Olympus 2010 Annual Report Download

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Annual Report 2010

Table of contents

  • Page 1
    Annual Report 2010

  • Page 2
    ... Medical Systems Business 12 Life Science Business 14 Information & Communication Business 16 Others 17 Research and Development 18 Intellectual Property Report 20 Corporate Social Responsibility 22 Corporate Governance 23 Internal Controls 26 Business Risks 27 Board of Directors, Corporate Auditors...

  • Page 3
    ... America, Europe and Asia in 2009. Olympus is creating new fields and markets through the development of medical equipment that carefully reflects doctors' opinions while reducing the burdens placed on patients and their family. *Laparo-Endoscopic Single-Site Surgery LAPARO-ENDOSCOPIC SINGLE-SITE...

  • Page 4
    ...generation digital camera based on the Micro Four Thirds System to realize a significantly more compact high-performance, high-resolution camera. This camera enables everyday people to take high-quality pictures and brings new value to the world of imaging. Furthermore, in 2010, Olympus released the...

  • Page 5
    Photograph taken by Mitsuaki Iwago using an Olympus E-3 camera fitted with OLYMPUS 14-35mm F.2.0 SWD. OLYMPUS 2010 3 OLYMPUS 2010 3

  • Page 6
    A M E S S A GE F R OM T HE P R ES IDENT Based on the new corporate strategic plan, Olympus will strive to maximize its corporate value under the management slogan "Advancing to the Next Stage of Globalization." 4 OLYMPUS 2010

  • Page 7
    ... Business Situation and the New Corporate Strategic Plan The global financial market turmoil triggered by the fall of Lehman Brothers has calmed for the most part, and the actual economy is now showing signs of recovery. Amid such conditions, the Olympus Group returned to the black in fiscal 2010...

  • Page 8
    ... structure that can cement the business foundation of the interchangeable lens-type digital camera business and thereby realize high-range growth and secure stable profits amid the advancing digital network environment. In the areas of production and development, we will optimize production system...

  • Page 9
    ..., storing and sharing photographs. As for interchangeable lens-type digital camera systems, we will intensify our investment in technology and product development on the new-generation Micro Four Thirds System. We will reinforce the sales and marketing, distribution and after-sales service structure...

  • Page 10
    ...will strengthen our earnings structure and business culture in the three key fields of biological microscopes, living-cell imaging devices and industrial devices, while establishing a new growth strategy in the promising automated pathology field. In the non-destructive testing device field, we will...

  • Page 11
    ..., mainly for the Medical Systems Business. With the aim of achieving a lean corporate structure, we will carefully examine cost efficiencies to determine where to invest. In R&D activities, we will focus our investment on imaging, next-generation health care and environmental technologies. Tsuyoshi...

  • Page 12
    ... high resolution, mobility and reliability. 08 09 10 The Imaging Systems Business is centered on digital cameras, voice recorders and optical components. In fiscal 2010, ended March 31, 2010, this business saw sales decrease 22.1% year on year to ¥174,924 million (US$1,944 million). Operating...

  • Page 13
    ..., this high-end model of the µ[mju:] TOUGH series is also equipped with the DUAL IS function to secure image stabilization. 5. LINEAR PCM RECORDER LS-11 With an uncompressed digital recording system, this new product in the Linear PCM Recorder series offers high sound quality recording that...

  • Page 14
    ... tiny camera and lights, allows pictures to be taken of the entire small bowel. Endo Capsule delivers high-resolution images equivalent to those provided by endoscopes. Overseas Sales The actual capsules do not have a logo on them. 08 09 10 Core products in the Medical Systems Business include...

  • Page 15
    ...of surgical and endotherapy products while strengthening its sales structure in China, where the market continues to expand. Despite the influence of foreign currency exchange rate fluctuations, Olympus anticipates revenue growth on the back of market recoveries in Japan and North America as well as...

  • Page 16
    ... Japanese market. On the back of corporate capital investment restraint, however, sales of industrial microscopes decreased in the first half of the fiscal year under review. In addition, foreign currency exchange rate fluctuations negatively affected the revenue of this business. 14 OLYMPUS 2010

  • Page 17
    ... printers and non-destructive testing devices businesses of the Others Business and its name will change to the "Life Science and Industrial Systems Business." Therefore, because of the impact of foreign currency exchange rate fluctuations and the sale of the diagnostic systems business, sales are...

  • Page 18
    ...& Communication Business is managed by consolidated subsidiary ITX Corporation, which engages in mobile handset sales. Promoting management structural reforms, ITX Corporation reviewed its business categories. On the back of this, a portion of the Information & Communication Business was transferred...

  • Page 19
    ..., Olympus mainly engages in the manufacture and sale of industrial endoscopes, non-destructive testing devices and printers as well as system development. Adding to this lineup, ITX Corporation's business incubation operations-mainly in such areas as life science, network & technology, mobile phones...

  • Page 20
    ... of procedures. 1. Imaging Systems Business R&D expenditures recorded by the Imaging Systems Business totaled approximately ¥9.8 billion in fiscal 2010. Achievements on this investment include the following. 1. Development of OLYMPUS PEN E-P1 Interchangeable Lens-Type Digital Camera Based on the...

  • Page 21
    ... of cellSens® Dimension/Standard Imaging Software For the life science field, Olympus has developed imaging software which is easily customized for creating a seamless workflow offering functionality, flexibility, and scalability to support users' most demanding image acquisition and analysis needs...

  • Page 22
    ... sales. During the fiscal year under review, conditions in both the Japanese and global economies remained serious. However, Olympus promoted business structural reforms to secure its high earnings capabilities, and, accordingly, R&D efficiency was slightly improved, reflecting increased operating...

  • Page 23
    ... United States 6 12 22 Electronic Imaging Technology Japan 3 Precision Technology 10 04 05 06 07 08 09 10 Number and Ratio of Patents Held by Business Group Imaging Systems Medical Systems Life Science Industrial Systems Corporate R&D Center Total Japan patents ...% to total...

  • Page 24
    ... B I L I TY The Social IN management philosophy express our commitment to help all people achieve health and happiness in their lives by working as an integral member of society, by sharing our values and by offering new values to society through our business activities. We also create a win-win...

  • Page 25
    ... of duties from executive officers' responsibilities for business execution. The number of executive officers stands at 31. Outside Directors and Their Principal Activities Under Japan's Corporation Law, companies with an auditor system are not required to have outside directors on their boards of...

  • Page 26
    ... of the Special Committee, which gives advice to the Company from a position independent of Olympus' top management should a large-scale acquisition (over 20%) of shares be proposed. Auditors, Board of Auditors Olympus adopted an auditor system. Japan's Corporation Law requires corporations that...

  • Page 27
    ... major medical-related companies and holding briefings mainly for individual investors several times a year. Olympus has provided details of its corporate strategic plan, financial results and presentation data, including concurrent disclosure in both Japanese and English, on its web site. OLYMPUS...

  • Page 28
    ...its compliance structure and set up a help line as a point of contact for any employee inquiries about compliance. Should compliance-related problems arise, Olympus has in place a system that enables the directors responsible to report problems to the Board of Directors and the Board of Auditors. In...

  • Page 29
    ... changes. Risks Related to Production and Development Activities In the Imaging System Business, core production operations are located in China. Accordingly, a rise in the value of the yuan could lead to an increase in costs and impact Group earnings. Moreover, production activities may be impacted...

  • Page 30
    BOARD OF DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS (As of June 29, 2010) Board of Directors Representative Director/President Tsuyoshi Kikukawa Directors/Executive Vice President Masaharu Okubo Hideo Yamada Haruhito Morishima Directors/Senior Executive Managing Officers Masataka Suzuki ...

  • Page 31
    ...Financial Review 30 Ten-Year Summary 32 Consolidated Balance Sheets 34 Consolidated Statements of Operations 36 Consolidated Statements of Changes in Net Assets 37 Consolidated Statements of Cash Flows 38 Notes to the Consolidated Financial Statements 39 Independent Auditors' Report 62 OLYMPUS 2010...

  • Page 32
    ... in Japan. Sales of industrial microscopes, however, were substantially affected by decreased corporate capital investment, mainly in the first half of the fiscal year under review. Foreign currency exchange fluctuations also negatively impacted the entire micro-imaging field, resulting in decreased...

  • Page 33
    ...,300 million (US$226 million) paid for the redemption of bonds. Research & Development Expenditures The Olympus Group continuously pursues new technologies through its R&D activities in order to bolster its core competencies in current businesses and create new business opportunities. In fiscal 2010...

  • Page 34
    ... 2000-2006: Equity = Total Shareholders' equity Fiscal 2010 Sales by Geographic Area (%) Fiscal 2010 Sales by Business Segment (%) Other areas 2.9 Others 10.0 Asia 11.3 42.3 Europe 21.3 Japan 21.4 19.8 Information and Communication Business Life Science Business Imaging Systems Business 22...

  • Page 35
    Millions of yen (except per share amounts) 2008 2007 2006 2005 2004 2003 2002 2001 420,227 708,648 1,128,875 106.3 57,969 5.1 65,928 50,070 37,522 214.... 2,275 201,547 35.9 114,779 264,473 20,705 584,103 0.80 389,968 1,906 192,229 32.9 124,287 264,473 19,865 OLYMPUS 2010 33

  • Page 36
    ... (Note 24) ...Total investments and other assets ... 140,271 9,492 194,065 131,029 474,857 ¥ 1,152,227 127,144 15,661 180,540 145,093 468,438 ¥ 1,106,318 1,558,567 105,467 2,156,278 1,455,877 5,276,189 $12,802,522 See accompanying notes to consolidated financial statements. 34 OLYMPUS 2010

  • Page 37
    ...,608 shares as of March 31, 2010 and 2009 ...Capital surplus...Retained earnings ...Treasury stock, at cost ...Total shareholders' equity ...Net unrealized holding gains (losses) on available-for-sale securities, net of taxes .. Net unrealized losses on hedging derivatives, net of taxes ...Foreign...

  • Page 38
    ...-sale securities, net ...Foreign currency exchange gain (loss), net ...Net gain (loss) of investments in affiliated companies carried on the equity method ...Loss on investment in partnership (Note 3a)...Gain on sales of investments in subsidiaries and affiliates ...Gain on sales of property, plant...

  • Page 39
    ... ASSETS Olympus Corporation and Consolidated Subsidiaries For the years ended March 31, 2010, 2009 and 2008 Millions of yen Net unrealized holding gains (losses) on availableTotal for-sale Treasury shareholders' securities, stock, at cost equity net of taxes Net unrealized gains (losses) on Foreign...

  • Page 40
    ... taxes paid ...Net cash provided by operating activities ...CASH FLOWS FROM INVESTING ACTIVITIES: Deposits in time deposits ...Withdrawals from time deposits ...Sales of securities (Note 3b) ...Purchases of property, plant and equipment (Note 3c)...Sales of property, plant and equipment (Note 3d...

  • Page 41
    ... BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements of Olympus Corporation (the "Company") and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and...

  • Page 42
    ... by the straight-line method over periods (mainly 5 years) which are shorter than the average remaining years of service of the employees. The retirement allowance for directors and corporate auditors was recorded at an estimate of amount to be paid in accordance with the internal rules for those...

  • Page 43
    ...on the consolidated statements of operations was not material. (b) PRACTICAL SOLUTION ON UNIFICATION OF ACCOUNTING POLICIES APPLIED TO FOREIGN SUBSIDIARIES FOR CONSOLIDATED FINANCIAL STATEMENTS Effective April 2008, PITF No. 18 has been adopted. As a result of this change, operating profit decreased...

  • Page 44
    ... trade receivables denominated in foreign currencies are hedged by forward foreign exchange contracts. Marketable securities and investment securities are exposed to market risk. Those securities are composed of mainly the shares of common stock of other companies with which the Group has business...

  • Page 45
    ...and the Board of directors for their review. (c) Monitoring of liquidity risk (the risk that the Group may not be able to meet its obligations on scheduled due dates) Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidity risk...

  • Page 46
    Investment securities The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either quoted market prices or prices provided by the financial institutions making markets in these securities. For information on securities classified by holding purpose,...

  • Page 47
    ... Investment securities Total Note: Figures for 2010 include the cost of investment in jointly-controlled companies, amounting to ¥475 million ( $5,278 thousand). ¥ 10,100 ¥ 10,100 $ 112,222 $ 112,222 The following tables summarize acquisition costs, book values and fair value of securities...

  • Page 48
    ... ...Non-listed foreign bonds ...Others ...Total ...Maturities of available-for-sale securities were as follows: Millions of yen Over a year but within five years Over five years but within ten years ¥ 10,839 393 1,732 ¥ 12,964 Within a year Total Corporate bonds...Others ...Total ...Investment...

  • Page 49
    ... bank, due March 2013 1.51% loan from a Japanese bank, due March 2015 Other bonds Others from foreign banks Others from Japanese banks (Secured long-term debt) Others from Japanese banks Less-current maturities (Unsecured long-term debt) 2010 2009 2010 ¥ 25,000 20,000 20,000 20,000 20,000...

  • Page 50
    ... rates used by the Company were mainly 2.0% in fiscal 2010 and 2009. The rate of expected return on plan assets used by the Company is mainly 4.0% in fiscal 2010 and 2009. The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally to each service...

  • Page 51
    ... auditor 91 employees 6 directors of subsidiaries of ITX Corporation Common stock 5,795 From October 6, 2005 to April 28, 2006 From June 24, 2007 to June 23, 2010 - - - - - 3,730 - - 245 3,485 ¥ ¥ - - Class and number of shares of common stock for which new subscription rights were offered...

  • Page 52
    ... designated as common stock. However, a company may, by a resolution of its board of directors, designate an amount not exceeding one-half of the prices of the new shares as additional paid-in capital, which is included in capital surplus. Under the Japanese Corporate Law (the "Law"), in cases where...

  • Page 53
    ... per share (Millions of yen) Funds of distribution (Yen) Record Date Effective date General Shareholders' Meeting (June 29, 2010) ... Common Stock ¥4,049 (Thousands of U.S. dollars) Retained earnings ¥15 (U.S. dollars) March 31, 2010 June 30, 2010 $44,989 $0.17 A summary of information...

  • Page 54
    ... long-term debt as of March 31, 2010 and 2009: Millions of yen Thousands of U.S. dollars 2010 2009 2010 Cash and time deposits ...Notes and accounts receivable...Inventories ...Buildings and structures ...Machinery and equipment ...Investment securities ... ¥ - 457 274 1,554 419 38 ¥ 30 390...

  • Page 55
    ... recorded for the years ended March 31, 2010, 2009 and 2008 were as follows: For the year ended March 31, 2010 Use Type of assets Location Millions of yen Thousands of U.S. dollars Assets used for Other Business Goodwill Buildings and structures Tools, furniture and fixtures Leased assets Software...

  • Page 56
    ... Diagnostic systems business of the Company for the year ended March 31, 2010 were follows: Millions of yen Thousands of U.S. dollars Current assets...Noncurrent assets...Current liabilities ...Noncurrent liabilities ...Foreign currency translation adjustment...Gain on transfer of business ...Price...

  • Page 57
    ... the same manner as operating leases. Certain information for such non-capitalized finance leases for the years ended March 31, 2010 and 2009 were as follows: Millions of yen Thousands of U.S. dollars (Equivalent amount) 2010 2009 2010 Acquisition cost ...Accumulated depreciation ...Accumulated...

  • Page 58
    ... to the Company's policy regarding derivative transactions. Contracts of derivative financial instruments are executed by finance departments of the Company or subsidiaries. The Company's and its consolidated subsidiaries' trade payable that are denominated in foreign currencies which meet specific...

  • Page 59
    ...option contracts, currency swap contracts and interest rate swap contracts are estimated by obtaining quotes from financial institutions. The fair value of foreign exchange forward contracts is estimated based on market prices for contracts with similar terms. *Foreign exchange forward contracts are...

  • Page 60
    ...Millions of yen 2010 Imaging Systems Business Medical Systems Business Life Science Business Information and Communication Business Elimination and Consolidated Corporate Total Others Total Net sales: Unaffiliated customers ...Intersegment ...Total ...Operating expenses ...Operating income (loss...

  • Page 61
    ... microscopes Information and Communication Business: Mobile terminals, Mobile solutions, Mobile content services, Network infrastructure systems, Development and sales of business package software, Semiconductor devices, Electric equipment Others: Industrial endoscopes, Non-destructive testing...

  • Page 62
    ...Notes: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. 60 OLYMPUS 2010

  • Page 63
    ... Business activities (3) Capital 3. Date of establishment May 2010 4. Equity ratio The Company owns 80% of voting rights (ITX Corporation is planned to invest 20%) Olympus Business Creates Corp. Discovery and development of new business, and the business management of fledgling subsidiaries At time...

  • Page 64
    ... of Olympus Corporation and consolidated subsidiaries as of March 31, 2010, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended, all expressed in yen. These financial statements are the responsibility of the Company's management. Our...

  • Page 65
    ... and development of sophisticated digital system design technology Olympus-Supportmate Corp. (Tokyo) Providing cleaning services and promoting employment in the Olympus group companies for the disabled Olympus Memory Works Corp. (Tokyo) Planning, production and selling of network-related products...

  • Page 66
    ...non-destructive testing equipment Olympus (Beijing) Industry & Technology Limited (Beijing, China) Manufacture of optical equipment and electronic products Olympus Europa Holding GmbH (Hamburg, Germany) Parent company of European subsidiaries, offering corporate support services to Group companies...

  • Page 67
    .... Furthermore, they are subject to a number of risks and uncertainties that, without limitation, relate to economic conditions, worldwide business competition, customer demand, foreign currency exchange rates, tax rules, regulations and other factors. Olympus therefore wishes to caution readers that...

  • Page 68
    AN-0810D Printed in Japan This report uses environment-friendly ink and paper.