yen a year ago due mainly to sales increase.

 

Industrial Devices

 

Sales decreased by 7% to 338.2 billion yen from 364.0 billion yen a year ago. Despite sales increases in electronic components and materials, this result was due mainly to sales decreases in optical pickups and semiconductors. Segment profit significantly improved to 7.3 billion yen compared with a loss of 2.7 billion yen a year ago due mainly to fixed cost reduction.

 

Energy

 

Sales decreased by 2% to 142.6 billion yen from 145.1 billion yen a year ago. Despite sales increases in automotive-use batteries, and solar photovoltaic systems in Japan, this result was due mainly to sales decreases in consumer-use lithium-ion batteries and dry batteries. Segment profit amounted to 0.1 billion yen compared with a loss of 7.5 billion a year ago due mainly to fixed cost reduction and streamlining material costs.

 

Other

 

Sales decreased by 29% to 343.5 billion yen from 484.5 billion yen a year ago. The sales decline owing to the SANYO-related business transfers implemented in fiscal 2012 led to the overall sales decrease. Segment profit increased by 6% to 4.1 billion yen from 3.9 billion yen a year ago due mainly to fixed cost reduction.

 

(3)	Assets, Liabilities and Equity

 

The Company’s consolidated total assets as of June 30, 2012 decreased by 168.3 billion yen to 6,432.7 billion yen from March 31, 2012. This was due mainly to a decrease in investments and advances, affected by the disposition and decline of the market value in investment, in addition to appreciation of the yen.

 

Regarding liabilities, total liabilities amounted to 4,528.3 billion yen, a decrease of 95.2 billion yen compared with March 31, 2012. This was attributable primarily to a decrease in short-term bonds balance.

 

Panasonic Corporation shareholders’ equity decreased by 62.6 billion yen, compared with March 31, 2012, to 1,867.2 billion yen. This was due mainly to deterioration in accumulated other comprehensive income (loss) along with appreciation of the yen and decline of the market value in investment. Adding Noncontrolling interests to Panasonic Corporation shareholders’ equity, total equity decreased by 73.1 billion yen to 1,904.4 billion yen compared with March 31, 2012.

 

(4)	Cash Flows

 

Cash flows from operating activities

 

Net cash provided by operating activities for the first quarter of fiscal 2013 amounted to 53.8 billion yen compared with an outflow of 34.6 billion yen a year ago. This difference was due to a positive net income in first quarter of fiscal 2013 compared with a net loss in fiscal 2012, and an improvement in working capital (net of trade receivables, inventories and trade payables).

 

Cash flows from investing activities

 

Net cash provided by investing activities amounted to 1.3 billion yen compared with an outflow of 56.4 billion yen a year ago. This was due primarily to a decrease in capital expenditures and an increase in proceeds from disposals of investments and property, plant and equipment.

 

Cash flows from financing activities

 

Net cash used in financing activities increased by 37.9 billion yen to 73.8 billion yen, due mainly to a decrease in short-term bonds balance.

 

Taking into consideration exchange rate fluctuations, cash and cash equivalents totaled 536.7 billion yen as of June 30, 2012, down 37.8 billion yen, compared with the end of the last fiscal year.

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(5)	Research and Development

 

Panasonic’s R&D expenditures for the three months ended June 30, 2012 totaled 122.5 billion yen, down 7% from a year ago. There were no significant changes in R&D activities for the period.

 

(6)	Major Property, Plant and Equipment

 

Effective from the beginning of fiscal 2013, investments in molding dies are included in capital investment. Accordingly, the Company revised the forecast for fiscal 2013 of the capital investment to 360 billion yen from 310 billion yen of its original plan.

 

Panasonic’s capital investment (tangible assets) for the three months ended June 30, 2012 totaled 70.6 billion yen, up 10% from a year ago. In calculating this percentage, prior year’s figure has been revised to conform with the presentation for molding dies for fiscal 2013.

 

Panasonic transferred the Mobara plant of Panasonic Liquid Crystal Display Co., Ltd., to Japan Display Inc. in April 2012.

 

(7)	Depreciation

 

Panasonic’s depreciation (tangible assets) for the three months ended June 30, 2012 totaled 67.8 billion yen, down 9% from a year ago.

 

Effective from the beginning of fiscal 2013, depreciation expenses in molding dies are included in depreciation. In calculating percentage above, prior year’s figures have been revised to conform with the presentation for molding dies for fiscal 2013.

 

(8)	Number of Employees

 

Numbers of employees at the end of the first quarter of fiscal 2013 were 327,512, a decrease of 3,255, compared with the end of the fiscal 2012.

 

(9)	Risk Factors

 

There were no risks newly identified during the three months ended June 30, 2012.

 

III	Shares and Shareholders

 

(1)	Shares of Common Stock Issued as of June 30, 2012:    2,453,053,497 shares

 

The common stock of the Company is listed on the Tokyo, Osaka and Nagoya stock exchanges in Japan. In the United States, the Company’s American Depositary Shares (ADSs) are listed on the New York Stock Exchange.

 

(2)	Amount of Common Stock (Stated Capital) as of June 30, 2012:    258,740 million yen

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CONTENTS

 

IV	Financial Statements

 

Index of Consolidated Financial Statements of Panasonic Corporation and Subsidiaries:

 

		Page
Consolidated Balance Sheets as of June 30 and March 31, 2012		8
Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2012 and 2011		10
Consolidated Statements of Cash Flows for the three months ended June 30, 2012 and 2011		11
Notes to Consolidated Financial Statements		13

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Consolidated Balance Sheets

 

June 30 and March 31, 2012

 

		Yen (millions)
Assets		June 30, 2012				March 31, 2012
Current assets:
Cash and cash equivalents			536,651				574,411
Time deposits			18,128				36,575
Short-term investments (Note 3)			466				483
Trade receivables:
Notes			81,414				73,044
Accounts (Note 12)			914,344				963,202
Allowance for doubtful receivables			(25,004	)			(26,604	)
Net trade receivables			970,754				1,009,642
Inventories (Notes 1 and 2)			838,387				801,991
Other current assets (Note 12)			462,499				454,663
Total current assets (Note 1)			2,826,885				2,877,765
Investments and advances (Note 3)			375,277				451,879
Property, plant and equipment (Notes 1 and 5):
Land			372,988				374,855
Buildings			1,673,472				1,679,665
Machinery and equipment			2,643,133				2,590,026
Construction in progress			89,356				90,786
			4,778,949				4,735,332
Less accumulated depreciation			3,042,705				2,972,774
Net property, plant and equipment			1,736,244				1,762,558
Other assets:
Goodwill			754,511				757,417
Intangible assets (Note 5)			335,882				345,751
Other assets			403,918				405,685
Total other assets			1,494,311				1,508,853
			6,432,717				6,601,055

 

See accompanying Notes to Consolidated Financial Statements.

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Consolidated Balance Sheets

 

June 30 and March 31, 2012

 

		Yen (millions)
Liabilities and Equity		June 30, 2012				March 31, 2012
Current liabilities:
Short-term debt, including current portion of long-term debt (Note 11)			605,242				633,847
Trade payables:
Notes			64,573				53,243
Accounts (Note 12)			784,465				797,770
Total trade payables			849,038				851,013
Accrued income taxes			39,941				32,553
Accrued payroll			243,961				204,842
Other accrued expenses (Note 14)			707,288				749,495
Deposits and advances from customers			78,441				71,102
Employees’ deposits			7,631				7,651
Other current liabilities (Note 12)			293,429				329,001
Total current liabilities			2,824,971				2,879,504
Noncurrent liabilities:
Long-term debt			920,844				941,768
Retirement and severance benefits			550,947				566,550
Other liabilities			231,506				235,667
Total noncurrent liabilities			1,703,297				1,743,985
Equity:
Panasonic Corporation shareholders’ equity:
Common stock (Note 6)			258,740				258,740
Capital surplus (Note 10)			1,117,447				1,117,530
Legal reserve			95,538				94,512
Retained earnings			1,441,396				1,441,177
Accumulated other comprehensive income (loss):
Cumulative translation adjustments			(529,331	)			(482,168	)
Unrealized holding gains (losses) of available-for-sale securities (Note 3)			(12,941	)			13,283
Unrealized gains (losses) of derivative instruments (Note 12)			1,457				(3,728	)
Pension liability adjustments			(258,111	)			(262,542	)
Total accumulated other comprehensive income (loss)			(798,926	)			(735,155	)
Treasury stock, at cost (Note 6)			(247,020	)			(247,018	)
Total Panasonic Corporation shareholders’ equity (Note 10)			1,867,175				1,929,786
Noncontrolling interests (Note 10)			37,274				47,780
Total equity			1,904,449				1,977,566
Commitments and contingent liabilities (Notes 4 and 14)
			6,432,717				6,601,055

 

See accompanying Notes to Consolidated Financial Statements.

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss)

 

Three months ended June 30, 2012 and 2011

 

Consolidated Statements of Operations

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Revenues, costs and expenses:
Net sales			1,814,498				1,929,548
Cost of sales (Note 12)			(1,350,995	)			(1,455,507	)
Selling, general and administrative expenses			(424,900	)			(468,465	)
Interest income			2,803				3,426
Dividends received			2,228				2,815
Other income (Notes 11 and 12)			24,208				3,752
Interest expense			(5,626	)			(7,345	)
Other deductions (Notes 5, 11, and 12)			(24,391	)			(25,657	)
Income (loss) before income taxes			37,825				(17,433	)
Provision for income taxes			(27,453	)			(17,453	)
Equity in earnings of associated companies			703				2,262
Net income (loss)			11,075				(32,624	)
Less net income (loss) attributable to noncontrolling interests			(1,734	)			(2,273	)
Net income (loss) attributable to Panasonic Corporation			12,809				(30,351	)
		Yen
Net income (loss) per share attributable to Panasonic Corporation common shareholders (Note 8):
Basic			5.54				(13.13	)
Diluted			—				—

 

Consolidated Statements of Comprehensive Income (Loss)

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Net income (loss)			11,075				(32,624	)
Other comprehensive income (loss), net of tax:
Translation adjustments			(50,747	)			(28,327	)
Unrealized holding losses of available-for-sale securities			(26,243	)			(1,886	)
Unrealized holding gains of derivative instruments (Note 12)			5,185				1,459
Pension liability adjustments			4,457				2,785
			(67,348	)			(25,969	)
Comprehensive income (loss)			(56,273	)			(58,593	)
Comprehensive income (loss) attributable to noncontrolling interests (Note 10)			(5,311	)			(3,678	)
Comprehensive income (loss) attributable to Panasonic Corporation (Note 10)			(50,962	)			(54,915	)

 

See accompanying Notes to Consolidated Financial Statements.

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

 

Three months ended June 30, 2012 and 2011

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Cash flows from operating activities:
Net income (loss)			11,075				(32,624	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization (Note 1)			84,875				95,319
Net (gain) loss on sale of investments			(7,034	)			976
Provision for doubtful receivables			1,462				836
Deferred income taxes			(1,104	)			7,843
Write-down of investment securities (Note 11)			596				133
Impairment losses on long-lived assets (Note 5)			162				882
Cash effects of change in:
Trade receivables			17,180				(2,866	)
Inventories (Note 1)			(57,270	)			(88,324	)
Other current assets			(28,770	)			(23,658	)
Trade payables			23,860				(2,762	)
Accrued income taxes			8,761				(15,497	)
Accrued expenses and other current liabilities			4,262				18,886
Retirement and severance benefits			(4,312	)			(5,802	)
Deposits and advances from customers			6,346				9,160
Other, net			(6,320	)			2,906
Net cash provided by (used in) operating activities			53,769				(34,592	)
Cash flows from investing activities:
Proceeds from disposition of investments and advances			42,380				12,241
Increase in investments and advances			(1,244	)			(2,181	)
Capital expenditures (Note 1)			(86,019	)			(97,546	)
Proceeds from disposals of property, plant and equipment			37,762				25,397
Decrease in time deposits, net			16,918				10,297
Other, net			(8,480	)			(4,575	)
Net cash provided by (used in) investing activities			1,317				(56,367	)

 

(Continued)

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

 

Three months ended June 30, 2012 and 2011

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Cash flows from financing activities:
Increase (decrease) in short-term debt, net			(31,519	)			2,736
Proceeds from long-term debt			—				730
Repayments of long-term debt			(23,965	)			(18,211	)
Dividends paid to Panasonic Corporation shareholders (Notes 9 and 10)			(11,559	)			(10,351	)
Dividends paid to noncontrolling interests (Note 10)			(6,642	)			(5,796	)
Repurchase of common stock (Note 10)			(9	)			(55	)
Sale of treasury stock (Note 10)			2				42
Purchase of noncontrolling interests (Note 10)			(686	)			(5,197	)
Other, net			563				217
Net cash used in financing activities			(73,815	)			(35,885	)
Effect of exchange rate changes on cash and cash equivalents			(19,031	)			(10,941	)
Net decrease in cash and cash equivalents			(37,760	)			(137,785	)
Cash and cash equivalents at beginning of period			574,411				974,826
Cash and cash equivalents at end of period			536,651				837,041

 

See accompanying Notes to Consolidated Financial Statements.

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PANASONIC CORPORATION

AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

 

(1)	Summary of Significant Accounting Policies

 

(a)

Description of Business

 

Panasonic Corporation (hereinafter, the “Company,” including consolidated subsidiaries, unless the context otherwise requires) is one of the world’s leading producers of electronic and electric products. The Company currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology, expanding to building materials and equipment, and housing business.

 

Sales by segment for the three months ended June 30, 2012 were as follows: AVC Networks—15%, Appliances—19%, Systems & Communications—7%, Eco Solutions—15%, Automotive Systems—8%, Industrial Devices—15%, Energy—6% and Other—15%. A sales breakdown by geographical market was as follows: Japan—51%, North and South America—13%, Europe—9%, and Asia and Others—27%.

 

The Company is not dependent on a single supplier and has no significant difficulty in obtaining raw materials from suppliers.

 

(b)

Basis of Presentation of Consolidated Financial Statements

 

The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.

 

The consolidated financial statements presented herein have been prepared in a manner that reflects adjustments which are necessary to conform with U.S. generally accepted accounting principles (U.S. GAAP).

 

(c)

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its majority-owned, controlled subsidiaries. The Company also consolidates entities in which controlling interest exists through variable interests in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, “Consolidation.” All significant intercompany balances and transactions have been eliminated in consolidation.

 

The equity method is used to account for investments in associated companies in which the Company exerts significant influence, generally having a 20% to 50% voting interest, and corporate joint ventures. These investments are included in “Investments and advances” in the consolidated balance sheets.

 

The Company has 564 consolidated subsidiaries and 101 associated companies under equity method as of June 30, 2012.

 

From fiscal 2013, the Company includes investments in molding dies and related depreciation expenses in capital investment and depreciation, respectively. Accordingly, the company changed its presentation of consolidated statements of cash flows to include investments in molding dies in “Capital expenditures” as part of investing activities, and include related depreciation expenses in “Depreciation and amortization” as part of operating activities, respectively, on the consolidated statement of cash flows for the three months ended June 30, 2012. The Company had historically presented them in “Changes in Inventories” as part of operating activities. Certain reclassifications have been made to the previous years’ related disclosures.

 

This revision decreased net cash used in operating activities and increased net cash used in investing activities by 8,666 million yen on the consolidated statement of cash flows for the three months ended June 30, 2011. As for the consolidated balance sheet as of March 31, 2012, “Inventories” in current assets decreased, and property, plant and equipment increased by 28,275 million yen, respectively.

 

The Company does not consider any of these revisions made to the consolidated statement of cash flows for the three months ended June 30, 2011, and balance sheet and the related disclosures as of March 31, 2012 to be material. The revisions do not have any impact on the consolidated statements of operations.

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(d)

Use of Estimates

 

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions are reflected in valuation and disclosure of revenue recognition, allowance for doubtful receivables, valuation of inventories, impairment of long-lived assets, impairment of goodwill, environmental liabilities, valuation of deferred tax assets, uncertain tax positions, employee retirement and severance benefit plans.

 

(e)

Adoption of New Accounting Pronouncements

 

On April 1, 2012, the Company adopted Accounting Standards Update (ASU) 2011-05, “Presentation of Comprehensive Income.” Under ASU 2011-05, which amends ASC 220, “Comprehensive Income,” an entity has the option to present the components of net income and other comprehensive income in either one or two consecutive financial statements. ASU 2011-05 eliminates the option to present other comprehensive income in the statements of equity. According to the adoption of ASU 2011-05, the Company presents two consecutive financial statements as “Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss)”.

 

On April 1, 2012, the Company adopted ASU 2011-08, “Testing Goodwill for Impairment.” ASU 2011-08, which amends ASC 350, “Intangibles—Goodwill and Other,” permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, an entity need not perform the two-step impairment test. The adoption of ASU 2011-08 did not have any effect on the Company’s consolidated financial statements.

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(2)	Inventories

 

Inventories at June 30 and March 31, 2012 are summarized as follows:

 

		Yen (millions)
		June 30, 2012				March 31, 2012
Finished goods			475,661				450,990
Work in process			151,977				144,403
Raw materials			210,749				206,598
			838,387				801,991

 

(3)	Investments in Securities

 

In accordance with ASC 320, “Investments—Debt and Equity Securities,” the Company classifies its existing marketable equity securities other than investments in associated companies and all debt securities as available-for-sale.

 

The cost, fair value and net unrealized holding gains (losses) of available-for-sale securities included in short-term investments, and investments and advances at June 30 and March 31, 2012 are as follows:

 

		Yen (millions)
		June 30, 2012
		Cost				Fair value				Net unrealized holding gains (losses)
Current:
Other debt securities			473				466				(7	)
			473				466				(7	)
Noncurrent:
Equity securities			137,635				152,310				14,675
Corporate and government bonds			1,701				1,728				27
Other debt securities			18				18				—
			139,354				154,056				14,702
		Yen (millions)
		March 31, 2012
		Cost				Fair value				Net unrealized holding gains (losses)
Current:
Other debt securities			473				483				10
			473				483				10
Noncurrent:
Equity securities			171,412				225,433				54,021
Corporate and government bonds			1,689				1,711				22
Other debt securities			80				110				30
			173,181				227,254				54,073

 

The carrying amounts of the Company’s cost method investments totaled 23,698 million yen and 24,553 million yen at June 30 and March 31, 2012, respectively.

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(4)

Leases

 

The Company has operating leases for certain land, buildings, machinery and equipment, and finite-lived intangible assets. Future minimum lease payments under operating leases at June 30, 2012 are as follows:

 

		Yen (millions)
Due within 1 year			45,290
Due after 1 year within 2 years			29,564
Due after 2 years within 3 years			14,179
Due after 3 years within 4 years			5,692
Due after 4 years within 5 years			3,668
Thereafter			13,706
Total minimum lease payments			112,099

 

(5)	Long-Lived Assets

 

The Company periodically reviews the recorded value of its long-lived assets to determine if the future cash flows to be derived from these assets will be sufficient to recover the remaining recorded asset values. Impairment losses are included in other deductions in the consolidated statements of operations, and are not charged to segment profit.

 

The Company recognized impairment losses in the aggregate of 162 million yen of long-lived assets mainly related to “Eco Solutions” segment for the three months ended June 30, 2012.

 

The Company recognized impairment losses in the aggregate of 882 million yen of long-lived assets mainly related to “Eco Solutions” segment for the three months ended June 30, 2011.

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(6)	Number of Common Shares

 

Number of common shares authorized and issued and number of treasury common shares as of June 30 and March 31, 2012 are as follows:

 

		Number of shares
		June 30, 2012				March 31, 2012
Common stock:
Authorized			4,950,000,000				4,950,000,000
Issued			2,453,053,497				2,453,053,497
Treasury stock			141,360,988				141,351,296

 

(7)	Panasonic Corporation Shareholders’ Equity per Share

 

Panasonic Corporation shareholders’ equity per share as of June 30 and March 31, 2012 are as follows:

 

		Yen
		June 30, 2012				March 31, 2012
Panasonic Corporation shareholders’ equity per share			807.71				834.79

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(8)	Net Income (Loss) per Share Attributable to Panasonic Corporation Common Shareholders

 

A reconciliation of the numerators and denominators of the basic net income (loss) per share attributable to Panasonic Corporation common shareholders computation for the three months ended June 30, 2012 and 2011 are as follows:

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Net income (loss) attributable to Panasonic Corporation common shareholders			12,809				(30,351	)
		Number of shares
		Three months ended June 30
		2012				2011
Average common shares outstanding			2,311,696,994				2,312,259,218
		Yen
		Three months ended June 30
		2012				2011
Net income (loss) per share attributable to Panasonic Corporation common shareholders:
Basic			5.54				(13.13	)

 

Diluted net income (loss) per share attributable to Panasonic Corporation common shareholders has been omitted because the Company did not have potentially dilutive common shares that were outstanding for the period.

 

(9)	Cash Dividends

 

On May 11, 2012, the board of directors approved a year-end dividend of 5.0 yen per share, totaling 11,559 million yen on outstanding common stock as of March 31, 2012. The dividends, which became effective on June 8, 2012, were sourced out of retained earnings.

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(10)

Equity

 

The change in the carrying amount of Panasonic Corporation shareholders’ equity, noncontrolling interests and total equity in the consolidated balance sheets for the three months ended June 30, 2012 and 2011 are as follows:

 

		Yen (millions)
		Three months ended June 30, 2012
		Panasonic Corporation shareholders’ equity				Noncontrolling interests				Total equity
Balance at April 1, 2012			1,929,786				47,780				1,977,566
Dividends paid to Panasonic Corporation shareholders			(11,559	)			—				(11,559	)
Dividends paid to noncontrolling interests			—				(6,642	)			(6,642	)
Repurchase of common stock			(9	)			—				(9	)
Sale of treasury stock			2				—				2
Equity transactions with noncontrolling interests			(83	)			(603	)			(686	)
Other			—				2,050				2,050
Comprehensive income (loss):
Net income (loss)			12,809				(1,734	)			11,075
Other comprehensive income (loss), net of tax:
Translation adjustments			(47,163	)			(3,584	)			(50,747	)
Unrealized holding losses of available-for-sale securities			(26,224	)			(19	)			(26,243	)
Unrealized holding gains of derivative instruments			5,185				—				5,185
Pension liability adjustments			4,431				26				4,457
Total comprehensive loss			(50,962	)			(5,311	)			(56,273	)
Balance at June 30, 2012			1,867,175				37,274				1,904,449

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		Yen (millions)
		Three months ended June 30, 2011
		Panasonic Corporation shareholders’ equity				Noncontrolling interests				Total equity
Balance at April 1, 2011			2,558,992				387,343				2,946,335
Dividends paid to Panasonic Corporation shareholders			(10,351	)			—				(10,351	)
Dividends paid to noncontrolling interests			—				(5,796	)			(5,796	)
Repurchase of common stock			(55	)			—				(55	)
Sale of treasury stock			256,037				—				256,037
Equity transactions with noncontrolling interests			16,472				(277,664	)			(261,192	)
Other			—				(165	)			(165	)
Comprehensive income (loss):
Net loss			(30,351	)			(2,273	)			(32,624	)
Other comprehensive income (loss), net of tax:
Translation adjustments			(26,983	)			(1,344	)			(28,327	)
Unrealized holding losses of available-for-sale securities			(1,810	)			(76	)			(1,886	)
Unrealized holding gains of derivative instruments			1,459				—				1,459
Pension liability adjustments			2,770				15				2,785
Total comprehensive loss			(54,915	)			(3,678	)			(58,593	)
Balance at June 30, 2011			2,766,180				100,040				2,866,220

 

Net income (loss) attributable to Panasonic Corporation and transfers (to) from the noncontrolling interests for the three months ended June 30, 2012 and 2011 are as follows:

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Net income (loss) attributable to Panasonic Corporation			12,809				(30,351	)
Transfers (to) from the noncontrolling interests:
Decrease in capital surplus for purchase of additional shares in consolidated subsidiaries primarily for the purpose of conversion into wholly-owned subsidiaries			(83	)			17,310
Total			(83	)			17,310
Change from net income (loss) attributable to Panasonic Corporation and Transfers (to) from the noncontrolling interests			12,726				(13,041	)

 

On April 1, 2011, Panasonic Electric Works Co., Ltd. and SANYO Electric Co., Ltd. became wholly-owned subsidiaries through share exchange. The difference between the fair value of the shares of the Company delivered to the noncontrolling interests and the decrease in the carrying amount of the noncontrolling interests was recognized as an adjustment to capital surplus.

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(11)	Supplementary Information

 

Included in other deductions for the three months ended June 30, 2012 and 2011 are as follows:

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Expenses associated with the implementation of the early retirement programs in the domestic and overseas subsidiaries			392				3,571
Write-down of investment securities			596				133
Foreign exchange losses			7,137				4,229

 

Net loss related to the Great East Japan Earthquake included in other deductions for the three months ended June 30, 2011 amounted to 5,515 million yen, which was net of insurance recovery from loss due to the earthquake of 6,910 million yen.

 

Net gain from insurance recovery related to the flooding in Thailand included in other income for the three months ended June 30, 2012 amounted to 330 million yen, which was net of loss of 344 million yen incurred due to the flooding.

 

Net periodic benefit cost for the three months ended June 30, 2012 and 2011 are 14,938 million yen and 17,281 million yen, respectively.

 

326,000 million yen and 369,489 million yen of short-term bonds are included in Short-term debt, including current portion of long-term debt on the consolidated balance sheets as of June 30 and March 31, 2012, respectively.

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(12)	Derivatives and Hedging Activities

 

The Company operates internationally, giving rise to significant exposure to market risks arising from changes in foreign exchange rates, interests rates and commodity prices. The Company assesses these risks by continually monitoring changes in these exposures and by evaluating hedging opportunities. Derivative financial instruments utilized by the Company to hedge these risks are comprised principally of foreign exchange contracts, interests rate swaps, cross currency swaps and commodity derivatives. The Company does not hold or issue derivative financial instruments for trading purposes.

 

The Company accounts for derivative instruments in accordance with ASC 815, “Derivatives and Hedging.” Amounts included in accumulated other comprehensive income (loss) at June 30, 2012 are expected to be recognized in earnings principally over the next twelve months. The maximum term over which the Company is hedging exposures to the variability of cash flows for foreign currency exchange risk is approximately five months.

 

The Company is exposed to credit risk in the event of non-performance by counterparties to the derivative contracts, but such risk is considered mitigated by the high credit rating of the counterparties.

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The fair values of derivative instruments at June 30, 2012 are as follows:

 

		Yen (millions)
		Asset derivatives						Liability derivatives
		Consolidated balance sheet location		Fair value				Consolidated balance sheet location		Fair value
Derivatives designated as hedging instruments under ASC 815:
Foreign exchange contracts		Other current assets			4,178			Other current liabilities			(176	)
Commodity futures		Other current assets			6			Other current liabilities			(955	)
Total derivatives designated as hedging instruments under ASC 815					4,184						(1,131	)
Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange contracts		Other current assets			3,185			Other current liabilities			(1,202	)
Cross currency swaps		—			—			Other current liabilities			(2,477	)
Commodity futures		Other current assets			8,395			Other current liabilities			(8,395	)
Total derivatives not designated as hedging instruments under ASC 815					11,580						(12,074	)
Total derivatives					15,764						(13,205	)

 

The fair values of derivative instruments at March 31, 2012 are as follows:

 

		Yen (millions)
		Asset derivatives						Liability derivatives
		Consolidated balance sheet location		Fair value				Consolidated balance sheet location		Fair value
Derivatives designated as hedging instruments under ASC 815:
Foreign exchange contracts		Other current assets			56			Other current liabilities			(10,209	)
Commodity futures		Other current assets			1,599			Other current liabilities			(231	)
Total derivatives designated as hedging instruments under ASC 815					1,655						(10,440	)
Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange contracts		Other current assets			6,774			Other current liabilities			(1,524	)
Cross currency swaps		Other current assets			304			—			—
Commodity futures		Other current assets			979			Other current liabilities			(979	)
Total derivatives not designated as hedging instruments under ASC 815					8,057						(2,503	)
Total derivatives					9,712						(12,943	)

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The effect of derivative instruments on the consolidated statement of operations for the three months ended June 30, 2012 is as follows:

 

Yen (millions)
Hedging instruments in ASC 815 fair value hedging relationships		Location of gain or (loss) recognized in operations		Amount of gain or (loss) recognized in operations
Commodity futures		Other income (deductions)			(36	)
Total					(36	)
Yen (millions)
Related hedged items in ASC 815 fair value hedging relationships		Location of gain or (loss) recognized in operations		Amount of gain or (loss) recognized in operations
Trade accounts receivable (payable)		Other income (deductions)			38
Total					38

 

Fair value hedges resulted in gains of 2 million yen of ineffectiveness.

 

Yen (millions)
Derivatives in ASC 815 cash flow hedging relationships		Amount of gain (loss) recognized in OCI on derivative (effective portion)				Location of gain (loss) reclassified from accumulated OCI into operations (effective portion)		Amount of gain (loss) reclassified from accumulated OCI into operations (effective portion)
Foreign exchange contracts			7,518			Other income (deductions)			(3,800	)
Commodity futures			(1,558	)		Cost of sales			867
Total			5,960						(2,933	)

 

Yen (millions)
Derivatives in ASC 815 cash flow hedging relationships		Location of gain (loss) recognized in operations on derivative (ineffective portion and amount excluded from effectiveness testing)		Amount of gain (loss) recognized in operations on derivative (ineffective portion and amount excluded from effectiveness testing)
Foreign exchange contracts		Other income (deductions)			157
Commodity futures		—			—
Total					157
Yen (millions)
Derivatives not designated as hedging instruments under ASC 815		Location of gain (loss) recognized in operations on derivative		Amount of gain (loss) recognized in operations on derivative
Foreign exchange contracts		Other income (deductions)			3,747
Cross currency swaps		Other income (deductions)			(2,781	)
Commodity futures		Other income (deductions)			0
Total					966

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The effect of derivative instruments on the consolidated statement of operations for the three months ended June 30, 2011 is as follows:

 

Yen (millions)
Hedging instruments in ASC 815 fair value hedging relationships		Location of gain or (loss) recognized in operations		Amount of gain or (loss) recognized in operations
Commodity futures		Other income (deductions)			(1,348	)
Total					(1,348	)
Yen (millions)
Related hedged items in ASC 815 fair value hedging relationships		Location of gain or (loss) recognized in operations		Amount of gain or (loss) recognized in operations
Trade accounts receivable (payable)		Other income (deductions)			1,702
Total					1,702

 

Fair value hedges resulted in gains of 354 million yen of ineffectiveness.

 

Yen (millions)
Derivatives in ASC 815 cash flow hedging relationships		Amount of gain (loss) recognized in OCI on derivative (effective portion)				Location of gain (loss) reclassified from accumulated OCI into operations (effective portion)		Amount of gain (loss) reclassified from accumulated OCI into operations (effective portion)
Foreign exchange contracts			3,087			Other income (deductions)			(2,376	)
Commodity futures			(2,698	)		Cost of sales			1,196
Total			389						(1,180	)

 

Yen (millions)
Derivatives in ASC 815 cash flow hedging relationships		Location of gain (loss) recognized in operations on derivative (ineffective portion and amount excluded from effectiveness testing)		Amount of gain (loss) recognized in operations on derivative (ineffective portion and amount excluded from effectiveness testing)
Foreign exchange contracts		Other income (deductions)			208
Commodity futures		—			—
Total					208
Yen (millions)
Derivatives not designated as hedging instruments under ASC 815		Location of gain (loss) recognized in operations on derivative		Amount of gain (loss) recognized in operations on derivative
Foreign exchange contracts		Other income (deductions)			2,996
Cross currency swaps		Other income (deductions)			808
Interest rate swaps		Other income (deductions)			0
Commodity futures		Other income (deductions)			0
Total					3,804

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(13)	Fair Value

 

ASC 820, “Fair Value Measurements and Disclosures” defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

 

 

Assets and liabilities measured at fair value on a recurring basis

 

The following table presents assets and liabilities that are measured at fair value on a recurring basis at June 30 and March 31, 2012:

 

		Yen (millions)
		June 30, 2012
		Level 1				Level 2				Level 3				Total
Assets:
Available-for-sale securities:
Equity securities			152,310				—				—				152,310
Corporate and government bonds			—				1,728				—				1,728
Other debt securities			—				484				—				484
Total available-for-sale securities			152,310				2,212				—				154,522
Derivatives:
Foreign exchange contracts			—				7,363				—				7,363
Commodity futures			198				8,203				—				8,401
Total derivatives			198				15,566				—				15,764
Total			152,508				17,778				—				170,286
Liabilities:
Derivatives:
Foreign exchange contracts			—				(1,378	)			—				(1,378	)
Cross currency swaps			—				(2,477	)			—				(2,477	)
Commodity futures			(9,158	)			(192	)			—				(9,350	)
Total derivatives			(9,158	)			(4,047	)			—				(13,205	)
Total			(9,158	)			(4,047	)			—				(13,205	)

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		Yen (millions)
		March 31, 2012
		Level 1				Level 2				Level 3				Total
Assets:
Available-for-sale securities:
Equity securities			225,433				—				—				225,433
Corporate and government bonds			—				1,711				—				1,711
Other debt securities			—				593				—				593
Total available-for-sale securities			225,433				2,304				—				227,737
Derivatives:
Foreign exchange contracts			—				6,830				—				6,830
Cross currency swaps			—				304				—				304
Commodity futures			2,056				522				—				2,578
Total derivatives			2,056				7,656				—				9,712
Total			227,489				9,960				—				237,449
Liabilities:
Derivatives:
Foreign exchange contracts			—				(11,733	)			—				(11,733	)
Commodity futures			(753	)			(457	)			—				(1,210	)
Total derivatives			(753	)			(12,190	)			—				(12,943	)
Total			(753	)			(12,190	)			—				(12,943	)

 

The Company’s existing marketable equity securities and commodity futures are included in Level 1, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions.

 

Level 2 available-for-sale securities include all debt securities, which are valued using inputs other than quoted prices that are observable. Level 2 derivatives including foreign exchange contracts and commodity futures are valued using quotes obtained from brokers, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and market prices for commodity futures.

 

Assets and liabilities measured at fair value on a nonrecurring basis

 

For the three months ended June 30, 2012 and 2011, there were no circumstances that required any significant assets and liabilities that are not measured at fair value on an ongoing basis to be measured and recognized at fair value.

 

The fair value of financial instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

 

Available-for-sale securities

The carrying amount is equal to the fair value which is estimated based on quoted market prices. The fair value is also described in Note 3.

 

Long-term debt, including current portion

The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using appropriate current discount rates. The Company classified long-term debt in Level 2.

 

Derivative financial instruments

The fair value of derivative financial instruments is estimated based on unadjusted market prices or quotes obtained from brokers, which are periodically validated by pricing models using observable inactive market inputs. The fair value is equal to the carrying amount and also described in Note 12.

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Advances

The fair value of advances is estimated based on the present value of future cash flows using appropriate current discount rates. The Company classified advances in Level 2. The following table excludes advances for which carrying amount approximates fair value.

 

Financial instruments other than listed above (such as Cash and cash equivalents, Time deposits, Trade receivables, Short-term debt, Trade payables, Accrued expenses)

The carrying amount approximates fair value because of the short maturity of these instruments. The following table excludes these financial instruments.

 

		Yen (millions)
		June 30, 2012								March 31, 2012
		Carrying amount				Fair value				Carrying amount				Fair value
Non-derivatives:
Assets:
Available-for-sale securities			154,522				154,522				227,737				227,737
Liabilities:
Long-term debt, including current portion			(1,142,248	)			(1,161,363	)			(1,157,393	)			(1,175,868	)
Derivatives:
Assets:
Foreign exchange contracts			7,363				7,363				6,830				6,830
Cross currency swaps			—				—				304				304
Commodity futures:			8,401				8,401				2,578				2,578
Liabilities:
Foreign exchange contracts			(1,378	)			(1,378	)			(11,733	)			(11,733	)
Cross currency swaps			(2,477	)			(2,477	)			—				—
Commodity futures:			(9,350	)			(9,350	)			(1,210	)			(1,210	)

 

Limitations

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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(14)	Commitments and Contingent Liabilities

 

The Company provides guarantees to third parties mainly on bank loans provided to associated companies and customers. The guarantees are made to enhance their credit. For each guarantee provided, the Company is required to perform under the guarantee if the guaranteed party defaults on a payment. Also, the Company sold certain trade receivables to independent third parties, some of which are with recourse. If the collectibility of those receivables with recourse becomes doubtful, the Company is obligated to assume the liabilities. At June 30, 2012, the maximum amount of undiscounted payments the Company would have to make in the event of default was 31,588 million yen. The carrying amount of the liabilities recognized for the Company’s obligations as a guarantor under those guarantees at June 30, 2012 was immaterial.

 

In connection with the sale and lease back of certain machinery and equipment, the Company guarantees a specific value of the leased assets. For each guarantee provided, the Company is required to perform under the guarantee if certain conditions are met during or at the end of the lease term. At June 30, 2012, the maximum amount of undiscounted payments the Company would have to make in the event that these conditions were met was 8,960 million yen. The carrying amount of the liabilities recognized for the Company’s obligations as guarantors under those guarantees at June 30, 2012 was 3,083 million yen.

 

The Company and certain subsidiaries are under the term of leasehold interest contracts for land of domestic factories and have obligations for restitution on their leaving. The asset retirement obligations cannot be reasonably estimated because the durations of use of the leased assets are not specified and there are no plans to undertake relocation in the future. Therefore, the Company did not recognize asset retirement obligations.

 

The Company and certain of its subsidiaries are subject to a number of legal proceedings including civil litigations related to tax, products or intellectual properties, or governmental investigations.

 

Since November 2007, the Company and MT Picture Display Co., Ltd. (MTPD), a subsidiary of the Company, are subject to investigations by government authorities, including the Japan Fair Trade Commission, the U.S. Department of Justice and the European Commission, in respect of alleged antitrust violations relating to cathode ray tubes (CRTs). Subsequent to these actions by the authorities, a number of class action lawsuits have been filed in the U.S. and Canada against the Company and certain of its subsidiaries. In fiscal 2010, the Japan Fair Trade Commission issued a cease and desist order against MTPD and assessed a fine against its three subsidiaries in South East Asia, but each named company filed for a hearing to challenge the orders which is currently subject to proceedings. Since February 2009, the Company is subject to investigations by government authorities, including the U.S. Department of Justice and the European Commission, in respect to alleged antitrust violations relating to compressors for refrigerator use. Subsequent to these actions by the authorities, a number of class action lawsuits have been filed in the U.S. and Canada against the Company and certain of its subsidiaries. The Company has paid a fine to the U.S. Department of Justice and the Competition Bureau Canada in fiscal 2011 to resolve alleged antitrust violations relating to compressors for refrigerator use. In fiscal 2012, the Company received notification of a European Commission Decision and accepted a fine on refrigerator compressors. The Company has been cooperating with the various governmental investigations. Depending upon the outcome of these different proceedings, the Company and certain of its subsidiaries may be subject to an uncertain amount of fines, and accordingly the Company has accrued for certain probable and reasonable estimated amounts for the fines. The ability to predict the outcome of these actions and proceedings is difficult to assess given that certain of the investigations and legal proceedings are still at an early stage, present novel legal theories, involve a large number of parties or taking place in jurisdictions outside of Japan where the laws are complex or unclear. Accordingly, the Company is unable to estimate the losses or range of losses for the actions and proceedings where there is only a reasonable possibility that a loss exceeding amounts already recognized may have been incurred.

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Other than those above, there are a number of legal actions against the Company and certain subsidiaries. Management is of the opinion that damages, if any, resulting from these actions will not have a material effect on the Company’s consolidated financial statements.

 

(15)	Segment Information

 

In accordance with the provisions of ASC 280, “Segment Reporting,” the segments reported below are the components of the Company for which separate financial information is available that is evaluated regularly by the chief operating decision maker of the Company in deciding how to allocate resources and in assessing performance.

 

Segments correspond to categories of activity classified primarily by markets, products and brand names. The Company restructured its Group organization on January 1, 2012 resulting in eight reportable segments. “AVC Networks” provides imaging equipment such as flat-panel TVs, AVC network equipment including Blu-ray Disc recorders, digital cameras and PCs as well as in-flight entertainment systems and other business-use AV equipment; “Appliances” delivers the homemaking, cooking, beauty and grooming, health, air-conditioning equipment, and cooling and heating equipment; “Systems & Communications” delivers products and services of the system networks and mobile communications; “Eco Solutions” is comprised of four business groups, which are the lighting business, the energy systems business, the housing systems business, and the environmental systems business; “Automotive Systems” operates car-use-multimedia-related equipment, eco-car-related equipment and electrical component; “Industrial Devices” covers a wide range of products such as electronic components, semiconductors and optical devices; “Energy” develops a broad energy-based business including solar photovoltaic systems and lithium-ion batteries; and “Other” consists of Healthcare Company, Manufacturing Solutions Company, PanaHome Corporation and others.

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By Segment:

 

Segment information for the three months ended June 30, 2011 has been reclassified to conform to the presentation for the three months ended June 30, 2012. Information by segment for each period is shown in the tables below:

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Sales:
AVC Networks:
Customers			304,194				385,330
Intersegment			55,461				64,536
Total			359,655				449,866
Appliances:
Customers			333,317				303,730
Intersegment			98,087				114,024
Total			431,404				417,754
System & Communications:
Customers			109,670				133,864
Intersegment			54,805				47,704
Total			164,475				181,568
Eco Solutions:
Customers			293,113				296,368
Intersegment			62,054				60,170
Total			355,167				356,538
Automotive Systems:
Customers			186,883				104,461
Intersegment			3,844				7,266
Total			190,727				111,727
Industrial Devices:
Customers			277,369				303,585
Intersegment			60,882				60,395
Total			338,251				363,980
Energy:
Customers			83,423				78,650
Intersegment			59,221				66,490
Total			142,644				145,140
Other:
Customers			226,529				323,560
Intersegment			116,982				160,915
Total			343,511				484,475
Eliminations			(511,336	)			(581,500	)
Consolidated total			1,814,498				1,929,548

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		Yen (millions)
		Three months ended June 30
		2012				2011
Segment profit (loss):
AVC Networks			7,400				(3,824	)
Appliances			37,375				34,893
System & Communications			(8,310	)			(9,907	)
Eco Solutions			3,872				6,115
Automotive Systems			4,229				(3,644	)
Industrial Devices			7,346				(2,667	)
Energy			119				(7,487	)
Other			4,113				3,864
Corporate and eliminations			(17,541	)			(11,767	)
Total segment profit			38,603				5,576
Interest income			2,803				3,426
Dividends received			2,228				2,815
Other income			24,208				3,752
Interest expense			(5,626	)			(7,345	)
Other deductions			(24,391	)			(25,657	)
Consolidated income (loss) before income taxes			37,825				(17,433	)

 

Corporate expenses include certain corporate R&D expenditures and general corporate expenses.

 

By Geographical Area:

 

Sales attributed to countries based upon the customer’s location are as follows:

 

		Yen (millions)
		Three months ended June 30
		2012				2011
Sales:
Japan			922,144				967,596
North and South America			244,020				240,140
Europe			168,121				197,207
Asia and Others			480,213				524,605
Consolidated total			1,814,498				1,929,548
United States included in North and South America			206,296				201,995
China included in Asia and Others			252,708				270,782

 

There are no individually material countries of which should be separately disclosed in North and South America, Europe, and Asia and Others, except for the United States of America and China on sales.

 

Transfers between business segments or geographic segments are made at arms-length prices. There is no material concentration of sales to a single external major customer for the three months ended June 30, 2012 and 2011.