Oki 2011 Annual Report Download - page 25

Annual Report 2011 23
nal patents required in the development and manufacture of new
products. In the event the OKI Group is unable to secure patents
or rights, or secures patents or rights under unfavorable terms and
conditions, its performance and financial position may be affected.
The OKI Group endeavors to comply with patents held by third
parties. It is not, however, in a position to completely guarantee
the OKI Group will not violate intellectual property rights held by
another party. In the event the OKI Group is involved in a claim
relating to the violation of intellectual property rights, it is likely to
incur legal and other expenses. In the event the OKI Group is
found to have breached intellectual property rights held by another
party, then it is likely to incur damages. In either event, the per-
formance and financial position of the OKI Group may be affected.
(9) Statutory and Regulatory Compliance
The OKI Group is subject to statutory and regulatory requirements,
business and investment application and approval, export restric-
tions relating to national security and other factors, import
regulations including customs and taxation and a variety of govern-
ment ordinances in each of the countries and regions in which it
operates. The OKI Group is also subject to statutory and regulatory
requirements relating to commerce, antitrust, patents and intellec-
tual property rights, taxation, foreign currencies, the environment
and recycling. In the event the OKI Group is unable to comply with
any of the aforementioned or any unexpected changes occur, the
possibility exists that its activities would be restricted or sus-
pended. Accordingly, the aforementioned and other statutory and
regulatory requirements may impact the OKI Group’s performance
and financial position.
(10) Natural and Other Disasters
The OKI Group conducts periodic inspections and implements a
variety of accident, disaster and fire prevention measures to mini-
mize stoppages of its production lines. However, there is no
guarantee that the OKI Group will be able to completely prevent
accidents as well as natural and other disasters that negatively
affect the operations of its production facilities. Moreover, acci-
dents in production lines due to earthquake, wind or flood damage
or electric outages as well as natural and other disasters in the
countries where the OKI Group conducts marketing operations may
adversely impact the Group’s performance and financial position.
(11) Information Management
Although the OKI Group implements defense measures to protect
its internal systems against computer viruses and the leakage of
information, the Group cannot guarantee complete protection
from system failure and information leakage attributable to human
error, new virus strains other like causes. The Group, therefore,
faces the risk of cumulative losses should there be a breech in the
information management structure.
(12) Procurement and Training of Human Resources
The ability to secure and foster high-quality human resources is a
key factor in ensuring further growth as a stable earnings company.
Accordingly, the OKI Group strives to recruit capable employees at
every level, including new graduates and mid-career employees. In
an effort to foster exceptional human resources, the OKI Group also
conducts on-the-job training, education and a variety of training
activities. In the event the OKI Group is unable to secure and foster
high-quality human resources or a number of key employees leave
the OKI Group, future growth may be affected.
(13) Interest-Rate Fluctuations
The OKI Group maintains interest-bearing debt that is subject to
the impact of fluctuations in interest rates. The OKI Group utilizes
interest-rate swaps and other instruments to manage the risks of
interest-rate fluctuations. However, there is a possibility that inter-
est charges may suffer an increase associated with a rise in
interest rates and that the increased cost of raising capital would
adversely affect the Group’s ability to raise working capital.
(14) Changes to Accounting Standards
The OKI Group makes consolidated and non-consolidated financial
statements in accordance with accounting standards generally rec-
ognized as fair and accurate. Should changes to accounting
standards occur, there is a possibility that the OKI Group’s per-
formance and financial position may be adversely affected.
(15) Debt Recovery
While the OKI Group constantly appraises the financial situation of
its customers and sets aside an adequate amount of allowances
based on its provision for bad debts after the Balance Sheet date, a
sudden deterioration in the financial condition of a major customer
could exert a negative influence on the OKI Group’s performance.
(16) Impairment Loss on Fixed Assets
In the event that it becomes necessary for the OKI Group to dis-
pose of impairment loss on fixed assets, such as tangible and
intangible fixed assets, investment and other assets, the Group’s
performance and financial position may be adversely affected.
(17) Deferred Tax Assets
The OKI Group amortizes deferred assets against retained losses
carried forward and temporary differences as appropriate. In the
event the OKI Group is unable to liquidate deferred tax assets due
to the decline in taxable income brought on by fluctuations in its
business results, the OKI Group’s performance may be affected.
(18) Retirement Benefit Obligations
The OKI Group provides for retirement benefit obligations based
on a discount rate established using actuarial calculations and on
expected yield on pension assets. However, such preconditions
and assumptions are susceptible to changes in market interest
rates and stock market trends, which may cause actual results to
differ from such preconditions and assumptions. Such an event
could lead to an increase in retirement benefit obligations and
impact the OKI Group’s performance and financial position.
(19) Stock Price Fluctuations
The OKI Group holds shares in listed companies as part of its invest-
ment securities portfolio. Falling share prices may lead to valuation
losses or declines in unrealized gains on such holdings, which may
impact the OKI Group’s performance and financial position.
(20) Dilution of Stocks
On December 22, 2010, the OKI Group made a private placement
issuance of Class A Preferred Stocks to a third party, with the aim
of building a strong business foundation capable of generating sta-
ble, sustained profits and dramatically improving its financial base.
Holders of Class A Preferred Stocks have the right to request pur-
chase of common stocks as compensation (purchase request
period: April 1, 2014–March 31, 2024) and a purchase provision
(lump purchase on April 1, 2024). In the event that, in the future,
common stocks are issued as a result of such purchase request or
purchase provision, existing common stocks will become diluted,
which may impact the stock price.