Sharp 2013 Annual Report Download - page 27

Annual Report 2013 25
Risk Factors
areas served by Kansai Electric Power (KEPCO) and elsewhere in
KEPCO. In the winter of 2012, Sharp responded to an energy-
a new strain of influenza or other infectious disease; or major
fluctuations in the stock and bond markets.
(19) Outline of Significant Events Relating to
Assumed Going Concern
The operating results for the six months ended March 31, 2013,
turned positive due to sales increase of distinctive devices and
products such as smartphones and tablet terminals with IGZO
LCDs as well as Black Solar high-efficiency solar cells. Also,
company-wide measures, including reductions in inventories
and slashing total costs primarily focused on labor costs through
such schemes as a voluntary retirement program, have largely
contributed to the turnaround. Continuing from the previous
fiscal year, Sharp’s consolidated financial performance for fiscal
2012 resulted in substantial operating and net losses, as well as
substantial negative cash flows from operating activities. In ad-
dition, concerns have been expressed that Sharp might face dif-
ficulties in redemption of the 20th unsecured convertible bonds
with subscription rights to shares, due on September 30, 2013.
Although there are events or conditions that may cast significant
doubt on the entity’s ability to continue as a going concern, we
believe that these conditions will not cast a material uncertainty
about Sharp’s ability to continue as a going concern, due to
implementation of various measures to resolve these and other
major issues as described below. Therefore, no further disclosure
for the “Going Concern Assumption” in the notes to the con-
solidated financial statements is necessary.
Sharp has received continued support and cooperation from
financial institutions. With respect to a ¥360.0 billion syndicated
loan due in June 2013, the agreement was amended on June
25, 2013 to extend the loan with the consent of the two main
banks—Mizuho Corporate Bank, Ltd. and The Bank of Tokyo-
Mitsubishi UFJ, Ltd.—and other participating banks. On the
same day, an agreement was reached with the two main banks
to provide an additional borrowing facility of ¥150.0 billion,
which will be used to redeem Sharp’s 20th unsecured convert-
ible bonds with subscription rights to shares, due on September
30, 2013. Accordingly, there is no problem with the redemption
of those bonds. As a corporate strategy for steady achievement
of “recovery and growth,” Sharp has developed a Medium-Term
Management Plan incorporating five strategic measures: “Re-
structuring its Business Portfolio,” “Improving the Profitability
of its LCD Business,” “Expanding Overseas Businesses Focusing
on the ASEAN Market,” “Reducing Fixed Costs by Reforming
its Cost Structure,” and “Improving its Financial Position.” Also,
in order to strengthen headquarters control and governance
function, as well as action forces to complete the Medium-Term
Management Plan, Sharp newly set up the “Corporate Manage-
ment Group” and “Structural Reform Group.” Through steady
implementation of the Medium-Term Management Plan and
financial arrangements, Sharp aims to improve its financial posi-
tion, while at the same time reinforcing management founda-
tion, to realize sustainable growth and a stable net income.