Metgasco Limited
Annual Report 2013

Plain-text annual report

Please address inquiries for further information to: Mitsubishi Electric Corporation, Corporate Finance Div. Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo 100-8310, Japan Phone: 81-3-3218-2391 X-X01-3-C9215-A　HQ1307〈MDOC〉 Contents 02 To Our Shareholders 03 Financial Highlights 04 Corporate Strategy 08 At a Glance Fiscal 2013 Overview 10 Review of Operations 10 Energy and Electric Systems 11 Industrial Automation Systems 12 Information and Communication Systems 13 Electronic Devices 14 Home Appliances 15 Research and Development / Intellectual Property 18 Corporate Social Responsibility 21 Corporate Governance 22 Directors and Executive Officers 23 Organization 24 Major Subsidiaries and Affiliates 25 Financial Section 73 Corporate Data / Shareholder Information Aiming to become a global, leading green company, enriching society with technology. Looking ahead to our 100th anniversary in 2021, our continued aim is to help enrich society. By enriching society, we mean creating a “people-friendly” society that ensures safety, peace of mind, health and comfort for all, as well as a more “earth-friendly” society that recycles and uses resources efficiently. We at the Mitsubishi Electric Group provide a wide spectrum of products and services, ranging from semiconductors to large-scale systems, with applications for homes, offices, factories, social infrastructure and even space systems. As we strive to become a global, leading green company that enriches society with technology, we will increase cross-cooperation within the Group while providing advanced technologies and engaging in a wide array of business pursuits. For the earth and for the future—the Mitsubishi Electric Group will continue to make steady steps toward achieving this goal. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 01 To Our Shareholders Economic conditions throughout the fiscal year ended March 31, business strategies; expanding business activities in China, India 2013 (hereafter, fiscal 2013) remained harsh. Despite a weakening and other emerging economies; bolstering the social infrastructure in the value of the yen from the third quarter and firm trends in systems business; and developing the solutions business by the economies of the United States and developing countries, combining a wide array of technologies with expertise gained in this difficult operating environment was largely attributable to the security business and other fields. business stagnation in Europe, slower economic growth in China, To facilitate new growth, we aim to enhance corporate value and a delay in the anticipated recovery of Japan’s economy. by promoting robust growth strategies based on renewed and Under these circumstances, the Mitsubishi Electric Group placed meticulous efforts to bolster operations in the area of greater emphasis than ever before on promoting growth strategies Soundness—one of the three key viewpoints of Balanced rooted in its competitive advantages as well as on efforts to boost Corporate Management—with particular consideration given to its competitiveness and strengthen its management structure. corporate ethics and compliance. The promotion of such growth Reflecting the harsh operating environment, the Mitsubishi strategies is also underpinned by a management foundation Electric Group recorded consolidated net sales of ¥3,567.2 billion realigned to be even stronger. in the fiscal year ended March 31, 2013, a decrease of 2% As we stride forward resolutely to achieve our goals, we ask for compared with the previous fiscal year. Operating income declined your continued support and understanding. 33% year on year to ¥152.1 billion, for a Group operating income ratio of 4.3%. Meanwhile, net income fell 38% to ¥69.5 billion. Based on results for the fiscal year under review, we will redouble our efforts to implement existing initiatives with the aim of achieving the standing management targets for operating income ratio, return on equity (ROE), and interest-bearing debt to total assets of above 5%, above 10%, and below 15%, respectively. The Mitsubishi Electric Group is taking steps to strengthen its initiatives in growing market fields. To that end, we are engaging in growth strategies that include: promoting environment-related 02 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 July 2013 President & CEO Kenichiro Yamanishi Financial Highlights Performance for the year ended March 31, 2013 Years ended March 31 Net sales Operating income2 Net income attributable to Mitsubishi Electric Corp. Total assets Interest-bearing debt Mitsubishi Electric Corp. shareholders’ equity Capital expenditures R&D expenditures Per-Share Amounts Net income attributable to Mitsubishi Electric Corp. Basic Diluted3 Cash dividends declared Statistical Information Operating income ratio Return on equity (ROE) Interest-bearing debt to total assets Yen (millions) 2013 2012 2011 ¥3,567,184 152,095 69,517 3,410,410 540,572 1,300,070 150,425 172,222 ¥3,639,468 225,444 112,063 3,391,651 542,291 1,132,465 159,346 169,686 ¥3,645,331 233,761 124,525 3,332,679 484,352 1,050,340 107,638 151,779 U.S. dollars (thousands) 2013 $37,948,766 1,618,032 739,543 36,280,957 5,750,765 13,830,532 1,600,266 1,832,149 Yen U.S. dollars ¥32.38 ¥52.20 ¥58.00 — 11 — 12 — 12 % 4.3% 5.7 15.9 6.2% 6.4% 10.3 16.0 12.4 14.5 $0.344 — 0.117 — — — See accompanying notes to consolidated financial statements. 1 The Company prepares consolidated financial statements with procedures, accounting terms, forms, and preparation that are in conformity with accounting principles generally accepted in the United States of America based on the rules and regulations applicable in Japan. 2 Operating income is presented as net sales less cost of sales, selling, general, administrative and R&D expenses, and loss on impairment of long-lived assets. 3 Diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above figure as no dilutive securities existed. Net Sales Breakdown by Business Segment 14.5% Others Net sales ¥590,366 million Energy and Electric Systems 25.9% Net sales ¥1,058,177 million Home Appliances 20.1% Net sales ¥821,298 million Industrial Automation Systems 22.7% ¥927,857 million Net sales Electronic Devices 4.0% Net sales ¥164,065 million Information and Communication Systems 12.8% ¥522,422 million Net sales MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 03 Corporate Strategy “Changes for the Better,” our corporate statement, encapsulates all that we stand for and aspire to—a brighter future for society, industry and everyday life through innovation. Supporting this commitment to innovation and sustainable operations is a solid management structure backed by balanced management initiatives that stem from three key viewpoints: Growth; Profitability and Efficiency; and Soundness. In terms of its corporate social responsibility (CSR) initiatives, the entire Mitsubishi Electric Group is steered by its Corporate Mission and Seven Guiding Principles. Putting particular emphasis on compliance with applicable laws and high ethical standards, we are committed to strengthening internal controls to ensure legal compliance Group-wide, as well as thoroughly implementing education and training. In addition, we continue to work diligently to protect the environment. Among a host of initiatives, we are striving to create a low-carbon, recycling-based society as part of our Environmental Vision 2021 program. To ensure that we continue to meet the expectations of shareholders, we have undertaken reforms that are guiding our ongoing evolution into a network of highly competitive, electric-electronic businesses while leveraging synergies to further enhance corporate value. Management Policy Achieve Balanced Corporate Management Further Enhance Soundness, Profitability, Efficiency and Growth Growth Profitability Efficiency Soundness Establish a Robust Management Foundation and Ensure Sustainable Growth Increase Corporate Value Framework for Implementing Balance Corporate Management The Mitsubishi Electric Group undertakes management operations strengthening four integration synergies —(1) between production and sales divisions, (2) between business segments, (3) between business segments and corporate divisions, and (4) globally, based on its Front-line Priority framework in the two areas of between parent factories in Japan and overseas facilities—as well customer contact and production. In the first front-line area of as by harmonizing business, product and regional strategies. customer contact, the Group enhances its competitiveness in Through the two aspects of the Front-line Priority framework sales and services. In the latter front-line area of production, the and the four integration synergies, the Group is implementing objective of the Front-line Priority works to bolster the Group’s Balanced Corporate Management that involves promoting “manufacturing craftsmanship” in the areas of quality, costs, growth strategies, strengthening its management foundation, production engineering technologies, research and development, improving its financial standing and undertaking CSR-related and and intellectual property (IP). In addition, the Group is pursuing corporate governance-related initiatives. its policy of intensifying cross-business collaboration by 04 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Pursuing Ever Higher Growth Guided by its overarching policy of Balanced Corporate Basic Growth Strategies The Mitsubishi Electric Group’s basic growth strategies comprise Management, and with regard to management targets, which the VI Strategy,1 which aims to make strong businesses stronger, must be continuously and stably achieved for operating income and the AD Strategy,2 which is designed to reinforce solutions ratio, return on equity (ROE) and ratio of interest-bearing debt to businesses centered on strong businesses. In promoting the VI total assets (above 5%, above 10% and below 15%, respectively), Strategy, the Mitsubishi Electric Group is working to bolster the the Mitsubishi Electric Group will aim to become a global, leading competitiveness of its products by drawing on technological green company, enriching society with technology. With this in synergies and to create new strong businesses mind, the Group will strengthen its growth strategies in each From an AD Strategy perspective, the Group is harnessing its business in order to pursue ever higher growth from three portfolio of strong businesses and accumulated experience to viewpoints: the environment and energy; social infrastructure expand its business domain. To this end, the Mitsubishi Electric systems; and global business development. Group is employing IT to further boost the strengths of individual In fiscal 2013, the Mitsubishi Electric Group positioned creation equipment and businesses and further promoting collaboration of strong businesses, recuperation of net sales above ¥4.0 trillion, both within and outside the Group. and an overseas sales ratio of 40% at the heart of its business activities. This directive encapsulates the Group’s renewed com- mitment to accelerating measures aimed at promoting growth strategies. Moving forward, we will pay particular attention to overcoming individual issues in global markets. 1 “VI” derives from “VICTORY” 2 “AD” derives from ADVANCE” Three Management Targets to be Continuously and Stably Achieved Operating income ratio ROE Ratio of interest-bearing debt to total assets 5 % or more 10 % or more 15 % or less MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 05 Strengthening Global Strategies As part of its efforts to fortify its business system to make strong businesses stronger globally, the Mitsubishi Electric Group contin- ues to invest capital in existing business bases in Japan and over- seas, for example, by constructing a new plant for railway ground systems in Japan, building a business base for air-conditioning systems operations and opening a plant for rolling stock air-conditioning systems in the United States. In addition, the Group is not only establishing manufacturing companies— including in such fields as factory automation systems in China as increased growth, the Mitsubishi Electric Group will expand its business development activities in a number of countries, including Brazil, Indonesia, Mexico and Turkey, while taking steps to enter as yet untapped regions. At the same time, the Group will place considerable weight on expanding its business domains and product fields in regions in which it already has operations. Strengthening Our Management Foundation The Mitsubishi Electric Group consistently promotes Group-wide operational improvement measures, taking active steps to further well as automotive equipment in China and Mexico—to serve solidify its operational structure. rapidly growing markets, it is also setting up sales companies to tap into new markets in Brazil, Indonesia and Turkey while carrying out acquisitions to create synergies and expand its businesses. For example, in March 2013 the Group acquired the factory automation systems business of a Turkish local distributor GTS*. *GENEL TEKN K S STEMLER SANAY ve T CARET ANON M RKET S, . l . l . l . l . l . l . l Promoting Global Business Strategies Regarding the businesses within the Group that possess notewor- To this end, we constantly strive to reinforce the “manufacturing craftsmanship” that is integral to our foundations as a manufac- turer. In order to achieve this objective, we are always looking to enhance productivity and quality, to promote prioritized develop- ment rooted in growth strategies, to strengthen our R&D capabilities and the development of IP activities by promoting such initiatives as the development of key components, and to improve material procurement by bolstering value engineering (VE) and other activities. Furthermore, we are working to improve thy global growth potential, namely power systems, transportation our financial standing through measures that include inventory systems, building systems, factory automation systems, automotive reduction and striving to allocate human resources effectively, equipment, space systems, power devices, air conditioning systems underpinned by the aim to make strong businesses stronger. and other businesses, the Mitsubishi Electric Group will expand The Mitsubishi Electric Group will continuously and resolutely such businesses to be a driving force of Group-wide performance. promote these initiatives and make every effort to strengthen This will be accomplished by implementing and augmenting quality, cost efficiencies, production technology capabilities, global business promotion systems, while reinforcing market development capabilities, IP activities, and sales and services, strategies in priority markets. Through such actions, the Group is with the goal of further boosting profitability. contributing to the improvement of corporate value. Bolstering Regional Strategies with Priority on Asia The Mitsubishi Electric Group will bolster cross-business regional Improving Our Financial Standing As of March 31, 2013, total interest-bearing debt, including bonds, stood at ¥540.6 billion for a ratio of interest-bearing debt strategies with priority on Asia in response to newly emerging to total assets of 15.9%. markets, which are anticipated to experience high growth rates. The Mitsubishi Electric Group is implementing thorough In the Chinese market, in which it has already established numer- structural reforms to increase the competitiveness and earnings of ous businesses and built a solid foundation, the Group will apply all Group businesses. To raise overall profitability, we are striving its combined strength to the further expansion of its operations by to boost competitiveness in the areas of quality, costs, production strengthening collaborative links between its operating bases as technology capabilities, development capabilities, IP, marketing well as its businesses. The Group will also take steps to augment and services. In addition, in order to streamline asset turnover partnerships with leading business groups in China. In India, and the efficiency of funding operations, we are reducing inven- where the time is ripe for full-scale business expansion, the tories, primarily through “just in time” activities, while expanding Group will tap into growing markets by leveraging strong global our global cash management system. These initiatives are aimed businesses, particularly within the Energy and Electric Systems at generating stable cash flow. and Industrial Automation Systems business segments. With accumulated cash flow, we are taking a balanced approach Furthermore, the Mitsubishi Electric Group will strengthen its to invest in growth areas, provide returns to shareholders and competitiveness in Thailand by reinforcing capabilities in relation reduce interest-bearing debt. to that country’s position as an important global manufacturing base for the Group, in addition to carrying out business expansion in line with Thailand’s needs as a growth market. To secure 06 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Striving for Constant Improvement Based on its Balanced Corporate Management policy, the Mitsubishi Electric Group is steadily implementing the aforemen- tioned management strategies, which are designed to enhance the formidable competitiveness of its individual businesses. At the same time, we continue to implement reforms intended to guide our ongoing evolution into highly competitive, electric-electronic businesses while leveraging synergies to further enhance corporate value and ensure sustainable growth. To accomplish these goals, it is increasingly important that we strive for constant improvement, which puts into practice the spirit that is embodied in our corporate statement, “Changes for the Better.” The Mitsubishi Electric Group will continue to change in order to create new value. We are confident these efforts will yield even greater corporate value in the future. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 07 At a Glance Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 1,044 1,040 1,028 1,027 1,058 09 10 11 12 13 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 927 978 928 852 733 09 10 11 12 13 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 582 526 488 516 522 09 10 11 12 13 (Years ended March 31) Operating income Operating income Operating income Yen (billions) 150 120 90 60 30 0 -30 75 75 83 85 85 09 10 11 12 13 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 100 101 61 50 26 09 10 11 12 13 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 25 19 14 21 2 09 10 11 12 13 (Years ended March 31) MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES Turbine generators, hydraulic turbine generators, nuclear power plant equipment, motors, transformers, power electronics equipment, circuit breakers, gas insulated switches, switch control devices, surveillance system control and security systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management systems, particle beam treatment systems, and others Programmable logic controllers, inverters, servomotors, human-machine interface, motors, hoists, magnetic switches, no-fuse circuit breakers, short circuit breakers, transformers for electricity distribution, time and power meters, uninterruptible power supply, industrial fans, computerized numerical controllers, electrical discharge machines, laser processing machines, industrial robots, clutches, automotive electrical equipment, car electronics and car mechatronics, car multimedia, and others Wireless and wired communications systems, surveillance cameras, satellite communications equipment, satellites, radar equipment, antennas, missile systems, fire control systems, broadcasting equipment, data transmission devices, network security systems, information systems equipment, systems integration, and others M Fiscal 2013 Overview May • Commenced demonstration experiments at Ofuna Smart House using the industry’s first PV/EV-linked home energy management system (HEMS), which provides optimal control of all electrical appliances • Chosen by Volvo Car Corporation as a partner in the strategic development of next-generation automotive infotainment systems • Received a full turnkey order for Static VAR Compensator (SVC) systems from Dubai Electricity & Water Authority (DEWA) 2012 Ofuna Smart House August • Received consecutive orders for the installation of high-speed elevators in Chengdu, China • Launched "Smart Quality" in Japan as a new total concept for the Home Appliances business • Established Mitsubishi Elevator ETA India Private Limited to sell, manufacture, install, and provide maintenance for elevators and escalators in India September • Established the comprehensive sales company Mitsubishi Electric do Brasil Comércio e Serviços Ltda. in Brazil June • Resumed production of security systems at a new facility within the Communication Network Center’s Koriyama Factory • Delivered a digital signage system to Narita International Airport Corporation • Delivered an electric power supply system to East Japan Railway Company for installation at Hiraizumi Station on the Tohoku Line July • Established Mitsubishi Electric Korea Co., Ltd. in Korea • Established MELCO CNC do Brasil Comércio e Serviços S.A., a new FA systems company, to strengthen the Group’s computerized numerical controller (CNC) business in Brazil Production facility at the Koriyama Factory Photovoltaic power generation (Hiraizumi Station) Mitsubishi Electric Korea Co., Ltd. 08 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Electronic Devices Home Appliances Others Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 Net sales Yen (billions) 1,200 1,000 916 924 825 849 821 167 139 176 201 164 09 10 11 12 13 (Years ended March 31) 800 600 400 200 0 09 10 11 12 13 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 596 553 609 612 590 09 10 11 12 13 (Years ended March 31) Operating income (loss) Operating income Operating income Yen (billions) 150 120 90 60 30 0 -30 -30 09 -7 10 6 11 4 -6 12 13 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 35 42 5 22 19 09 10 11 12 13 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 12 3 14 20 19 09 10 11 12 13 (Years ended March 31) MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES Power modules, high-frequency devices, optical devices, LCD devices, microcomputers, system LSIs, and others LCD televisions, projection TVs, display monitors, projectors, Blu-ray disc recorders, room air conditioners, package air conditioners, air-to-water heat pump boilers, refrigerators, electric fans, ventilators, photovoltaic systems, hot water supply systems, LED lamps, fluorescent lamps, indoor lighting, compressors, chillers, dehumidifiers, air purifiers, showcases, cleaners, jar rice cookers, microwave ovens, IH cooking heaters, and others Procurement, logistics, real estate, advertising, finance and other services October • Commenced operations at a new railway ground systems factory at the Kobe Works • Shipped milestone 2,000th turbine generator • Established a new company in China to provide procurement, repair, and sales of service parts (maintenance and consumable parts) for Mitsubishi Electric’s industrial automation machinery products including electrical discharge machines (EDMs) as a part of efforts to strengthen after-sales service capabilities March • Established Mitsubishi Electric Automotive de Mexico, S.A. de C.V. to manufacture and sell automotive equipment in Mexico • Completed expansion of a satellite production facility at the Company’s Kamakura Works • Installed elevators and escalators to Ginza Kabukiza (Chuo-ku, Tokyo) Turbine generator 2013 November • Established the comprehensive sales company PT. Mitsubishi Electric Indonesia in Indonesia December • Established Mitsubishi Electric Turkey A. . in Turkey • Developed new plastic-identification technology for recycling of post-consumer S, home appliances* * Development in collaboration with Shimadzu Corporation * Financially supported by the Ministry of Economy, Trade and Industry, Japan Advanced plastic material separating system New satellite production facility Ginza Kabukiza February • Developed 100-Gbps optical transmission technology that realizes 2.5 times the transmission speed of conventional inter-city optical networks MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 09 Review of Operations Energy and Electric Systems Net Sales Breakdown by Business Segment 25.9% Net Sales ¥1,058.2billion up 3% year on year Operating Income ¥85.1billion up ¥0.2 billion year on year The social infrastructure systems business saw a decrease in orders compared with the previous fiscal year due mainly to lower demand as reconstruction demand, which had surged in fiscal 2012 following the Great East Japan Earthquake, declined. Nevertheless, overall sales were virtually unchanged from the previous fiscal year largely due to an increase in power genera- tion business activities worldwide. The building systems business experienced increases in both orders and sales compared with the previous fiscal year, owing to growth in modernization-related demand for elevators and escalators in Japan as well as for new installations overseas, mainly in China. As a result, total sales in the Energy and Electric Systems segment amounted to ¥1,058.2 billion, up 3% compared with the previous fiscal year. Operating income increased by ¥0.2 billion year on year to ¥85.1 billion mainly due to higher sales. 10 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Next-generation SiC Inverter for Railcars Mitsubishi Electric has developed a traction inverter for railcars that incorporates silicon carbide (SiC), a new type of semicon- ductor. This new inverter, with its energy-efficient, compact, lightweight, low-maintenance and low-noise design, is expected to play a major role in next-generation railcar propulsion systems. Digital Signage System at Narita International Airport Mitsubishi Electric has successfully installed Japan’s largest digital signage system1 at Narita International Airport. This system comprises 100 display units made up of a total 336 display panels, including a unit consisting of 27 46-inch LCD multi-display screens. As a part of efforts to ensure the presen- tation of information in an appropriate and timely manner, a wide range of content, including airport news and entertain- ment, is delivered according to the location of each display. 1. Based on Mitsubishi Electric research as of June 2012. Southern Tohoku Proton Therapy Cancer Center Particle Beam Treatment System Proton Type This cutting-edge system uses linear protons and heavy- particle beams to target the affected areas. Easier on pa- tients, this treatment method is expected to help improve quality of life. Power Plants Mitsubishi Electric power plant installations are used both by power utility companies and by companies in various industries as in-house power generators. Owing to its accumulated expertise and leading technological capabilities, Mitsubishi Electric is able to provide optimal power plants in various power generation fields. AXIEZ Machine-room-less Elevators Along with enhanced energy-saving functions, including all- LED lighting, the AXIEZ’s variable-speed control elevator sys- tem reduces waiting times thanks to advances in leading-edge speed adjustment technology. This technology has evolved into a super variable speed control system for improved conve- nience and operational efficiency. The AXIEZ also features an improved design. Facima BA-System, an Open Integrated Management System for Building Facilities The Facima BA-System centrally controls building facilities and equipment through open management integration that is com- patible with facilities and equipment made by different manu- facturers. Owing to its enhanced functions and support menu, ranging from energy-saving to efficient building management operations, the Facima BA-System offers a new style of build- ing management. Industrial Automation Systems Net Sales Breakdown by Business Segment 22.7% Net Sales ¥927.9billion down 5% year on year Operating Income ¥60.6billion down ¥40.6 billion year on year The factory automation systems business saw decreases in both orders and sales compared with the previous fiscal year owing to lower capital expenditures, including in areas related to semiconductors and flat panel displays in China, South Korea, and Taiwan. The automotive equipment business recorded a decrease in orders due to the slump in new automobile sales in Europe and a drop in sales by Japanese automobile manufacturers in China. Overall sales were unchanged from the previous fiscal year, however, reflecting market recovery in North America and the steady market sup- port provided by eco-car subsidies in Japan. As a result, total sales in the Industrial Automation Systems segment amounted to ¥927.9 billion, down 5% compared with the previous fiscal year. Operating income decreased by ¥40.6 billion year on year to ¥60.6 billion due primarily to the decline in sales. Programmable Logic Controllers Mitsubishi Electric’s MELSEC series of programmable logic controllers supports a wide array of production and social infrastructure applications; solutions range from control and safety devices to information and instrumentation management. As a leading global brand, the MELSEC series contributes to the construction of cutting-edge control systems owing to its capabilities, performance, product variety and high reliability. AC Servos The MELSERVO-J4 series features the world’s highest level of performance and functionality. Its advanced design allows “one touch” auto-tuning and vibration suppression that enhances the speed, precision and overall performance of production equipment and manufacturing devices. The MELSERVO-J4 series has applications in numerous fields, including semiconductors, FPD (Flat Panel Display) production, packaging systems and industrial machinery. Low-voltage Circuit Breakers Low-voltage Circuit Breakers are used for wiring protection and short-circuit protection in low-voltage circuits. Since 1933 Mitsubishi Electric has been continuously designing and developing such breakers, the latest of which is the new WS-V “World” series; ideally suited to both power distribution and OEM markets. Electrical Discharge Machines (EDMs) Beginning with the newly launched MV series, a strategic product globally, Mitsubishi Electric provides a lineup of EDMs that add value and improve the manufacturing productivity of molds and precision components. Such equipment is indis- pensable to the production of automobiles, home electronics and IT-related devices. Electric Power Steering (Motors and Controllers) Mitsubishi Electric was the first company in the world to mass produce motors and controllers for electric power steering to assist driver steering in line with driving conditions. Over the years, Mitsubishi Electric has helped to improve steering feel, response and stability while delivering compact units and high-output performance, and contributing to reduced automobile CO2 emissions. Memory Car Navigation System Mitsubishi Electric’s DIATONE SOUND.NAVI is a car navigation system that incorporates the high-quality sound of the DIATONE high-end audio system. In addition to a sound quality and tone control function that rivals that of high-end car audio equipment, DIATONE SOUND.NAVI offers a wide range of advanced navigation capabilities that support driving safety based on simple map features. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 11 Information and Communication Systems Net Sales Breakdown by Business Segment 12.8% Net Sales ¥522.4billion up 1% year on year Operating Income ¥1.6billion down ¥19.7 billion year on year The telecommunications equipment business experienced increases in both orders and sales compared with the previous fiscal year mainly because of higher demand for com- munications infrastructure equipment. The information systems and services business saw no change in sales compared with the previous fiscal year as growth in the system integration business was offset by a decline in the IT infrastructure service business. The electronic systems business recorded a year-on-year increase in orders due primarily to a large order received for the space sys- tems business. In contrast, sales decreased compared with the previous fiscal year owing to a decline in the electronics business. As a result, total sales in the Information and Communication Systems segment amounted to ¥522.4 billion, up 1% com- pared with the previous fiscal year. Operating income decreased by ¥19.7 billion year on year to ¥1.6 billion due primarily to an increase in costs and a decrease in electronic systems business sales. 12 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Information System Integrated Control Center Specialist engineers are available 24/7 to remotely operate and monitor client information systems and to analyze and determine any problem that might occur using automated tools, enabling a rapid response to any system malfunction. (Mitsubishi Electric Information Network Corporation) Mission-critical Server Employing virtualization technology in its complete fault-tolerant system as an overarching concept, this server not only ensures the succession of customers’ application assets, but also integrates internal mission-critical tasks and systems for situations where failure is not an option. (Mitsubishi Electric Information Technology Corporation) DS2000 Standard Satellite Platform The DS2000 is a standard satellite platform modeled after JAXA’s ETS-VIII platform, which was designed to meet the need for high-quality, low-cost satellites with shortened delivery times. The DS2000 has maintained a competitive edge internationally, and is employed in such satellites as Himawari-7, 8, 9, Superbird-C2, ST-2 and Türksat-4A/4B. Vehicle-mounted Stations for Satellite Communications Vehicle-mounted satellite communication equipment enables transmission of video and audio for broadcast news (satellite news gathering) and information for disaster management. Mitsubishi Electric products have achieved Japan’s highest market share in this field, and are employed by Japanese broadcasters, the public sector and infrastructure companies such as gas and electricity utilities. Broadband Optical Access Systems Mitsubishi Electric is progressively installing Gigabit Ethernet Passive Optical Network (GE-PON) systems, which play a central role in broadband services. The need for GE-PON systems is steadily expanding due to high-capacity broadband content, including the increased use of visual services. Digital CCTV (Closed-circuit Television) System This digital CCTV system meets the expanding range of needs for video surveillance systems, which is achieved through new digital technology incorporated into its high-resolution megapixel camera and its high level of scalability, which can accommodate even large-scale systems. Electronic Devices Net Sales Breakdown by Business Segment 4.0% Net Sales ¥164.1billion down 18% year on year Operating Income (Loss) (¥5.6billion) down ¥9.2 billion year on year The semiconductor business saw decreases in both orders and sales compared with the previous fiscal year due mainly to a decline in demand for industrial-, consumer- and railcar-use power modules. The LCD module business experienced increases in both orders and sales year on year amid higher demand for industrial-use products. As a result, total sales in the Electronic Devices segment totaled ¥164.1 billion, down 18% compared with the previous fis- cal year. This segment incurred an operating loss of ¥5.6 billion, a negative year on year turnaround of ¥9.2 billion, mainly because of the drop in sales. SiC Power Modules Mitsubishi Electric is helping to boost the efficiency yet also reduce the size and weight of the power electronics equipment, including home appliances as well as industrial and rolling stock equipment, through its power modules that use silicon carbide (SiC), a next-generation semiconductor material, for inverters. Large-capacity MPD Series of IGBT Modules for Renewable Energy Power Converters Mitsubishi Electric’s Mega Power Dual (MPD) Series of insulated-gate bipolar transistor (IGBT) modules is contributing to smaller and more efficient power conversion equipment, including megawatt-class power generation systems as well as large-capacity inverters and uninterruptible power supply (UPS) systems for industrial equipment. The MPD Series uses a sixth-generation Carrier-Stored Trench-gate Bipolar Transistor (CSTBT)1 that reduces collector-emitter saturation voltage by approximately 15% and gate capacitance by 30 to 50%. 1. CSTBT is a proprietary IGBT that employs a carrier storage effect. Ku-band 50W GaN HEMT for Satellite Earth Stations Mitsubishi Electric’s gallium nitride (GaN) high-electron mobility transistor (HEMT) Ku-band (12-18GHz) amplifier features industry-leading output power of 50W, linear gain of 9dB and power-added efficiency of 30%, thereby helping to reduce the size and weight of satellite earth stations. 40Gbps Driver-In EML-TOSA Compliant with XLMD2-MSA Mitsubishi Electric’s 40Gbps electro-absorption modulator with laser diode-transmitter optical sub assembly (EML-TOSA) is the first device of its kind in the world 1 to comply with the 40Gbps Miniature Device Multi-Source Agreement (XLMD2-MSA). This product helps to reduce the size of communication facilities and expand high-speed optical transmission networks. 1. Based on Mitsubishi Electric research as of March 1, 2013. Color TFT-LCD Modules with Touch Panels for Industrial Applications Mitsubishi Electric’s line-up of color thin-film transistor liquid- crystal display (TFT-LCD) modules with projected capacitive touch panels enable intuitive operations that can be performed even when wearing gloves and provide excellent visual clarity even in bright outdoor environments. In addition to LCD panels, these modules come with touch panels, controllers and total support services, including driver software. This line-up contributes significantly to increasing the user interface sophistication of industrial equipment. 8.4-, 10.4- and 12.1-inch SVGA and XGA Color TFT-LCD Modules for Industrial Use Mitsubishi Electric’s SVGA and XGA color TFT-LCD modules come with circuit board-embedded LED drivers that help realize smaller, lower-cost end products. These modules ensure clear images in outdoor and other bright environments and are ideal for a variety of indoor and outdoor locations due to their wide viewing angles and broad operating temperature range. Glove MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 13 Home Appliances Net Sales Breakdown by Business Segment 20.1% Net Sales Room Air Conditioners In addition to KIRIGAMINE room air conditioners, Mitsubishi Electric offers an extensive lineup of products with applications extending from stores, offices and buildings to factories and industrial facilities while featuring environmentally compatible, energy-saving technologies. These qualities allow Mitsubishi Electric to meet air conditioning needs globally. Photovoltaic system Smart All-electric Homes Energy Generation In-house Power Generation Induction cooking heater Energy Savings Heat Pump Technology To ensure the comfort and convenience of all-electric-powered homes, Mitsubishi Electric is proposing “smart all-electric home” lifestyle ideas that improve energy creation via photovoltaic generation and effective energy usage through high-efficiency technologies such as heat pumps. ¥821.3billion down 3% year on year Built-in dishwasher Heat pump hot water supply system Comfortable Lifestyle Safe/Convenient Hot water floor heating system Mitsubishi Ecomist bath drying, heating, and ventilation system with mist function Operating Income ¥19.3billion down ¥3.1 billion year on year The home appliances business experienced a 3% decrease in sales compared with the previous fiscal year to ¥821.3 billion. Despite an increase in air conditioning products in Asian countries, this result is largely attribut- able to the substantial decline in demand for LCD televisions and Blu-ray disc recorders in the Japanese market. Operating income fell by ¥3.1 billion year on year to ¥19.3 billion due primarily to the drop in sales. 14 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Home Appliance Lineup The home appliances business strives to deliver technologies and products that bring convenience, comfort and enjoyment to everyday life. Focusing on keywords such as “delicious,” “delightful” and “soothing,” every effort is made to further enhance people’s quality of life through intelligent, connected and economical, or in short, smart technologies. LED Lighting Currently under rapid development, LEDs possess outstanding features that expand lighting possibilities, including longevity, low power consumption, absence of mercury and the enabling of more compact fixtures. LEDs also significantly contribute to power conservation efforts. Digital Signage Mitsubishi Electric offers a full lineup of visual display products, including large-screen LCD public displays and multiple large-screen systems. Through these products, the Company is providing solutions for meeting rooms, schools, retail stores and other indoor venues, as well as for a wide range of businesses and applications, such as train stations and public facilities. Visual Equipment for Public and Business Applications Our high-quality image processing technologies deliver exceptionally sharp color reproduction. Mitsubishi Electric offers a range of products developed to suit a variety of application needs. These systems are being used in Japan and abroad for large-screen applications that display images, data and information. Research and Development / Intellectual Property L Research and Development R&D Initiatives The Mitsubishi Electric Group’s R&D network comprises the realize optimal energy management as they enable use of surplus electricity which is charged to EV batteries during off-peak times Advanced Technology R&D Center, Information Technology R&D such as night time, for effective in-house utilization. Center and Industrial Design Center in Japan as well as laborato- ries in the United States and Europe. These centers operate under the umbrella of the Corporate Research and Development Group 1. Photovoltaic 2. Electric Vehicle 3. Home Energy Management System working in collaboration with the development departments in EV PV system individual business groups. R&D is an essential element supporting Mitsubishi Electric’s ongoing growth. Based on a global standpoint, we will maintain our focus on R&D activities that combine business, development, intellectual property and international standardization strategies. At the same time, we will engage in development that contin- ues to make strong businesses stronger from an increasingly global perspective. This emphasis is aimed at securing the world- wide expansion of those businesses that form the backbone of our growth strategy and establishing new business domains. Moreover, we will place additional weight on development that helps to create robust businesses five years into the future. Moving forward, we will work to distinguish ourselves from competitors in such wide-ranging fields as air conditioning equipment and systems, automotive equipment, car multimedia, PV-converter Link EV-converter HEMS controller Gun stand plug-in station Main unit Conceptual image of PV-EV bidirectional power conditioner installation Realizing an independent power source during times of disaster and ensuring optimal energy use under everyday conditions F-CUT, Ultra-high-speed Laser Cutting Technology This innovation for laser processing machines is able to carve any factory automation equipment, power systems, elevators and shape by controlling the alternative “on” and “off” commands in escalators, and defense and space systems. To this end, we will discharging beam at a precision of 1/1,000,000 of a second, in bolster our technological capabilities as a part of efforts to consis- connection with the laser processing machines used for metallic tently excel in international markets. For example, our overseas material cutting. laboratories will play a central role in consolidating collaborative Furthermore, Mitsubishi Electric Research Laboratories, Inc., one ties between operating bases in North America and Europe and of the Group’s US subsidiaries, has developed a technology to promoting development aligned to our global strategy in the area determine the shortest processing path to reduce machine hours of air conditioning equipment and systems. regardless of the physical complexity of shape to be processed. From the standpoint of safeguarding the environment, the These innovations, in comparison with the conventional pro- Group is aggressively addressing the technological challenges cessing method1, have shortened standard machine hours for related to smart community/smart grids, power devices, heat processing by 45%2. Their use in the latest laser processing pump applications and other aspects of energy and environmental machines for cutting metallic materials contributes to enhanced businesses. Such initiatives are being undertaken with the aim of productivity in the manufacturing sector. realizing the Group’s Environmental Vision 2021. Through these efforts, Mitsubishi Electric is working to achieve a sustainable society by combining leading technologies from its wide array of business fields and developing energy-saving products and systems. R&D Achievements in Fiscal 2013 The PV1/EV2-linked Controlled Power Conditioner This newly developed technology is able to deal with changes in electric current that may be caused by factors such as the variation of electricity generated by PV depending on the intensity of solar radiation and steep changes in the power consumption of home appliances. A related innovation is seamless control of EV charging and discharging. Through configuration with the HEMS3 controller, which performs control and surveillance of home appliances, these technologies contribute to ensuring stable power supply to 1. “Conventional” refers to the fiber laser processing method without F-CUT 2. This ratio assumes an instance of cutting stainless material of 1 millimeter board thickness. 35.5s Machining time shortened 45% 19.5s Conventional F-CUT Our ultrahigh-speed oscillation control technology enables the operating laser beam to be switched on and off with precision to the closest 1/1,000,000 of a second Automatic optimization of processing routes based on advanced control theory Beam off Beam on Fiber laser processing machine equipped with F-CUT (ML3015N X-F) houses even during blackouts caused by natural disasters. Capable of processing any shape; enables shorter machining times Additionally, under normal conditions, these technologies MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 15 Radar Satellite for High-resolution Land Observation Mitsubishi Electric has developed a radio observation technology, which enables a satellite in orbit to spotlight a particular geo- graphic location or terrestrial objects, regardless of weather and time (in both daylight and at night). This technology ensures full recognition and identification of individual constructions on ground surfaces, such as buildings and roads. This technology is to be incorporated into the Advanced Land Observation Satellite-2 (“ALOS-2”)1. It is expected that this tech- nology will contribute extensively to functions such as faster fact-finding in the areas affected by large-scale natural disasters in Japan or elsewhere and a higher degree of efficiency in surveil- lance of national territories. 1. A new Advanced Land Observation Satellite succeeding its precursor “DAICHI” which ended operations in May 2011. ALOS-2 is currently being developed by a national independent administrative institution Japan Aerospace Exploration Agency (“JAXA”). Surface observation using the existing DAICHI satellite Surface observation using ALOS-2 Conceptual image of high-resolution radar surface observation using ALOS-2 Captures clear above-ground images over a broad expanse both night and day and irrespective of weather conditions L Intellectual Property Basic Policy The Mitsubishi Electric Group recognizes that intellectual property Global IP Strategy The Mitsubishi Electric Group identifies critical IP-related themes (IP) rights represent a vital management resource essential to its in connection with mainstay businesses and important R&D proj- future. Therefore, every effort is made to integrate the Group’s ects. At the same time, the Group channels its energies toward business, R&D and IP activities. Moving forward, the Mitsubishi the globalization of its robust patent portfolio by promoting Electric Group will further strengthen its IP capabilities while patent filing activities. With regard to its overseas operations, the promoting its growth strategy. Structure of the Intellectual Property Division The Mitsubishi Electric Group’s IP-related operations are the direct Group is accelerating the globalization of its IP activities through actions such as working to increase the number of patent appli- cations it files prior to undertaking business development in emerging countries, including India and Brazil. responsibility of the president and are overseen by the Head Office Moreover, the Mitsubishi Electric Group is actively engaging in IP Division under an appointed IP executive officer. Day-to-day activities aimed at acquiring design rights in Japan and overseas issues are handled by IP departments at relevant facilities, R&D to further enhance its robust patent portfolio. These efforts are centers and affiliated companies. The Head Office IP Division intended to specifically protect proprietary assets in both technol- formulates strategies for the entire Group, promotes critical ogy and design areas. IP-related projects and coordinates interaction with the patent office. At the manufacturing facility, R&D center and affiliated company levels, IP departments pursue specific objectives in line with the Group’s overall IP strategies. Annual Trends in Overseas Patent Applications by the Mitsubishi Electric Group Integrating Business, R&D and IP Activities (No. of Applications) 8,000 Integration IP Network IP/Standardization Strategy IP Division at Headquarters President Business Strategy IP Departments at Business Groups, Facilities, Affiliates Development Strategy R&D Centers IP Departments 16 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 6,000 4,000 2,000 0 2010 2011 2012 2013 (FY) USA Europe China Other Further Strengthening Global IP Capabilities IP representative Europe Asia USA / Brazil Head Office IP Division V Protecting products through IP rights V Acquiring international standard-related patents V Counterfeit product countermeasures The Mitsubishi Electric Group has assigned IP representatives to each of its bases in the United States, Europe and China. Every effort is being made to strengthen IP capabilities at Group facili- ties, R&D centers and affiliated companies in each country. Standardization Strategy As companies continue to globalize their business activities, the international standardization of technologies that contribute to global market growth is significantly impacting business strategies. For this reason, the importance of promoting IP strategies in consideration of international standards is increasing. In response to this situation, the Mitsubishi Electric Group is placing emphasis on activities to standardize its development technologies and acquire related IP rights. The Group is paying particular attention to the acquisition of international standard patents, while patent pools, including those for MPEG and Blu-ray DiscTM, are proving to be a wellspring for IP revenues. These revenues are contributing to improvement and growth in business earnings. Furthermore, the Mitsubishi Electric Group is working to reinforce its activities to acquire rights for international standard-related technologies. The Group is looking to utilize these patents to help increase the market share of its products. *Blu-ray DiscTM is a trademark of the Blu-ray Disc Association Activities Aimed at Preventing Infringement on the Group’s IP Rights The Mitsubishi Electric Group works diligently to prevent any infringement on its IP rights by other companies. In addition to in-house activities, the Group places particular weight on collabo- rating with industry organizations while approaching government agencies both in Japan and overseas as a part of a wide range of measures to prevent the counterfeiting of its products. Respecting the IP Rights of Others The Mitsubishi Electric Group recognizes that any infringement on the IP rights of another company has the potential to significantly impair the Group’s continued viability as a going concern. The resulting potential impairments include being obliged to pay significant licensing fees or being forced to discontinue the man- ufacture of a certain product. In order to prevent any infringement on the IP rights of other companies, the Group provides education and training to raise employee awareness and promote greater respect for the IP rights of others. At the same time, the Group has put in place a set of rules to facilitate appropriate actions such as surveying other companies’ patent rights at every stage from development to production. The Mitsubishi Electric Group works diligently to ensure strict adherence to these rules. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 17 Corporate Social Responsibility The Mitsubishi Electric Group promotes its corporate social responsibility (CSR) activities based on the conviction that all business activities must take CSR into consideration. The Group’s Corporate Mission and Seven Guiding Principles form its basic CSR policies. We are vigilant in our enforcement of cor- porate ethics and compliance and constantly work to improve educational programs and strengthen our internal control system. At the same time, we pursue initiatives related to quality management, environmental preservation, philanthropy and improved communication with all stakeholders. Corporate Mission The Mitsubishi Electric Group will continually improve its technologies and services by applying creativity to all aspects of its business. By doing so, we enhance the quality of life in our society. To this end, all members of the Group will pursue the following Seven Guiding Principles. Seven Guiding Principles Trust, Quality, Technology, Citizenship, Ethics, Environment, Growth The Mitsubishi Electric Group’s Corporate Social Responsibility The operating environment continues to undergo dramatic changes, reflecting advances in globalization, revisions to legislation and other factors. What must continue regardless of how the times may change is a respect for corporate ethics and compliance and a commitment to never compromise on environmental issues and product quality. This commitment of the Mitsubishi Electric Group was first articulated in the Keiei no Yotei, or Keys to Management, which was drawn up at the time of Mitsubishi Electric’s founding in 1921. The spirit of this document, which states our contributions in areas such as the prosperity of society, product quality and cus- tomer satisfaction, lives on today in our Corporate Mission and Seven Guiding Principles. With these tenets as our core principles, the Group promotes various initiatives in order to fulfill its corpo- rate social responsibilities. In particular, our commitment to compliance has underpinned corporate management while forming the core of our efforts to strengthen the Group’s internal control system and implement employee training programs. Despite this commitment, it was revealed that in Mitsubishi Electric’s electronic systems business there was some overcharging of expenses as well as inappropriate invoicing with regard to contracts involving its defense- and space-related businesses. This led to the Company’s suspension by Japanese authorities from participating in further bidding. Taking this matter very seriously, we conducted a detailed investi- gation to determine the details and causes of this incident. The results of our investigation have been incorporated into counter- measures aimed at preventing similar incidents from recurring. Implementing these countermeasures and working diligently to strengthen our compliance activities, we will make every possible effort to regain the trust of all stakeholders as quickly as possible. As a member of society, the Mitsubishi Electric Group is respon- sible for upholding corporate ethics and compliance as well as contributing to society. The Group recognizes its responsibility to contribute to society through the technologies it has built up over the years. A sincere concern for the environment permeates all of the Mitsubishi Electric Group’s products, services and businesses. In this sense, every facet of our business activities is geared toward contributing to the environment. The technologies and products that comprise our portfolio support environmental protection, energy conservation and social infrastructure while being gentle 18 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 to humankind and the earth, thereby enriching society. Looking ahead, we will help create a low-carbon society by harnessing the strengths of our wide-ranging technological capabilities. Philanthropic Activities To help create a society full of smiles, where caring and harmony are a way of life, the Mitsubishi Electric Group carries out a vari- ety of philanthropic activities both in Japan and overseas in the spirit of its corporate mission. This mission states that we “will continually improve our technologies and services by applying creativity to all aspects of our business” and thereby enhance quality of life in society. Promoting Activities Deeply Rooted in Local Communities Emphasizing the three categories of social welfare, environmental preservation and the promotion of science and technology, our philanthropic activities in Japan are underpinned primarily by the Mitsubishi Electric SOCIO-ROOTS Fund, a gift program in which the Company matches any donation made by an employee to social welfare facilities; the “Satoyama” Woodland Preservation Project, which involves employee volunteers participating in envi- ronmental restoration activities in the areas surrounding our offic- es and production facilities; and science classes that encourage children to experience for themselves the appeal of science and thereby foster the development of the engineers of tomorrow. Focusing on our philanthropic activities overseas, we imple- ment a broad range of initiatives, including undertaking nature conservation activities with the help of employee volunteers, Satoyama Woodland Preservation Project participants (Japan) A Science Class that helps communicate the appeal of science to children (Japan) Supporting the El Primer Palau music festival (Spain) funding social welfare facilities and organizations, and offering support for young musicians and sports teams. Common to all of Mitsubishi Electric’s philanthropic initiatives is a focus on activities deeply rooted in local communities. In this way, we are promoting greater communication with all members of society through actions that meet local needs. Philanthropic Activities through Mitsubishi Electric’s Overseas Foundations The Mitsubishi Electric America Foundation and Mitsubishi Electric Thai Foundation, both founded in 1991, play leading roles in our social welfare activities and the promotion of science and technology. The Mitsubishi Electric America Foundation helps young people with disabilities to participate more fully in society. The Mitsubishi Electric Thai Foundation provides scholarships to university students, supports a school lunch program for grade school students, and promotes volunteer work in schools. Recipients of university scholarships and Foundation representatives (Thailand) In the school lunch program, students use funds from the Foundation to grow crops for school lunches. (Thailand) The Congressional Internship Program for Individuals with Intellectual Disabilities (United States) An employee volunteer working with a student on Disability Mentoring Day (United States) Environmental Activities The 7th Environmental Plan Aiming to be a leading green company that continues to address the needs of a global society, the Mitsubishi Electric Group is working to strengthen its corporate constitution by fine-tuning its production to use less energy and fewer resources as well as to contribute to society by taking into consideration environmental concerns and improving the environment through its products and services. In 2007, the Mitsubishi Electric released details of its long-term vision for environmental management, Environmental Vision 2021. Under this vision, the Mitsubishi Electric Group commenced its 7th Environmental Plan, which covers the period from fiscal 2013 to fiscal 2015. This plan is built around three core pillars encom- passing initiatives toward realizing a low-carbon society, initiatives toward creating a recycling-based society and initiatives aimed at strengthening the Group’s environmental management founda- tion and expanding environment-related businesses. As a part of efforts to realize a low-carbon society, particular emphasis is being placed on measures to further expand contribution amounts for reducing CO2 emissions, both at production stage and product usage stage. Strengthening Our Corporate Constitution • Reducing CO2 Emissions from Production Under its 7th Environmental Plan, which covers the period from fiscal 2013 to fiscal 2015, the Mitsubishi Electric Group has taken steps to manage its CO2 emissions reduction targets in terms of carbon equivalent energy per net sales.* Doing so ensures that a proper evaluation of the efforts made to reduce emissions can be made even when there is an increase or decrease in the volume of production. The Group has identified the target of reducing the carbon equivalent energy per net sales of CO2 emissions to 83% of the level recorded in fiscal 2011 in fiscal 2015. In order to achieve this target, a variety of initiatives will be implemented. In an effort to reduce CO2 emissions from the production line, steps will be taken to visualize and remove the energy waste inherent in the production process. At the same time, the Group will focus on increasing the efficiency and management of utilities, including air conditioners and lighting. Attention will also be paid to managing and controlling the use of electric power during peak periods through the introduction of monitoring systems with the aim of realizing a reduction through the use of demand management. Complementing these initiatives, the Mitsubishi Electric Group will continue to expand its use of photovoltaic power generation. The improvement in CO2 emissions in terms of carbon equiva- lent energy per net sales was 96% in fiscal 2013. This result fell Reduce CO2 emissions from product usage by 30% (Base year: fiscal 2001) Reduce total emissions from production by 30% (Base year: fiscal 1991) Aim to reduce CO2 emissions from power generation Environmental Vision 2021 Global Leading Green Company Promote product “3Rs”; reduce, reuse and recycle Reduce resource inputs Aim for zero emissions from manufacturing Contribute to Society (through our products, services and business activities) Strengthen our Constitution (through boosting efficiency and reducing waste) Creating a Low-Carbon Society Creating a Recycling-Based Society Respecting Biodiversity Ensuring harmony with nature and fostering environmental awareness MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 19 short of the fiscal year target of 89%. Failure to achieve the target was largely attributable to the downturn in sales in the Electronic Devices and Industrial Automation Marketing business segments as well as the construction of a new plant tower by the Energy and Electric Systems business segment. Taking each of the aforementioned into consideration, the Mitsubishi Electric Group will bolster existing initiatives with reduction activities that focus on thermal energies in fiscal 2014. Efforts will also be channeled toward accelerating the deployment of energy-efficient technolo- gies across all sites. *The amount of CO2 emission in terms of per unit of sales. Group-wide Plan to Reduce CO2 Emissions from Production Total amount of emissions (10,000 tons) Base year 24 118 25 69 120 100 80 60 40 20 0 Actual amount of reduction under the 6th Environmental Plan 106,000 tons Planned amount of reduction under the 7th Environmental Plan 121,000 tons 100% 92% 96% 97 86 3.4 22 17 47 3.5 27 19 51 93 3.7 27 16 50 92 3.5 27 17 48 100 28 19 53 83% 101 29 19 53 6th Environmental Plan 7th Environmental Plan CO2 emissions per unit of sales rate (%) 98 62% 100 80 60 40 20 0 1991 2010 2011 2012 2013 2014 2015 2021 (FY) (cid:31) Mitsubishi Electric (base year: FY1991) (cid:31) Affiliates in Japan (base year: FY2001) (cid:31) Overseas affiliates (base year: FY2006) Group total (cid:31) Amount of reduction CO2 emissions per unit of sales (compared to FY2011) Contributing to Society • Reducing CO2 Emissions from Product Usage The Mitsubishi Electric Group is endeavoring to further reduce its products’ CO2 emissions resulting from use. The amount of reduction in CO2 emissions from product usage refers to the reduction attributable to the replacement of old products (sold in fiscal 2001) with new and highly energy-efficient products (sold in fiscal 2013). In addition to enhancing the energy-saving perfor- mance of individual products, the Mitsubishi Electric Group is working to increase the number of its products that actively ben- efit the environment while expanding its sales volume in order to maximize its contribution toward reducing overall CO2 emissions. The Group’s total reduction in CO2 emissions from product usage in fiscal 2013 was 49,030,000 tons across 134 products. Total CO2 emissions from product usage came to 120,340,000 tons. With an eye to enhancing their energy-saving performance, based on specific targets certain products have been chosen by the Mitsubishi Electric Group for further development. In particular, a 27% average reduction in energy consumption is targeted for 84 products under the 7th Environmental Plan. In fiscal 2013, the number of products whose development took into account established reduction targets increased to 109. Having achieved an average reduction in energy consumption of 29%, the Group exceeded the target set for under the final year of the plan. This was largely attributable to successful efforts to improve the energy consumption of all products. CO2 Emissions Reduction from Production and Products CO2 emissions from production CO2 emissions from product usage Implemented improvement activities Promoting highly energy-efficient production (strengthening the corporate constitution) Development and widespread use of highly energy-efficient products (contributing to society) Reduction of 35,000 tons Contribution to the reduction of approximately 49,000,000 tons The deemed market reduction (134 products) attributable to the substitution of products sold in fiscal 2013 Total CO2 Emissions by the Mitsubishi Electric Group 920,000 tons Approximately 120,000,000 tons (134 products) More information about the Mitsubishi Electric Group’s environmental and CSR initiatives is available on our website at the following URL. http://www.MitsubishiElectric.com/company/csr/ http://www.MitsubishiElectric.co.jp/corporate/environment/ 20 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Corporate Governance Basic Corporate Governance Policy To realize sustained growth and increase corporate value, Executive officers are responsible for ensuring compliance and management efficiency in their assigned areas of operations. Mitsubishi Electric works to maintain the flexibility of its operations Internal auditors monitor executive officers’ performance of while promoting management transparency. These endeavors are duties. Internal auditors report on the results of such monitoring supported by an efficient corporate governance structure that to the executive officer in charge of auditing. And the executive clearly defines and reinforces the supervisory functions of manage- officer in charge of auditing and accounting auditors report on ment while ensuring that the Company is responsive to the expec- the results of such monitoring to the Audit Committee. tations of customers, shareholders, and all of our stakeholders. Mitsubishi Electric maintains a multi-dimensional risk manage- Corporate Management and Governance Structure Corporate Management Structure In June 2003, Mitsubishi Electric became a company with a ment system in which all executive officers participate. Under this system, executive officers are responsible for risk management in their assigned areas of operation. In addition, executive officers exchange information and participate in important management initiatives and decisions through regularly scheduled executive committee system. Key to this structure is the separation of officers’ meetings. supervisory and executive functions; the Board of Directors plays a supervisory decision-making role and executive officers handle the day-to-day running of the Company. The Corporate Auditing Division and Audit Committee Acting independently, Mitsubishi Electric’s Corporate Auditing The present Board is comprised of 12 directors (five of whom Division conducts internal audits of the Company from a fair and are outside directors), who objectively supervise and advise the impartial standpoint. In addition, the division’s activities are Company’s management. The Board of Directors has three inter- supported by auditors with profound knowledge of their particu- nal bodies: the Audit, Nomination and Compensation commit- lar fields, assigned from certain business units. tees. Each body has five members, three of whom are outside The Audit Committee is made up of five directors, three of directors. The Audit Committee is supported by dedicated whom are outside directors. In accordance with the policies and independent staff. Internal Control System Further ensuring effective corporate governance, the roles of assignments agreed to by the committee, the performances of directors and executive officers as well as affiliated companies are audited. The Corporate Auditing Division, through the executive officer Chairman and President & CEO are clearly defined and exclusive. in charge of auditing, submits reports to the Audit Committee, The Chairman heads the board of directors and the President & which holds periodic meetings to exchange information and dis- CEO heads the Company’s executive officers. Neither the Chair- cuss auditing policies. In addition, the Audit Committee discusses man nor the President & CEO is a member of the Nomination or policies and methods of auditing with accounting auditors, who Compensation Committees. This allows for the clear division of furnish it with reports on the status and results of the audits of executive and supervisory functions, thereby enabling Mitsubishi the Company that they themselves conduct. Electric to ensure effective corporate governance. Decision Making and Execution Report Executive Officers President & CEO Executive Vice Presidents Senior Vice Presidents Executive Officers Business/Administration Divisions General Shareholders’ Meeting Report Appointment Appointment/Dismissal/Supervision Reporting to Supervision Board of Directors Chairman Nomination Committee Directors Outside Directors (majority) Audit Committee Directors Outside Directors (majority) Compensation Committee Directors Outside Directors (majority) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 21 Directors and Executive Officers Directors (As of June 27, 2013) Setsuhiro Shimomura ........................... Chairman Kenichiro Yamanishi ............................ Representative Executive Officer, President & CEO Hiroki Yoshimatsu ................................ Member of the Audit Committee Noritomo Hashimoto ........................... Member of the Nomination Committee, Senior Vice President Ryosuke Fujimoto ................................. Chairman of the Audit Committee Nobuyuki Okuma ................................. Chairman of the Nomination Committee, Chairman of the Compensation Committee, Executive Officer Akihiro Matsuyama .............................. Member of the Compensation Committee, Executive Officer Mikio Sasaki .......................................... Member of the Compensation Committee, Senior Corporate Advisor, Mitsubishi Corporation Shigemitsu Miki .................................... Member of the Nomination Committee, Member of the Audit Committee, Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Fujiatsu Makino .................................... Member of the Audit Committee, Member of the Compensation Committee, Certified Public Accountant, Registered Tax Accountant Mitoji Yabunaka ................................... Member of the Nomination Committee, Member of the Compensation Committee, Advisor, Nomura Research Institute, Ltd. Hiroshi Obayashi .................................. Member of the Nomination Committee, Member of the Audit Committee, Attorney-at-Law Executive Officers (As of June 27, 2013) Representative Executive Officer President & CEO: Kenichiro Yamanishi Representative Executive Officer Executive Vice President: Mitsuo Muneyuki ................................. In charge of Export Control and Building Systems Masaki Sakuyama ................................. In charge of Semiconductor & Device Senior Vice Presidents: Takashi Sasakawa ................................. In charge of Electronic Systems Noritomo Hashimoto ........................... In charge of Corporate Strategic Planning and Operations of Associated Companies Executive Officers: Kazuhiko Tsutsumi ............................... In charge of IT and Research & Development Yoshiaki Nakatani................................. In charge of Energy & Industrial Systems Tsuyoshi Nakamura .............................. In charge of Legal Affairs & Compliance Masaharu Moriyasu .............................. In charge of Total Productivity Management & Environmental Programs Hiroyuki Umemura ............................... In charge of Living Environment & Digital Media Equipment Yasuyuki Nakanishi .............................. In charge of Communication Systems Takayuki Sueki ..................................... In charge of Global Strategic Planning & Marketing Masayuki Ichige .................................... In charge of Auditing, Government & External Relations and Public Relations Isao Iguchi ............................................. In charge of Advertising and Domestic Marketing Hideyuki Okubo ................................... In charge of Factory Automation Systems Yutaka Ohashi ...................................... In charge of Automotive Equipment Toru Yoshinaga ..................................... In charge of Information Systems & Network Service Nobuyuki Okuma ................................. In charge of General Affairs and Human Resources Akihiro Matsuyama .............................. In charge of Accounting and Finance Takashi Sakamoto ................................ In charge of Purchasing Takahiro Kikuchi ................................... In charge of Public Utility Systems Kenji Kondo .......................................... In charge of Export Control and Intellectual Property 22 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Organization (As of June 27, 2013) Board of Directors Chairman Nomination Committee Audit Committee Compensation Committee Audit Committee Office Executive Officers’ Meeting President & CEO Executive Vice Presidents Senior Vice Presidents Executive Officers (cid:31) Corporate Auditing Div. (cid:31) Corporate Marketing Group (cid:31) Corporate Strategic Planning Div. (cid:31) Corporate IT Strategy Div. (cid:31) Global Strategic Planning & Marketing Group (cid:31) Associated Companies Div. (cid:31) Government & External Relations Div. (cid:31) Corporate Administration Div. (cid:31) Corporate Human Resources Div. (cid:31) Corporate Accounting Div. (cid:31) Corporate Finance Div. (cid:31) Corporate Purchasing Div. (cid:31) Public Relations Div. (cid:31) Corporate Advertising Div. (cid:31) Corporate Legal & Compliance Div. (cid:31) Corporate Export Control Div. (cid:31) Corporate Total Productivity Management & Environmental Programs Group (cid:31) Corporate Research and Development Group (cid:31) Information Systems & Network Service Group (cid:31) Public Utility Systems Group (cid:31) Energy & Industrial Systems Group (cid:31) Building Systems Group (cid:31) Corporate Licensing Div. (cid:31) Electronic Systems Group (cid:31) Corporate Intellectual Property Div. (cid:31) Communication Systems Group (cid:31) Living Environment & Digital Media Equipment Group (cid:31) Factory Automation Systems Group (cid:31) Automotive Equipment Group (cid:31) Semiconductor & Device Group Business Planning Office Market Planning & Administration Dept. Compliance Dept. Marketing Research & Business Development Dept. Branch Offices (Hokkaido, Tohoku, Kanetsu, Kanagawa, Hokuriku, Chubu, Kansai, Chugoku, Shikoku, Kyushu) Global Planning & Administration Div. Compliance Dept. Regional Marketing Div. Regional Strategic Development Div. Regional Corporate Offices Americas (U.S.A.) Europe (U.K.) Asia (Singapore) China Taiwan Corporate Productivity Engineering Dept. Compliance Dept. Corporate Quality Assurance Planning Dept. Corporate Environmental Sustainability Group Corporate Logistics Dept. Information Technology Center Design Systems Engineering Center Manufacturing Engineering Center Planning & Administration Dept. Compliance Dept. Advanced Technology R&D Center Information Technology R&D Center Industrial Design Center Planning & Administration Dept. Compliance Dept. Engineering Planning Dept. Marketing Dept. Planning & Administration Dept. Compliance Dept. Engineering Planning Dept. ITS Business Development Group Public-Use Systems Marketing Div. Transportation Systems Div. Overseas Marketing Div. Plant Engineering & Construction Div. Branch Offices Kobe Works, Itami Works, Nagasaki Works Planning & Administration Dept. Compliance Dept. Engineering Planning Dept. Nuclear Power Plant Technical Supervisory Office Power Systems Marketing Div. Overseas Marketing Div. Power Plant Engineering & Construction Center Branch Offices Energy Systems Center, Transmission & Distribution Systems Center, Power Distribution Systems Center Planning & Administration Dept. Compliance Dept. Engineering Planning Dept. Total Security Systems Dept. Domestic Marketing Div. Overseas Marketing Div. Building Systems Field Operation Div. Branch Offices Inazawa Works Electronic Systems Compliance Dept. Planning & Administration Dept. Defense Systems Div. Space Systems Div. IT Space Solutions Div. Branch Offices Communication Systems Center, Kamakura Works Planning & Administration Dept. Compliance Dept. Communication Systems Engineering Center Telecommunication Systems Sales & Marketing Div. Telecommunications Carrier Sales & Marketing Div. Branch Offices Communication Networks Center Planning & Administration Dept. Compliance Dept. Engineering Dept. External Relations Dept. Customer Satisfaction Promotion Dept. Marketing & Operations Strategic Planning Dept. Eco-Facility Systems Marketing Dept. Air-Conditioning & Refrigeration Systems Div. Lighting, Ventilation, Housing Systems & PV Systems Div. Home Appliances Div. Digital Media Equipment Div. Living Environment Systems Laboratory Branch Offices Nakatsugawa Works, Air-Conditioning & Refrigeration Systems Works, Shizuoka Works, Kyoto Works, Gunma Works Planning & Administration Dept. Compliance Dept. Industrial Products Marketing Div. Industrial Automation Marketing Div. Overseas Marketing Div. Global Account Management Div. Branch Offices Nagoya Works, Fukuyama Works Planning & Administration Dept. Automotive Equipment Compliance Dept. Automotive Equipment Marketing Div. Automotive Equipment Overseas Marketing Div. Automotive Electronics Development Center Branch Offices Himeji Works, Sanda Works Planning & Administration Div. Compliance Dept. Semiconductor & Device Marketing Div. A Semiconductor & Device Marketing Div. B LCD Div. Branch Offices Power Device Works, High Frequency & Optical Device Works MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 23 Major Subsidiaries and Affiliates (As of March 31, 2013) Manufacturing Sales/Installation/Services Comprehensive Sales Companies Energy and Electric Systems Tada Electric Co., Ltd. Toyo Electric Corporation Mitsubishi Electric Building Techno-Service Co., Ltd. Mitsubishi Electric Plant Engineering Corporation Mitsubishi Electric Power Products, Inc. Mitsubishi Electric Control Software Corporation Mitsubishi Elevator Asia Co., Ltd. Ryoden Elevator Construction, Ltd. Mitsubishi Electric Shanghai Electric Elevator Co., Ltd. Ryoko Co., Ltd. Toshiba Mitsubishi-Electric Industrial Systems Corporation Mitsubishi Hitachi Home Elevator Corporation RYO-SA BUILWARE Co., Ltd. Mitsubishi Elevator Hong Kong Co., Ltd. Mitsubishi Elevator Korea Co., Ltd. Shanghai Mitsubishi Elevator Co., Ltd. Hitachi Mitsubishi Hydro Corporation ETA-Melco Elevator Co. L.L.C. Industrial Automation Systems DB Seiko Co., Ltd. Meiryo Technica Co., Ltd. Ryowa Corporation Ryoden Koki Engineering Co., Ltd. Mitsubishi Electric Automotive America, Inc. Meldas System Engineering Corporation Mitsubishi Electric Thai Auto-Parts Co., Ltd. Mitsubishi Electric Mechatronics Software Corporation Mitsubishi Electric Dalian Industrial Products Co., Ltd. Mitsubishi Electric Automation (Hong Kong) Ltd. Mitsubishi Electric Automation, Inc. Mitsubishi Electric Automation Korea Co., Ltd. Chiyoda Mitsubishi Electric Co., Ltd. and other regional comprehensive sales companies (10 companies) Mitsubishi Electric Europe B.V. Mitsubishi Electric US, Inc. Mitsubishi Electric Taiwan Co., Ltd. Mitsubishi Electric & Electronics (Shanghai) Co., Ltd. Mitsubishi Electric Asia Pte. Ltd. Mitsubishi Electric Australia Pty. Ltd. Mitsubishi Electric (H.K.) Ltd. Ryoden Trading Co., Ltd. Kanaden Corporation Mansei Corporation Information and Communication Systems Electronic Devices Home Appliances Others Mitsubishi Electric Automotive Czech s.r.o. Shizuki Electric Co., Inc. Nippon Injector Corporation Shihlin Electric & Engineering Corporation Setsuyo Astec Corporation Mitsubishi Electric TOKKI Systems Corporation Diamond Telecommunication Co., Ltd. Mitsubishi Precision Co., Ltd. SPC Electronics Corporation Seiryo Electric Co., Ltd. Miyoshi Electronics Corporation Oi Electric Co., Ltd. Mitsubishi Electric Information Systems Corporation Mitsubishi Electric Information Network Corporation Mitsubishi Electric Information Technology Corporation Mitsubishi Space Software Co., Ltd. Mitsubishi Electric Business Systems Co., Ltd. Mitsubishi Electric Micro-Computer Application Software Co., Ltd. Itec Hankyu Hanshin Co., Ltd. Melco Display Technology Inc. Melco Semiconductor Engineering Corporation IT Semicon Co., Ltd. Mitsubishi Electric Metecs Co., Ltd. Vincotech Holdings S.à r.l. Renesas Electronics Corporation Powerex, Inc. Mitsubishi Electric Lighting Corporation Mitsubishi Electric Home Appliance Co., Ltd. Mitsubishi Electric Consumer Products (Thailand) Co., Ltd. Shanghai Mitsubishi Electric & Shangling Air-Conditioner and Electric Appliance Co., Ltd. Mitsubishi Electric (Guangzhou) Compressor Co., Ltd. Siam Compressor Industry Co., Ltd. Mitsubishi Electric Visual Solutions America, Inc. Kang Yong Electric Public Co., Ltd. Mitsubishi Electric Living Environment Systems Corporation Mitsubishi Electric Life Network Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Equipment Sales Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Systems Co., Ltd. Melco Facilities Corporation Mitsubishi Electric Kang Yong Watana Co., Ltd. Mitsubishi Electric Air-Conditioning & Visual Information Systems (Shanghai) Ltd. Mitsubishi Electric Trading Corporation Mitsubishi Electric Engineering Co., Ltd. Mitsubishi Electric Logistics Corporation Mitsubishi Electric System & Service Co., Ltd. The Kodensha Co., Ltd. Mitsubishi Electric Life Service Corporation iPLANET Inc. Mitsubishi Electric Credit Corporation KITA KOUDENSHA Corporation Notes: 1. Comprehensive sales companies include several companies that are responsible for selling products from a number of businesses, and therefore are put into their own separate category rather than separating them by business segment. 2. Companies shaded in gray are consolidated subsidiaries, while others are equity-method affiliate companies. 3. The name of IT Semicon Co., Ltd. was changed to Melco power device Co. Ltd. on April 1, 2013. 24 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Financial Section Contents 26 Five-Year Summary 27 Financial Review 36 Consolidated Balance Sheets 38 Consolidated Statements of Income 38 Consolidated Statements of Comprehensive Income 39 Consolidated Statements of Equity 40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 72 Independent Auditors’ Report MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 25 Five-Year Summary Mitsubishi Electric Corporation and Subsidiaries Years ended March 31 2013 2012 2011 2010 Yen (millions) 2009 U.S. dollars (thousands) 2013 Summary of Operations Net sales Cost of sales Selling, general, administrative and R&D expenses Loss on impairment of long-lived assets Operating costs Operating income Income before income taxes Net income attributable ¥3,567,184 2,604,360 ¥3,639,468 2,628,964 ¥3,645,331 2,622,959 ¥3,353,298 2,505,095 ¥3,665,119 2,710,976 $37,948,766 27,705,957 806,412 781,278 784,606 736,959 783,673 8,578,851 4,317 3,782 4,005 16,942 30,742 45,926 3,415,089 3,414,024 3,411,570 3,258,996 3,525,391 36,330,734 152,095 65,141 225,444 224,080 233,761 210,237 94,302 64,259 139,728 43,933 1,618,032 692,989 to Mitsubishi Electric Corp. ¥ 69,517 ¥ 112,063 ¥ 124,525 ¥ 28,278 ¥ 12,167 $ 739,543 Financial Ratios Return on sales (%) Return on equity (%) Return on assets (%) Equity ratio (%) Per-Share Amounts Net income attributable to Mitsubishi Electric Corp. (yen/U.S. dollars) Basic Diluted Cash dividends declared (yen/U.S. dollars) Statistical Information Current assets Current liabilities Working capital Mitsubishi Electric Corp. shareholders’ equity Cash dividends paid Total assets Capital expenditures R&D expenditures Depreciation Employees 1.95 5.72 2.04 38.12 3.08 10.27 3.33 33.39 3.42 12.36 3.80 31.52 0.84 3.12 0.86 30.00 0.33 1.29 0.36 25.48 — — — — ¥32.38 — ¥52.20 — ¥58.00 — ¥13.18 13.18 ¥5.67 5.67 $0.344 — ¥ 11 ¥ 12 ¥ 12 ¥ 4 ¥ 6 $0.117 ¥2,144,260 1,425,759 ¥2,197,384 1,433,501 ¥2,073,064 1,470,387 ¥1,927,473 1,266,909 ¥1,939,916 1,413,015 $22,811,276 15,167,649 718,501 763,883 602,677 660,564 526,901 7,643,627 1,300,070 23,616 3,410,410 150,425 172,222 1,050,340 19,315 3,332,679 107,638 151,779 ¥ 127,942 ¥ 127,244 ¥ 105,280 1,132,465 27,910 3,391,651 159,346 169,686 964,584 — 3,215,094 109,069 133,781 ¥ 119,762 849,476 27,904 3,334,123 141,434 144,444 ¥ 148,018 13,830,532 251,234 36,280,957 1,600,266 1,832,149 $ 1,361,085 (at the end of the year) 120,958 117,314 114,443 109,565 106,931 — Notes: 1. The Company prepares consolidated financial statements with procedures, accounting terms, forms, and preparation that are in conformity with accounting principles generally accepted in the United States of America based on the rules and regulations applicable in Japan. 2. Operating income is presented as net sales less cost of sales, selling, general, administrative and R&D expenses, and loss on impairment of long-lived assets. Total operating income for each segment conforms to above mentioned operating income. Business restructuring expenses are shown as non-operating expenses. 3. R&D expenditures include elements spent on quality improvements, which constitute manufacturing costs. 4. U.S. dollar amounts are translated from yen at the rate of ¥94=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2013. 5. The Company has 162 consolidated subsidiaries and 39 equity-method companies as of March 31, 2013. 6. For the year ended March 31, 2010, the Company applies FASB ASC Topic 810 “Consolidation”. Due to the adoption of ASC Topic 810, “Net Income” is renamed “Net income attributable to Mitsubishi Electric Corp.”. Also, income before income taxes includes equity in earnings (losses) of affiliated companies, while excluding net income attributable to noncontrolling interests. Consequently, the Company has reclassified the figures for all prior periods. 7. For the years ended March 31, 2013, 2012, and 2011, data for diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above table as no dilutive securities existed. 26 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Financial Review OVERVIEW Fiscal 2013, the year ended March 31, 2013, saw the business environment continue to suffer under difficult conditions. Despite a weakening in the yen from the latter half of the third quarter, and generally firm trends in the United States and newly emerging countries, this harsh business environment was largely attributable to the economic downturn in Europe, slower rates of growth in China, and longer than expected delays in Japan’s recovery. Under these circumstances, the Mitsubishi Electric Group placed greater emphasis than ever before on promoting growth strategies rooted in its own advantages as well as on Group efforts undertaken to date to boost its competitiveness and strength- ening its business structure. As a result, in fiscal 2013, the Mitsubishi Electric Group recorded net sales of ¥3,567.2 billion and operating income of ¥152.1 billion. After recording the payment of ¥75.7 billion as a non-operating expense for the refund of overcharged expenses to certain parties in the electronic systems business, income before income taxes came to ¥65.1 billion. Net income attributable to Mitsubishi Electric Corporation was ¥69.5 billion for the fiscal year under review. Net Sales The Mitsubishi Electric Group recorded decreases in sales in the following business segments: Industrial Automation Systems, Electronic Devices, Home Appliances, and Other. In the fiscal year under review, consolidated net sales fell by ¥72.3 billion year Net sales / Operating income 3.67 3.653.64 3.35 3.57 234 225 on year to ¥3,567.2 billion. Cost of Sales, Expenses and Operating Income The cost of sales decreased by ¥24.6 billion compared with the previous fiscal year to ¥2,604.4 billion, representing 73.0% of total net sales, an increase of 0.8 of a percentage point. Selling, general and administrative (SG&A) expenses together with research and development (R&D) expenses totaled ¥806.4 billion, up ¥25.1 billion year on year. As a result, the ratio of SG&A and R&D expenses to net sales increased by 1.1 percentage points year on year to 22.6%. Loss on impairment of long-lived assets increased by ¥0.5 billion year on year to ¥4.3 billion. Accounting for the aforementioned factors, operating income amounted to ¥152.1 billion, a decline of ¥73.3 billion compared with the previous fiscal year. This decrease was primarily attributable to lower income in the Industrial Automation Systems, Information and Communications Systems, Electronic Devices, Home Appliances, and Other business segments. Non-Operating Income and Expenses Financial income, the sum of interest and dividend income less interest expenses, amounted to ¥1.2 billion, a decrease of ¥0.3 billion year on year. Equity in losses of affiliated companies totaled ¥14.6 billion, an increase of ¥11.3 billion compared with the previous fiscal year. Other income grew by ¥3.2 billion to ¥25.4 billion year on year due primar- ily to increases in exchange gains and gains on the sale of assets. Other expenses climbed by ¥77.2 billion year on year to ¥98.9 billion because of such factors as the recording of ¥75.7 billion as a non-operating expenses for the refund of overcharged expenses to certain parties in the electronic systems business. 152 140 94 09 10 11 12 13 09 10 11 12 13 Net sales (Yen in trillions) Operating income (Yen in billions) Net income attributable to Mitsubishi Electric Corp. / Basic net income per share attributable to Mitsubishi Electric Corp. 125 112 70 58.00 52.20 32.38 28 12 13.18 5.67 09 10 11 12 13 09 10 11 12 13 Net income attributable to Mitsubishi Electric Corp. (Yen in billions) Basic net income per share attributable to Mitsubishi Electric Corp. (Yen) Income before Income Taxes Income before income taxes decreased by ¥158.9 billion compared with the previous fiscal year to ¥65.1 billion, for a ratio to net sales of 1.8%. This is largely attributable to the aforementioned downturn in operating income and deterioration in non-operating income and expenses. Net Income Attributable to Mitsubishi Electric Corp. Net income attributable to Mitsubishi Electric Corp. fell by ¥42.5 billion year on year to ¥69.5 billion (a ratio to net sales of 1.9%). Despite the drop in tax expenses and other factors, this decline was largely due to the drop in income before income taxes. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 27 Business Risks The Mitsubishi Electric Group engages in the development, manufacture and sale of products in the Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances and Other busi- ness fields in Japan as well as North America, Europe, Asia and other overseas regions. As a result, the Group’s financial standing and business performance may be affected by a variety of factors. Factors that may affect the financial standing and business performance of the Mitsubishi Electric Group include but are not limited to the following. As such, additional factors may arise at any given time. (1) Important trends The Mitsubishi Electric Group’s operations may be affected by trends in the global economy, social conditions, laws, tax codes and regulations. (2) Foreign currency exchange rates Fluctuations in foreign currency markets may affect Mitsubishi Electric’s sales of exported products and purchases of import- ed materials that are denominated in U.S. dollars or euros, as well as its Asian production bases’ sales of exported products and purchases of imported materials that are denominated in foreign currencies. (3) Stock markets A fall in stock market prices may cause Mitsubishi Electric to record devaluation losses on marketable securities or cause an increase in retirement benefit obligations in accordance with a decline in the fair value of pension assets. (4) Supply/demand balance for products and procurement conditions for materials and components A decline in prices and shipments due to changes in the supply/demand balance as well as an increase in costs due to a worsening of material and component procurement conditions may adversely affect the Mitsubishi Electric Group’s performance. (5) Fund raising An increase in interest rates, the yen interest rate in particular, would increase Mitsubishi Electric’s interest expenses. (6) Significant intellectual property matters Important patent filings, licensing, copyrights and patent-related disputes may adversely affect related businesses. (7) Environmental legislation or relevant issues Mitsubishi Electric may incur losses or expenses owing to changes in environmental legislation or the occurrence of envi- ronmental issues. Such changes in legislation or the occurrence of environmental issues may also affect the Group’s overall operations, including manufacturing activities. (8) Flaws or defects in products or services Mitsubishi Electric may incur losses or expenses relating to flaws or defects in products or services. A decrease in the general assessment of the quality of Group products and services may also impact overall operations. (9) Lawsuits and other legal proceedings Lawsuits and/or other legal proceedings against the Mitsubishi Electric Group may affect its overall operations. (10) Disruptive changes Disruptive changes in the technology, development and manufacturing of products using new technology and timing of market introduction may adversely affect the Mitsubishi Electric Group’s performance. (11) Business restructuring The Mitsubishi Electric Group may record losses due to restructuring measures. (12) Natural disasters The Mitsubishi Electric Group’s operations, particularly manufacturing activities, may be affected by the occurrence of earth- quakes, typhoons, tsunami, fires and other large-scale disasters. (13) Other significant factors The Mitsubishi Electric Group‘s operations may be affected by the outbreak of social or political upheaval due to terrorism, war, pandemic by new strains of influenza and other diseases, or other factors. 28 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 RESULTS BY BUSINESS SEGMENT Net Sales by Business Segment Years ended March 31 2013 2012 2011 2010 Yen (millions) 2009 U.S. dollars (thousands) 2013 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total ¥1,058,177 927,857 ¥1,027,115 978,380 ¥1,027,749 927,002 ¥1,039,669 733,132 ¥1,043,633 851,688 $11,257,202 9,870,819 522,422 164,065 821,298 590,366 4,084,185 (517,001) ¥3,567,184 516,354 200,799 849,274 611,619 4,183,541 (544,073) ¥3,639,468 487,915 175,910 924,478 609,416 4,152,470 (507,139) ¥3,645,331 526,161 138,985 824,679 552,981 3,815,607 (462,309) ¥3,353,298 582,146 166,969 915,710 596,091 4,156,237 (491,118) ¥3,665,119 5,557,681 1,745,372 8,737,213 6,280,490 43,448,777 (5,500,011) $37,948,766 Operating Income (Loss) by Business Segment Years ended March 31 2013 2012 2011 2010 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total ¥ 85,140 60,592 ¥ 84,920 101,192 ¥ 83,055 100,089 ¥ 74,727 26,138 1,591 (5,580) 19,300 18,790 179,833 (27,738) ¥152,095 21,312 3,585 22,358 20,348 253,715 (28,271) ¥225,444 13,743 5,901 42,008 14,475 259,271 (25,510) ¥233,761 18,672 (7,141) 4,809 3,204 120,409 (26,107) ¥ 94,302 Yen (millions) 2009 ¥ 74,539 49,934 24,869 (29,807) 34,706 12,341 166,582 (26,854) ¥139,728 U.S. dollars (thousands) 2013 $ 905,745 644,596 16,925 (59,362) 205,319 199,894 1,913,117 (295,085) $1,618,032 Energy and Electric Systems The social infrastructure systems business saw a decrease in orders compared with the previous fiscal year due mainly to lower demand as reconstruction demand, which had surged in fiscal 2012 following the Great East Japan Earthquake, declined. Nevertheless, overall sales were virtually unchanged from the previ- ous fiscal year largely due to an increase in power generation business activities worldwide. The building systems business experienced increases in both orders and sales compared with the previous fiscal year, owing to growth in modernization-related demand for elevators and escalators in Japan as well as for new installations over- seas, mainly in China. As a result, total sales in the Energy and Electric Systems segment amounted to ¥1,058.2 billion, up 3% compared with the previous fiscal year. Operating income increased by ¥0.2 billion year on year to ¥85.1 billion mainly due to higher sales. Net sales and Operating income of Energy and Electric Systems 1,044 1,0401,0281,027 1,058 83 85 85 75 75 09 10 11 12 13 09 10 11 12 13 Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income of Industrial Automation Systems Industrial Automation Systems The factory automation systems business saw decreases in both orders and sales 852 compared with the previous fiscal year owing to lower capital expenditures, including in areas related to semiconductors and flat panel displays in China, South Korea, and Taiwan. The automotive equipment business recorded a decrease in orders due to the slump in new automobile sales in Europe and a drop in sales by Japanese automobile manufacturers in China. Overall sales were unchanged from the pre- 978 928 927 100 101 733 61 50 26 vious fiscal year, however, reflecting market recovery in North America and the 09 10 11 12 13 09 10 11 12 13 steady market support provided by eco-car subsidies in Japan. Net sales (Yen in billions) Operating income (Yen in billions) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 29 As a result, total sales in the Industrial Automation Systems segment amounted to ¥927.9 billion, down 5% compared with the previous fiscal year. Net sales and Operating income of Information and Communication Systems Operating income decreased by ¥40.6 billion year on year to ¥60.6 billion due 582 25 primarily to the decline in sales. 526 488 516 522 21 19 14 2 Information and Communication Systems The telecommunications equipment business experienced increases in both orders and sales compared with the previous fiscal year mainly because of higher demand for communications infrastructure equipment. The information systems and services business saw no change in sales com- pared with the previous fiscal year as growth in the system integration business was offset by a decline in the IT infrastructure service business. 09 10 11 12 13 09 10 11 12 13 The electronic systems business recorded a year-on-year increase in orders due primarily to a large order received for the space systems business. In con- trast, sales decreased compared with the previous fiscal year owing to a decline Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income (loss) of Electronic Devices in the electronics business. As a result, total sales in the Information and Communication Systems seg- ment amounted to ¥522.4 billion, up 1% compared with the previous fiscal year. Operating income decreased by ¥19.7 billion year on year to ¥1.6 billion due pri- marily to an increase in costs and a decrease in electronic systems business sales. 201 167 176 164 139 6 4 -6 -30 -7 Electronic Devices The semiconductor business saw decreases in both orders and sales compared with the previous fiscal year due mainly to a decline in demand for industrial-, consumer- and railcar-use power modules. The LCD module business experienced increases in both orders and sales year on year amid higher demand for industrial-use products. 09 10 11 12 13 09 10 11 12 13 Net sales (Yen in billions) Operating income (loss) (Yen in billions) As a result, total sales in the Electronic Devices segment totaled ¥164.1 bil- Net sales and Operating income of Home Appliances lion, down 18% compared with the previous fiscal year. This segment incurred an operating loss of ¥5.6 billion, a negative year on year turnaround of ¥9.2 bil- lion, mainly because of the drop in sales. 916 825 924 849 821 42 35 Home Appliances The home appliances business experienced a 3% decrease in sales compared with the previous fiscal year to ¥821.3 billion. Despite an increase in air condi- 22 19 tioning products in Asian countries, this result is largely attributable to the sub- 5 stantial decline in demand for LCD televisions and Blu-ray disc recorders in the Japanese market. Operating income fell by ¥3.1 billion year on year to ¥19.3 billion due pri- marily to the drop in sales. Others Net sales amounted to ¥590.4 billion, a decrease of 3% compared with the pre- vious fiscal year. This decline largely reflected weak results at affiliated companies involved in materials procurement and logistics. Operating income decreased by ¥1.6 billion year on year to ¥18.8 billion, largely because of lower sales. 09 10 11 12 13 09 10 11 12 13 Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income of Others 596 609 612 553 590 20 19 14 12 3 09 10 11 12 13 09 10 11 12 13 Net sales (Yen in billions) Operating income (Yen in billions) 30 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 RESULTS BY GEOGRAPHIC SEGMENT Net Sales by Geographic Segment Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total Yen (millions) 2009 U.S. dollars (thousands) 2013 2013 2012 2011 2010 ¥3,064,014 248,105 624,724 289,933 40,255 ¥3,186,719 222,543 582,888 309,997 40,184 ¥3,176,605 229,958 583,827 293,952 38,200 ¥2,886,502 205,713 445,722 282,822 33,140 ¥3,178,807 240,589 461,549 321,501 34,107 (699,847) ¥3,567,184 (702,863) ¥3,639,468 (677,211) ¥3,645,331 (500,601) ¥3,353,298 (571,434) ¥3,665,119 $32,595,894 2,639,415 6,646,000 3,084,394 428,244 (7,445,181) $37,948,766 Operating Income (Loss) by Geographic Segment Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total 2013 2012 2011 ¥116,923 (1,744) 36,172 4,527 2,209 (5,992) ¥152,095 ¥179,452 3,339 34,220 6,319 3,905 (1,791) ¥225,444 ¥177,354 1,363 43,734 7,830 4,329 (849) ¥233,761 2010 ¥49,673 5,531 27,337 3,091 1,949 6,721 ¥94,302 Yen (millions) 2009 ¥ 89,293 (3,599) 32,072 10,727 1,020 10,215 ¥139,728 U.S. dollars (thousands) 2013 $1,243,862 (18,553) 384,808 48,160 23,500 (63,745) $1,618,032 Japan Sales totaled ¥3,064.0 billion, down 4% compared with the previous fiscal year. This largely reflected the downturn in sales in the factory automation systems, semiconductor and visual equipment businesses. Operating income declined by ¥62.5 billion to ¥116.9 billion. North America Sales increased by 11% year on year to ¥248.1 billion primarily due to higher sales in the transportation systems, automotive equipment and air conditioning equipment businesses. However, Mitsubishi Electric incurred an operating loss in its operations in North America totaling ¥1.7 billion, a deterioration of ¥5.1 billion year on year. This was mainly due to the drop in visual equip- ment prices and sales. Asia (excluding Japan) Sales totaled ¥624.7 billion, up 7% compared with the previous fiscal year mainly because of higher sales in elevators and escala- tors, automotive equipment and air conditioners. Operating income increased by ¥2.0 billion to ¥36.2 billion. Europe Sales decreased by 6% year on year to ¥289.9 billion mainly because of lower sales in the semiconductor and air conditioning equipment businesses. Operating income declined by ¥1.8 billion to ¥4.5 billion. Others Sales in other regions, including figures for Mitsubishi Electric’s Australian subsidiary, amounted to ¥40.3 billion, while operating income was ¥2.2 billion. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 31 RESEARCH AND DEVELOPMENT R&D Expenditures Years ended March 31 2013 2012 2011 2010 Yen (billions) 2009 U.S. dollars (millions) 2013 Energy and Electric Systems ¥ 29.8 ¥ 30.5 ¥ 27.1 ¥ 23.5 ¥ 24.0 $ 317.6 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Consolidated total 58.9 16.5 8.3 30.9 27.8 54.9 16.2 9.4 30.4 28.3 45.0 14.9 8.6 30.7 25.5 34.7 12.5 7.3 29.6 26.1 37.8 15.1 8.3 32.4 26.9 627.2 175.2 88.1 328.6 295.4 ¥172.2 ¥169.7 ¥151.8 ¥133.8 ¥144.4 $1,832.1 Note: Figures for each segment and the consolidated total are rounded to the nearest unit. The Mitsubishi Electric Group actively promotes R&D initiatives that cover fundamental and advanced applications as well as product commercialization and manufacturing technologies. Carrying out these initiatives are various Group facilities, including corporate laboratories in Japan and laboratories in the United States and Europe as well as the R&D departments of factories and consolidated subsidiaries. Moreover, we pursue advanced and wide-ranging R&D activities in partnership with universities and research institutions both in Japan and overseas. In fiscal 2013, total R&D expenditures, including quality improvement expenses constituting manufacturing costs, amount- ed to ¥172.2 billion. Mitsubishi Electric reports R&D activities by business segment according to purpose, type, result and expenditure. In the Energy and Electric Systems segment, our research is directed at boosting the competitiveness of such core products as rotating machines for generators, electric motors and other machinery, switches and transformers; other power transmis- sion/distribution/reception equipment and systems; transportation systems; and elevators and escalators. Other R&D areas include IT-application systems for supervision and control, power information systems and building management systems. Notable among Mitsubishi Electric’s recent R&D achievements are SiC auxiliary power supply systems for railcars; Station Energy Saving Inverter (S-EIV) and verification of the Trainnet, JR EAST Yamanote Line information providing system on board; Static Synchronous Compensator (STATCOM) boasting the world's largest capacity; 72/84kV dead tank type vacuum circuit breaker; MELPRO-CHARGE2, a new digital protection relay; radiation monitoring system; Facima BA-system touch, building automation system; and, SiC elevator control panel. R&D expenditures in this segment totaled ¥29.8 billion. In the Industrial Automation Systems segment, R&D activities are aimed at enhancing the competitiveness of our lineup, which includes motors and related products; mechatronics equipment; FA control equipment and systems; automotive electric and electronic components, including electric power steering (EPS) and related products; and car multimedia systems. Mitsubishi Electric’s important R&D successes encompass MELSEC-Q Series C Controller; MS-T Contactor and Motor Starter Series; industrial smart meters; CNC drive units; MX600, oil wire-cut electrical discharge machine; ML3015NX-F, 2-dimensional fiber laser process- ing systems; EV-based smart grid system verification; stepped up joint development in collaboration with Volvo Car Corporation in the automotive equipment field; DIATONE SOUND. NAVI, high-end audio and car navigation system; and, a ninth-generation alternator contributing to the more effective utilization of regenerative energy. R&D expenditures in this segment totaled ¥58.9 billion. R&D expenditures R&D expenditures ratio In the Information and Communication Systems segment, Mitsubishi Electric pursues research related to the development of information and communication technology (ICT) systems, which include network systems for telecommunication operators and network solutions equipment, as well as space systems, includ- ing satellites, ground systems and large telescopes. Notable R&D successes for Mitsubishi Electric include a 100Gbps long distance transmission technology; a base transceiver station for 3G/LTE dual femtocell wireless communication systems; the completion of upgrades of the India-Middle East-Western Europe (IMEWE) Cable Network’s submarine cable network applying 40 gigabit per second (Gbps) dense wavelength division multiplexing (DWDM) technology; MELOOKμ+, digital CCTV system; an optical transceiver for 10G-EPON system; new products in the MistyGuard SignedPDF®*1 Series of electronic signature solu- 32 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 170 172 144 152 134 4.7 4.8 4.2 3.9 4.0 09 10 11 12 13 09 10 11 12 13 R&D expenditures (Yen in billions) R&D expenditures / Net sales (%) tions; Melphin®*2/DUO, pharmacy system; DIASMILE®*3, cloud-based ID management service; DeviCERT®*4, electronic certificate issuing service for smart devices; and, HANBAI-SHINAN Ver3.5, sales management system. R&D expenditures in this segment totaled ¥16.5 billion. In the Electronic Devices segment, our R&D focuses on semiconductor and other electronic devices that are themselves vital components used in all our business segments. Major R&D achievements include the sixth-generation MPD series of IGBT mod- ules; SiC power semiconductor modules; MOSFET-type super-mini DIPIPM; Ku-band 50W GaN HEMT for satellite earth stations; a low-noise, small-package amplifier for GPS in mobile devices; a compact 40Gbps Electro-absorption Modulator with Laser diode- Transmitter Optical Sub Assembly (EML-TOSA) for optical transmissions; and, the DIAFINE®*5 Mitsubishi color TFT-LCD modules with projected capacitive touch panels for industrial application. R&D expenditures in this segment totaled ¥8.3 billion. In the Home Appliances segment, Mitsubishi Electric is engaged in the development of products in such wide-ranging fields as air conditioning equipment, kitchen appliances,vacuum cleaners, lighting, visual information systems, electronic housing products and photovoltaic systems. Major R&D achievements include hybrid type KIRIGAMINE room air conditioners with built- in smart stop system; Smart Cube refrigerators with thin-insulated structure and high capacity; FUJIN TC-ZXC Series, compact cyclone vacuum cleaners; REAL LASERVUE LCD TV, with a built-in red laser backlight reproducing more vivid and higher color quality reproduction; MILIE, a new LED lighting brand; power control technologies and conditioners offering the industry’s first*6 PV-EV Linked HEMS; and, new product groups that incorporate the total concept of “smart quality” using smart (intelligent, connected and economical) technologies. R&D expenditures in this segment totaled ¥30.9 billion. In Others, fundamental technology R&D that benefits the entire Group is carried out at the Corporate Research and Development Group and the Corporate Total Productivity Management & Environmental Programs Group research centers, which strive to enhance Group competitiveness and create new businesses. In our main areas of R&D we have developed radar satel- lite for high-resolution land observation; efficient, high-performance technology for air conditioners (design harmonized with energy-saving technology); cost reduction of large-capacity traction machines for high-speed elevators and expansion of products lineup; and, chromaticity systems for LED lighting devices. R&D expenditures in this area amounted to ¥27.8 billion. *1. SignedPDF is a registered trademark of Mitsubishi Electric Information Systems Corporation *2. Melphin is a registered trademark of Mitsubishi Electric Information Systems Corporation *3. DIASMILE is a registered trademark of Mitsubishi Electric Information Technology Corporation *4. DeviCERT is a registered trademark of Japan Net Corporation *5. DIAFINE is a registered trademark of Mitsubishi Shindoh Co., Ltd.: Mitsubishi Electric is licensed to use this technology for a term of 10 years from January 17, 2008 *6. Mitsubishi Electric survey as of May 15, 2012 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 33 FINANCIAL POSITION Total assets amounted to ¥3,410.4 billion as of March 31, 2013, an increase of Interest-bearing debt Debt ratio ¥18.8 billion compared with the previous fiscal year-end. Cash and cash equiva- lents fell by ¥93.3 billion. The total amount of trade receivables and long-term 678 trade receivables increased by ¥25.3 billion. The balance of inventory climbed ¥14.6 billion. Against the backdrop of capital investment, property, plant and 538 542 541 484 20.3 equipment grew by ¥46.2 billion. Under liabilities, the outstanding balance of debt and corporate bonds fell by ¥1.7 billion compared with the end of the previous fiscal year to ¥540.6 bil- lion. As a result, the ratio of interest-bearing debt to total assets was 15.9%, a decrease of 0.1 of a percentage point year on year. Trade payables declined by ¥47.5 billion. At the same time, retirement and severance benefits fell by ¥117.1 billion largely because of an increase in pension plan assets in line with higher share prices. As a result of these and other factors, total liabilities dropped by ¥157.2 billion to ¥2,043.4 billion. Mitsubishi Electric Corp. shareholders’ equity rose by ¥167.6 billion com- pared with the previous fiscal year-end to ¥1,300.1 billion and the ratio of Mitsubishi Electric Corp. shareholders’ equity to total assets was 38.1%, up 4.7 percentage points year on year. Despite the decrease attributable to the payment 16.7 16.0 15.9 14.5 09 10 11 12 13 09 10 11 12 13 Interest-bearing debt (Yen in billions) Interest-bearing debt / Total assets (%) Total assets / Mitsubishi Electric Corp. shareholders’ equity Shareholders’ equity ratio of cash dividends totaling ¥23.6 billion, this increase was largely the result of the net income attributable to Mitsubishi Electric Corp. amounting to ¥69.5 billion 3,334 3,215 3,333 3,392 3,410 for the fiscal year under review and the increase in accumulated other compre- hensive income of ¥122.1 billion reflecting such factors as the weak yen and upswing in share prices. 38.1 33.4 31.5 30.0 25.5 1,300 1,132 1,050 965 849 09 10 11 12 13 09 10 11 12 13 Total assets (Yen in billions) Mitsubishi Electric Corp. shareholders’ equity (Yen in billions) Shareholders’ equity ratio (%) 34 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 CAPITAL EXPENDITURES In line with its policy of improving performance by implementing the Balanced Capital expenditures Depreciation Corporate Management Policy while pursuing further growth, the Mitsubishi Electric Group aims to realize its growth strategies as it increases profitability. To that end, the Group directed its capital investment mainly toward the areas of 159 150 148 141 energy and electric systems, factory automation equipment, automotive products, 109 108 power devices and air conditioning equipment. At the same time the Group con- tinued to reinforce its solid business platform through the careful selection and 127 128 120 105 concentration of investments. On an individual business segment basis, investments were made in Energy and Electric Systems (including power systems, electric equipment for rolling stock and elevators/escalators) aimed at increasing production capacity, streamlining and enhancing quality. In Industrial Automation, capital expenditures were used primar- ily for boosting production capacity for factory automation systems and automo- tive equipment operations. In Information and Communication Systems, funds 09 10 11 12 13 09 10 11 12 13 Capital expenditures (Yen in billions) Depreciation (Yen in billions) were appropriated for bolstering research and development capabilities, while in Electronic Devices, Mitsubishi Electric directed investment mainly toward augmenting production in the power device business. In Home Appliances, expenditures focused largely on increasing the air-conditioning equipment production capacity, streamlining operations and enhancing quality. In Common and Others, investments mainly went toward boosting research and development capabilities. Capital expenditures are derived from cash on hand and funds from operations. During the consolidated fiscal year under review, production capacity was not materially affected by the sale, disposal, damage or loss due to natural disaster of property, plant and equipment. CASH FLOWS In the year ended March 31, 2013, net cash provided by operating activities Cash flows amounted to ¥82.8 billion, while net cash used in investing activities was ¥153.7 billion. As a result, free cash flow was an outflow of ¥70.9 billion, down ¥10.0 billion from the outflow recorded in the previous fiscal year. Taken into account along with net cash used in financing activities of ¥41.2 billion, fiscal year-end cash and cash equivalents amounted to ¥298.9 billion, a decrease of ¥93.3 bil- 330 328 196 182 181 75 83 lion year on year. Net cash provided by operating cash flows increased by ¥7.6 billion com- pared with the previous fiscal year to ¥82.8 billion. Although net income attributable to Mitsubishi Electric Corp. and deferred income taxes declined, a recovery of trade notes and accounts receivable supported the increase. -134 -146 -156 -154 -215 09 10 11 12 13 -34 -81 -71 13 09 10 11 12 Net cash used in investing activities decreased by ¥2.5 billion year on year to ¥153.7 billion. During the period under review, loans receivable increased. Other major movements included an increase in proceeds from sale of short- term investments and investment securities as well as the decrease in capital Net cash provided by operating activities (Yen in billions) Net cash used in investing activities (Yen in billions) Free cash flows (Yen in billions) expenditure. Net cash used in financing activities was ¥41.2 billion. This represented a ¥48.2 billion turnaround from the inflow recorded in the previous fiscal year. The principal component was repayment of debt. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 35 Consolidated Balance Sheets Mitsubishi Electric Corporation and Subsidiaries March 31, 2013 and 2012 Assets Current assets: 2013 Yen (millions) 2012 U.S. dollars (thousands) (note 2) 2013 Cash and cash equivalents ¥ 298,881 ¥ 392,181 $ 3,179,585 Short-term investments (notes 3, 17 and 18) Trade receivables (notes 4, 6 and 15) Inventories (note 5) Prepaid expenses and other current assets (notes 9, 14 and 18) Total current assets 812 974,505 590,735 2,995 950,736 576,179 279,327 275,293 2,144,260 2,197,384 8,638 10,367,074 6,284,415 2,971,564 22,811,276 Long-term receivables and investments: Long-term trade receivables (note 17) Investments in securities and other (notes 3, 14, 17 and 18) Investments in and advances to affiliated companies (note 6) Total long-term receivables and investments 2,521 242,271 181,285 426,077 1,017 240,463 179,039 420,519 26,819 2,577,351 1,928,564 4,532,734 Property, plant and equipment (notes 7, 18, 19 and 20): Land Buildings Machinery and equipment Construction in progress Less accumulated depreciation Net property, plant and equipment 105,449 659,411 102,298 624,495 1,637,682 1,541,239 50,813 2,453,355 1,850,355 603,000 41,365 2,309,397 1,752,552 556,845 1,121,798 7,015,010 17,422,149 540,564 26,099,521 19,684,627 6,414,894 Other assets (notes 9, 10 and 18) 237,073 216,903 2,522,053 Total assets ¥3,410,410 ¥3,391,651 $36,280,957 See accompanying notes to consolidated financial statements. 36 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Liabilities and Equity Current liabilities: Bank loans (note 7) Current portion of long-term debt (notes 7, 17 and 20) Trade payables (notes 6 and 8) Accrued expenses (note 16) Accrued income taxes (note 9) Other current liabilities (notes 10, 14 and 18) 2013 Yen (millions) 2012 U.S. dollars (thousands) (note 2) 2013 ¥ 131,837 ¥ 111,670 $ 1,402,521 103,081 652,718 335,858 11,919 190,346 88,832 700,262 350,740 15,866 166,131 1,096,606 6,943,809 3,572,957 126,798 2,024,958 Total current liabilities 1,425,759 1,433,501 15,167,649 Long-term debt (notes 7, 17 and 20) Retirement and severance benefits (note 10) Other liabilities (notes 9, 14, 16 and 18) 305,654 254,977 57,029 341,789 372,082 53,259 3,251,638 2,712,521 606,692 Total liabilities 2,043,419 2,200,631 21,738,500 Mitsubishi Electric Corp. shareholders’ equity Common stock (note 11): Authorized 8,000,000,000 shares; issued 2,147,201,551 shares in 2013 and in 2012 Capital surplus (note 11) Legal reserve Retained earnings Accumulated other comprehensive 175,820 205,945 61,406 950,621 175,820 206,343 61,040 905,086 1,870,426 2,190,904 653,255 10,112,990 income (loss) (notes 3, 9, 10, 12 and 14) (93,487) (215,603) (994,543) Treasury stock, at cost 306,490 shares in 2013 and 285,390 shares in 2012 (235) (221) (2,500) Total Mitsubishi Electric Corp. shareholders’ equity 1,300,070 1,132,465 13,830,532 Noncontrolling interests Total equity 66,921 58,555 1,366,991 1,191,020 711,925 14,542,457 Commitments and contingent liabilities (note 16) Total liabilities and equity ¥3,410,410 ¥3,391,651 $36,280,957 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 37 Consolidated Statements of Income Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2013, 2012 and 2011 Revenues: Net sales (note 6) Interest and dividends (note 6) Other (notes 3, 12, 14 and 19) Total revenues Costs and expenses: Cost of sales (notes 10 and 20) Selling, general and administrative (notes 10, 19 and 20) Research and development Loss on impairment of long-lived assets (notes 18 and 19) Interest Equity in losses of affiliated companies (note 6) Other (notes 3, 12, 14, 15, 16 and 19) Total costs and expenses 2013 2012 Yen (millions) 2011 ¥3,567,184 7,742 25,361 3,600,287 ¥3,639,468 8,332 22,196 3,669,996 ¥3,645,331 8,162 28,035 3,681,528 2,604,360 648,890 157,522 4,317 6,507 14,619 98,931 3,535,146 2,628,964 625,283 155,995 3,782 6,818 3,366 21,708 3,445,916 2,622,959 645,779 138,827 4,005 7,749 20,285 31,687 3,471,291 U.S. dollars (thousands) (note 2) 2013 $37,948,766 82,361 269,798 38,300,925 27,705,957 6,903,085 1,675,766 45,926 69,223 155,521 1,052,458 37,607,936 Income before income taxes 65,141 224,080 210,237 692,989 Income taxes (note 9): Current Deferred 23,490 (32,999) (9,509) 42,187 63,628 105,815 54,309 22,788 77,097 Net income 74,650 118,265 133,140 Net income attributable to noncontrolling interests 5,133 6,202 8,615 249,893 (351,053) (101,160) 794,149 54,606 Net income attributable to Mitsubishi Electric Corp. ¥ 69,517 ¥ 112,063 ¥ 124,525 $ 739,543 Net income per share attributable to Mitsubishi Electric Corp. (note 13): Basic Diluted See accompanying notes to consolidated financial statements. ¥32.38 — ¥52.20 — Yen ¥58.00 — U.S. dollars (note 2) $0.344 — Consolidated Statements of Comprehensive Income Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2013, 2012 and 2011 Net income Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Total 2013 ¥ 74,650 2012 ¥118,265 Yen (millions) 2011 ¥133,140 U.S. dollars (thousands) (note 2) 2013 $ 794,149 66,592 47,633 14,845 43 129,113 (8,843) 2,234 6,298 54 (257) (21,213) 9,284 (10,679) (183) (22,791) 708,426 506,734 157,926 457 1,373,543 Comprehensive income 203,763 118,008 110,349 2,167,692 Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Mitsubishi Electric Corp. See accompanying notes to consolidated financial statements. 12,130 5,629 5,234 129,043 ¥191,633 ¥112,379 ¥105,115 $2,038,649 38 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Consolidated Statements of Equity Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2013, 2012 and 2011 Balance at March 31, 2010 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2011 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2012 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2013 Balance at March 31, 2012 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2013 Accumulated other comprehensive income (loss) ¥(196,509) Total Mitsubishi Electric Corp. shareholders’ equity ¥(1,496) ¥ 964,584 Treasury stock Non- controlling interests Total equity ¥56,610 ¥1,021,194 Yen (millions) Common stock Legal reserve ¥175,820 ¥210,006 ¥58,281 Capital surplus Retained earnings ¥718,482 124,525 (17,876) 9,284 (10,643) (175) 942 (942) (19,315) (1,516) 179 ¥175,820 ¥208,669 ¥59,223 ¥822,750 ¥(215,919) 112,063 (8,254) 2,234 6,285 51 1, 817 (1,817) 124,525 (17,876) 9,284 (10,643) (175) 105,115 — 8,615 (3,337) (36) (8) 5,234 124,525 8,615 (21,213) 9,284 (10,679) (183) 110,349 — (1,516) (3,159) (4,675) (19,315) (46) 1,518 ¥ (203) ¥1,050,340 (46) 1,339 (19,315) (46) 1,518 ¥58,685 ¥1,109,025 112,063 (8,254) 2,234 6,285 51 112,379 — 6,202 (589) 13 3 5,629 112,063 6,202 (8,843) 2,234 6,298 54 118,008 — (2,326) (2,326) (5,759) (8,085) (27,910) ¥175,820 ¥206,343 ¥61,040 ¥905,086 ¥(215,603) 69,517 59,631 47,633 14,803 49 366 (366) (27,910) (20) 2 ¥ (221) ¥1,132,465 (20) 2 (27,910) (20) 2 ¥58,555 ¥1,191,020 69,517 59,631 47,633 14,803 49 191,633 — 5,133 6,961 42 (6) 12,130 69,517 5,133 66,592 47,633 14,845 43 203,763 — (398) (398) (3,764) (4,162) (23,616) ¥175,820 ¥205,945 ¥61,406 ¥950,621 ¥ (93,487) (23,616) (16) 2 ¥ (235) ¥1,300,070 (16) 2 (23,616) (16) 2 ¥66,921 ¥1,366,991 U.S. dollars (thousands) (note 2) Accumulated other comprehensive Legal income (loss) reserve $1,870,426 $2,195,138 $649,361 $ 9,628,575 $(2,293,649) Common stock Retained earnings Capital surplus Total Mitsubishi Electric Corp. shareholders’ equity Non- controlling interests Treasury stock Total equity $(2,351) $12,047,500 $622,925 $12,670,425 739,543 634,372 506,734 157,479 521 3,894 (3,894) (4,234) (251,234) $1,870,426 $2,190,904 $653,255 $10,112,990 $ (994,543) 739,543 634,372 506,734 157,479 521 2,038,649 — 54,606 74,054 447 (64) 129,043 739,543 54,606 708,426 506,734 157,926 457 2,167,692 — (4,234) (40,043) (44,277) (251,234) (170) 21 $(2,500) $13,830,532 $711,925 $14,542,457 (251,234) (170) 21 (170) 21 See accompanying notes to consolidated financial statements. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 39 Consolidated Statements of Cash Flows Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2013, 2012 and 2011 2013 2012 Yen (millions) 2011 U.S. dollars (thousands) (note 2) 2013 ¥ 74,650 ¥ 118,265 ¥ 133,140 $ 794,149 127,942 127,244 105,280 1,361,085 4,014 3,367 3,538 42,702 (296) (32,999) (2,480) 4,828 14,619 (49) 16,706 (21,241) (62,549) (63,638) 16,787 6,458 82,752 834 63,628 (1,682) 6,961 3,366 (166,091) (55,737) (17,553) 9,113 (61,108) (7,311) 51,884 75,180 (463) 22,788 (1,300) 3,979 20,285 (14,594) (65,512) 2,493 66,177 (29,019) 43,653 37,196 327,641 (3,149) (351,053) (26,383) 51,362 155,521 (521) 177,723 (225,968) (665,415) (677,000) 178,585 68,702 880,340 (150,425) (159,346) (107,638) (1,600,266) 4,792 5,085 4,504 50,979 (13,036) (11,766) (51,640) (138,681) 29,088 (14,398) (9,722) (153,701) 57,003 (90,786) 19,237 (23,616) (16) 2 (2,977) 15,961 90 (6,198) (156,174) 138,283 (139,775) 46,630 (27,910) (20) 2 (10,182) 18,895 (19) (9,732) (145,630) 100 (62,248) (5,114) (19,315) (46) 5 (2,610) 309,447 (153,170) (103,426) (1,635,117) 606,415 (965,809) 204,649 (251,234) (170) 21 (31,670) (41,153) 7,028 (89,228) (437,798) 18,802 (93,300) 392,181 ¥ 298,881 (5,920) (79,886) 472,067 ¥ 392,181 (11,834) 80,949 391,118 ¥ 472,067 200,022 (992,553) 4,172,138 $ 3,179,585 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Impairment losses of property, plant and equipment Loss (gain) from sales and disposal of property, plant and equipment, net Deferred income taxes Loss (gain) from sales of securities and other, net Devaluation losses of securities and other, net Equity in losses of affiliated companies Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in trade payables Increase (decrease) in accrued expenses and retirement and severance benefits Increase (decrease) in other liabilities Other, net Net cash provided by operating activities Cash flows from investing activities: Capital expenditure Proceeds from sale of property, plant and equipment Purchase of short-term investments and investment securities Proceeds from sale of short-term investments and investment securities Decrease (increase) in loans receivable Other, net Net cash used in investing activities Cash flows from financing activities: Proceeds from long-term debt Repayment of long-term debt Increase (decrease) in short-term debt, net Dividends paid Purchase of treasury stock Reissuance of treasury stock Other, net Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year See accompanying notes to consolidated financial statements. 40 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Notes to Consolidated Financial Statements Mitsubishi Electric Corporation and Subsidiaries (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Mitsubishi Electric Corporation (the “Company”) is a multina- 2011-05, an entity has the option to present the components of net income and comprehensive income in either one or tional organization which develops, manufactures, sells and two consecutive financial statements, and the Company distributes a broad range of electrical and electronic equip- applies the latter. On the other hand, though ASU 2011-05 ments in the fields as diverse as home appliances and space requires entities to present separate line items for reclassifi- electronics. cation adjustments of items out of accumulated other com- The Company and its subsidiaries’ principal lines of prehensive income into net income, the Company does not business are: (1) Energy and Electric Systems, (2) Industrial present these adjustments separately because the effective Automation Systems, (3) Information and Communication date of the requirement was deferred by the issuance of ASU Systems, (4) Electronic Devices, (5) Home Appliances and (6) 2011-12. The adoption of ASU 2011-05 and ASU 2011-12 Others. does not have a material effect on the Company’s consoli- Each line’s sales as a percentage of total consolidated dated financial position and results of operations. sales, before elimination of internal sales, for the year ended March 31, 2013 are as follows: Energy and Electric Systems – 26%, Industrial Automation Systems – 23%, Information and Communication Systems – 13%, Electronic Devices – 4%, Home Appliances – 20% and Others – 14%. Majority of the operations of the Company and its sub- sidiaries is mainly conducted in Japan. Net sales for the year ended March 31, 2013 comprises of the following geo- graphical locations: Japan – 66%, North America – 7%, Asia (excluding Japan) – 17%, Europe – 8% and Others – 2%. Our manufacturing operations are conducted principally at the Parent company with 22 manufacturing sites located in Japan as well as overseas manufacturing sites located in the United States, United Kingdom, Thailand, Malaysia, China and other countries. (b) Basis of Presentation The Company and its subsidiaries maintain their books of (c) Consolidation The Company prepares the consolidated financial statements including the accounts of the parent company and those of its majority-owned subsidiaries, whether directly or indi- rectly controlled. All significant intercompany transactions, accounts, and unrealized gains or losses have been eliminated. Investments in corporate joint ventures and affiliated companies with the ownership interest of 20% to 50%, in which the Company does not have control, but has the abil- ity to exercise significant influence, are accounted for by the equity method of accounting. Investments of less than 20% or where the Company does not have significant influence are accounted for by the cost method. The Company evaluates Variable Interest Entities (VIEs) whether it has a controlling financial interest in an entity through means other than voting rights and whether it should consolidate the entity as the primary beneficiary when the account in conformity with financial accounting standards in Company has a controlling financial interest. the countries of their domicile. The Company prepares the consolidated financial state- ments with reflecting the adjustments which are considered necessary to conform with accounting principles generally accepted in the United States of America. Starting year ended March 31, 2013, the Company applies Financial Accounting Standards Board (FASB) Accounting Standards Updates (ASU) 2011-05 “Presentation of Comprehensive Income” and ASU 2011-12 “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (An Amendment of Accounting Standards Codification (ASC) Topic 220 “Comprehensive Income”) ret- rospectively for all periods presented. ASU 2011-05 eliminates the option in accounting principles generally accepted in the United States of America to present other comprehensive income in the statement of changes in equity. Under ASU (d) Use of Estimates The Company makes estimates and assumptions to prepare the consolidated financial statements in conformity with generally accepted accounting principles, and those estimates and assumptions affect the reported amounts of assets and liabilities as well as the disclosed amounts of contingent assets and liabilities at the date of the consolidated financial state- ments and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include valuation allowances for receivables, inventories and deferred tax assets; the carrying amount of property, plant and equipment; and assets and obligations related to employee benefits. Actual results could differ from those estimates. (e) Cash and Cash Equivalents The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equiva- lents for the consolidated cash flow statements. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 41 (f) Short-Term Investments and Investment Securities The Company classifies investments in debt and equity secu- ucts at the average production costs. Those products are recorded at the lower of cost or market. Net costs in excess rities into trading, available-for-sale, or held-to-maturity of billings on long-term contracts are included in inventories. securities. Raw material and finished product inventories are gener- Trading securities are bought and held principally for the ally recorded using the average-cost method, and evaluated purpose of selling them in the near term. Held-to-maturity at the lower of cost or market. In accordance with the general securities are those securities in which the Company has the practice in the heavy electrical industry, inventories related to ability and intent to hold the security until maturity. All securi- Energy and Electric Systems include items with long manufac- ties not included in trading or held-to-maturity are classified turing periods which are not realizable within one year. as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amor- tized cost, adjusted for the amortization or accretion of pre- miums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for- sale securities are excluded from earnings and are reported as a separate component of other comprehensive income (loss) until realized. Realized gains or losses from the sale of securi- ties are determined on the average cost of the particular secu- rity held at the time of sale. A decline in the fair value of any available-for-sale security below costs that is other-than-temporary results in a reduction in carrying amount to the fair value, which becomes the new cost basis for the security. (i) Property, Plant and Equipment The Company records property, plant and equipment at cost. Depreciation of property, plant and equipment is generally calculated by the declining-balance method, except for certain assets which are depreciated by the straight-line method, over the estimated useful life of the assets according to general class, type of construction, and use of these assets. The estimated useful life of buildings is 3 to 50 years, while machinery and equipment is 2 to 20 years. (j) Leases The Company records capital leases at the inception of the lease at the lower of the discounted present value of future minimum lease payments or the fair value of the leased assets. The amortization of the leased assets is calculated in accordance with the Company’s normal depreciation policy. To determine whether an impairment of equity security is other-than-temporary, the Company considers whether it (k) Income Taxes The Company recognizes deferred tax assets and liabilities has the ability and intent to hold the security until a market for the future tax consequences attributable to differences price recovery and considers whether evidence indicating between the financial statement carrying amounts of existing the market price of the security is recoverable to the carrying assets and liabilities and their respective tax basis, operating amount outweighs the counter evidence. Evidence considered loss and tax credit carryforwards. Deferred tax assets and in this assessment includes the reasons for the impairment, liabilities are measured using enacted tax rates expected to the severity and duration of the impairment, changes in value apply to taxable income in the years in which the temporary subsequent to year-end, and forecasted performance of the differences are expected to be recovered or settled. The effect investee. on deferred tax assets and liabilities of a change in tax rates To determine whether an impairment of debt security is is recognized in income in the period that includes the enact- other-than-temporary, the Company considers whether it has ment date. the intent to sell the equity investment and more likely than Valuation allowances are established to reduce deferred not where the Company is required to sell until a market price tax assets to their net realizable value if it is more likely than of the investment is recoverable to the amortized cost. not that some portion or all of the deferred tax asset will not Other investments are stated at cost. The Company rec- be realized. ognizes a loss when there is other-than-temporary decline in The Company recognizes the financial statement effects value of other investments, using the same policy as described of unrecognized tax benefits only if those positions are more above for available-for-sale security impairments. likely than not of being sustained. (g) Allowance for Doubtful Receivables The Company records an allowance for doubtful receiv- (l) Product Warranties The Company generally offers warranties on its products ables based on credit loss history and evaluation of specific doubtful receivables. against certain manufacturing and other defects for the spe- cific periods of time and/or usage of the product depending (h) Inventories In work-in-process, the Company records the ordered prod- ucts at the acquisition cost and the regular purchased prod- on the nature of the product, the geographic location of its sale and other factors. The Company recognizes accrued war- ranty costs based primarily on historical experience of actual warranty claims as well as current information on repair costs. 42 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 (m) Retirement and Severance Benefits The Company recognizes the funded status (i.e., the differ- able to Mitsubishi Electric Corp. by the weighted-average number of common shares outstanding during each year. ence between the fair value of plan assets and the projected Diluted net income per share attributable to Mitsubishi Electric benefit obligations) of its pension plans in the consolidated Corp. reflects the potential dilution and is calculated on the balance sheet at the end of the year, and records the cor- basis that dilutive securities were converted at the beginning responding amount to accumulated other comprehensive of the year or at time of issuance (if later), and that dilutive income (loss), net of tax. The adjustment items for accumulat- stock option were exercised (less the number of treasury stock ed other comprehensive income (loss) are unrecognized prior assumed to be purchased from the proceeds using the aver- service cost and unrecognized net gain or loss. The amounts age market price of the Company’s common stock). of these adjustments are recognized as net periodic pension cost in future years. (r) Foreign Currency Translation The Company translates receivables and payables in foreign (n) Revenue Recognition The Company recognizes revenue when persuasive evidence currency at the prevailing rates of exchange at the balance sheet date. Gains and losses resulting from translation of of an arrangement including title transfer exists, delivery has receivables and payables are recognized in current earnings. occurred, the sales price is fixed or determinable, and collect- Assets and liabilities of the Company’s overseas consolidating ibility is probable. These criteria are met for mass-merchandis- subsidiaries are translated into Japanese yen at the prevail- ing products such as consumer products and semiconductors ing rates of exchange at the balance sheet date. Income and at the time when the product is received by the customer, expense items are translated at the average exchange rate and for products with acceptance provisions such as heavy prevailing during the year. Gains and losses resulting from machinery and industrial products at the time when the prod- translation of financial statements are recognized as foreign uct is received by the customer and the specific criteria of the currency translation adjustments in other comprehensive product are demonstrated by the Company with only certain income (loss). inconsequential or perfunctory work left to be performed by the customer. Revenue from maintenance agreements is recognized over the contract term when the maintenance is provided and the cost is incurred. Also, the Company applies the percentage of completion method for long-term con- struction contracts. The Company measures the percentage of completion by comparing expenses recognized through the current year to the aggregate amount of estimated cost. Any anticipated losses on fixed price contracts are charged to operations when such losses can be estimated. Provisions are made for contingencies in the period when they become known pursuant to specific contract terms and conditions and are estimable. The contract which may consists of any combination of products, equipment, installation and maintenance is allo- cated revenue to each accounting unit based on its relative fair value, when each deliverable is accounted for separate accounting unit. (o) Research and Development and Advertising The Company accounts for the costs of research and devel- opment and advertising as expense when those costs are incurred. (p) Shipping and Handling Costs The Company records shipping and handling costs mainly as selling, general and administrative expenses. (q) Net Income per Share The Company calculates basic net income per share attribut- able to Mitsubishi Electric Corp. divided net income attribut- (s) Derivatives The Company recognizes all derivatives as either assets or lia- bilities in the consolidated financial statements and measures them at fair value. For derivatives designated as fair value hedges, changes in fair value of the hedged item and the derivative are recognized in current earnings. For derivatives designated as cash flow hedges, fair value changes of the effective portion of the hedging instruments are recognized as a component of other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of all hedges is recognized in earnings immediately. The Company discloses the use and purpose of derivative instruments, accounting for derivative instruments and related hedged items. The Company also discloses the effects on the entity’s financial position, results of operations, and cash flows by the derivative instruments and hedging activities. (t) Securitizations The Company accounts for the securitization of the accounts receivables as a sale, if it is determined based on the Company’s evaluation that it has surrendered control over the transferred receivables. Accordingly, the receivables sold under these facilities are excluded from Trade receivables in the accompanying con- solidated balance sheets. Gain or loss on sale of receivables is calculated based on the allocated carrying amount of the receivables sold. When a portion of accounts receivables is transferred, the participating interest that continues to be held is recorded at the allocated carrying amount of the assets based on their relative fair values at the date of the transfer. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 43 The Company estimates fair value based on the present value guarantees that the Company has undertaken, including a of future expected cash flows less credit losses. rollforward of the Company’s product warranty liabilities. The (u) Impairment of Long-Lived Assets The Company reviews for impairment of long–lived assets such as property, plant, and equipment and purchased intan- gibles subject to amortization, to be held and used whenever Company continually monitors the conditions of the guaran- tees and indemnifications to identify occurrence of probable losses, and when such losses are identified and if estimable, they are recognized in current earnings. events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of (y) Asset Retirement Obligations The Company recognizes legal obligations associated with the assets to be held and used is measured by a comparison of retirement of long-lived assets that result from an acquisition, the carrying amount of an asset to estimated undiscounted construction and development, and (or) from a normal opera- future cash flows expected to be generated by the asset. If tion of a long-lived asset, except for certain lease obligations. the carrying amount of an asset exceeds its estimated future The Company recognizes a liability for an asset retirement cash flows, an impairment loss is recognized by the amount obligation at fair value in the period which it is incurred if a by which the carrying amount of the asset exceeds the fair reasonable estimate of fair value can be made. The associated value of the asset. Long-lived assets to be disposed of other asset retirement costs are capitalized as part of the carrying than sale continue to be classified as held and used until they amount of the long-lived asset and subsequently allocated to are disposed. expense over the asset’s useful life. Subsequent to the initial Long-lived assets classified as held-for-sale are separately measurement of the asset retirement obligation, the obliga- presented in the balance sheet and reported at the lower of tion is adjusted at the end of each period to reflect the pas- the carrying amount or fair value less costs to sell, and are sage of time and changes in the estimated future cash flows no longer depreciated. The assets and liabilities of a disposed underlying the obligation. group classified as held-for-sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheets. (v) Goodwill and Other Intangible Assets The Company accounts for business combinations using the acquisition method. The Company recognizes at fair value the assets acquired, the liabilities assumed, any noncontrolling interests in the acquiree, and acquired goodwill at the acquisi- tion date. The Company discloses the nature of business com- bination to enable the readers to evaluate the effects of such transaction on the consolidated financial statements. The Company does not amortize goodwill but tests it for impairment at least annually. Also other intangible assets with indefinite useful life are not amortized, but instead tested for impairment until its useful life is determined. On the other hand, other intangible assets determined to have useful life are amortized over their respective estimated useful life and tested for impairment. (z) Reclassifications The Company has made certain reclassifications of the previ- ous fiscal years’ consolidated financial statements to conform to the presentation used for the year ended March 31, 2013. (aa) Future Application of New Accounting Standards In July 2012, the FASB issued ASU 2012-02 “Testing Indefinite-Lived Intangible Assets for Impairment” (An Amendment of ASC Topic 350 “Intangibles—Goodwill and Other”). ASU 2012-02 allows an entity to first assess qualita- tive factors to determine whether it is necessary to perform the quantitative impairment test for indefinite-lived intangible assets. An entity that elects to perform a qualitative assess- ment is required to perform the quantitative impairment test for an indefinite-lived intangible asset if it is more likely than not that the asset is impaired. The Company is required to adopt ASU 2012-02 on April 1, 2013. The adoption of ASU 2012-02 will not have a material effect on the Company’s consolidated financial position and results of operations. (w) Cost Associated with Exit or Disposal Activities The Company recognizes the costs associated with exit or dis- In February 2013, the FASB issued ASU 2013-02 “Reporting of Amounts Reclassified Out of Accumulated posal activities as liability only when it meets the definition of Other Comprehensive Income” (An Amendment of ASC Topic a liability in the Statements of Financial Accounting Concepts 220 “Comprehensive Income”). ASU 2013-02 requires enti- No. 6, “Elements of Financial Statements”. The Company ties to disclose items reclassified out of accumulated other uses fair value for initial measurement of liabilities related to comprehensive income and into net income and references to exit or disposal activities. (x) Guarantees The Company recognizes the guarantees and indemnifica- tion arrangements as liability measured at fair value as they are issued or modified by the Company, and discloses the other disclosures about items that are not reclassified in their entirety into net income. The Company is required to adopt ASU 2013-02 on April 1, 2013. The adoption of ASU 2013-02 will not have a material effect on the Company’s consolidated financial position and results of operations. 44 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 In March 2013, the FASB issued ASU 2013-05 “Parent’s Basis of Accounting” (An Amendment of ASC Topic 205 Accounting for the Cumulative Translation Adjustment upon “Presentation of Financial Statements”). ASU 2013-07 clarifies Derecognition of Certain Subsidiaries or Groups of Assets when an entity should apply the liquidation basis of account- within a Foreign Entity or of an Investment in a Foreign Entity ing and provides guidance on principles for the recognition (a consensus of the FASB Emerging Issues Task Force)” (An and measurement of assets and liabilities and requirements Amendment of ASC Topic 830 “Foreign Currency Matters”). for financial statements prepared using the liquidation basis ASU 2013-05 addresses the accounting for the cumulative of accounting. ASU 2013-07 requires entities to prepare its translation adjustment when a parent either sells a part or financial statements using the liquidation basis of accounting all of its investment in a foreign entity or no longer holds a when liquidation is imminent and to present relevant infor- controlling financial interest in a subsidiary or group of assets mation about an entity’s expected resources in liquidation by that is a nonprofit activity or a business within a foreign entity. measuring and presenting assets at the amount of the expect- ASU 2013-05 requires entities to apply the guidance in ASC ed cash proceeds from liquidation that include any items that 830-30 to release any related cumulative translation adjust- it had not previously recognized under U.S. GAAP but that it ment into net income. The Company is required to adopt ASU expects to either sell in liquidation or use in settling liabilities. 2013-05 on April 1, 2014. The adoption of ASU 2013-05 will The Company is required to adopt ASU 2013-07 on April 1, not have a material effect on the Company’s consolidated 2014. The adoption of ASU 2013-07 will not have a material financial position and results of operations. effect on the Company’s consolidated financial position and In April 2013, the FASB issued ASU 2013-07 “Liquidation results of operations. (2) U.S. DOLLAR AMOUNTS The Company has presented the consolidated financial state- exchange rate prevailing on the Tokyo Foreign Exchange ments in Japanese yen, and solely for the convenience of the Market at the end of March 2013. This translation should not reader, has provided translated amounts in United States dol- be construed as a representation that the amounts shown lars at the rate of ¥94=U.S.$1, which was the approximate could be converted into United States dollars at such rate. (3) SECURITIES Marketable securities included in short-term investments and unrealized holding losses and fair value for such securities by investments in securities and other consist of available-for- equity securities and debt securities at March 31, 2013 and sale securities. The cost, gross unrealized holding gains, gross 2012 were as follows: 2013: Available-for-sale: Equity securities Debt securities 2012: Available-for-sale: Equity securities Debt securities Gross unrealized holding gains Gross unrealized holding losses Yen (millions) Fair value ¥44,736 1,113 ¥45,849 Gross unrealized holding gains ¥28,533 783 ¥29,316 ¥1,512 2,442 ¥3,954 ¥120,887 36,019 ¥156,906 Gross unrealized holding losses Yen (millions) Fair value ¥4,891 4,315 ¥9,206 ¥119,054 42,573 ¥161,627 Cost ¥ 77,663 37,348 ¥115,011 Cost ¥ 95,412 46,105 ¥141,517 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 45 2013: Available-for-sale: Equity securities Debt securities Gross unrealized holding gains Gross unrealized holding losses Cost Fair value U.S. dollars (thousands) $ 826,202 397,319 $1,223,521 $475,915 11,841 $487,756 $16,085 25,979 $42,064 $1,286,032 383,181 $1,669,213 Debt securities consist of Japanese government debt securi- In the year ended 2011, net unrealized gains on available- ties, corporate debt securities and others. for-sale securities, net of taxes and noncontrolling interests, In the years ended March 31, 2013 and 2012, net unre- decreased by ¥10,643 million. alized gains on available-for-sale securities, net of taxes As of March 31, 2013 and 2012, the cost of non-market- and noncontrolling interests, increased by ¥14,803 million able equity securities were ¥15,033 million ($159,926 thou- ($157,479 thousand) and ¥6,285 million, respectively. sand) and ¥14,627 million, respectively. Maturities of marketable securities classified as available-for-sale at March 31, 2013 were as follows: Due within one year Due after one year through five years Due after five years Marketable equity securities Cost ¥ 810 1,346 35,192 77,663 ¥115,011 Yen (millions) Fair value ¥ 812 2,050 33,157 120,887 ¥156,906 Cost $ 8,617 14,319 374,383 826,202 $1,223,521 U.S. dollars (thousands) Fair value $ 8,638 21,809 352,734 1,286,032 $1,669,213 Gross unrealized losses on available-for-sale securities and the fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss positions, at March 31, 2013 were as follows: Available-for-sale: Equity securities Debt securities Available-for-sale: Equity securities Debt securities Less than 12 months Fair value Unrealized losses 12 months or more Fair value Unrealized losses Yen (millions) Total Fair value Unrealized losses ¥6,756 — ¥6,756 ¥468 — ¥468 ¥ 3,496 29,864 ¥33,360 ¥1,044 2,442 ¥3,486 ¥10,252 29,864 ¥40,116 ¥1,512 2,442 ¥3,954 Less than 12 months Fair value Unrealized losses 12 months or more Fair value Unrealized losses U.S. dollars (thousands) Total Fair value Unrealized losses $71,872 — $71,872 $4,979 — $4,979 $ 37,192 317,702 $11,106 25,979 $109,064 317,702 $16,085 25,979 $354,894 $37,085 $426,766 $42,064 The Company did not recognize an impairment loss from the sonable period of time sufficient for a recovery of fair value, decline in the fair value of the marketable securities includ- the Company does not consider those securities to be other- ing the unrealized losses. Based on that evaluation and the than-temporarily impaired. Company’s ability and intent to hold those securities for a rea- 46 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Proceeds from the sale of available-for-sale securities and gross realized gains and losses on those sales in the years ended March 31, 2013, 2012 and 2011 were as follows: Proceeds Gross realized gains Gross realized losses 2013 ¥22,287 2,527 47 2012 ¥1,460 486 5 Yen (millions) 2011 ¥3,955 1,157 11 U.S. dollars (thousands) 2013 $237,096 26,883 500 For the years ended March 31, 2013, 2012 and 2011 the Company recognized loss on impairment of marketable securities ¥3,860 million ($41,064 thousand), ¥6,912 million and ¥3,679 million due to other-than-temporary declines in fair value. (4) TRADE RECEIVABLES Trade receivables are summarized as follows: Notes receivable Accounts receivable Allowance for doubtful receivables (5) INVENTORIES Inventories are comprised of the following: Work in process Less accumulated billings on long-term contracts Raw materials Finished products (6) INVESTMENTS IN AFFILIATED COMPANIES 2013 ¥ 56,284 926,511 (8,290) ¥974,505 Yen (millions) 2012 ¥ 61,745 897,332 (8,341) ¥950,736 U.S. dollars (thousands) 2013 $ 598,766 9,856,500 (88,192) $10,367,074 2013 ¥271,574 13,166 258,408 90,477 241,850 Yen (millions) 2012 ¥277,017 24,220 252,797 90,471 232,911 ¥590,735 ¥576,179 U.S. dollars (thousands) 2013 $2,889,085 140,064 2,749,021 962,521 2,572,873 $6,284,415 Summary of combined financial information relating to affiliated companies accounted for by the equity method of account- ing (Renesas Electronics Corporation, Toshiba Mitsubishi-Electric Industrial Systems Corporation, etc.) as of March 31, 2013 and 2012, and for the years ended March 31, 2013, 2012 and 2011 are as follows: Yen (millions) 2012 U.S. dollars (thousands) 2013 Financial Position Current assets Property, plant and equipment Other assets Total assets Current liabilities Long-term debt Total liabilities Shareholders’ equity 2013 ¥1,395,527 343,725 192,039 ¥1,931,291 ¥ 948,324 517,159 1,465,483 465,808 ¥1,431,161 403,553 204,841 ¥2,039,555 ¥1,213,890 285,338 1,499,228 540,327 Total liabilities and shareholders’ equity ¥1,931,291 ¥2,039,555 $14,846,032 3,656,649 2,042,968 $20,545,649 $10,088,553 5,501,692 15,590,245 4,955,404 $20,545,649 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 47 2013 2012 Yen (millions) 2011 U.S. dollars (thousands) 2013 Results of Operations Sales Net income (loss) attributable to affiliated companies ¥1,869,079 (84,953) ¥1,956,596 (36,010) ¥2,181,546 (69,818) $19,883,819 (903,755) The balances and transactions with affiliated companies accounted for by the equity method of accounting as of March 31, 2013 and 2012, and for the years ended March 31, 2013, 2012 and 2011 are as follows: Trade receivables Trade payables Sales Purchases Dividends 2013 ¥ 74,470 129,123 2013 ¥298,033 166,633 10,174 2012 ¥314,740 184,766 6,945 Yen (millions) 2012 ¥ 76,720 144,502 Yen (millions) 2011 ¥314,174 160,188 8,963 U.S. dollars (thousands) 2013 $ 792,234 1,373,649 U.S. dollars (thousands) 2013 $3,170,564 1,772,691 108,234 Investments in affiliated companies accounted for by the equity method of accounting include the shares of 10 publicly quoted affiliates (10 publicly quoted affiliates existed in 2012), which are summarized as follows: Investments at equity Quoted market value 2013 ¥52,720 65,751 Yen (millions) 2012 ¥75,783 92,453 U.S. dollars (thousands) 2013 $560,851 699,479 The Company recorded an amount of ¥13,785 million in investments in affiliated companies as goodwill related to ($146,649 thousand), the portion of the costs of investments equity investments on its consolidated balance sheets. in affiliated companies accounted for by the equity method At March 31, 2013 and 2012, the Company recognizes of accounting at the date of acquisition that exceeds the that no impairment exists on its goodwill. amounts of net assets attributable to the Company, included (7) BANK LOANS AND LONG-TERM DEBT Bank loans consisted of the following: Borrowings from banks and others Commercial paper 2013 ¥101,617 30,220 ¥131,837 Yen (millions) 2012 ¥111,450 220 ¥111,670 U.S. dollars (thousands) 2013 $1,081,032 321,489 $1,402,521 The weighted average interest rates on borrowings from At March 31, 2013, the Company had unused committed banks and others outstanding as of March 31, 2013 and 2012 lines of credit that can provide short-term funds from sub- were 0.71% and 1.04%, respectively. scribing financial institutions amounting to ¥114,000 million ($1,212,766 thousand). 48 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Long-term debt consisted of the following: Borrowings from banks and other companies, due 2013 to 2022 with bearing interest rate ranging from 0.35% to 3.00% at March 31, 2013: due 2012 to 2022 with bearing interest rate ranging from 0.40% to 4.70% at March 31, 2012: Secured Unsecured 1.70% Japanese yen bonds due 2012 1.40% Japanese yen bonds due 2012 1.17% Japanese yen bonds due 2014 0.58% Japanese yen bonds due 2013 Capital lease obligations Less amount due within one year 2013 Yen (millions) 2012 U.S. dollars (thousands) 2013 ¥ 821 319,527 — — 30,000 30,000 28,387 408,735 103,081 ¥305,654 ¥ 935 290,439 10,000 40,000 30,000 30,000 29,247 430,621 88,832 ¥341,789 $ 8,734 3,399,223 — — 319,149 319,149 301,989 4,348,244 1,096,606 $3,251,638 U.S. dollars (thousands) $1,096,606 1,069,000 940,691 499,085 222,319 520,543 $4,348,244 The aggregate annual maturities of long-term debt outstanding at March 31, 2013 were as follows: Year ending March 31: 2014 2015 2016 2017 2018 Thereafter Total Yen (millions) ¥103,081 100,486 88,425 46,914 20,898 48,931 ¥408,735 Substantially all of the loans with banks and others have basic Certain of the secured loan agreements contain provi- written agreements. With respect to all present or future sions that permit the lenders to require additional collateral, loans, these agreements state that the Company would need and substantially all of the unsecured loan agreements permit to provide collateral or guarantors immediately upon the the lenders to require collateral or guarantors. Property, plant banks’ request and that any collateral furnished pursuant to and equipment carried at ¥1,184 million ($12,596 thousand) such agreements will be used against repayment of debts in are pledged as security for long-term loans from banks and case of default. others. (8) TRADE PAYABLES Trade payables are summarized as follows: Notes payable Accounts payable 2013 ¥ 16,868 635,850 ¥652,718 Yen (millions) 2012 ¥ 19,653 680,609 ¥700,262 U.S. dollars (thousands) 2013 $ 179,447 6,764,362 $6,943,809 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 49 (9) INCOME TAXES Total income taxes were allocated as follows: Income before income taxes Shareholders’ equity—accumulated other comprehensive income (loss): Foreign currency translation adjustments Pension liability adjustments Unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments 2013 ¥ (9,509) 2012 ¥105,815 Yen (millions) 2011 ¥77,097 U.S. dollars (thousands) 2013 $(101,160) 5,037 26,637 7,230 38 (135) (144) 2,777 37 (1,978) (1,651) (6,886) (7) 53,585 283,372 76,914 405 ¥ 29,433 ¥108,350 ¥66,575 $ 313,116 The significant components of deferred tax expense attributable to income taxes are as follows: Change in valuation allowance related to deferred tax assets Other 2013 2012 ¥(40,029) 7,030 ¥(32,999) ¥ (6,915) 70,543 ¥63,628 Yen (millions) 2011 ¥ (2,234) 25,022 ¥22,788 U.S. dollars (thousands) 2013 $(425,840) 74,787 $(351,053) The Company is subjected to a number of income taxes. The March 31, 2013, approximately 41% for the years ended statutory tax rate is approximately 38% for the year ended March 31, 2012 and 2011. The effective tax rate for the years ended March 31, 2013, 2012 and 2011 is reconciled with the Japanese statutory tax rate in the following table: Japanese statutory tax rate Change in valuation allowance Adjustment for unrealized profit on intercompany transactions Expenses permanently not deductible for tax purposes International tax rate difference Tax credits Tax effect attributable to investments at equity Effect of income tax rate change Other Effective tax rate 2013 38.0% (60.1) 21.4 2.8 (17.9) (0.3) (10.4) 7.6 4.3 (14.6)% 2012 41.0% 3.6 (0.4) 1.0 (5.1) (3.3) (2.6) 14.3 (1.3) 47.2% 2011 41.0% 4.8 (1.0) 1.0 (6.9) (4.2) (0.7) — 2.7 36.7% For the year ended March 31, 2013, because it is expected likely than not that the temporary differences related to its that certain investments in affiliated companies will no longer investment in affiliated companies will be realized. The effects be accounted for by the equity method of accounting during are included in Change in valuation allowance. the following year, the Company concluded that it is more 50 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2013 and 2012 are as follows: Deferred tax assets: Retirement and severance benefits Accrued expenses Property, plant and equipment Inventories Pension liability adjustments Tax loss carryforwards Other Total gross deferred tax assets Valuation allowance Deferred tax assets, less valuation allowance Deferred tax liabilities: Securities contributed to employee retirement benefit trust Property, plant and equipment Net unrealized gains on securities Other Total gross deferred tax liabilities Net deferred tax assets 2013 ¥ 77,846 92,474 34,815 23,998 79,533 18,484 140,342 467,492 (68,676) 398,816 30,404 10,939 14,637 33,162 89,142 Yen (millions) 2012 U.S. dollars (thousands) 2013 ¥ 93,206 101,762 33,172 41,234 106,170 7,652 122,909 506,105 (108,705) 397,400 30,404 12,135 7,407 33,236 83,182 $ 828,149 983,766 370,372 255,298 846,096 196,638 1,493,000 4,973,319 (730,596) 4,242,723 323,447 116,372 155,713 352,787 948,319 ¥309,674 ¥314,218 $3,294,404 The valuation allowance for deferred tax assets as of April those temporary differences become deductible. Management 1, 2011 was ¥115,620 million. The net change in the total considers the scheduled reversal of deferred tax liabilities, pro- valuation allowance for the year ended March 31, 2012 was jected future taxable income, and tax planning strategies in a decrease of ¥6,915 million. The net change in the total making this assessment. valuation allowance for the year ended March 31, 2013 At March 31, 2013, the Company and certain subsidiar- was a decrease of ¥40,029 million ($425,840 thousand). In ies had net operating loss carryforwards of ¥32,895 million assessing the realizability of deferred tax assets, management ($349,947 thousand) and ¥100,105 million ($1,064,947 considers whether it is more likely than not that some portion thousand) for corporate and local income tax purposes, or all of the deferred tax assets will be realized. The ultimate respectively, which were available to offset future taxable realization of deferred tax assets is dependent upon the gen- income, if any. A significant portion of the net operating loss eration of future taxable income during the periods in which carryforwards will expire in the years ending March 31, 2022. Net deferred tax assets and liabilities at March 31, 2013 and 2012 are reflected in the accompanying consolidated balance sheets under the following captions: Prepaid expenses and other current assets Other assets Other liabilities 2013 ¥126,884 186,929 (4,139) ¥309,674 Yen (millions) 2012 ¥146,077 172,204 (4,063) ¥314,218 U.S. dollars (thousands) 2013 $1,349,830 1,988,606 (44,032) $3,294,404 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 51 Deferred tax liabilities have not been recognized for undis- of income. Both interest and penalties accrued as of March tributed earnings of domestic subsidiaries and some affili- 31, 2013 and 2012, and interest and penalties for the years ated companies as such income, if distributed in the form of ended March 31, 2013, 2012 and 2011 are not material. dividends, is either not taxable under present circumstances The Company and its subsidiaries file income tax returns or is not material. Deferred tax liabilities for the undistributed in Japan and various foreign tax jurisdictions. The tax years income of foreign subsidiaries and affiliated companies have that remain subject to examination by major tax jurisdictions been recognized. Although the Company believes that there are no sig- nificant unrecognized tax benefits as of March 31, 2013 and 2012, future determination by tax authorities could affect the effective tax rate in the future periods. The Company records interest and penalties related to additional income tax, etc. in the consolidated statements are as follows: Location Japan United States Thailand Europe (10) RETIREMENT AND SEVERANCE BENEFITS Open tax years 2006-2013 2010-2013 2008-2013 2008-2013 The Company has non-contributory and contributory defined 2005, and established a defined contribution plan on April benefit plans covering substantially all of its employees who 1, 2005. In addition, the Company amended its contributory meet eligibility requirements. defined benefit plan and introduced a cash balance pension Under the non-contributory plans, employees with less plan. Under the cash balance pension plan, each participant than twenty years of service are entitled to lump-sum sever- has a notional account which is credited yearly based on the ance indemnities at date of severance, and employees with current rate of contribution and market-related interest rate. twenty or more years of service are entitled to annuity pay- The domestic consolidated subsidiaries sponsor various ments subsequent to retirement, determined by the current pension plans, which are partially or entirely employees’ pen- basic rate of pay, length of service and termination condi- sion fund plan, and/or corporate pension fund plan, based on tions. In addition, certain employees who meet the eligibility each subsidiaries’ respective pension policies. requirements are entitled to additional lump-sum payments In addition, the foreign consolidated subsidiaries that at the date of retirement based on the retirement age. Under have adopted pension policy mainly sponsors defined contri- the contributory plans, employees are entitled to annuity bution pension plan. payments at a certain age. The assets of certain of the non- The Company measures the fair value of plan assets and contributory plans and the contributory plans are combined in the projected benefit obligation at the end of the year, and accordance with the regulations and administered by a board recognizes the funded status (i.e., the difference between the of trustees comprised equally of employer and employee fair value of plan assets and the projected benefit obligations) representatives. An employee retirement benefit trust is estab- of pension in consolidated balance sheets with the amount of lished for certain of the non-contributory plans. corresponding adjustment to Accumulated other comprehen- The Company amended its benefit plan under labor and sive income (loss), net of tax. management agreement during the year ended March 31, 52 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Obligations and funded status Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets are as follows: Change in benefit obligations: Benefit obligations at beginning of year Service cost Interest cost Plan participants’ contributions Amendments Actuarial loss Benefits paid Acquisitions and divestitures, etc. Benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Plan participants’ contributions Benefits paid Acquisitions and divestitures, etc. Fair value of plan assets at end of year 2013 ¥1,052,970 29,433 21,562 1,077 957 8,823 (77,667) 1,014 1,038,169 683,258 90,710 47,051 1,077 (38,251) 841 784,686 Yen (millions) 2012 U.S. dollars (thousands) 2013 ¥1,072,082 29,222 21,838 1,108 — 11,147 (82,476) 49 1,052,970 655,586 15,024 46,238 1,108 (34,456) (242) 683,258 $11,201,809 313,117 229,383 11,457 10,181 93,862 (826,245) 10,787 11,044,351 7,268,702 965,000 500,543 11,457 (406,926) 8,947 8,347,723 Funded status at end of year ¥ (253,483) ¥ (369,712) $ (2,696,628) Amounts recognized in the consolidated balance sheet at March 31, 2013 and 2012 consist of: Other assets Other current liabilities Retirement and severance benefits 2013 ¥ 7,353 (5,859) (254,977) ¥(253,483) Yen (millions) 2012 ¥ 7,912 (5,542) (372,082) ¥(369,712) Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2013 and 2012 consist of: Actuarial gain or loss Prior service benefit (gain) 2013 ¥300,091 (77,514) ¥222,577 Yen (millions) 2012 ¥ 395,639 (100,219) ¥ 295,420 U.S. dollars (thousands) 2013 $ 78,223 (62,330) (2,712,521) $(2,696,628) U.S. dollars (thousands) 2013 $3,192,457 (824,617) $2,367,840 The accumulated benefit obligations for all defined benefit plans were as follows: Accumulated benefit obligations 2013 ¥1,031,769 Yen (millions) 2012 ¥1,046,736 U.S. dollars (thousands) 2013 $10,976,266 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 53 Components of net periodic retirement and severance costs and other amounts recognized in other comprehensive income (loss) Net periodic retirement and severance costs for the years ended March 31, 2013, 2012 and 2011 consisted of the following components: Service cost Interest cost on projected benefit obligation Expected return on plan assets Amortization of prior service benefit (gain) Amortization of actuarial loss Plan participants’ contributions 2013 ¥ 30,510 21,562 (13,556) (21,748) 27,253 44,021 (1,077) 2012 ¥ 30,330 21,838 (12,834) (17,044) 27,904 50,194 (1,108) Yen (millions) 2011 ¥ 30,054 22,346 (12,057) (16,996) 35,107 58,454 (1,129) Net periodic retirement and severance costs ¥ 42,944 ¥ 49,086 ¥ 57,325 U.S. dollars (thousands) 2013 $ 324,574 229,383 (144,213) (231,362) 289,926 468,308 (11,457) $ 456,851 Other changes in plan assets and projected benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2013 and 2012 were summarized as follows: Actuarial gain or loss Amortization of actuarial loss (gain) Prior service benefit Amortization of prior service benefit 2013 ¥(68,295) (27,253) 957 21,748 ¥(72,843) Yen (millions) 2012 ¥ 8,750 (27,904) — 17,044 ¥ (2,110) U.S. dollars (thousands) 2013 $(726,543) (289,926) 10,181 231,362 $(774,926) The estimated actuarial gain or loss and prior service benefit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are summarized as follows: Actuarial gain or loss Prior service benefit (gain) Yen (millions) ¥ 15,886 (21,683) U.S. dollars (thousands) $ 169,000 (230,670) Actuarial assumptions Actuarial assumptions used to determine benefit obligations at March 31, 2013 and 2012 were as follows: Discount rate Assumed rate of increase in future compensation levels 2013 2.0% 1.7% 2012 2.0% 1.7% Actuarial assumptions used to determine net periodic retirement and severance costs for the years ended March 31, 2013, 2012 and 2011 were as follows: Discount rate Assumed rate of increase in future compensation levels Expected long-term rate of return on plan assets 2013 2.0% 1.7% 2.5% 2012 2.0% 1.7% 2.5% 2011 2.0% 1.7% 2.5% The expected long-term rate of return is based on actual historical returns and the expectations for future returns of each plan asset category in which the Company invests. 54 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Plan Assets The fair values of the Company’s pension plan assets at March 31, 2013 and 2012 were as follows: Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other 2013 Yen (millions) Level 1 Level 2 Level 3 Total ¥172,899 — ¥ — 171,648 ¥ — — ¥172,899 171,648 4,224 — 21,447 276,469 — — 25,671 276,469 — — 88,260 34,601 — 15,138 88,260 49,739 ¥177,123 ¥592,425 ¥15,138 ¥784,686 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 20% domestic stocks and 80% foreign stocks. 3. Pooled funds of debt securities include approximately 70% domestic bonds and 30% foreign bonds. 4. Government, municipal and corporate debt securities of level 1 include government debt securities. Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other 2012 Yen (millions) Level 1 Level 2 Level 3 Total ¥137,940 — ¥ — 141,103 ¥ — — ¥137,940 141,103 3,410 — 22,548 248,523 — — 25,958 248,523 — — 83,287 31,296 — 15,151 83,287 46,447 ¥141,350 ¥526,757 ¥15,151 ¥683,258 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 30% domestic stocks and 70% foreign stocks. 3. Pooled funds of debt securities include approximately 70% domestic bonds and 30% foreign bonds. 4. Government, municipal and corporate debt securities of level 1 include government debt securities. Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other U.S. dollars (thousands) 2013 Level 1 Level 2 Level 3 Total $1,839,351 — $ — 1,826,043 $ — $1,839,351 1,826,043 — 44,936 — 228,160 2,941,160 — — 273,096 2,941,160 — — 938,936 368,095 — 161,042 938,936 529,137 $1,884,287 $6,302,394 $161,042 $8,347,723 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 55 The Company’s investment policies are designed to ensure selection of plan assets, the Company has examined the con- adequate plan assets are available to provide future pay- tents of investment, and appropriately diversified investments. ments of pension benefits to eligible participants. Taking into See note 18 which shows categorized input for fair value account the expected long-term rate of return on plan assets, measurements by the valuation technique into a three-level the Company formulates an investment portfolio comprised hierarchy. of the optimal combination of equity and debt securities. Each level into which assets are categorized is based on Plan assets are invested in individual equity and debt securi- inputs used to measure the fair value of the assets. ties using the guidelines of the investment portfolio in order Level 1 assets are comprised principally of equity securi- to produce a total return that will match the expected return ties and government bonds, which are valued using unad- on a mid-term to long-term basis. The Company evaluates the justed quoted market prices in active markets with sufficient gap between expected return and actual return of invested volume and frequency of transactions. Level 2 assets are plan assets on an annual basis. In addition, taking into the comprised principally of pooled funds that invest in equity consideration the management environment and the revision and debt securities, corporate bonds and investments in life of regulations, the Company revises the investment portfolio insurance company general accounts. Pooled funds are valued when and to the extent considered necessary to achieve the at their net asset values that are calculated by the sponsor of expected long-term rate of return on plan assets based on the the fund. Corporate bonds are valued using quoted prices for pension asset and liability management method. identical assets in markets that are not active. Investments in The Company’s investment portfolio consists of three life insurance company general accounts are valued at the major components: approximately 30% is invested in equity securities, approximately 65% is invested in debt securities amounts that are the conventional interest adding to the principle amounts calculated by life insurance company. Level and investments in life insurance company general accounts, 3 assets comprise hedge funds, which are valued based on and approximately 5% is invested in hedge funds. As for unobservable inputs. An analysis of the changes in Level 3 assets which comprise hedge funds measured at fair value for the year ended March 31, 2013 and 2012 is as follows: Balance at beginning of year Actual return: Relating to assets sold Relating to assets still held Purchases, sales and settlements Transfers in and/or out of Level 3 Balance at end of year 2013 ¥15,151 — (13) — — Yen (millions) 2012 ¥ — — (51) 14,000 1,202 U.S. dollars (thousands) 2013 $161,181 — (139) — — ¥15,138 ¥15,151 $161,042 Cash Flows The Company expects to contribute ¥47,882 million ($509,383 thousand) to its pension plan in the year ending March 31, 2014. Estimated future benefit payments are as follows: Year ending March 31: 2014 2015 2016 2017 2018 2019—2023 Yen (millions) ¥ 70,472 67,677 67,566 61,158 55,731 262,099 U.S. dollars (thousands) $ 749,702 719,968 718,787 650,617 592,883 2,788,287 The amount of cost recognized for the Company and certain subsidiaries’ defined contribution plans for the years ended March 31, 2013, 2012 and 2011 were ¥7,447 million ($79,223 thousand), ¥6,938 million and ¥6,709 million, respectively. 56 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 (11) SHAREHOLDERS’ EQUITY Changes in common stock for the years ended March 31, 2013 and 2012 were as follows: Number of common shares issued: Balance at beginning of year Balance at end of year 2013 2012 Shares 2,147,201,551 2,147,201,551 2,147,201,551 2,147,201,551 Conversions into common stock of convertible debenture The amount available for dividends under the Japanese issued subsequent to October 1, 1982 and exercise of war- Corporate Law is based on the amount recorded in the rants were accounted for in accordance with the provisions of Company’s books of account in accordance with account- the Japanese Commercial Code by crediting one-half of the ing standards of Japan. The adjustments included in the conversion price and exercise price to each of the common accompanying consolidated financial statements to have them stock account and the capital surplus account. conform with accounting principles generally accepted in The Japanese Corporate Law enforced on May 1, 2006 the United States of America, but not recorded in the books requires that an amount equal to 10% of dividends and other of account, have no effect on the determination of retained distributions paid in cash by the Company and its domes- earnings available for dividends under the Japanese Corporate tic subsidiaries be appropriated as a legal reserve until the aggregated amount of additional paid-in capital and the legal Law. Retained earnings available for dividends shown in the Company’s books of account amounted to ¥226,902 million reserve equal to 25% of the common stocks. The additional ($2,413,851 thousand) at March 31, 2013. paid-in capital and the legal reserve may be used to reduce Cash dividends and appropriations to the legal reserve a deficit or transferred to common stock with a resolution of charged to retained earnings during the years ended March the shareholders’ meeting. 31, 2013, 2012 and 2011 represent dividends paid out during the years and the related appropriations to the legal reserve. (12) OTHER COMPREHENSIVE INCOME (LOSS) Change in accumulated other comprehensive income (loss) is as follows: Foreign currency translation adjustments: Balance at beginning of year Adjustments for the year Balance at end of year Pension liability adjustments: Balance at beginning of year Adjustments for the year Balance at end of year Unrealized gains (losses) on securities: Balance at beginning of year Adjustments for the year Balance at end of year Unrealized gains (losses) on derivative instruments: Balance at beginning of year Adjustments for the year Balance at end of year Total accumulated other comprehensive income (loss): Balance at beginning of year Adjustments for the year Balance at end of year 2013 2012 Yen (millions) 2011 U.S. dollars (thousands) 2013 ¥ (67,654) 59,631 ¥ (59,400) (8,254) ¥ (41,524) (17,876) (8,023) (67,654) (59,400) (160,156) 47,633 (112,523) (162,390) 2,234 (160,156) 12,242 14,803 27,045 (35) 49 14 5,957 6,285 12,242 (86) 51 (35) (171,674) 9,284 (162,390) 16,600 (10,643) 5,957 89 (175) (86) $ (719,724) 634,372 (85,352) (1,703,787) 506,734 (1,197,053) 130,234 157,479 287,713 (372) 521 149 (215,603) 122,116 (215,919) 316 (196,509) (19,410) ¥ (93,487) ¥(215,603) ¥(215,919) (2,293,649) 1,299,106 $ (994,543) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 57 Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments are as follows: Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2013: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥ 64,668 ¥ (5,037) ¥ 59,631 Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) — — — 64,668 (5,037) 59,631 68,765 (24,545) 44,220 5,505 74,270 20,071 1,962 22,033 87 ¥161,058 (2,092) (26,637) 3,413 47,633 (6,489) 13,582 (741) (7,230) (38) 1,221 14,803 49 ¥(38,942) ¥122,116 Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2012: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥(8,379) ¥ 135 ¥(8,244) Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) 58 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 (10) (8,389) — 135 (10) (8,254) (8,770) 4,597 (4,173) 10,860 2,090 3,536 5,526 9,062 88 ¥ 2,851 (4,453) 144 (654) (2,123) (2,777) 6,407 2,234 2,882 3,403 6,285 (37) ¥(2,535) 51 ¥ 316 2011: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥(22,684) ¥ 1,948 ¥(20,736) Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) 2,830 30 2,860 (19,854) 1,978 (17,876) (23,921) 9,077 (14,844) 31,554 7,633 (7,426) 1,651 24,128 9,284 (22,250) 8,864 (13,386) 4,721 (17,529) (182) ¥(29,932) (1,978) 6,886 7 ¥10,522 2,743 (10,643) (175) ¥(19,410) Before-tax amount U.S. dollars (thousands) Tax (expense) or benefit Net-of-tax amount 2013: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year $ 687,957 $ (53,585) $ 634,372 Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) — — — 687,957 (53,585) 634,372 731,542 (261,117) 470,425 58,564 790,106 (22,255) (283,372) 36,309 506,734 213,521 (69,031) 144,490 20,872 234,393 (7,883) (76,914) 12,989 157,479 926 (405) 521 $1,713,382 $(414,276) $1,299,106 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 59 (13) NET INCOME PER SHARE ATTRIBUTABLE TO MITSUBISHI ELECTRIC CORP. A reconciliation of the numerators and denominators of the basic and diluted net income per share attributable to Mitsubishi Electric Corp. calculations is as follows: Net income attributable to Mitsubishi Electric Corp. Effect of dilutive securities Diluted net income attributable to Mitsubishi Electric Corp. Average common shares outstanding Effect of dilutive securities: Diluted common shares outstanding Net income per share attributable to Mitsubishi Electric Corp.: Basic Diluted 2013 2012 Yen (millions) 2011 ¥69,517 — ¥112,063 — ¥124,525 — U.S. dollars (thousands) 2013 $739,543 — ¥69,517 ¥112,063 ¥124,525 $739,543 2013 2,146,906,220 — 2,146,906,220 2012 2,146,926,221 — 2,146,926,221 Shares 2011 2,146,959,471 — 2,146,959,471 2013 2012 2011 2013 Yen U.S. dollars ¥32.38 — ¥52.20 — ¥58.00 — $0.344 — Diluted net income per share attributable to Mitsubishi Electric Corp. is not presented as no dilutive securities existed as of and for the year ended March 31, 2013, 2012 and 2011. (14) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Foreign Exchange Risk Management and Interest Rate Risk Management The Company and its subsidiaries operate internationally, giv- ing rise to significant exposure to market risks from changes in foreign currencies and interest rates. Derivative financial instruments are comprised principally of foreign exchange contracts, foreign currency swaps and interest rate swaps uti- lized by the Company and certain of its subsidiaries to reduce these risks. The Company and its subsidiaries do not hold or issue financial instruments for trading purposes. Contract Amounts, Notional Principal Amounts and Credit Risk The Company and its subsidiaries are exposed to risk of credit- related losses in the event of nonperformance by counterpar- ties to foreign exchange contracts, foreign currency swaps and interest rate swaps. The Company believes such risk is minimal due to the high credit ratings of these counterparties. Other derivative instruments are debt securities that contain embedded derivatives with intention to hold for a certain period. The Company believes that no material risks exist on its debt securities because the principal of those debt securi- ties are guaranteed. Information with Respect to Fair Value Hedge Certain subsidiaries have entered into foreign currency swaps to 60 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 hedge currency exposure and designate them as fair value hedges. Information with Respect to Cash Flow Hedges The Company and certain of its subsidiaries have entered into forward foreign exchange contracts mainly with forecasted transactions to hedge against market risks from changes in foreign currencies and interest rate swap agreements to modify the interest rate characteristics of a portion of its long- term debt from a variable to a fixed rate. The Company and certain of its subsidiaries designate them as cash flow hedges. The maximum period for cash flow hedges is 38 months. The Company expects that the amounts of net gain of ¥15 mil- lion ($160 thousand) in accumulated other comprehensive income (loss) will be reclassified into earnings over the next 12 months with transactions such as collection of foreign cur- rency receivables and payment of foreign currency payables and interests on long-term debt. Derivatives not designated as hedging Instruments The Company and certain of its subsidiaries enter into foreign exchange contracts and certain of foreign currency swaps and interest rate swaps that are not designated as hedging instru- ments to hedge against certain foreign currency and interest rate exposures. The Company and certain of its subsidiaries recognize the changes in unrealized gains and losses on such instruments in earnings. Contract amounts of foreign exchange contracts and foreign currency swaps and notional principal amounts of interest rate swaps and other derivative instruments at March 31, 2013 and 2012 are as follows: Foreign exchange contracts: Forwards to sell foreign currencies Forwards to buy foreign currencies Foreign currency swaps Interest rate swaps Other derivative instruments 2013 ¥106,974 66,586 17,196 7,000 28,300 Yen (millions) 2012 ¥91,946 47,207 23,651 7,000 29,800 U.S. dollars (thousands) 2013 $1,138,021 708,362 182,936 74,468 301,064 The estimated fair values of foreign exchange contracts, foreign currency swaps, interest rate swaps and other derivative instru- ments at March 31, 2013 and 2012 are as follows: Derivatives designated as hedging instruments Consolidated balance sheet line item 2013 Yen (millions) 2012 Asset derivatives Estimated fair value U.S. dollars (thousands) 2013 Foreign exchange contracts Prepaid expenses and other current assets ¥118 ¥72 $1,255 Derivatives designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Interest rate swaps Total Other current liabilities Other liabilities Derivatives not designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Foreign currency swaps Interest rate swaps Total Prepaid expenses and other current assets Prepaid expenses and other current assets Investments in securities and other Derivatives not designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Foreign currency swaps Other derivative instruments Total Other current liabilities Other current liabilities Other fixed liabilities 2013 ¥23 61 ¥84 Yen (millions) 2012 ¥ 16 115 ¥131 2013 Yen (millions) 2012 Liability derivatives Estimated fair value U.S. dollars (thousands) 2013 $245 649 $894 Asset derivatives Estimated fair value U.S. dollars (thousands) 2013 ¥6,686 ¥2,339 $71,127 211 84 ¥6,981 21 2,245 108 ¥2,468 894 $74,266 2013 ¥4,076 197 1,819 ¥6,092 Yen (millions) 2012 ¥3,682 27 3,909 ¥7,618 Liability derivatives Estimated fair value U.S. dollars (thousands) 2013 $43,361 2,096 19,351 $64,808 The effect of foreign exchange contracts and interest rate swaps designated as cash flow hedges on the consolidated statements of income for the years ended March 31, 2013 and 2012 are as follows: Derivatives in cash flow hedging relationships Foreign exchange contracts Interest rate swaps Total 2013 ¥ 85 49 ¥134 Amount of gain or (loss) recognized in OCI on derivative (effective portion) U.S. dollars (thousands) Yen (millions) 2012 ¥ 68 45 ¥113 2013 $ 904 522 $1,426 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 61 Derivatives in cash flow hedging relationships Line item of gain or (loss) recognized from accumulated OCI into income (effective portion) Amount of gain or (loss) recognized from accumulated OCI into income (effective portion) U.S. dollars (thousands) Yen (millions) 2012 2013 2013 Foreign exchange contracts Other revenues (cost and expenses) ¥47 ¥(16) $500 The effect of foreign exchange contracts, foreign currency swaps, interest rate swaps and other derivative instruments not desig- nated as hedging instruments on the consolidated statements of income for the years ended March 31, 2013 and 2012 are set forth below: Derivatives not designated as hedging instruments Line item of gain or (loss) recognized in income on derivative Amount of gain or (loss) recognized in income on derivative U.S. dollars (thousands) Yen (millions) 2012 2013 2013 Foreign exchange contracts Foreign currency swaps Interest rate swaps Other derivative instruments Total (15) SECURITIZATIONS Other revenues (cost and expenses) Other revenues (cost and expenses) Other revenues (cost and expenses) Other revenues (cost and expenses) ¥(8,302) ¥ 3,130 $(88,319) (88) (24) (945) (20) (936) (256) 2,090 ¥(6,324) (3,909) ¥(1,744) 22,234 $(67,277) The Company sells its accounts receivable under several secu- The Company recognized losses of ¥492 million ($5,234 ritization programs. thousand), ¥450 million and ¥643 million on the securitiza- When the Company retains subordinated interests in the tions of receivables for the years ended March 31, 2013, 2012 certain accounts receivables after the sale of these receivables, and 2011, respectively. a portion of these, where the Company retains subordinated Subsequent to securitization, the Company retains collec- interests, is not taken off the balance sheet and is recorded at tion and administrative responsibilities for the receivables. The their fair value. Such carrying value is adjusted to reflect the Company has not recorded a servicing asset or liability since portion that is not expected to be collectible. As of March 31, the cost of collection effort is similar to the amount of com- 2013, the Company did not retain subordinated interests in the mission income. certain accounts receivables after the sale of these receivables. Certain cash flows received from special purpose entities (SPEs) and banks on the above transactions for the years ended March 31, 2013, 2012 and 2011 are as follows: Proceeds from new securitizations 2013 ¥404,156 2012 ¥383,396 Yen (millions) 2011 ¥413,959 U.S. dollars (thousands) 2013 $4,299,532 Quantitative information about trade receivables including securitized receivables as of March 31, 2013 and 2012 are as follows: Trade receivables Less: Securitized receivables Total receivables 2013 ¥1,085,905 111,400 ¥ 974,505 Yen (millions) 2012 ¥1,039,731 88,995 ¥ 950,736 U.S. dollars (thousands) 2013 $11,552,181 1,185,107 $10,367,074 As of March 31, 2013 and 2012, delinquencies and credit losses of trade receivables including securitized receivables are immaterial. 62 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 (16) COMMITMENTS AND CONTINGENT LIABILITIES At March 31, 2013, commitments outstanding for the pur- case is now pending before the court of second instance. chase of property, plant and equipment were ¥21,263 million In June 2012, the Company received the European ($226,202 thousand). Commission’s decision presenting an amount of fine as pay- It is common practice in Japan for companies, in the ordi- able by the Company after revision of the pertinent computa- nary course of business, to receive promissory notes in settle- tions. In September 2012, the Company took another legal ment of accounts receivable and to subsequently discount action with the European General Court seeking a revision, such notes at banks. At March 31, 2013, certain subsidiaries which would result in a downward modification of the fine, of were contingently liable to trade notes discounted in the the current computation method presented by the European amount of ¥539 million ($5,734 thousand). Certain subsidiar- Commission. ies account for the discounted notes as sale of receivables. Since July 2011, the Company was subject to inves- As of March 31, 2013, the Company had no significant tigation conducted by Japan Fair Trade Commission for a concentrations of credit risk. suspected infringement of the Antimonopoly Act in connec- While the Company and certain of its subsidiar- tion with the sales of certain automotive parts in Japan. In ies are defendants and co-defendants in various lawsuits November 2012, the Fair Trade Commission rendered a cease and legal actions, based upon the advice of legal counsel, and desist order and surcharge payment order as a result of its the Company’s management is of the opinion that dam- investigation. ages, if any, would not have a material adverse effect on For the year ended March 31, 2013, the Company the Company’s consolidated financial position and results of recorded an amount of ¥1,410 million ($15,000 thousand) operations, except for the following cases. as a various competition-law-related expenses in Costs and The Company and certain of its subsidiaries move toward expenses - Other. The actual payment of the fine as referred reconciliation with some DRAM purchasers in relation to the to above was completed by the end of year ended March 31, possibility of violation of competition law concerning DRAM 2013 and the Company already fulfilled its reporting obliga- sales. tions to the competent authority on its remediation measures In January 2007, the Company received a decision ren- implemented in conformity with the cease and desist order. dered by the European Commission imposing fines for an In addition, since July 2011, the Company and certain of infringement of EU Competition Law in connection with its its subsidiaries have been cooperating with Competition Law sales of certain gas-insulated switchgears in Europe. However, investigations and inquiries conducted by the United States there was a significant inconsistency on recognition of the Department of Justice and the European Commission regard- material underlying facts between the European Commission ing the sales of certain automotive parts in the United States and the Company. Therefore, the Company appealed to the of America and European countries. European General Court and challenged the decision. In July As of March 31, 2013, the Company recorded reasonably 2011, the Company received a judgment from the European estimated amount of ¥26,952 million($286,723 thousand) General Court upholding the European Commission’s deci- as a reserve for various competition-law-related expenses in sion on the underlying facts while annulling the fine imposed Other fixed liabilities relating to the DRAM case in the United on the Company on the basis that the European Commission applied inconsistent methods of calculation to different States of America and in Europe, the gas-insulated switch- gears case in Europe, and certain automotive parts case in the companies. United States of America. The Company is unable to estimate In September 2011, since there was still a significant the impact on the Company’s consolidated financial position inconsistency on recognition of the material underlying facts and results of operations as to be arising out of the other between the European Commission and the Company, the legal proceedings. Company appealed to the European Court of Justice and the The following table provides the undiscounted maximum amount of potential future payments for each major group of guaran- tees at March 31, 2013: Guarantees of bank loan: Employees Affiliated and other companies Other Total Yen (millions) ¥ 5,357 2,400 6,540 ¥14,297 U.S. dollars (thousands) $ 56,989 25,532 69,574 $152,095 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 63 The guarantees for the employees are principally made for nies are made to enhance their credit, and the term of guar- their housing loans, and the term of guarantees is 1 year to antees is 1 year to 3 years. 18 years. The guarantees for the affiliated and other compa- Change in accrued product warranty for the years ended March 31, 2013 and 2012 is summarized as follows: Balance at beginning of year Addition Utilization Foreign currency translation adjustments Balance at end of year (17) FAIR VALUE OF FINANCIAL INSTRUMENTS 2013 ¥41,107 39,935 35,049 927 ¥46,920 Yen (millions) 2012 ¥49,392 35,690 43,613 (362) ¥41,107 U.S. dollars (thousands) 2013 $437,309 424,840 372,862 9,862 $499,149 The Company uses the following methods and assumptions to estimate the fair value of each class of financial instrument for which it is practical to estimate its value: (a) Cash and cash equivalents, Trade receivables, Bank loans, Trade payables, Accrued expenses and Other current liabilities (c) Long-term trade receivables The fair value of the Company’s long-term trade receivables is calculated under income approach using market interest rates, therefore, it is classified in level 2. (d) Long-term debt The fair value of the Company’s corporate bonds is calculated The carrying amount approximates fair value because of the under market approach using quoted published price, there- short term nature of these instruments. fore, it is classified in level 2. The fair value of the Company’s (b) Short-term investments and Investments in securities and other The fair values of most short-term investments and invest- ments in securities and other are estimated based on quoted long-term debt is calculated under income approach using market interest rates, therefore, it is classified in level 2. The Company excludes the financial instruments relating to lease activities because its carrying amount approximates fair value. market prices for these instruments. For other investments for which there are no quoted market prices, a reasonable (e) Derivative financial instruments The fair values of derivative financial instruments, consisting estimate of fair value could not be made without incurring principally of foreign exchange contracts, foreign currency excessive costs. swaps and interest rate swaps are estimated by obtaining quotes from brokers. (See note 14 about estimated fair value.) The estimated fair values of the Company’s financial instruments at March 31, 2013 and 2012 are summarized as follows: 2013 Carrying amount Yen (millions) 2012 Estimated fair value Carrying amount Estimated fair value U.S. dollars (thousands) Estimated fair value 2013 Carrying amount Nonderivatives: Assets: Marketable securities and other Long-term trade receivables ¥161,905 2,521 ¥161,905 2,555 ¥166,824 1,017 ¥166,824 1,056 $1,722,394 26,819 $1,722,394 27,181 Liabilities: Long-term debt, including current portion 380,348 381,579 401,374 403,718 4,046,255 4,059,351 Limitations Fair value estimates are made at a specific point in time based and involve uncertainties and matters of significant judgment on relevant market information and information about the and therefore cannot be determined with precision. Changes financial instrument. These estimates are subjective in nature in assumptions could significantly affect the estimates. 64 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 (18) FAIR VALUE MEASUREMENTS The Company defines fair value as “the price that would be Level 1 : Quoted prices in active markets for identical assets received to sell an asset or paid to transfer a liability in an orderly or liabilities. transaction between market participants at the measurement date”. On that basis, the Company has categorized the inputs for Level 2 : Inputs other than quoted prices included within Level 1 that are directly or indirectly observable for fair value measurement by the valuation technique into a three- the asset or liability. level hierarchy, and placed the order of priority. Level 3 : Unobservable inputs for the asset or liability. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2013 and 2012. The Company measures the fair value of those assets and liabilities in accordance with the require- ments of FASB ASC for those assets and liabilities. Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives Level 1 Level 2 Level 3 Total 2013 Yen (millions) ¥120,887 ¥ — ¥— ¥120,887 — — — — 38,824 2,194 7,099 6,176 — — — — 38,824 2,194 7,099 6,176 Yen (millions) Level 1 Level 2 Level 3 Total 2012 ¥119,054 ¥ — ¥— ¥119,054 — — — — 44,288 3,482 2,540 7,749 — — — — 44,288 3,482 2,540 7,749 U.S. dollars (thousands) Level 1 Level 2 Level 3 Total 2013 Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives $1,286,032 $ — $— $1,286,032 — — — — 413,021 23,341 75,521 65,702 — — — — 413,021 23,341 75,521 65,702 Level 1 equity securities are marketable equity securities, and frequency of transactions. Level 2 debt securities are which are valued using unadjusted quoted market prices in active markets with sufficient volume and frequency of trans- valued based on market approach, using quoted prices for identical assets in markets that are not active. Level 2 deriva- actions. Debt securities are comprised of government, munici- tives are comprised principally of foreign exchange contracts, pal and corporate debt securities and others, and investment which are valued based on market approach, using quotes trusts. Level 1 debt securities are valued using unadjusted obtained from counterparties or third parties. quoted market prices in active markets with sufficient volume MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 65 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis At March 31, 2013, in accordance with the requirements of portion of long-lived assets were written down to their fair FASB ASC Topic 360 “Property, Plant and Equipment”, a por- value of ¥6,423 million, resulting in an impairment charge tion of long-lived assets were written down to their fair value of ¥3,782 million, which was included in loss on impairment of ¥4,226 million ($44,957 thousand), resulting in an impair- of long-lived assets for the year ended March 31, 2012. The ment charge of ¥4,317 million ($45,926 thousand), which impaired long-lived assets are classified as Level 3 assets, was included in loss on impairment of long-lived assets for the because they are measured based on the unobservable inputs year ended March 31, 2013. The impaired long-lived assets such as estimated future cash flows under income approach are classified as Level 3 assets, because they are measured or net sale price under market approach. based on the unobservable inputs such as estimated future The valuation process of long-lived assets is docu- cash flows under income approach or net sale price under mented in “Notes to Consolidated Financial Statements (1) market approach. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT At March 31, 2012, in accordance with the requirements ACCOUNTING POLICIES (u)Impairment of Long-Lived Assets”. of FASB ASC Topic 360 “Property, Plant and Equipment”, a (19) SUPPLEMENTARY INCOME AND EXPENSE INFORMATION Advertising expenses Shipping and handling costs Exchange gains (losses) Business restructuring costs Loss on disaster Refund payment for overcharged expenses Loss on impairment of long-lived assets 2013 ¥(18,029) (71,613) 8,034 — — (75,717) (4,317) 2012 ¥(18,372) (73,283) (2,000) — — — (3,782) Yen (millions) 2011 ¥(17,053) (74,782) (10,174) (2,501) (5,456) — (4,005) U.S. dollars (thousands) 2013 $(191,798) (761,840) 85,468 — — (805,500) (45,926) Advertising expenses are included in “Costs and expenses— overcharged project costs by transferring man-hours among Selling, general and administrative”. different contracts which the Company entered into with Shipping and handling costs represents the costs included the Japanese Ministry of Defense (MOD), Cabinet Satellite in “Costs and expenses—Selling, general and administrative”. Intelligence Center, Japan Aerospace Exploration Agency, Exchange gains (losses) are included in “Revenues— and National Institute of Information and Communications Other” and “Costs and expenses—Other”. Technology. Also, similar incidents were identified concern- Business restructuring costs are included in “Costs and ing contracts between four of the Company's affiliates and expenses—Other”. MOD. Consequently, since January 2012, the Company and For the year ended March 31, 2011, the Company rec- the aforementioned affiliates were suspended by those enti- ognized business restructuring costs of ¥2,501 million for the after-sale service expense and retirement benefits and others ties from nomination or participation in further bidding. As a result of investigation conducted by the entities, for the year associated with the restructuring of the visual equipment busi- ended March 31, 2013, the Company recorded a total of nesses in North America. ¥75,717 million ($805,500 thousand) as a refund payment for Loss on disaster is included in “Costs and expenses— overcharged expenses in Costs and expenses—Other that cov- Other”. ers the refund of overcharged expenses, related penalties and For the year ended March 31, 2011, the Company rec- interest arising from the series of incidents referred to herein. ognized disaster losses of ¥5,456 million for the repair and The reimbursement was already completed to each entity by removal of facilities, the disposal and inspection of inventories the end of the year ended March 31, 2013 and, as of the date and restoration support for counterparties which is suffered of respective payments, the suspension from nomination or from an earthquake associated with the recovery from dam- age suffered from the Great East Japan Earthquake. participation in further bidding with each entity was already lifted. Refund payment for overcharged expenses is included in Loss on impairment of long-lived assets is included in “Costs and expenses—Other”. “Costs and expenses—Loss on impairment of long-lived assets”. For the electronic systems business, it was revealed in For the year ended March 31, 2013, the Company and January 2012 that the Company had been billing improperly certain of its subsidiaries recognized impairment losses of 66 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 ¥4,014 million ($42,702 thousand) for tangible assets such as Devices business related assets and ¥1,110 million for the buildings and machinery as well as ¥303 million ($3,224 thou- Home Appliances business related assets due to a decline in sand) for intangible assets. The impairment losses included the profitability. The impairment losses were mainly measured ¥2,404 million ($25,575 thousand) for the Electronic Devices based on the fair value less cost to sell. business related assets and ¥1,212 million ($12,894 thousand) For the year ended March 31, 2011, the Company and for the Home Appliances business related assets due to a certain of its subsidiaries recognized impairment losses of decline in the profitability. The impairment losses were mainly ¥3,538 million for tangible assets such as buildings and measured based on the fair value of the discounted present machinery as well as ¥467 million for intangible assets. The value of expected future cash flow. impairment losses included ¥1,879 million for the Home For the year ended March 31, 2012, the Company and Appliances business related assets due to a decline in the certain of its subsidiaries recognized impairment losses of profitability and ¥1,908 million for the welfare related assets. ¥3,367 million for tangible assets such as buildings and The impairment losses were mainly measured based on the machinery as well as ¥415 million for intangible assets. The fair value less cost to sell. impairment losses included ¥2,429 million for the Electronic (20) LEASES The Company and certain of its subsidiaries enter into capital lease and operating lease agreements with Mitsubishi Electric Credit Corporation, an equity method investee. The leased assets, which are committed under capital lease agreements, are capitalized. The Company and certain of its subsidiaries lease machin- ery and equipments. At March 31, 2013, the aggregated cost and accumulated depreciation of leased assets under capital leases amounted to ¥45,152 million ($480,340 thousand) and ¥22,736 million ($241,872 thousand), respectively. Future minimum lease payments under capital and non-cancelable operating leases as of March 31, 2013 are as follows: Year ending March 31: 2014 2015 2016 2017 2018 Thereafter Total minimum lease payments Less: Estimated executory costs Net minimum lease payments Less: Amount representing interest Present value of net minimum capital lease payments Less: Current portion of obligations under capital leases Obligations under capital leases, excluding current portion Yen (millions) U.S. dollars (thousands) Capital leases Operating leases Capital leases Operating leases ¥ 4,452 3,404 2,231 1,309 799 644 ¥12,839 ¥10,595 8,474 5,626 2,913 897 64 28,569 87 28,482 95 28,387 10,476 ¥17,911 $ 47,362 36,213 23,734 13,926 8,500 6,851 $136,586 $112,713 90,149 59,851 30,989 9,543 681 303,926 926 303,000 1,011 301,989 111,447 $190,542 Rental expenses related to operating leases for the years ended March 31, 2013, 2012 and 2011 amounted to ¥42,587 million ($453,053 thousand), ¥42,076 million and ¥41,007 million, respectively. These operating leases are for office space, warehouses, employee facilities and computer equipment, and are customarily renewed. (21) SUPPLEMENTARY CASH FLOW INFORMATION Cash paid during the year for: Interest Income taxes 2013 2012 Yen (millions) 2011 ¥ 6,425 41,022 ¥ 6,413 65,901 ¥ 7,722 34,166 U.S. dollars (thousands) 2013 $ 68,351 436,404 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 67 (22) SEGMENT INFORMATION Operating segment presented below is identified based on the The Company conducts business through 6 reportable segments for which separate financial information is available, business segments, Energy and Electric Systems, Industrial and is periodically used for decision of business resources allo- Automation Systems, Information and Communication cation and evaluation of business operation by the Company’s Systems, Electronic Devices, Home Appliances, and Others, management. based on types and characteristics of products, production method, and similarity in market. Principal businesses of each segment are as follows: Energy and Electric Systems Industrial Automation Systems Turbine generators, hydraulic turbine generators, nuclear power plant equipment, motors, transformers, power electronics equipment, circuit breakers, gas insulated switches, switch control devices, surveillance-system control and security systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management systems, particle beam treatment systems, and others Programmable logic controllers, inverters, servomotors, human-machine interface, motors, hoists, magnetic switches, no-fuse circuit breakers, short-circuit breakers, transformers for electricity distribution, time and power meters, uninterruptible power supply, industrial fans, computerized numerical controllers, electrical-discharge machines, laser processing machines, industrial robots, clutches, automotive electrical equipment, car electronics and car mechatronics, car multimedia, and others Information and Communication Systems Wireless and wired communications systems, surveillance cameras, satellite communications equipment, satellites, radar equipment, antennas, missile systems, fire control systems, broadcasting equipment, data transmission devices, network security systems, information systems equipment, systems integration, and others Electronic Devices Power modules, high-frequency devices, optical devices, LCD devices, microcomputers, system LSIs, and others Home Appliances LCD televisions, projection TVs, display monitors, projectors, blu-ray disc recorders, room air conditioners, package air conditioners, air-to-water heat pump boilers, refrigerators, electric fans, ventilators, photovoltaic power generation sys- tems, hot water supply systems, LED lamps, fluorescent lamps, indoor lighting, compressors, chillers, dehumidifiers, air purifiers, showcases, cleaners, rice cookers, microwave ovens, IH cooking heaters, and others Others Procurement, logistics, real estate, advertising, finance and other services Intersegment transactions are conducted generally at the price that the Company’s management recognizes as approximate arm's length price. Operating income (loss) in Segment Information is measured in a manner consistent with consolidated oper- ating income. Segment Information Segment information in the years ended March 31, 2013, 2012 and 2011 are as follows: As of and for the year ended March 31, 2013 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income (loss) II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures ¥1,049,982 8,195 1,058,177 973,037 ¥ 85,140 ¥918,123 9,734 927,857 867,265 ¥ 60,592 ¥491,792 30,630 522,422 520,831 ¥ 1,591 ¥142,961 21,104 164,065 169,645 ¥ (5,580) ¥799,817 21,481 821,298 801,998 ¥ 19,300 ¥164,509 425,857 590,366 571,576 ¥ 18,790 ¥3,567,184 517,001 4,084,185 3,904,352 ¥ 179,833 ¥ — ¥3,567,184 — 3,567,184 3,415,089 ¥ 152,095 (517,001) (517,001) (489,263) ¥ (27,738) ¥1,134,443 ¥863,477 ¥486,183 ¥132,793 ¥668,313 ¥213,989 ¥3,499,198 ¥ (88,788) ¥3,410,410 26,274 46,477 24,769 11,573 25,821 6,393 141,307 143 39,449 — 55,824 — 19,706 2,404 13,732 1,212 27,869 558 6,913 4,317 163,493 — — — 141,307 4,317 163,493 68 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 As of and for the year ended March 31, 2012 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total As of and for the year ended March 31, 2011 I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures ¥1,018,949 8,166 1,027,115 942,195 ¥ 84,920 ¥967,779 10,601 978,380 877,188 ¥101,192 ¥489,824 26,530 516,354 495,042 ¥ 21,312 ¥170,412 30,387 200,799 197,214 ¥ 3,585 ¥821,270 28,004 849,274 826,916 ¥ 22,358 ¥171,234 440,385 611,619 591,271 ¥ 20,348 ¥3,639,468 544,073 4,183,541 3,929,826 ¥ 253,715 ¥ — ¥3,639,468 — 3,639,468 3,414,024 ¥ 225,444 (544,073) (544,073) (515,802) ¥ (28,271) ¥1,064,369 ¥855,710 ¥477,646 ¥147,926 ¥636,835 ¥191,056 ¥3,373,542 ¥ 18,109 ¥3,391,651 24,365 43,380 29,036 11,207 26,678 5,480 140,146 — 30,269 — 56,487 — 22,116 2,429 21,424 1,110 35,160 243 5,620 3,782 171,076 — — — 140,146 3,782 171,076 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total ¥1,019,270 8,479 1,027,749 944,694 ¥ 83,055 ¥921,667 5,335 927,002 826,913 ¥100,089 ¥465,688 22,227 487,915 474,172 ¥ 13,743 ¥149,623 26,287 175,910 170,009 ¥ 5,901 ¥911,788 12,690 924,478 882,470 ¥ 42,008 ¥177,295 432,121 609,416 594,941 ¥ 14,475 ¥3,645,331 507,139 4,152,470 3,893,199 ¥ 259,271 ¥ — ¥3,645,331 — 3,645,331 3,411,570 ¥ 233,761 (507,139) (507,139) (481,629) ¥ (25,510) ¥1,030,968 ¥806,494 ¥369,813 ¥139,333 ¥695,730 ¥164,719 ¥3,207,057 ¥ 125,622 ¥3,332,679 21,076 40,193 16,123 10,414 25,280 5,616 118,702 — 22,582 — 35,989 42 12,123 — 15,130 1,879 29,139 2,084 3,323 4,005 118,286 — — — 118,702 4,005 118,286 U.S. dollars (thousands) As of and for the year ended March 31, 2013 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total I Net sales and operating income Sales: (1) External customers $11,170,021 (2) Intersegment 87,181 Net sales 11,257,202 Operating costs 10,351,457 Operating income (loss) $ 905,745 $9,767,266 103,553 9,870,819 9,226,223 $ 644,596 $5,231,830 $1,520,861 224,511 1,745,372 1,804,734 $ 16,925 $ (59,362) 325,851 5,557,681 5,540,756 $8,508,692 $1,750,096 $37,948,766 $ — $37,948,766 — 5,500,011 37,948,766 43,448,777 36,330,734 41,535,660 $ 205,319 $ 199,894 $ 1,913,117 $ (295,085) $ 1,618,032 (5,500,011) (5,500,011) (5,204,926) 4,530,394 6,280,490 6,080,596 228,521 8,737,213 8,531,894 II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures $12,068,543 $9,185,925 $5,172,160 $1,412,691 $7,109,713 $2,276,479 $37,225,511 $ (944,554) $36,280,957 279,511 494,436 263,500 123,116 274,691 68,011 1,503,265 1,521 419,670 — 593,872 — 209,638 25,575 146,085 12,894 296,479 5,936 73,543 45,926 1,739,287 — — — 1,503,265 45,926 1,739,287 Notes: 1 The amount of unallocatable R&D expenditure included in “Eliminations and other” on “Operating costs” for the years ended March 31, 2013, 2012 and 2011 are ¥27,738 million ($295,085 thousand), ¥28,271 million and ¥25,510 million, respectively. 2 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2013, 2012 and 2011 are ¥126,212 million ($1,342,681 thousand), ¥211,012 million and ¥267,159 million, respectively, and those amounts are mainly the Company’s deposit in bank. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 69 Geographical Information Sales to external customers by the location of customers, and long-lived assets by the location of the Company and its subsidiar- ies as of and for the years ended March 31, 2013, 2012 and 2011 are as follows: As of and for the year ended March 31, 2013 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,335,713 North America ¥262,706 Asia (excluding Japan) ¥604,335 65.5% 7.4% 516,568 27,663 16.9% 90,798 Europe ¥280,126 7.8% 14,160 Others ¥84,304 Overseas total ¥1,231,471 Consolidated total ¥3,567,184 2.4% 2,692 34.5% 135,313 100.0% 651,881 As of and for the year ended March 31, 2012 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,419,275 North America ¥239,566 Asia (excluding Japan) ¥590,890 66.5% 6.6% 505,529 12,550 16.2% 66,488 Europe ¥304,233 8.4% 13,127 Others ¥85,504 Overseas total ¥1,220,193 Consolidated total ¥3,639,468 2.3% 2,235 33.5% 94,400 100.0% 599,929 As of and for the year ended March 31, 2011 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,416,090 66.3% 488,524 North America ¥251,071 Asia (excluding Japan) ¥603,261 6.9% 8,055 16.6% 57,465 Europe ¥289,440 7.9% 13,481 Others ¥85,469 Overseas total ¥1,229,241 Consolidated total ¥3,645,331 2.3% 2,154 33.7% 81,155 100.0% 569,679 As of and for the year ended March 31, 2013 U.S. dollars (thousands) Overseas Sales to external customers % of total net sales Long-lived assets Japan $24,848,011 North America $2,794,744 Asia (excluding Japan) $6,429,096 Europe $2,980,064 Others $896,851 Overseas total $13,100,755 Consolidated total $37,948,766 65.5% 7.4% 16.9% 7.8% 2.4% 34.5% 100.0% 5,495,404 294,287 965,936 150,639 28,638 1,439,500 6,934,904 Notes: The major countries and regions included in each segments are as follows: (1) North America : United States, and Canada (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, and Indonesia (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, and Italy In addition to the disclosure requirement of FASB ASC Topic 280 “Segment Reporting”, the Company discloses the following information as supplement. Geographical Information Based on the Location of the Company and Its Subsidiaries As of and for the year ended March 31, 2013 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income (loss) II Assets ¥2,561,242 502,772 3,064,014 2,947,091 ¥ 116,923 ¥2,594,608 ¥233,548 14,557 248,105 249,849 ¥ (1,744) ¥210,356 ¥450,791 173,933 624,724 588,552 ¥ 36,172 ¥559,138 ¥281,400 8,533 289,933 285,406 ¥ 4,527 ¥184,872 ¥40,203 52 40,255 38,046 ¥ 2,209 ¥34,043 ¥3,567,184 699,847 4,267,031 4,108,944 ¥ 158,087 ¥3,583,017 ¥ — (699,847) (699,847) (693,855) ¥ (5,992) ¥(172,607) ¥3,567,184 — 3,567,184 3,415,089 ¥ 152,095 ¥3,410,410 70 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 As of and for the year ended March 31, 2012 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets ¥2,675,473 511,246 3,186,719 3,007,267 ¥ 179,452 ¥2,594,841 ¥206,359 16,184 222,543 219,204 ¥ 3,339 ¥177,694 ¥416,574 166,314 582,888 548,668 ¥ 34,220 ¥448,911 ¥300,891 9,106 309,997 303,678 ¥ 6,319 ¥169,676 ¥40,171 13 40,184 36,279 ¥ 3,905 ¥28,783 ¥3,639,468 702,863 4,342,331 4,115,096 ¥ 227,235 ¥3,419,905 ¥ — (702,863) (702,863) (701,072) ¥ (1,791) ¥ (28,254) ¥3,639,468 — 3,639,468 3,414,024 ¥ 225,444 ¥3,391,651 As of and for the year ended March 31, 2011 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets ¥2,685,219 491,386 3,176,605 2,999,251 ¥ 177,354 ¥2,552,679 ¥216,536 13,422 229,958 228,595 ¥ 1,363 ¥155,972 ¥419,557 164,270 583,827 540,093 ¥ 43,734 ¥430,965 ¥285,862 8,090 293,952 286,122 ¥ 7,830 ¥183,427 ¥38,157 43 38,200 33,871 ¥ 4,329 ¥26,958 ¥3,645,331 677,211 4,322,542 4,087,932 ¥ 234,610 ¥3,350,001 ¥ — (677,211) (677,211) (676,362) ¥ (849) ¥ (17,322) ¥3,645,331 — 3,645,331 3,411,570 ¥ 233,761 ¥3,332,679 As of and for the year ended March 31, 2013 U.S. dollars (thousands) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income (loss) II Assets 5,348,638 32,595,894 31,352,032 $27,247,256 $2,484,553 $4,795,649 $2,993,617 $427,691 $37,948,766 $ — $37,948,766 — 37,948,766 36,330,734 $ 1,243,862 $ (18,553) $ 384,808 $ 48,160 $ 23,500 $ 1,681,777 $ (63,745) $ 1,618,032 $27,602,213 $2,237,830 $5,948,277 $1,966,723 $362,159 $38,117,202 $(1,836,245) $36,280,957 (7,445,181) (7,445,181) (7,381,436) 7,445,181 45,393,947 43,712,170 1,850,351 6,646,000 6,261,192 154,862 2,639,415 2,657,968 90,777 3,084,394 3,036,234 553 428,244 404,744 Notes: 1 The Company has identified 5 location segments based on geographical proximity, similarity in market, and interconnectedness within business activities. 2 The major countries and regions included in each segments are as follows: (1) North America : United States, and Canada (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, and Indonesia (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, and Italy 3 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2013, 2012 and 2011 is ¥126,212 million ($1,342,681 thousand), ¥211,012 million and ¥267,159 million, respectively, and those amounts are mainly the Company’s deposit in bank. (23) SUBSEQUENT EVENT On June 27, 2013, the date the consolidated financial statements were issued, there are no incidence of subsequent events that would give material effects on the Company’s consolidated financial position and results of operations. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 71 Independent Auditors’ Report 72 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 Corporate Data / Shareholder Information (As of March 31, 2013) Corporate Data Mitsubishi Electric Corporation Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo 100-8310, Japan Tel: +81(3)3218-2111 Established: January 15, 1921 Paid-in Capital: ¥175,820 million Shares issued: 2,147,201,551 shares Employees: 120,958 Major Shareholders The Master Trust Bank of Japan, Ltd. (Trust Account) State Street Bank and Trust Company Japan Trustee Services Bank, Ltd. (Trust Account) Meiji Yasuda Life Insurance Company Nippon Life Insurance Company Mitsubishi Electric Group Employees Shareholding Union SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS The Bank of Tokyo-Mitsubishi UFJ, Ltd. Japan Trustee Services Bank, Ltd. (Trust Account 4) The Chase Manhattan Bank, N.A. London S.L. Omnibus Account Annual Meeting The annual meeting of shareholders of the Corporation is regularly held in June each year. Additionally, special meeting of shareholders may be held as necessary. Stock Exchange Listings Japan: Tokyo Europe: London Number of Shares (thousands) Percentage of Total 160,862 117,118 102,394 81,862 72,439 52,391 48,014 36,822 33,178 32,387 7.5% 5.5% 4.8% 3.8% 3.4% 2.4% 2.2% 1.7% 1.5% 1.5% Distribution of Shareholders Other Corporations 6.4% Traders of Financial Instruments 1.1% Foreign Corporations 32.3% Financial Institutions 42.8% Individuals and Others 17.4% Stock Price (Yen) 1,500 1,200 900 600 300 0 ’10/4 Mitsubishi Electric’s Stock Price Nikkei Stock Average ’11/4 ’12/4 The Nikkei Stock Average is based on information copyrighted by Nihon Keizai Shimbun, Inc. 20,000 15,000 10,000 5,000 ’13/4 Nikkei Stock Average (Yen) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2013 73 Please address inquiries for further information to: Mitsubishi Electric Corporation, Corporate Finance Div. Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo 100-8310, Japan Phone: 81-3-3218-2391 X-X01-3-C9215-A　HQ1307〈MDOC〉 

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