Financial Material

Consolidated financial results for the nine months ended December 31, 2011 recorded net sales of 1,903.6 billion yen, down 18.3%, compared to the same period last year. Operating income was 9.1 billion yen, down 86.3%. Net loss was 213.5 billion yen, due mainly to the loss on suspension of large-size LCD plant operation recorded in the first quarter and restructuring charges, as well as the recording of the reversal of deferred tax assets in connection with tax reforms and a decline in business results. Net sales were down 425.7 billion yen compared to the same period in the previous year, due mainly to the worse-than-expected decline in the LCD TV market in Japan, the reduced sales of large-size LCDs to outside customers, the decrease in sales of mobile phones in Japan, and the sluggish sales of solar cells. There were large declines in net sales for the Audio-Visual and Communication Equipment, LCDs, and Solar Cells. Profits were affected by reduced sales, as well as by extraordinary expenses and costs of reinforcing business foundations—for example an inventory write-down, business restructuring, and the reversal of deferred tax assets. These led to a significant decline in operating income of 57.3 billion yen, down 86.3%, compared to the same period last year, and a huge net loss of 213.5 billion yen. Looking at the operating income for each product group, there were large declines in profit for each of the Audio-Visual and Communication Equipment, LCDs, and Solar Cells, just the same as in sales. There was a negative impact from market environment factors, including a 304.3 billion yen market price decline, and a 9.9 billion yen exchange-rate fluctuation compared with the same period in the previous year, along with a 3.0 billion yen loss from the floods in Thailand. Extraordinary expenses include the loss on suspension of large-size LCD plant operation in the first quarter arising from the Great East Japan Earthquake and restructuring charges accompanying the introduction of oxide semiconductor (IGZO) technology at the Kameyama No. 2 Plant. In addition, a reversal of deferred tax assets of 119.8 billion yen was recorded for the third quarter ended December 31, 2011. This was due to the impact of tax reforms leading to a decrease in effective corporate tax rates, and also due to the downturn in business results. The reversal of deferred tax assets is a non-cash charge and does not have a negative impact on Sharp’s cash flows and operating income.