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Annual Report 2012 For the Year Ended March 31, 2012
Annual Report 2012For the Year Ended March 31, 2012
・Performance in the Year Ended March 31, 2012
・Forecast for the Year Ending March 31, 2013
・Dividend Policy
・About the Company Name Change
Contents
01
02
07
16
08
10
14
12
37
Panasonic Information Systems Co., Ltd. ANNUAL REPORT 2012
Consolidated Financial Highlights
Message from the President
“All for the Customer”
Revisions to the Medium-Term Management Plan
Financial Section
16 Management’s Discussion and Analysis
18 Risk Factors
20 Consolidated Balance Sheet
22 Consolidated Statement of Income and Comprehensive Income
23 Consolidated Statement of Changes in Equity
24 Consolidated Statement of Cash Flows
25 Notes to Consolidated Financial Statements
36 Independent Auditors’ Report
Business Overview
Introduction Examples
Corporate Governance
CSR
Corporate Data / Stock Information
Cautionary Statement with Respect to Forward-Looking StatementsThis annual report contains forward-looking statements that reflect the Panasonic Information Systems Group’s plans, business strategies and targets. These statements are in accordance with assumptions and beliefs determined by management based on currently available information and involve uncertainties and changes in the business environment at home and abroad. Actual results and business performance may differ materially from these statements.
Annual Report 2012 1
(Millions of Yen) (Millions of Yen / %) (Millions of Yen / %) (Yen)
Net Sales
39,066 37,320 36,650 36,373
Net Income Basic Net Income per Share
266.78 261.13240.51 242.25
209.02
Operating Income (Millions of Yen)Operating Income to Net Sales (%)
4,877
12.5
4,371 4,2554,205
2008 2009 2010 2011 20122008 2009 2010 2011 20122008 2009 2010 2011 2012 2008 2009 2010 2011 2012
2,842 2,7832,563 2,581
2,227
12.4 12.3 11.711.711.9
4,63234,221
Operating Income/Operating Income to Net Sales
Panasonic Information Systems Co., Ltd. (formerly, Panasonic Electric Works Information Systems Co., Ltd.) and consolidated subsidiaries Years Ended March 31
Consolidated Financial Highlights
Millions of YenThousands of U.S.
Dollars (Note 1)
2012 2011 2010 2009 2008 2012
Net sales ¥ 36,373 ¥ 34,221 ¥ 36,650 ¥ 37,320 ¥ 39,066 $ 443,573
Operating income 4,255 4,205 4,371 4,632 4,877 51,890
Net income 2,227 2,581 2,563 2,783 2,842 27,159
Net cash provided by operating activities 3,834 3,154 4,483 3,864 2,848 46,756
Net cash provided by (used in) investing activities 6,908 （2,862） （2,829） （3,866） （1,921） 84,244
Net cash used in financing activities （903） （821） （863） （710） （639） （11,012）
Cash and cash equivalents 14,069 4,230 4,759 3,968 4,679 171,573
Total assets 29,012 27,317 25,146 23,211 21,185 353,805
Equity 22,859 21,359 19,659 17,604 15,552 278,768
Yen U.S. Dollars (Note 1)
Basic net income (Note 2) ¥ 209.02 ¥ 242.25 ¥ 240.51 ¥ 261.13 ¥ 266.78 $ 2.55
Cash dividends 65.00 65.00 65.00 75.00 65.00 0.79
Operating income to net sales 11.7% 12.3% 11.9% 12.4% 12.5%
Return on equity 10.1% 12.6% 13.8% 16.8% 19.7%
Equity ratio 78.8% 78.2% 78.2% 75.7% 73.3% Notes: 1. Amounts expressed in U.S. dollars are calculated using the exchange rate prevailing on March 31, 2012 of ¥82 to US $1.00. 2. Diluted net income per share is not indicated here, because there are no potentially dilutive shares.
2 Panasonic Information Systems Co., Ltd.
Message from the President
“All for the Customer”To fulfill our passion for providing ever better products and services, we will pull together to surmount all
difficulties and continue to move forward.
We value our DNA as a manufacturer and spirit of challenge.
To ensure that we provide our “all for the customer,” we will marshal our forces behind our singleness of
purpose.
July 1, 2012 The Company’s name changed to Panasonic Information Systems Co., Ltd.
The Company was established in 1999 when the information system department of the former Matsushita Electric Works, Co., Ltd.,
became independent. For some 50 years since that time, based on our technical expertise we have offered total solutions for information
systems from planning and designing to development, operation and maintenance.
Our strength lies in our on-site capabilities cultivated by staying closely in tune with site needs, solving problems through trial and error.
We strive to deliver useful solutions from the customer’s perspective.
Annual Report 2012 3
4 Panasonic Information Systems Co., Ltd.
Performance in the Year Ended March 31, 2012
Forecast for the Year Ending
March 31, 2013
During the fiscal year ended March
31, 2012, the Japanese economy
experienced a gradual recovery from
the effects of the Great East Japan
Earthquake. However, the economy fell
short of a full-fledged rebound due to
such factors as the flooding in Thailand
and prolonged appreciation of the yen.
In the IT service industry, the experience
of disaster on an unprecedented scale
led to new act iv i ty as companies
revamped the i r IT st rateg ies. For
example, companies began making
increased use of data centers as one
aspect of their disaster countermeasures
and electricity conservation measures.
In this operating environment, the
Group persevered in accordance with
the themes outlined in its medium-term
management plan, which was formulated
in the f iscal year ended March 31,
2011, and in its second year during the
period under review. We concentrated
on reorganiz ing IT systems in l ine
with the Panasonic Group’s business
restructuring that went into effect in
January 2012. We also stepped up
efforts launched in the previous year to
improve our management constitution by
cutting costs and augmenting business
efficiencies.
In addition to reorganizing systems
re lated to the Panasonic Group’s
restructuring during the year, we won a
substantial number of orders for large-
scale projects from customers outside
the former Panasonic Electric Works
Group, leading to a significant increase
in System Solutions sales. We also took
on business in new areas, such as the
provision of cloud services.
As a result, in the fiscal year ended
March 31, 2012, net sales rose for the
first time in seven years, and operating
income expanded for the first time in
five years. Net income declined, owing
to the posting of an extraordinary loss
stemming from restructuring expenses,
but as in the preceding fiscal year we
awarded a dividend of ¥65 per share,
comprising a stable dividend of ¥55 and
a performance-tied dividend of ¥10.
Ou r o rde r back log was down
substantially as of March 31, 2012,
partly because we had completed some
of the large-scale projects related to the
Panasonic Group’s restructuring by the
end of the fiscal year. We have already
commenced numerous projects for
the fiscal year ending March 31, 2013,
and we believe that completing these
projects by the end of the term will be
important.
The fiscal year ending March 31, 2013,
is the final year for our medium-term
management plan. Business conditions
are altogether different now than they
were in April 2010, when we formulated
this plan. For example, the surge in
popularity of cloud computing has
led to structural changes in corporate
IT strategies and investments. The
reorganization of the Panasonic Group
is one such example. In the fiscal year
ending March 31, 2013, we plan to
respond to these changes through the
initiatives outlined below.
Augmenting Sales in the General
Market
In line with the reorganization of the
Panasonic Group, in the fiscal year
Message from the President
2008 2009 2010 2011 2012
(Millions of Yen)
34,22136,373
39,06637,320 36,650 System and
CommunicationsEquipmentUp 7.5% year on year
System ServicesUp 0.4%year on year
System SolutionsUp 25.7% year on year
23,665 23,789 23,045 22,155 22,244
8,349
7,052 5,951 6,6475,699
6,125
7,580 6,958 6,367 8,0048,004
40,000
30,000
20,000
10,000
0
Pricedrop
Increase in develop-
ment cost
Higherinvestment
cost
Salesincrease
Stream-lining
2011 2012
(Millions of Yen)
-500-357
-676 +837
+745
4,205 4,255
Net Sales by Sales CategoryThe increase in the System Solutions business contributed to the first rise in net sales in seven years.
Operating IncomeOwing to higher net sales and rationalization efforts, operating income improved for the first time in five years.
General market sales targets10,000
8,000
6,000
4,000
2,000
0 2011 2012(Target)2013
(Millions of Yen)
7,3548,000
10,000
6,707
“Former Panasonic Electric Works Group” and “Outside the former Panasonic Electric Works Group”Change in category to “Panasonic Group” and “general market”
Annual Report 2012 5
ended March 31, 2012, we changed
our classification of business, from
“Panasonic Electric Works Group” and
“outside the Panasonic Electric Works
Group” to “Panasonic Group” and
“general market.”
For the general market, our current
med i um- te rm managemen t p l an
focuses on five growth business areas.
Particularly in the cloud-related business,
during the fiscal year ended March 31,
2012, we received orders from large
manufacturing companies to configure
core systems for cloud services, which
was a major success for us. With
regard to ERP system configuration,
we earned high marks for our detailed
follow-up and support structure, which
we believe will lead to a steady increase
in orders. Furthermore, in cooperation
with the Panasonic Group we made
IT-based solut ion proposals for i ts
“comprehensive” solution business. The
ticketing system that we are in charge
of introducing has been implemented at
numerous venues, including aquariums,
large-scale amusement facilities and art
museums. We plan to more aggressively
promote this business, as believe it has
the potential for future growth.
Going forward, we have set the goal of
generating net sales of ¥10,000 million
in the general market, and we will use
these five growth business areas as the
springboard to further development. As
a first step toward this goal, in the fiscal
year ending March 31, 2013, we are
targeting net sales of ¥8,000 million in
the general market.
As a Member of the Panasonic Group
One of our most important projects in the
fiscal year ended March 31, 2012, was
the IT system reconfiguration related to
the restructuring of the Panasonic Group.
We recognize that this business had
extremely important implications for the
Panasonic Group and broader society, as
well. Resolved that we would succeed in
this project at all costs, our management
team was deeply involved from the very
outset as we took on initiatives related to
IT infrastructure, application configuration
and networks. As a result, by the time
the Panasonic Group commenced
operations in its new guise, the work that
we had been entrusted was in nearly
perfect operation.
Owing to this restructuring of the
Panasonic Group, however, not only did
our parent company change, but the
changes paved the way for us to cultivate
the huge Panasonic market. In the future,
in our efforts targeting the Panasonic
Group we believe it will be important
to pursue initiatives that contribute
to growth and development from the
perspect ives of both “operat ions”
and “business.” For example, if we
can leverage the technologies and
expertise that our group has cultivated
to propose IT reforms that wil l cut
costs for the Panasonic Group, we will
contribute to improvements in its overall
operating efficiency. At the same time,
if we can participate on the IT side of
the “comprehensive” business that
Panasonic is pursuing, our technologies
and expertise should help to grow its
business. Through initiatives such as
these, we plan to create and reinforce
a new type of partnership with the
Panasonic Group.
Strengthening Management Practices
Further
Fear of failure can sap an organization’s
will to take on new fields of business.
For this very reason, we believe that
consistently making our management
practices more robust is essential to
our ability to continue addressing new
challenges. During the fiscal year ending
March 31, 2013, we will concentrate in
particular on accelerating our recovery
of up-front investment in creating an
environment for cloud computing. We
will also improve development quality
in a b id to reduce the number of
unprofitable projects. Naturally, people
are a company’s most important asset,
and people are at the heart of the IT
business. Accordingly, we will persevere
in e f fo r ts to cu l t i va te our human
“resources.”
Acquire new large-scale projects with main productsStrengthen sales by collaborating with the Panasonic GroupProvide high-quality cloud services to the general market through the Osaka Central Data Center
Contribute to operations • Expand the value chain • Respond to globalization • Contribute to IT cost reductionsContribute to business • Participate in “comprehensive business” centered on the “100 arrows strategy”
Accelerate the recovery of up-front investment to create an environment for cloud computingImprove development quality to reduce the number of unprofitable projects
Expansion into the general
market
Bolstermanagementconstitution
Contribute to Panasonic
Business Development for the Year Ended March 31, 2013
6 Panasonic Information Systems Co., Ltd.
Dividend Policy
About the Company Name Change
We expect the Japanese economy to
remain in a recovery phase, prompted
by demand related to reconstruction
f o l l o w i n g t h e G re a t E a s t J a p a n
Earthquake and a temporary easing in
yen appreciation. Nevertheless, some
deep-rooted concerns continue to cast
a shadow on the economic horizon and,
if they materialize, could affect corporate
IT investment.
As the fiscal year ending March 31,
2013, will be the final year for our group’s
medium-term management plan, we will
step up initiatives designed to meet its
targets. Bearing these efforts in mind, in
the upcoming fiscal year we forecast net
sales of ¥38,000 million and operating
income of ¥4,300 million.
The Company considers the return
of profits to shareholders a priority.
While keeping in mind the need to
replenish internal reserves, reinforcing
our management foundation for long-
term growth, our aim is to ensure
steady dividends, taking a proactive
stance in linking dividends to financial
performance.
The Articles of Incorporation provide
that March 31, September 30, and
other days specified by the Board of
Directors shall be the record dates for
the dividends from surplus funds and
that the Board of Directors shall be the
decision-making body concerning the
dividends from surplus funds. For the
foreseeable future we plan to pay stable
annual dividends of ¥55 per share.
While taking into overall consideration
the fund-raising environment, financial
conditions and the payout ratio, we aim
to also reflect our consolidated operating
performance in dividends.
In the fiscal year ended March 31,
2012, based on our policy of a stable
dividend of ¥55 plus a performance-
linked dividend, we set total dividends
per share at ¥65. For the fiscal year
ending March 31, 2013, we plan to pay
stable interim and year-end dividends of
¥27.5, plus performance-tied dividends
of ¥5, bringing total dividends to ¥65 per
share.
Effective July 1, 2012, our company
name changed to Panasonic Information
Systems Co., Ltd. As is described earlier,
the past one to two years have involved
major changes, both inside and outside
the Company. The reason behind our
corporate name change was to augment
corporate value further through a faster
response to these changes.
One aspect of the Panasonic Group’s
growth strategy is the goal of becoming
an “green innovation company.” We aim
to play a part in this, and we will pursue
corporate initiatives accordingly.
Our name change embodies our role
as the IT company for the Panasonic
Group. To fill these shoes, we will need
to increase our presence even more than
we have in the past.
We will apply our efforts to even more
diverse themes than previously. To be
successful in these endeavors, we
will remain ever mindful of our spirit of
challenge and achieve greater corporate
solidarity as we move forward. We ask
for the ongoing guidance and support of
our investors as we face the challenges
that lie ahead.
July 2012
Dividends per share (Yen)Payout ratio (%)
2008 2009 2010 2011 2012
65.0
75.0
65.0 65.0 65.0
28.7
24.427.0 26.8
31.1
(%)(Yen)
Dividends per Share, Payout Ratio
Net Sales
Operating Income
Net Income
36,373
4,255
2,227
38,000
4,300
2,600
－11.7%
6.1%
－11.3%
6.8%
4.5%
1.1%
16.7%
2012 2013
Amount Amount Year-on-year increaseRatio tonet sales
Ratio tonet sales
（Millions of Yen）
Forecast for the Year Ending March 31, 2013
Kazuhiro MaegawaPresident
Forecast for the Year Ending
March 31, 2013
Message from the President
Annual Report 2012 7
Revising Our “Five Growth
Business Areas”
The med ium-term management
plan specifies five growth business
areas: infrastructure optimization, IT
operations service, design process
reform, system integration for core
funct ions and col laborat ion with
Panasonic Electric Works. The plan
targets sales of ¥5,800 million for these
five growth business areas in the fiscal
year ending March 31, 2013. However,
owing to the rapid changes taking
place in our operating environment,
we have revised the content of these
business areas.
1. Change “Infrastructure
Optimization” to “Nextructure
Business”
In slightly more than the last year, the
popularity of cloud computing has
surged. At the forefront of this trend,
which is expected to continue into
the future, is Japanese companies’
efforts involving security and business
continuity plans (BCPs). These focuses
are expected to continue driving the
transition to the cloud.
In “infrastructure optimization,”
we had promoted the business of
building infrastructure that employed
v i r tual izat ion technology. Taking
i n to accoun t the changes tha t
are occur r ing, we have rev ised
this category to the “Nextructure
business,” to which we have added
thin client solutions. This change
enables compatibility with multiple
devices, such as smartphones and
tablet computers. By also including
Desktop as a Service (DaaS*) and
other serv ices in our integrated
cloud proposals, we can respond to
increasingly diverse customer needs.
2. Collaboration with
the Panasonic Group
Owing to the Panasonic Group’s
restructur ing, we have changed
“collaboration with Panasonic Electric
Works” to “collaboration with the
Panason ic Group . ” The fo rmer
Panasonic Electric Works is the main
body in Panasonic Eco Solutions, and
during the year under review we jointly
proposed “comprehensive” solutions
for leisure facilities and environmental
monitoring systems, among others,
and have steadily built up a track
record in this area. Going forward, we
aim to increase the number of joint
proposals we make with Panasonic
Eco Solut ions. We a lso p lan to
collaborate in other domains.
3. Revise Numerical Targets
We have revised our numerical targets
for the abovementioned “five growth
business areas.” Refer to the following
table.
4,000
3,000
2,000
1,000
0
(Millions of Yen)
2011 2012 2013(Target)Infrastructure optimization
Thin client business
1,890
3,100
1,730
Five growth business areas + α
Nextructure business
IT operations service
Design process reform
System integration for core functions
Collaboration with the Panasonic Group
Total
2011
1,730
230
120
180
110
2,370
2012
1,890
700
270
390
330
3,580
2013
3,100
800
400
1,000
500
5,800
1
2
3
4
5
(Millions of Yen)
Target Amount for the Five Growth Business Areas
Five Growth Business Areas: “Infrastructure Optimization”→ Addition of the thin client business and conversion to the “Nextructure business”
Revisions to the Medium-Term Management Plan
Responding Swiftly in a Changing Environment
* Converting PC desktop environments to thin clients
(virtual desktop), providing cloud services.
8 Panasonic Information Systems Co., Ltd.
Business Overview
Business Model
System Services
● System operation services at data centers● Maintenance and operation of customer systems
Information systems have become indispensible for corporate management. Various business systems are being put in place to enable companies to operate 24 hours a day, 365 days a year. These operations play a vital role in business continuity. From two data center locations, the Osaka IDC and Osaka Central Data Center, the Group maintains the safety and security of customer systems while providing operation services that meet customer needs, including for cloud services.
Performance in the Year to March 31, 2012
Downward pressure on the price of services for existing customers continued, but net sales were up year on year, owing to the acquisition of new customers and a higher utilization rate at the Osaka Central Data Center. The gross margin (ratio of gross profits to net sales) was affected by downward pressure on the price of services. However, we boosted efficiency via thorough system operations management and shifted personnel to development products, improving the cost of sales. The gross margin improved year on year as a result.
Future Strategy
Hisashi Kurono,Managing Director
Going forward, in add i t ion to using data centers for disaster countermeasures and electricity conservation measures, Japanese companies will look to augment secur i ty and ensure bus iness continuity from the perspective of
curtailing IT investment and heightening convenience. As a result, business is expected to continue moving to the cloud. In response to accelerating demand for cloud services in the general market, we will leverage our Nextructure business and IT operations service. To conventional cloud services, we will add disaster recovery (DR*) and DaaS services, thereby attracting new customers and working to continue providing high-value-added services for existing customers. We will pursue information system infrastructure innovation and contribute to the Panasonic Group’s provision of “comprehensive business” IT support and efforts to reduce expenditures.* Refers to the recovery of systems that have been damaged by disaster, as well as
preventive equipment and functions, as well as operating structures.
New customersSystem proposal
System Services
System Solutions
System andCommunications Equipment
● System operation services at data centers●Maintenance and operation of customer systems
● Core system architecture solutions● IT infrastructure architecture solutions● Development / provision of proprietary packaged software
● Sales of computers, servers, and communications equipment● Network and facility construction
Solution proposal
New customers
61%
22%
17%
EnhancingStock-Typed Business
Offering Multivendor Services
Build stronger relationships
Net Sales（Millions of Yen）Operating Margin（％）
2008 2009 2010 2011 2012
23,665 23,789 23,04522,155 22,244
20.321.5 20.7 19.9 20.7
（%）（Millions of Yen）
Net Sales, Operating Margin
Existingcustomers
Our
Cus
tom
ers
Breakdown of Net Sales
Breakdown of Net Sales
Breakdown of Net Sales
Annual Report 2012 9
System Solutions
System and Communications Equipment
● Core system architecture solutions● IT infrastructure architecture solutions●Development / provision of proprietary packaged software
● Sales of computers, servers, and communications equipment● Network and facility construction
We are seeing significant changes in the operating environment, and customers are looking for nothing short of a revolution in productivity and efficiency enhancements, as they continue to renovate their businesses to enhance their competitive advantage. We strive to deliver solutions strategies that make use of IT to assist our customers in these and all their goals.
When offering solutions to our customers, the Group also proposes the most suitable system equipment for the customer. We call this a “multivendor” approach.
We leverage a track record we have cultivated over our long history of operations in Japan and overseas, by testing every device available on the market for adoption. Based on our own experience, we confidently propose flexible combinations not tied to specific manufacturers.
Performance in the Year to March 31, 2012
During the year, we provided core systems for a leading constructor of homes and worked on a Web system for a leading communications company. In the area of in-house software, we worked aggressively to expand sales of our workflow packages. We also continued to take part in projects involving IT system reconfiguration in relation to the Panasonic Group’s restructuring. As a result, net sales substantially exceeded the previous year’s figure. The gross margin decreased year on year, owing to volume discounts on large-scale projects and increased development costs on some projects.
Future Strategy
Akira Hisano,Managing Director
In the general market, we will target vigorous medium-sized companies with businesses tailored to specific industries and sectors. I n the bus iness o f sys tem integration for core functions, we will create industry-specific templates for the medical equipment and
telecommunications sectors, aiming to develop solutions that fit customers’ needs more precisely. We will also provide IT support for business startups by energetic customers in environmental businesses and those that are aiming for IPOs. Our sales of sales management solutions for leisure facilities will target operators of art museums, natural history museums, aquariums and amusement facilities. We will combine our leisure facility ticketing system with Panasonic products to maximize synergies and promote the “comprehensive business strategy.”
Performance in the Year to March 31, 2012
Net sales increased during the year, owing to the sale of peripheral devices in tandem with the introduction of large-scale thin-client systems to local government bodies and favorable results in other areas. The gross margin was down year on year, but remained high as we continued to make high-value-added proposals.
Future Strategy
Business demand for smartphones, tablet computers and other devices is growing rapidly. With the introduction of cloud services, we expect demand for multi-device compatibility to continue rising. We plan to make integrated proposals designed to meet customers’ needs, and we expect to maintain a high level of profitability as a result of these high-value-added offerings.
2008 2009 2010 2011 2012
7,0526,647
5,6996,125
15.016.417.2 17.9 16.2
5,951
Net Sales（Millions of Yen）Operating Margin（％）
（%）（Millions of Yen）
2008 2009 2010 2011 2012
8,3497,580
6,958 6,367
8,004
20.2
15.418.4 24.9 19.2
Net Sales（Millions of Yen）Operating Margin（％）
（%）（Millions of Yen）
Net Sales, Operating Margin
Net Sales, Operating Margin
10 Panasonic Information Systems Co., Ltd.
Introduction Examples
Key Introduction Examples
This section introduces some of the services and solutions that we provided to customers in the fiscal year ended March 31, 2012.
Fuji City Office
Using Virtual Desktop to Create a Safe and Secure PC Environment for School Personnel
Solution Provided: Virtual Desktop Solution
Introduction Background and Issues
In the summer of 2010, personal computers were distributed to
some 1,200 employees of elementary and junior high schools
in the city of Fuji. However, the city needed to introduce
measures for lowering the burden of operations management
and protect the security of personal data of the schools’ pupils
and students. We addressed this situation by virtualizing the
PC environment. By handling all data on servers, we reduced
the operations management burden, and created a safe and
secure environment whereby no data was stored on the PCs
themselves.
Highlights
This project, which was moving along steadily, was affected
by the Great East Japan Earthquake. Although spared
major disaster, Fuji is in a region where rolling blackouts
were implemented, which complicated plans to complete
configuration as planned by summer. The city of Fuji resolved
to complete the job by August, when high demand for electrical
NIDEC CORPORATION (Nidec)
Introducing Nextructure Cloud ServicesThis Group, which is growing and expanding rapidly on a global
basis, needed to create a robust IT infrastructure and desired pay-
as-you go cloud services that were safe and secure. To achieve this,
we proposed Nextructure cloud services, providing highly reliable
architecture using a Processing Area Network (PAN) that is highly
flexible and reliable, and a flexible cloud service payment system.
International Christian University (ICU)
Introducing a Thin Client SolutionICU had introduced a thin client system in 2005, but the university
needed to install additional applications, improve operating efficiency and
shorten the time required for backups. ICU accorded high marks to the
performance and quality of the system we had introduced in 2005, so
we proposed that they continue employing a thin client system featuring
shorter operating times and improved efficiency.
Located in eastern Shizuoka Prefecture at the foot of Mt. Fuji, the city of Fuji has a population of approximately 260,000. The city is known for its beautiful natural surroundings, as well as its educational focus.
http://www.city.fuji.shizuoka.jp/
power was likely to make operations difficult. The Company
put the full extent of its technologies and expertise to work
in response to this requirement. In the end, we were able to
complete the job in only one and a half months.
Results
Service commenced on August 1, 2011. Although the job was
large in scope—creating a virtual desktop environment for
1,200 computers—activity proceeded apace, with no major
glitches. Because of a rapid increase in computer use by
school employees, we expanded remote access, centering on
Sundays. As a virtual desktop environment, the system offers
the flexibility to work from any location, allowing more effective
use of time and better operational efficiency. As no data is
retained on personal computers, there is no danger of students’
marks and personal information being leaked. Therefore, from a
security perspective the system was a major improvement.
Overview of the Virtual Desktop
Forwarded to desktop screenAt work Actual processingperformed on
the server
Desktop environment
Does not take up workplace space
Raises operational ef�ciency
Data not resident on the personal computer Improves security
No maintenance ofindividual terminals
Reduces operations management burden
At home
Annual Report 2012 11
KYOTO AqUARIUM
Providing a Speedy and Smooth Ticketing System That Leaves More Time for Enjoyment
Solution Provided: Ticketing System
Introduction Background and Issues
The aquarium wanted to allow visitors as much time as possible
to enjoy their facility without having to wait in crowds. To
surmount this problem, the facility needed a high-end ticketing
system that would issue tickets quickly and operate superlatively.
As the core of this overall system, the facility aimed to link
its group management and financial accounting systems to
boost operational efficiency and provide management analysis.
Furthermore, the core aquarium management system needed
to be constructed on an outsourced backbone for safety and
expandability, to simplify future expansion of operations.
Highlights
We constructed a broad information system covering the entire
aquarium. In addition to a ticket issuance system, our system
encompassed a group reservation system, in-facility digital
signage and the financial accounting system. Our most difficult
challenge lay in trying to gain a big-picture understanding of
the overall system while communicating the flow of operations.
We decided to create a system that would reflect the needs
Located within Kyoto’s Umekoji Park, this aquarium—one of the biggest inland aquariums in Japan—opened its doors in March 2012. The aquarium is noted for being the first in Japan to use completely artificial seawater in its tanks (excluding freshwater tanks).
http://www.kyoto-aquarium.com/
of workers without imposing undue rigidity on operations.
In January 2012, two months prior to opening, we set up a
help desk within the facility. In this manner, we were able to
interact with employees and resolve issues through repeated
operations. This approach helped to eliminate uncertainties
prior to opening.
Results
The aquarium opened on March 14, 2012, attracting nationwide
attention. The “one-year passport,” which allows free entrance
for a full year, was a huge hit, surpassing initial expectations.
Sales on the opening day were particularly high, with some
3,000 tickets issued, but the system performed smoothly in
issuing all tickets throughout the day. During the nine-day
Golden Week holiday period, approximately 145,000 people
visited the facility, and our system continued to operate trouble-
free. The aquarium plans to use the data accumulated from
product sales and on ages of entrants in the planning of future
business and events.
TOYOTA DIGITAl CRUISE, INC.
Introducing “actbrain” as an e-Learning Service Backbone SystemAs the company that provides IT infrastructure support for the Toyota Group, Toyota Digital
Cruise consulted with us about specific training procedures in order to provide information
security education to Group companies. They had begun considering an e-learning system,
but had a number of requirements, including the ability to resell and a provider that had
abundant experience and expertise in system introduction. The company ultimately decided
upon “actbrain,” after taking advantage of the introduction experience of Panasonic Electric
Works, our former parent company.
・ROZAI KOGYO KAISHA, lTD. Introduced virtual desktop service (DaaS)
・Tokushima Bunri University Introduced virtual desktop service (thin client)
・Participated in an experimental trial with Akita Next Generation Vehicle Verification Consortium “eneview” Operation Support System for Charging Stands
Other Key Introduction Examples
Total IT System Proposals for Leisure Facilities (Example)Cooperating not only in hardware, but strengthening our structure for proposing IT systems themselves as all-in-one solutions
Ticketing system
Admission information
Admissioninformation
Ticket issuing information
Selling information
Sales information
Salesinformation
Ticket issuing information
Reservation information
Selling informationGroup management
system
Credit card payment terminal
Kiosk terminal
Digital signage
Sales and inventory management systems
Financial accounting system
Entrance gate system
Visitor number and sales amountmonitoring
Billing information
Inputinformation
Information
Information
12 Panasonic Information Systems Co., Ltd.
Corporate Governance
President and Representative Director Kazuhiro MaegawaVice President and Representative Director Maki OkajimaManaging Director Akira Hisano Managing Director Hisashi Kurono Director Shuichi Takazaki Director Tatsuo YoshikawaDirector Takahiro Nakagawa*1
Director Toshiya Hirono*1
Auditor Takayuki Takeda*2
1. Business Execution
and Supervision
2. Auditing
3. Controls
The Board of Directors meeting is held
regularly once a month and irregularly as
required to report on significant operating
policies, decisions on substantive matters,
and the execution of business and duties,
as well as statutory matters. Also, to
provide neutral and impartial supervision,
two of the eight directors are outside
directors.
Ac tua l bus iness i s execu ted by
execut i ve d i rec tors and execut i ves
under the leadership of the president in
accordance with policies that have been
decided by the Board of Directors to
clarify the responsibility and to sufficiently
demonstrate supervisory functions. Also,
for the purpose of unit ing the whole
Company as one through the discussion
and sharing of information necessary
for the smooth and rational execution of
business, we have established business
strategy meetings and management study
groups.
The Company’s auditing system is made
up of auditors and the Board of Auditors,
an inte rna l aud i t un i t as we l l as an
accounting auditor, and is conducted as
follows: to implement a varied and effective
audit, each carries out the management
audit from a different point of view together
with appropriate coordination.
(1) Board of Auditors and
the Auditors’ Inspection
The Board of Auditors is comprised of
auditors, audit plans, methods and so
forth, and reports on the implementation
status of the audit. The audit is mostly
taken from the point of view of legality
and is conducted on operations and the
f inancial condition by auditors based
on plans determined by the Board of
Auditors. Auditors also attend important
meetings such as that of the Board of
Directors and give recommendations and
advice from an independent standpoint.
To strengthen the functions of the auditors,
we also established an audit of f ice to
support the auditors’ professional duties,
and we consult with auditors regarding the
assessment of the office and its personnel
changes.
(2) Internal Audit
The Company established the division
with the aim to execute fair and efficient
business and maintenance of an internal
check system to preempt and prevent
any irregularities. The division conducts
its audit in line with the annual plan, and
the results are reported to the Board of
Directors.
(3) Accounting Auditor
C o n c e r n i n g t h e a u d i t u n d e r t h e
Companies Act and Financial Instruments
and Exchange Law, the Company has
entered into an audit contract with Deloitte
Touche Tohmatsu LLC.
We believe developing a sound business
and mainta ining customers’ trust in
our business are indispensible to the
growth of the Company, so with the
goal of establishing a regulated business
environment, we have assigned a board
member to take charge of internal controls
(CSRM*). We have also established such
groups as corporate ethics and information
security management committees that will
deploy concrete measures companywide
based on the content of discussions.
*CSRM: Combining CSR (Corporate Social Responsibility) and Risk Management.
Officers of the Company (As of July 1, 2012)
Achieving Swift and Appropriate Decision Making and Supervisory and Auditing Functions, as well as Business Controls
Auditor Makoto Iwahashi*2,*3
Auditor Mitsuhiro AoyamaExecutive Officer Keisuke TanakaExecutive Officer Hajime OnishiExecutive Officer Takashi MaedaExecutive Officer Mitsuru MaekawaExecutive Officer Hiroyoshi MaruyamaExecutive Officer Osamu Mizokoshi*1 Outside director *2 Outside auditor*3 Appointed as an independent executive that meets the
requirement stipulated by the Tokyo Stock Exchange Group, Inc., that there be no danger of conflict of interest with general shareholders.
13Annual Report 2012
Appointment and Dismissal
Appointment and Dismissal Appointment and Dismissal
Appointment and Dismissal
Cooperation
CooperationAccounting Audit
Audit
Assistance
Supervision / Instruction
Supervision / InstructionInstruction
Control
Control
Internal Audit
General Meeting of Shareholders
Board of Directors Auditors Room
Internal Audit Division (Auditing)
Business Strategy Meeting
Business Review Meeting
Director in Charge of CSRM and Internal Control
Company-wide CommitteeCorporate Ethics Committee,
Information Security Management Committee, Other Committee
Accounting Auditors
President
Executive Division
Executive Directors Executive Of�cers
Board of Auditors
Takayuki Takeda,Auditor
Eye from Outside the Company
After many years of experience
in the accounting department at
Panasonic Electric Works (now,
Panasonic), I have served as
the Company’s standing auditor
(outside) for three years.
Our Board of Auditors, an “eye from outside the Company,”
comprises one standing auditor and two non-standing
auditors. One of the outside auditors (non-standing) has a
great deal of management experience in the IT industry in
which Panasonic IS operates.
During the Company’s fifth through eighth fiscal years, Mr.
Kuniaki Watanabe was appointed to this board. After working
at IBM Japan and GE, he served as president of DEC
Japan. Thereafter, he continued his career as the president
of major IT companies before setting up his own IT firm. Mr.
Makoto Iwahashi, who replaced Mr. Watanabe on the Board
of Auditors, will have served until June 2014. He became a
auditor following seven years as president of JFE Systems.
Both of these people brought to the Company a broad range
of experience, including their backgrounds as company
presidents. In addition to IT industry experience, they provided
advice and guidance to our Board of Auditors and Board of
Directors from an independent, industry-neutral standpoint.
With corporate governance the focus of increasing
Message from the Standing Auditor
Governance Structure
discussion recently, some parties have proposed making
outside directors mandatory and augmenting the authority of
auditors. Our company assigns multiple outside directors, as
well, and outside directors and auditors comment vigorously
at the Board of Directors meetings. Some changes in
corporate governance systems are necessary, but I believe
it is important to find ways for our current system to function
more effectively. To this end, as a standing auditor I make it
a point to ensure that non-standing auditors have access to
the same amount of information as standing directors and
auditors. They are provided with prior explanation on topics
for resolution by the Board of Directors and receive reports of
important internal meetings. This information provides them
with the decision-making materials they need to speak at the
Board of Directors meetings.
Our second “eye from outside the Company” involves
liaison with our accounting auditor. In addition to providing
Deloitte Touche Tohmatsu LLC with audit reports and
quarterly audit review reports, every month the standing
auditor, accounting auditor and Internal Audit Division meet to
exchange information and ideas.
Going forward, I aim to ensure that good communications
are maintained with outside auditors and the accounting
auditor, so that even if some impropriety arises, it can be
nipped in the bud early on.
14 Panasonic Information Systems Co., Ltd.
CSR
Compliance (Corporate Ethics)
As a Public Institution
For approximately 50 years since the
days of our predecessor, the information
systems division of Matsushita Electric
Works (its name at the time), we have
worked with the spirit of the words of
the founder of the Panasonic Group,
Konosuke Matsushita: “An enterprise
is a public institution” and “All for the
customer.”
“The mission as a business enterprise
is not just commercial pursuits, but to
devote ourselves to the progress and
development of society and the well-being
of people through our business activities,
thereby enhancing the quality of life
throughout the world.” This is the basis of
our corporate social responsibility (CSR)
activity.
Activities for Fairness
B a s e d o n t h e P a n a s o n i c G ro u p
management phi losophy, we try to
look beyond just complying with laws,
ordinances and rules to conduct fair and
honest business activities according to
conscience and good sense.
To thoroughly strengthen compliance,
we introduced and are developing a
corporate ethics program.
All for the Customer
Contributing to our customers’ business
leads to contributing to society. “To be
useful to the customer,” we always offer
dedication in our work through IT.
Coexistence with the Global
Environment
As IT equ ipment becomes more
prevalent and increasingly sophisticated,
power consumption is rising, and this is
becoming a major problem for the whole
of society. We use data centers that can
operate with lower power consumption
than before, and integrated servers that
use virtualization technology; we are
carrying out business operations that
consider the global environment at the
same time as utilizing our experience
with the latest IT. In such ways, we are
supporting our customers’ environmental
mitigation measures.
■ Promoting Compliance (Corporate Ethics)
The Company commenced its compliance
promotion activities in September 1, 2003,
through the introduction and development
of a corporate ethics program, through
which it conducts thorough activities
aimed at ensuring thoroughly fair corporate
activities (corporate ethics management).
■ Corporate Ethics Program1. Conducting Activities to Ensure
Universal Awareness of “Compliance
Guidelines”
To put the Panasonic Code of Conduct
in to pract ice , we have created a
Compliance Guidebook and distributed it
to all employees. The guidebook provides
a host of examples to help employees
hone their activities and sense of ethics
and to make judgments independently,
and is helping to instill a more thorough
understanding of compliance.
2. Employing e-learning for Thorough
Ethics Training
All employees undergo ethics training. We
have adopted an e-learning format, as we
believe that an accommodating learning
environment is important. The e-learning
system makes it easy to track employee
progress and confirm their understanding,
allowing more careful follow-up and
instilling compliance awareness more
thoroughly.
3. Establishment of a System to
Promote Corporate Ethics
We have in place a Corporate Ethics
Committee, which is chaired by the
president, and have appointed a director
to take charge of introducing and
promoting our corporate ethics program.
We have set up a Corporate Ethics
Secretariat to boost ethics awareness,
penetration and education within the
Company, and for each region we have
assigned corporate ethics leaders (mid-
level employees, approximately one for
each 40 employees) to instill a thorough
spirit of compliance.
4. Establishing a Corporate Ethics
Reporting line
We have put in place a Corporate Ethics
Reporting Line to encourage internal
reporting and as a place for consultation
in the event that an employee becomes
aware of activity that appears outside the
scope of ethical behavior. Available 24
hours a day, 365 days a year, the reporting
line is accessible via dedicated e-mail,
dedicated fax or by post. We have set up
a consultation-friendly environment and
expanded the line to users outside the
Company as well as inside. To protect the
rights of people making use of the line, we
strictly protect the identity of individuals
as well as reporting content, employing
due caution with regard to privacy and
Seeking to Contribute to Global Culture by Using IT Services to Enhance and Improve Societal Activities
15Annual Report 2012
handling. We also protect the privacy of the
personnel working at the reporting desk by
keeping their identities secret, as well.
5. Submitting a Commitment to
Corporate Ethics to All Employees
We require all employees to submit a
statement of commitment to corporate
ethics. This document is designed to
ensure compliance by encouraging each
employee to carry out their business
conscientiously and with common sense
in a spirit of fairness and sincerity. Going
forward, we plan to hone our corporate
sense of ethics so that we will remain
trusted by our customers, as we conduct
our work on the basis of this shared
conscientiousness, common sense and
spirit of fairness and sincerity.
We define “risk” as “factors that could
impair efforts to achieve our business
plans” and “the gap between social
expectations and corporate reality,” and
we conduct risk management initiatives
accordingly. Central to these activities is
the Risk Management Committee, which
is chaired by the president and reaches
throughout the Company, liaising with
each division and corporate function.
More specifically, in tandem with the
semi-annual formulation of business
plans we conduct risk assessments and
monitoring of each division and related
function. These activities are positioned
as one aspect of risk management
activities that respond to the Panasonic
Group’s global and across-the-Group
risk management.
Furthermore, we are formulating a
business continuity plan (BCP) in response
to risk from large-scale natural disasters.
We encourage all our employees to take
part in voluntary corporate citizenship
activities.
■ Eco-Cap CollectionThe Company’s management and
employees cooperate in collecting PET
bottle caps, which we send to the Ecocap
Movement, an NPO. The funds generated
through these recycling activities are
donated toward vaccines for people
in developing countries and to provide
disaster relief.
■ Fund-Raising ActivitiesThe Company’s managers and employees
work together on charity donation activities
to assist people affected by large-scale
seismic disasters and other calamities,
providing support to stricken regions via
such organizations as the Japanese Red
Cross Society and the United Nations High
Commissioner for Refugees (UNHCR).
■ Blood Donations and Bone Marrow Bank Registration
Because of Japan’s falling birthrate and
aging population, society faces a growing
need for blood transfusions, notably
for elderly people, but the number of
people in the younger age group that
typically donates blood is falling, resulting
in increasingly serious blood shortages
throughout Japan. To address this
shortage, each year we hold a blood
drive targeting our employees and in
cooperation with the Japanese Red Cross
Society Blood Center. During these blood
drives, we also encourage employees to
register with bone marrow banks.
■ Community Clean-up ActivitiesWe participate in the city of Osaka’s “Clean
Osaka” campaign. Through this activity,
the city of Osaka elicits participation from
citizens and volunteers in cleaning up
public spaces to maintain the city’s beauty.
Numerous employees participate in this
activity, clearing away trash from the areas
surrounding their offices.
The Company maintains a particular
focus on the appropriate management
of information, which we recognize as an
important social responsibility. In addition,
through ongoing quality improvement
efforts on both the operational and
developmental fronts, we are working to
strengthen our structure to ensure that
customers feel comfortable entrusting
their information systems to us.
Risk Management
Corporate Citizenship Activities
Increasing Information Security
and Quality
Major Charity Donation Activities
・Cyclones in Southern Myanmar (May 2008)・Great Sichuan Earthquake (May 2008)・Haiti Earthquake (January 2010)・Great East Japan Earthquake (March 2011)
16 Panasonic Information Systems Co., Ltd.
(Millions of Yen)Total Assets
2008 2009 2010 2011 2012
23,21125,416
27,317
21,185
29,012
Equity Ratio(%)
2008 2009 2010 2011 2012
73.375.7 78.2 78.2 78.8
2008 2009 2010 2011 2012
17,604
19,65921,359
15,552
22,859
(Millions of Yen)Equity
Financial Section / Management’s Discussion and Analysis
1.Financial Position
2.Assets, Liabilities and Net AssetsNet Sales
During the fiscal year ended March 31,
2012 (April 1, 2011, to March 31, 2012),
the Company focused on expanding
sales outside the Panasonic Electric
Works* Group and to restructuring IT
systems in preparation for the business
reorganization of the Panasonic Group.
As a result, net sales rose 6.3% during
the year, to ¥36,373 million.
Cost of sales, Gross Profit, Selling,
General and Administrative Expenses
During the year, we continued our efforts
to curtail costs and boost operating
efficiency. Cost of sales rose 7.5%, to
¥29,238 million. Gross profit rose ¥115
mill ion, or 1.6%, to ¥7,135 mill ion,
and the cost of sales ratio rose 0.9
percentage point, from 79.5% to 80.4%.
Sell ing, general and administrative
(SG&A) expenses rose 2.3% from the
preceding year, to ¥2,882 million. The
ratio of SG&A expenses to net sales
fell 0.3 percentage point, from 8.2% to
7.9%.
Operating Income, Other expense
Consolidated operating income rose
1.2%, to ¥4,254 mil l ion, whi le the
operating margin fell 0.6 percentage
point, to 11.7%. Other expense was
¥413 million. this was largely due to
the extraordinary loss for restructuring
expenses (of ¥451 million).The interest
coverage ratio rose from the previous
year’s 269.5 times to 269.9 times.
Net Income
Net income amounted to ¥2,227 million, fell
13.7% compared with the preceding year.
Assets
Within current assets, accounts receivable
on construction contracts rose ¥767 million
in line with progress on development
projects. Also, deposits paid to Panasonic
Corporat ion and other companies
increased by ¥1,337 million. Consequently,
as of March 31, 2012, current assets were
¥22,299 million, an increase of ¥1,766
million, or 8.6%, from one year earlier.
Fixed assets decreased ¥71 million, or
1.1% during the year, to ¥6,712 million
at fiscal year-end. This decline was
attributable to the depreciation of those
lease assets that were approaching the
end of their leasing agreements.
As a result, total assets were ¥29,012
million as of March 31, 2012, an increase
of ¥1,695 million, or 6.2%, from a year
earlier.
liabilities
Owing to the acquisition of equipment at
fiscal year-end, payables increased ¥453
million. This was the primary reason
for an ¥532 million, or 10.3% increase
in current liabilities during the year, to
¥5,717 million as of March 31, 2012.
Progress in the repayment of lease
obligations prompted a decrease in fixed
liabilities of ¥336 million, or 43.6%, to
¥436 million at fiscal year-end.
Equity
Owing to the posting of ¥2,227 million in
net income and the dividend payments
of ¥692 million—the sum of payments
for dividends awarded at the previous
fiscal year-end and the interim dividend,
equity amounted to ¥22,859 million on
March 31, 2012, up ¥1,499 million, or
7.0%, from one year previously.
* In January 2012, absorbed through merger with Panasonic
Corporation
17
ROA(%)
2008 2009 2010 2011 2012
23.521.3
18.216.3
15.2
ROE(%)
2008 2009 2010 2011 2012
19.7
16.8
13.812.6
10.1
Annual Report 2012
3.Cash Flows
4.Forecast for the Fiscal Year ending March 31, 2013
6.Research and Development
7.Capital Investment
5.Order Backlog
ROE/ROA
Return on equity (ROE) for the year
came to 10.1%, down from the previous
year’s figure. The main reason was
the recording of an extraordinary loss
stemming from restructuring expenses.
Return on assets (ROA) was 15.2%.
Cash Flows from Operating Activities
Net cash provided by operating activities
amounted to ¥3,834 million, ¥679 million
more than in the preceding year. Principal
factors included cash provided by
income before income taxes and minority
interests, of ¥3,842 million, depreciation
and amortization of ¥2,161 million, and
an increase in trade accounts payable,
which provided ¥408 million. Income
taxes paid used ¥1,855 million.
Cash Flows from Investing Activities
Net cash provided by financing activities
came to ¥6,908 million, compared with
¥2,862 million used in these activities
during the preceding fiscal year.
Primary reasons included ¥8,500
mi l l ion in income on the return of
deposits to Panasonic Corporation (after
netting out payments for deposits),
¥1,164 million for purchases of property
and equipment and ¥431 million for
purchases of software.
Cash Flows from Financing Activities
During the year, net cash used in
financing activities totaled ¥903 million,
¥82 million more than was used in these
activities in the preceding fiscal year.
Dividends paid of ¥692 million were the
principal use of cash.
Free Cash Flows
The aforementioned operating and
investing activities resulted in positive free
cash flows of ¥10,742 million, compared
with free cash flows of ¥292 million in the
previous year.
The Company’s forecast of consolidated
operating performance for the fiscal year
ending March 31, 2013 (April 1, 2012, to
March 31, 2013) is shown below.
Fiscal year ended March
31,2012(Millions of Yen)
Fiscal year ended March
31,2013(Millions of Yen)
Year-on-Yearincrease
(%)
Net Sales ¥36,373 ¥38,000 4.5%
Operating Income 4,255 4,300 1.1%
Net Income 2,227 2,600 16.7%
As of March 31, 2012, our order backlog
stood at ¥2,235 million, down 56.1%
from a year earlier. The main reason
for this decrease was the completion
of large-scale projects, such as the
configuration of IT systems in line with
the Panasonic Group’s restructuring, by
fiscal year-end.
The Group’s research and development
activities are mainly conducted at its
R&D Center. During the fiscal year ended
March 31, 2012, R&D expenditures
amounted to ¥129 mi l l ion, largely
for verifying the functionality of new
technologies and commercial licenses.
The new medium-term management
plan regards R&D activit ies for the
c rea t i on o f new bus inesses and
technologies as important measures, and
we plan to invest a total of ¥300 million
in these areas over a three-year period.
Capital investment in the year to March
31, 2012, amounted to ¥2,046 million.
Principal investments were for the
acquisition of high-capacity hardware
and the configuration of integrated server
environments, totaling ¥1,555 million. In
addition, ¥64 million was invested in the
development of an integrated IT asset
management system.
18 Panasonic Information Systems Co., Ltd.
Financial Section / Risk Factors
Items in this annual report concerning business conditions and financial conditions that may strongly affect investor decisions include the following risks. However, these do not cover all risks with respect to the Group and there may be other hard-to-predict risks not detailed in the material. The Group's business, performance and financial status may be adversely affected by various significant risk factors. Items regarding the future were determined by the Group as of the financial statement filing date (June 18, 2012).
Fluctuations in the Economic EnvironmentDemand for the Group’s products and serv ices may be affected by genera l economic trends mainly in Japan. Economic downturns and resulting declines in demand in the Japanese market may thus adversely affect the Group’s f inancial condit ion, operating results and cash flows.
Interest Rate FluctuationsInterest rate fluctuations may affect operating expense, interest expense and interest income, as well as the value of financial assets and liabilities, and may have an adverse impact on the Group’s business, performance and financial position.
Stock Price FallsThe Group holds Japanese stocks as investment securities, and decreases in their market value may necessitate the recognition of valuation losses. Furthermore, a decline in the valuation difference on available-for-sale securities may reduce net assets.
Competitive EnvironmentThe Group faces d i f f e ren t t ypes o f competitors in the information services industry, ranging from large international companies to relat ively smal l , rapidly growing companies. The Group actively makes investments and takes initiatives in strategic products and services. However,
investments or sales initiatives for a particular product or service may fail in comparison to competitors in terms of quantity, quality, and speed. Furthermore, competitors may have greater financial, technological and marketing resources than the Group.
Price CompetitionThe Group is subject to intense price competition in the information services industry, and this may make it difficult for the Group to determine prices for products and services to secure adequate profits. This downward pressure on prices may have a serious effect on securing the Group’s profits, and becomes especially noticeable when demand for products and services decreases. Prices of many of the Group’s products and services are expected to continue declining in the fiscal year ending March 31, 2013.
Competition in New TechnologiesThe Group may lose the ability to compete in new markets if it fails to correctly predict and develop the new technologies, products and services to meet future market needs.
Securing Capable Human ResourcesThe Group’s future success depends largely on its ability to retain skilled employees in the technical and management fields. The Group expects that it will be necessary to hire more personnel in the information services business field, but industry demand for skilled employees exceeds the supply, making competition for attracting and retaining these employees intense. Because of this severe competition for skilled employees, the Group may be unable to retain existing personnel or attract new talent. If this should happen, the Group’s business, performance and financial position could be adversely affected.
Business Alliances with Other Companies, etc.The Group develops its business by forming all iances with or strategic investments in other companies, and the strategic importance of partnering with third parties is increasing. In some cases, such partnerships are crucial to achieving the Group’s goal of introducing new products and services, but the Group may not be able to successfully collaborate or achieve expected synergies with its partners. In addition, these partners may change their business strategies and
it may become difficult for the Group to maintain these business partnerships. If any of the foregoing should happen, the Group’s businesses, performance and financial status could be adversely affected.
Procurement of Raw Materials, etc., and Purchase Price SurgesThe Group’s operations depend on obtaining high-qual i ty products and services in a t imely manner and in the necessary quantities, and we therefore select reliable suppliers. However, it may be difficult to change or increase suppliers, or switch to other products and services if the supply is interrupted or industry demand increases. This may adversely affect the Group’s businesses. Moreover, although the Group and suppliers decide purchase prices by contract, purchase prices may increase significantly due to changes in demand or for other reasons. Furthermore, some products and services are only available from a limited number of suppliers. If the Group is unable to procure such products and services, its businesses, performance and financial status may be adversely affected.
Capital Status and Financial Conditions of CustomersSome of the Group’s customers purchase products and services from the Group on payment terms that do not provide for immediate payment. If customers for whom the Group has substantial accounts receivable encounter financial difficulties and are unable to make payments on time, the Group’s businesses, performance and financial status may be adversely affected.
Risks Related to Future Plans, etc.The Group has announced its new medium-term management plan, which covers the period from April 1, 2010, through March 31, 2013, and an earnings forecast for the fiscal year ending March 31, 2013. However, the Group may fail to achieve all of the goals announced and/or the expected results.
Risks Related toEconomic Conditions
Risks Related to the Group’s Business Activities
19Annual Report 2012
Direct or Indirect Costs Related to Product liability or Warranty Claims Due to Defects in Products or Services The Group pays due attention to ensuring the quality of its products and services. However, the occurrence of defects in products or serv ices could make the Group liable for damages, including indirect damages, that are not completely covered by liability insurance and the Group could incur significant expenses. Moreover, negative publicity concerning these problems could impair the Group’s corporate image, and the Group’s businesses, performance and financial status may be adversely affected.
Intellectual Property Right ProtectionThe Group works to secure a competitive edge for i ts businesses by protecting intellectual property rights (IPRs) related to the technologies, products, and services it develops. However, rights may not be granted to provide adequate protection based on IPRs.
Furthermore, the Group may be unable to use or be forced to use on disadvantageous terms the technologies, products and services of third parties protected by IPRs when needed. As of March 31, 2012, the Group was using the IPRs of third parties under license from third parties for some of its products and services. However, in the future the Group may not be able to obtain the necessary licenses from third parties or may be able to obtain licenses only under disadvantageous terms.
Lit igation may also be necessary to defend the Group against IPR infringement claims brought by third parties or to enforce the Group’s IPRs. The Group may incur significant expenses and use significant management resources for such lawsuits. Furthermore, if third-party claims that the Group infringed on IPRs are upheld, the Group may cease to be able to use specific technologies, products and/or services, or be able to supply specific technologies, products and/or services, and may be liable for significant damages.
Changes in Account Standards and Tax SystemsThe Group’s business, performance and financial status may be adversely affected by the unforeseen application of new accounting standards and tax systems. Furthermore, differences in views with tax authorities on the Group’s tax returns could result in the Group being liable for more taxes than
expected.
Information leaksIn the normal course of business, the Group obtains information (including personal information) about customers and the like relating to privacy and creditworthiness. The Group pays due attention to safeguarding the confidentiality of this information and has implemented the greatest possible measures to prevent information leaks. However, the Group cannot rule out the possibility that such information may be leaked due to an accident or other inevitable cause. Such a leakage of information may result in the Group being held liable for damages to affected parties and may impair the Group’s corporate image. Moreover, there is a risk that the Group’s trade secrets may be misused by external parties. In such a case, the Group’s businesses, performance and financial status may be adversely affected.
losses Due to Other legal Restrictions, etc.The Group is subject to governmental regulations in Japan and other countries and regions in which it conducts its business. These inc lude government approvals required for conducting business and investments, laws and regulations governing national security, and export/import laws and regulations, as well as commercial, antitrust, intellectual property, financial transactions, worker protection, subcontractor protection, and business taxation laws and regulations. Tighter laws and regulations or stricter interpretations of them than in the past by authorities could place restrictions on the Group’s businesses or result in increased expenses for complying with them. The Group has taken measures to ensure that it is prepared to handle a compliance violation or other emergency through such efforts as establishing networks of emergency contacts and organizational bodies responsible for responses. However, the Group’s corporate image could be impaired and the Group’s businesses, performance and financial status could be adversely affected if its response is inadequate.
Effects of Disasters or Unpredictable EventsThe headquarters and major bases of the Group are located in Japan. The occurrence of a natural disaster such as an earthquake, flood or other unexpected event such as a fire, war or terrorist attack, infectious
disease outbreak, industr ial accident, malicious computer virus, breakdown or malfunction in the Group’s information system or communications network as a result of such events may result in serious damage to Group facilities, and the Group may have to stop operations at certain facilities and delay the provision of products and services.
The Group may incur considerable expenses for restoring damaged facilities, which could adversely affect the Group’s businesses, performance and financial position.
Pension liabilitiesThe Group has contributory, funded benefit pension plans covering substantially all employees in Japan who meet eligibility requirements. Revisions to experience assumptions and pension asset performance could result in an increase in unrecognized actuarial losses, leading to an increase in future net periodic benefit costs of these pension plans.
Fixed Asset ImpairmentThe Group has many fixed assets, such as property and equipment. Al l Group companies periodically review the recorded value of fixed assets on the balance sheet to determine if future cash flows to be derived from these assets will be sufficient to recover the residual values in accordance with account ing standards governing the impairment of fixed assets. If these assets cannot generate sufficient cash flows, impairment losses may have to be recognized.
Recognizing Uncertainties in Deferred Tax Assets and Income Taxes, etc.The Group evaluates the l ikel ihood of recognizing the tax benefits of deferred tax assets, based on taxable income forecasts and the evaluation of uncertainty, in considering the recoverability of deferred tax assets and evaluation of income tax uncerta int ies. However, deter iorat ing economic conditions, tax audits and other factors may result in temporary variances and net losses being carried forward beyond the period during which tax benefits can be recognized. In such a case, the Group would be required to recognize greater taxable income than had been anticipated, resulting in the possibility of higher corporate taxes.
Risks Related to Legal Restrictions and Litigation
Other Risks
Risks Related to Disasters or Unpredictable Events
20 Panasonic Information Systems Co., Ltd.
ASSETS Millions of Yen Thousands of U.S. Dollars (Note 1)
2012 2011 2012
Current Assets:
Cash and deposits (Notes 3 and 13) ¥ 176 ¥ 172 $ 2,146Accounts receivable - Trade (Notes 13 and 15) 6,869 6,442 83,768Inventories (Note 4) 152 204 1,854Deposits paid (Notes 3, 13 and 15) 13,999 12,662 170,720Deferred tax assets (Note 10) 408 322 4,975Other current assets (Note 15) 695 730 8,476
Total current assets 22,299 20,532 271,939
Property and Equipment:
Buildings 947 907 11,549Tools, furniture and fixtures 6,629 5,142 80,841Lease assets (Note 12) 802 835 9,780Construction in progress 746 531 9,098
Total 9,124 7,415 111,268Accumulated depreciation (5,110) (3,520) (62,317)
Net property and equipment 4,014 3,895 48,951
Investments and Other Assets:
Investment securities (Notes 5 and 13) 279 341 3,402Goodwill (Note 6) 29 45 354Software 586 522 7,146Development cost of software in progress 56 341 683Long-term deposits paid 254 256 3,098Long-term prepaid expenses 550 310 6,707Prepaid pension cost (Note 8) 844 891 10,293Deferred tax assets (Note 10) 24 33 293Other assets (Note 12) 83 177 1,012Allowance for doubtful receivables (6) (26) (73)
Total investments and other assets 2,699 2,890 32,915
Total ¥29,012 ¥27,317 $353,805
See notes to consolidated financial statements.
Panasonic Information Systems Co., Ltd. (formerly, Panasonic Electric Works Information Systems Co., Ltd.) and consolidated subsidiariesYear March 31, 2012
Consolidated Balance Sheet
Annual Report 2012 21
LIABILITIES AND EQUITY Millions of Yen Thousands of U.S. Dollars (Note 1)
2012 2011 2012
Current Liabilities:
Accounts payable - Trade (Notes 13 and 15) ¥ 1,847 ¥ 1,970 $ 22,524Accounts payable - Other (Notes 13 and 15) 1,555 1,102 18,963Income taxes payable (Note 13) 1,015 1,061 12,378Consumption taxes payable 121 61 1,476Deposits received (Note 7) 7 4 85Other current liabilities (Note 12) 1,172 987 14,294
Total current liabilities 5,717 5,185 69,720
Long-Term Liabilities:
Long-term deposits received (Note 7) 44 46 537Deferred tax liabilities (Note 10) 23 166 280Long-term lease obligations (Notes 12 and 13) 362 561 4,415Liability for retirement benefits (Note 8) 7 ̶ 85
Total long-term liabilities 436 773 5,317
Commitments Liabilities (Note 12) ̶ ̶ ̶
Equity (Notes 9 and 16):
Common stock -
authorized：40,000,000 shares; issued ：10,656,000 shares 1,040 1,040 12,683Capital surplus 871 871 10,622Retained earnings 20,891 19,356 254,768Treasury stock - at cost
320 shares in 2012 and 195 shares in 2011 (1) (0) (12)Accumulated other comprehensive income -
Unrealized gain on available-for-sale securities 58 92 707
Total equity 22,859 21,359 278,768
Total ¥29,012 ¥27,317 $353,805
22 Panasonic Information Systems Co., Ltd.
Millions of Yen Thousands of U.S. Dollars (Note 1)
2012 2011 2012
Net Sales (Note 15) ¥36,373 ¥34,221 $443,573
Cost of Sales (Notes 11 and 15) 29,238 27,201 356,561 Gross profit 7,135 7,020 87,012
Selling, General and Administrative Expenses (Notes 11 and 15) 2,880 2,815 35,122Operating income 4,255 4,205 51,890
Other Income (Expenses):
Interest income (Note 15) 58 66 707Interest expense (14) (12) (171)Gain on sales of investment securities (Note 5) ̶ 282 ̶Restructuring expense (451) ̶ (5,500)Other - net (6) (66) (72)
Other income (expense) - net (413) 270 (5,036) Income before income taxes and minority interests 3,842 4,475 46,854
Income Taxes (Note 10):
Current 1,808 1,714 22,049Deferred (193) 180 (2,354)
Total income taxes 1,615 1,894 19,695
Net Income before Minority Interests 2,227 2,581 27,159
Net Income 2,227 2,581 27,159
Net Income before Minority Interests 2,227 2,581 27,159
Other Comprehensive Income (Note 14) –
Unrealized gain on available-for-sale securities (34) (188) (415)
Comprehensive Income (Note 14) ¥ 2,193 ¥ 2,393 $ 26,744
Total Comprehensive Income Attributable to (Note 14):
Owners of the parent 2,193 2,393 26,744Minority interests ̶ ̶ ̶
Yen U.S. Dollars
Per Share of Common Stock (Notes 2.o and 16):
Basic net income ¥209.02 ¥242.25 $2.55Cash dividends applicable to the year 65.00 65.00 0.79
See notes to consolidated financial statements.
Consolidated Statement of Income and Comprehensive Income
Panasonic Information Systems Co., Ltd. (formerly, Panasonic Electric Works Information Systems Co., Ltd.) and consolidated subsidiariesYear Ended March 31, 2012
Annual Report 2012 23
Millions of Yen
Number of Shares of
Common StockIssued
Accumulated Other Comprehensive
Income
Common Stock CapitalSurplusRetainedEarnings
Treasury Stock
Unrealized Gain on Available-for-sale
SecuritiesTotal
Equity
Balance, April 1, 2010 10,656,000 ¥1,040 ¥871 ¥17,468 ¥(0) ¥280 ¥19,659
Net income ̶ ̶ ̶ 2,581 ̶ ̶ 2,581
Cash dividends, ¥65 per share ̶ ̶ ̶ (693) ̶ ̶ (693)
Purchase of treasury stock ̶ ̶ ̶ ̶ (0) ̶ (0)
Net changes in the year ̶ ̶ ̶ ̶ ̶ (188) (188)
Balance, March 31, 2011 10,656,000 1,040 871 19,356 (0) 92 21,359
Net income ̶ ̶ ̶ 2,227 ̶ ̶ 2,227
Cash dividends, ¥65 per share ̶ ̶ ̶ (692) ̶ ̶ (692)
Purchase of treasury stock ̶ ̶ ̶ ̶ (1) ̶ (1)
Net changes in the year ̶ ̶ ̶ ̶ ̶ (34) (34)
Balance, March 31, 2012 10,656,000 ¥1,040 ¥871 ¥20,891 ¥(1) ¥ 58 ¥22,859
Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive
Income
Common Stock CapitalSurplusRetainedEarnings
Treasury Stock
Unrealized Gain on Available-for-sale
SecuritiesTotal
Equity
Balance, March 31, 2011 $12,683 $10,622 $236,048 $(0) $ 1,122 $260,475
Net income ̶ ̶ 27,159 ̶ ̶ 27,159
Cash dividends, $0.79 per share ̶ ̶ (8,439) ̶ ̶ (8,439)
Purchase of treasury stock ̶ ̶ ̶ (12) ̶ (12)
Net changes in the year ̶ ̶ ̶ ̶ (415) (415)
Balance, March 31, 2012 $12,683 $10,622 $254,768 $(12) $ 707 $278,768
See notes to consolidated financial statements.
Consolidated Statement of Changes in Equity
Panasonic Information Systems Co., Ltd. (formerly, Panasonic Electric Works Information Systems Co., Ltd.) and consolidated subsidiariesYear Ended March 31, 2012
24 Panasonic Information Systems Co., Ltd.
Millions of Yen Thousands of U.S.Dollars (Note 1)
2012 2011 2012
Operating Activities:
Income before income taxes and minority interests ¥ 3,842 ¥ 4,475 $ 46,854Adjustments for:
Depreciation and amortization 2,161 1,495 26,354Decrease in allowance for doubtful receivables (19) (3) (232)Interest and dividend income (64) (73) (780)Interest expense 14 12 171Gain on sales of investment securities ̶ (282) ̶
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (408) 16 (4,976)Decrease (increase) in inventories 52 (61) 634Decrease (increase) in other current assets 9 (445) 110Decrease (increase) in prepaid pension cost 47 (285) 573Increase in liability for retirement benefits 7 ̶ 85Decrease in accounts payable (123) (254) (1,500)Increase in other current liabilities 262 62 3,195Decrease in other long-term liabilities (2) (13) (24)
Other - net (163) (120) (1,988)Subtotal 5,615 4,524 68,476
Interest and dividends received 88 77 1,073Interest paid (14) (12) (171)Income taxes paid (1,855) (1,435) (22,622)
Net cash provided by operating activities 3,834 3,154 46,756
Investing Activities:
Increase in deposits paid (8,000) (8,500) (97,561)Decrease in deposits paid 16,500 7,500 201,220Purchases of property and equipment (1,164) (1,580) (14,195)Sales of property and equipment 1 ̶ 12Purchases of software (431) (554) (5,256)Sales of investment securities ̶ 417 ̶Other - net 2 (145) 24
Net cash provided by (used in) investing activities 6,908 (2,862) 84,244
Financing Activities:
Repayment of lease obligations (211) (128) (2,573)Dividends paid (692) (693) (8,439)
Net cash used in financing activities (903) (821) (11,012)
Net Increase (Decrease) in Cash and Cash Equivalents 9,839 (529) 119,988
Cash and Cash Equivalents, Beginning of Year 4,230 4,759 51,585
Cash and Cash Equivalents, End of Year (Note 3) ¥ 14,069 ¥ 4,230 $ 171,573
See notes to consolidated financial statements.
Consolidated Statement of Cash Flows Panasonic Information Systems Co., Ltd. (formerly, Panasonic Electric Works Information Systems Co., Ltd.) and consolidated subsidiariesYear Ended March 31, 2012
Annual Report 2012 25
1 Basis of Presentation of Consolidated Financial Statements Panasonic Electric Works Information Systems Co., Ltd. (the “Company”) was incorporated on February 22, 1999 as a subsidiary of Panasonic Electric Works Co., Ltd. (the “Parent” (a)). The Company is 64% owned by the Parent at both March 31, 2012 and 2011. The principal business of the Company is to provide integration service for information systems; maintenance of computer systems; design, development, sales, lease, rental of computer software; information network service, and sales of related equipment. The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial
