Olympus 2006 Annual Report Download

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A n n u a l R e p o r t 2 0 0 6
A n n u a l R e p o r
t 2 0 0 6

Table of contents

  • Page 1
    Annual Report 2006

  • Page 2
    ... E V I E W O F O P E R AT I O N S 14 22 23 24 RESEARCH AND DEVELOPMENT 10 C O R P O R AT E G O V E R N A N C E A N D C S R FINANCIAL SECTION 25 INTELLECTUAL PROPERTY REPORT 53 B O A R D O F D I R E C T O R S , C O R P O R AT E A U D I T O R S A N D E X E C U T I V E O F F I C E R S P R I N C I PA...

  • Page 3
    ..., the Olympus Bio-imaging Lab rapidly develops the technologies necessar y for advanced cancer research. Along with these efforts, Olympus dispatches its researchers to the lab to implement joint research projects that meet the demands at hand. Olympus will continue to promote the health of global...

  • Page 4
    ...proprietary functions developed through Olympus' advanced Opto-Digital technical expertise. In February 2006, Olympus released the E-330 interchangeable-lens-type digital SLR camera, featuring the world's first* Live View function. The E-Series cameras offer the image quality of an SLR, any time and...

  • Page 5
    E ° 3 . 0 2 S ° 4 . 33 OLYM PU S 2006 3

  • Page 6
    ...medical care. In Januar y 2006, Olympus commenced sales of the EVIS EXERA II high-definition endoscope system in Europe and North America. The EVIS EXERA II features Olympus' new Narrow Band Imaging (NBIâ„¢)* function that enhances visibility for the examination of capillaries and other structures...

  • Page 7
    ... con duc intr o duc e ne w ch the Com pan y seek s to te thin king th ro ug h whi ora rp co in e styl new a ts Th is ap pro ach rep rese n the ng Oly mpu s inte g rate with lthy life , wh ile a lso h elpi mer s to lead a hap py, hea su con le...

  • Page 8
    A MESSAGE FROM THE PRESIDENT think w ha t's ne x t 6 O LYM PU S 2006

  • Page 9
    ... the Medical Systems Business and the Life Science Business. Along with growth of sales in those Businesses, ITX Corporation, a consolidated subsidiar y that joined the Olympus Group in September 2004, contributed to overall earnings in the course of the year, bringing a significant revenue increase...

  • Page 10
    ... realize new business vistas for minimally invasive medical care. Life S cie nce : C ha lle nging t he Bio t e chno lo gy Fie ld > The Life Science Business increased revenues and earnings during the fiscal year under review. This business rests on two pillars: the micro-imaging business centering...

  • Page 11
    ... s June 2006 > In the Information & Communication Business and Other Businesses, ITX Corporation leads the investment and consultation activities of the IT- and medical-related businesses. Olympus expects ITX Corporation to play a key role in the development of new and creative businesses. In the...

  • Page 12
    INTERVIEW WITH PRESIDENT OKUBO, O L Y M P U S I M A G I N G C O R P. think wha t's ne x t 1 0 O LYM PU S 2006

  • Page 13
    ... to expand the digital SLR camera business, which will be our core business in the future. Boasting leading-edge capabilities in optical lens engineering, we aimed to increase corporate earnings by making sales of lens barrels a key business. We also vigorously engaged in the reduction of costs and...

  • Page 14
    ...transforming its earnings structure so that it will be profit-focused, while promoting selection and concentration. Boosting the ratio of digital SLR cameras and optical components to the overall product lineup, Imaging Systems Business will establish a stable profit foundation. 1 2 O LYM PU S 2006

  • Page 15
    ... Live View function. We plan to further accelerate the digital SLR camera business, aiming to release several new products annually. > Despite the improvement of revenues in fiscal 2006, we have to maintain a belt-tightening management posture and a focus on efficiencies and meeting our sales and...

  • Page 16
    im agi ng R E V I E W O F O P E R AT I O N S D I G I TA L C A M E R A μ 720SW A 7.1 megapixel compact digital camera that is shockproof, waterproof, and dustproof D I G I TA L C A M E R A E-330 AF digital SLR with a full-time "Live View" LCD monitor D I G I TA L C A M E R A μ 710 A slim and ...

  • Page 17
    ...a product platform. that boasted small size and light weight. The E-330 (EVOLT E-330 in the U.S.), launched in February 2006, also got into the news with its epoch-making Full-Time Live View function. Furthermore, Olympus made full-scale entry into the external sales business of digital camera lens...

  • Page 18
    ...maintain sharpness; it corresponds to cutting and coagulation applications in general surgery Endo Capsule A capsule endoscope for small bowel observation that realizes Olympus' proprietary capsule guidance system and wireless power supply system, with sales having commenced in Europe 1 6 O LYM PU...

  • Page 19
    ... previous fiscal year. Overseas, sales grew 20.7% year on year due to healthy demand for the EVIS EXERA II high-definition endoscope system in the United States and Europe, and Olympus' strong sales promotion efforts in Asia and Central and South America. In October 2005, Olympus commenced sales in...

  • Page 20
    ... microscope that allows for the observation of IC patterns that are invisible at optical wavelengths UPRIGHT MICROSCOPE FLUOVIEW FV1000 A biological microscope with the world's first duallaser SIM scanning system for a real-time view of the processes at work in living cells 1 8 O LYM PU S 2006

  • Page 21
    ...on medical expenses, while overseas sales was strong in Europe and Asia, contributing to an overall increase in revenues. > The main products of the Life Science Business are clinical hemanalysis systems, biological microscopes, and industrial microscopes. Along with the organizational restructuring...

  • Page 22
    ... brisk sales of mobile handsets, the Information & Communication Business recorded an operating loss due to the cost increases. OUTLOOK FOR FISCAL 2007 > In accordance with the rapid progress of information technology, Olympus acknowledges the importance of business in the networking and mobile...

  • Page 23
    ... In the information equipment field, Olympus commenced sales of new, high-speed printers in line with its business alliance with RISO KAGAKU CORPORATION, contributing to an increase in the sales amount of printers and expendable supplies. In the biomedical materials field, revenues increased, owing...

  • Page 24
    ... height of 1.5 meters, waterproof to a depth of 3 meters, and has an exclusive Dust Reduction System. Furthermore, Olympus launched its new E-330 (EVOLT E-330 in the U.S.) digital single-lens reflex (SLR) camera in February 2006, which is equipped with the world's first* Full-Time Live View function...

  • Page 25
    ... management structure from a global perspective. Its organizational structure has the Board of Directors comprised of 15 directors, including two outside directors, and an executive officer system. The Board of Auditors consists of four auditors, including two outside auditors. In addition, Olympus...

  • Page 26
    ...R S Atsushi Yusa DIRECTOR/SENIOR EXECUTIVE MANAGING OFFICER Masaaki Terada DIRECTOR/EXECUTIVE MANAGING OFFICER Makoto Shimada Yasuo Nakamura Masaharu Okubo Hideo Yamada Hiroyuki Furihata Kazuhisa Yanagisawa Haruhito Morishima Masataka Suzuki DIRECTOR/EXECUTIVE OFFICER EXECUTIVE OFFICERS Tatsuo...

  • Page 27
    ... 26 TEN-YEAR SUMMARY 28 CONSOLIDATED BALANCE SHEETS 30 CONSOLIDATED STATEMENTS OF OPERATIONS 32 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 33 CONSOLIDATED STATEMENTS OF CASH FLOWS 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 35 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 52 OLYMPUS 2006 25

  • Page 28
    ... the film camera market both in Japan and overseas. In the Medical Systems Business, sales increased 15.5% to ¥266,317 million (US$2,316 million). The launch of new products such as the multipurpose GIF TYPE N260 videoscope for upper digestive tract use, the EVIS EXERA II high-definition endoscopic...

  • Page 29
    ... in fiscal 2006 was 1.00 times, compared with 0.95 times in the previous fiscal year. Research & Development Expenditures > The Olympus Group has been seeking new technologies through research and development activities to create new business areas and to strengthen the core competencies of current...

  • Page 30
    .... Sales by Geographic Area (%) Other areas 3.5 Sales by Business Segment (%) Others 6.7 Asia 9.8 26.0 38.5 Europe 25.3 Japan Information and Communication Business 29.1 Imaging Systems Business 27.2 22.9 North America Life Science Business 11.0 Medical Systems Business 06 06 28 OLYMPUS 2006

  • Page 31
    ... 402 190,287 35.7 232,226 264,473 17,874 521,101 0.70 334,411 573 186,117 35.7 211,144 264,473 17,098 510,123 0.61 329,413 528 180,182 35.3 193,282 264,279 16,426 OLYMPUS 2006 29

  • Page 32
    ...I D AT E D B A L A N C E S H E E T S Olympus Corporation and Consolidated Subsidiaries March 31, 2006 and 2005 Millions of yen 2006 2005 Thousands of U.S. dollars 2006 ASSETS CURRENT ASSETS: Cash and time deposits (Note 14)...Marketable securities (Note 3) ...Notes and accounts receivable (Notes...

  • Page 33
    ... T Y: (Note 12) Common stock: Authorized-1,000,000,000 shares Issued-271,283,608 shares ...Capital surplus ...Retained earnings ...Net unrealized holding gains on securities ...Foreign currency translation adjustments ...Treasury stock, at cost ...Total shareholders' equity ...48,332 73,049 153,864...

  • Page 34
    ... on the equity method ...Gain on sales of investment securities in subsidiaries and affiliates ...Gain on sale of beneficial interest in trust ...Gain on sale of property, plant and equipment ...Gain on the release from the substitutional portion of the government's Welfare Pension Insurance Scheme...

  • Page 35
    ... (loss) ...Decrease of retained earnings at beginning of year due to the adoption of a new accounting standard for retirement benefits by the consolidated subsidiary in the UK ...Cash dividends paid ...Bonuses for directors ...Net loss on disposal of treasury stock ...Decrease of projected benefit...

  • Page 36
    ......Purchases of property, plant and equipment ...Sales of property, plant and equipment ...Purchases of investment securities ...Sales of investment securities ...Proceeds from acquisition of new subsidiaries ...Payments for acquisition of new subsidiaries ...Net increase from sales of investment in...

  • Page 37
    ... of five to 20 years. In the second half of fiscal 2005, ITX Corporation and its subsidiaries that were previously accounted for by the equity method became new consolidated subsidiaries of the Company due to the additional acquisition of stock. ( c ) C A S H A N D C A S H E Q U I VA L E N T S In...

  • Page 38
    ... time of termination of service. It is the Company's policy to fund amounts required to maintain sufficient plan assets to provide for accrued benefits based on a certain percentage of wage and salary costs. The plan assets consist principally of interest-bearing bonds and listed equity securities...

  • Page 39
    ... Benefits" issued by Business Accounting Council on June 16, 1998, unrecognized pension assets are allowed to be recognized as assets and profits. In the year ended March 31, 2006, the Company adopted the partial amendment of "Corporate Accounting Standard No. 3 regarding Employee Retirement and...

  • Page 40
    ... 2006 Non-listed equity securities ...Non-listed foreign bonds ...Others ...Total ... ¥11,603 5,428 1,964 ¥18,995 ¥15,082 5,603 24,061 ¥44,746 $100,896 47,200 17,078 $165,174 Note: The preferred securities of ¥6,000 million issued by a specific purpose company, which is based on the scheme...

  • Page 41
    ...one to 180 days. The annual interest rates on these borrowings ranged from 0.02% to 13.40% and from 0.41% to 8.70% as of March 31, 2006 and 2005, respectively. Bank acceptances payable of ¥3,485 million ($30,304 thousand) were secured by certain trade accounts receivable and inventories as of March...

  • Page 42
    ...long-term debt subsequent to March 31, 2006 are as follows: Millions of yen Thousands of U.S. dollars 2007 ...2008 ...2009 ...2010 ...2011 ...Thereafter ...Total ... ¥ 33,222 8,666 65,107 34,600 52,432 99,028 ¥293,055 $ 288,887 75,357 566,148 300,870 455,930 861,112 $2,548,304 40 OLYMPUS 2006

  • Page 43
    ... after fiscal 2006 was recorded in Provision for losses on business restructuring in the consolidated statement of operations for the year ended March 31, 2005. The discount rates used by the Company are mainly 2.0% in fiscal 2006 and 2.0% in fiscal 2005. The rate of expected return on plan assets...

  • Page 44
    ... of U.S. dollars 2006 Deferred income tax assets: Inventories...Depreciation of property, plant and equipment ...Depreciation of intangible assets ...Severance and retirement allowances ...Prepaid expenses ...Marketable and investment securities ...Deferred assets ...Unrealized intercompany profits...

  • Page 45
    ... long-term debt as of March 31, 2006 and 2005: Millions of yen 2006 2005 Thousands of U.S. dollars 2006 Cash and time deposits ...Accounts receivable ...Inventories ...Land ...Buildings and structures ...Machinery and equipment ...Investment securities ...Other assets... ¥1,655 506 303 1,755 1,781...

  • Page 46
    ...of assets and liabilities when NDT Engineering Corporation and other companies were consolidated for the year ended March 31, 2006 were as follows: Millions of yen Thousands of U.S. dollars Notes and accounts receivable ...Inventories ...Property, plant and equipment ...Investments and other assets...

  • Page 47
    ... and are accounted for in the same manner as operating leases. Certain information for such non-capitalized finance leases for the years ended March 31, 2006 and 2005 was as follows: Millions of yen 2006 2005 Thousands of U.S. dollars 2006 (Equivalent amount) Acquisition cost ...Accumulated...

  • Page 48
    ... recorded at March 31, 2006. 1 9 . D E R I VA T I V E F I N A N C I A L I N S T R U M E N T S The Company and its consolidated subsidiaries use derivative financial instruments in the normal course of their business to manage the exposure to fluctuations in foreign exchange rates and interest rates...

  • Page 49
    ... years ended March 31, 2006, 2005 and 2004 are shown in the tables below: Millions of yen 2006 Imaging Systems Business Medical Systems Business Life Science Business Information and Communication Business Elimination and Corporate Consolidated Total Others Total Net sales: Unaffiliated customers...

  • Page 50
    .... 2. In April 2005, the Company transferred the product categories of industrial microscopes from the "Industrial Systems Business" to the "Life Science Business," and industrial endoscopes, printers, and bar code data processing equipment from the "Industrial Systems Business" to "Others" based on...

  • Page 51
    ... the following products: Imaging Systems Business: Film cameras, Digital cameras, Voice Recorders Medical Systems Business: Medical endoscopes, Surgical endoscopes, Endo-therapy devices, Ultrasound endoscopes Life Science Business: Diagnostic systems, Biological microscopes, Analytical services of...

  • Page 52
    ...Note: Segmentation is determined by geographical adjacency. America includes the United States, Canada, Mexico and Brazil. Europe includes Germany, the United Kingdom, France and other countries. Asia includes Singapore, Hong Kong, China, South Korea, Australia and other countries. 50 OLYMPUS 2006

  • Page 53
    .... North America includes the United States and Canada. Europe includes Germany, the United Kingdom, France and other countries. Asia includes Singapore, Hong Kong, China, South Korea, Australia and other countries. Other areas include Central and South America, Africa and others. OLYMPUS 2006 51

  • Page 54
    ... the three years in the period ended March 31, 2006, in conformity with accounting principles generally accepted in Japan. Without qualifying our opinion we draw attention to the following. (1) As discussed in Note 2, effective April 1, 2005, Olympus Corporation adopted new accounting standards for...

  • Page 55
    ... technology, the relization of cellular-level exploration. By channeling research and development to build up a competitive edge, the Company continues to create new levels of value for its imaging, medical, life science, and industrial systems businesses. In the fiscal year under review, Olympus...

  • Page 56
    ... at the end of the fiscal year ended March 31, 2006 are shown in the table below. Olympus holds patents with business potential in each of its businesses: imaging, medical, industrial, and life science. The Company's core imaging and medical businesses, however, account for 71% of all patents held...

  • Page 57
    ...Technology Inc. (Tokyo) Systems development ITX Corporation (Tokyo) Investment and business incubation I.T. Telecom, Inc. (Tokyo) Sale of information and communication equipment Soliste Corporation (Tokyo) Sale of electronic devices KS Olympus Co., Ltd. (Tokyo) Sale of optical equipment, medical...

  • Page 58
    ...Industrial America, Inc. (New York, U. S. A.) Import and sales of medical and industrial equipment Olympus Imaging Australia Pty Ltd. (Mount Waverley, Australia) Import and sale of electronic products 80 other overseas companies Olympus UK (Holding) Ltd. (London, U.K.) Holding company that manages...

  • Page 59
    ......Japan Trustee Services Bank, Ltd. (The Sumitomo Trust and Banking Company Retrust Portion, Sumitomo Mitsui Banking Corporation Pension Trust) ...Sumitomo Mitsui Banking Corporation ...Japan Trustee Services Bank, Ltd. (trust accounts) ...Terumo Corporation ...Tokio Marine & Nichido Fire Insurance...