Olympus 2011 Annual Report Download - page 32

30 OLYMPUS 2011
Consolidated Results of Operations
Company Overview
In fiscal 2011, the fiscal year ended March 31, 2011, the Japanese
economy showed signs of partial recovery despite ongoing deflation
and severe employment conditions. However, with the Great East
Japan Earthquake striking just before the fiscal year-end, corporate
activities were affected, and the outlook of the economy once again
turned unpredictable. Over the course of the year under review, the
global economy recovered gradually on the back of a business
uptrend mainly attributable to a demand boost in Asia.
Nevertheless, concerns about continuing high unemployment in
North America and Europe brought ongoing anxiety for possible
economic slowdown.
Amid this business environment, the Olympus Group continued
to implement the 2010 Corporate Strategic Plan (2010 CSP) in fiscal
2011. With the corporate slogan “Advancing to the Next Stage of
Globalization,” the Group commenced operations with the aim of
achieving the “transformation of Olympus into a more globally com-
petitive company” and “strengthening the Group’s business pres-
ence in emerging markets.”
To this end, in the Medical Systems Business the Group rein-
forced its global sales and service structures, mainly in North
America and Europe, while striving to cement new business founda-
tions in the surgical and respiratory organ-related products fields in
emerging markets, including China. In the Imaging Systems
Business, the Group expanded products lineups by leveraging its
proprietary optical technology together with technologies related to
its interchangeable lens-type digital cameras and compact digital
cameras as well as technologies for smaller and lighter products. At
the same time, the Group strengthened its sales structure in the
imaging systems markets of China and India. Viewing the rapidly
changing business environment as a growth opportunity, the Group
sought closer cooperation with ITX Corporation, which plays a cen-
tral role in groupwide information communication services, with the
aim of further developing the Information & Communication
Business. Simultaneously, aiming to ensure that ITX Corporation
possesses the necessary flexibility within its organization to take
prompt actions and implement strategies, the Company made ITX
Corporation a wholly owned subsidiary in March 2011 through a
takeover involving a share exchange.
Olympus intends to carry out drastic structural reforms across
the board for the purpose of proactively promoting global strategies
devised by Group headquarters, administration sections and busi-
ness segments. As part of such efforts, in April 2011, the Company
transformed its regional business structures in North America and
Europe into one where operations are controlled according to func-
tion by individual business segments. This will change the structure
of regional offices in terms of both local business operations and
internal control systems, facilitating more organic bonds and the
building closer cross-border ties between regional offices.
Consolidated net sales declined ¥35,981 million, or 4.1%, year on
year to ¥847,105 million (US$10,589 million). The decrease was due
to the impact of such factors as foreign exchange rate fluctuations,
the sale of the diagnostic systems business in August 2009 and
decreased sales in the Imaging Systems Business, which strong
sales in the Medical Systems and Information & Communication
businesses failed to offset. Operating income fell 41.2% to ¥35,360
million (US$442 million) due to the aforementioned foreign
exchange rate fluctuations and an operating loss in the Imaging
Systems Business. Reflecting these factors and the absence of
other income from the sale of the diagnostic system business as
posted in the previous fiscal year, net income dropped ¥40,382 mil-
lion, or 84.5%, to ¥7,381 million (US$92 million).
During the fiscal year under review, R&D expenditures amounted
to ¥67,286 million and capital expenditures totaled ¥32,699 million.
In fiscal 2010, Olympus reclassified its business segments. To
allow for the more accurate reporting of year-on-year changes in
results, calculations have been made after retroactively adjusting
the previous year’s results for the former Life Science Business
based on the reclassification of business under the new Life
Science and Industrial Systems Business.
Operating Results
Sales in the Medical Systems Business rose 1.3% year on year to
¥355,322 million (US$4,442 million), while operating income
declined 7.5% to ¥69,314 million (US$866 million).
In the gastrointestinal endoscope field, the Company recorded
increased profit. This was owing to strong sales of such mainstay
products as endoscopes and video processors in Japan, as well as
brisk sales in North America and Europe due to an expansion of the
high-definition endoscope lineup. In addition to these factors,
Olympus continued to enjoy healthy sales growth in China, which
also contributed to the favorable result. In the field encompassing
surgical and endotherapy devices, the Company enjoyed vigorous
sales of instruments for laparoscopic surgery, which, compared
with abdominal surgery, helps reduce the burden on patients, and
disposable guidewires for pancreaticobiliary duct endotherapy.
Despite the rise in sales, operating income declined due to the
impact of foreign exchange rate fluctuations and increased invest-
ment in R&D.
Sales in the Life Science and Industrial Systems Business fell
11.6% year on year to ¥100,808 million (US$1,260 million) and oper-
ating income declined 2.3% to ¥8,553 million (US$107 million).
In the life science field, sales of the new BX3 series biological
microscope system and the FV1000MPE multiphoton laser scan-
ning microscope were strong in Japan. However, profit in this field
decreased year on year due to the impact of foreign exchange rate
fluctuations.
In the industrial equipment field, sales of industrial microscopes
and the LEXT laser microscope series grew on the back of recover-
ing corporate capital investment, mainly in the semiconductor and
electronic component industries. In addition, the IPLEX L industrial
endoscope series and the EPOCH 1000 portable digital ultrasonic
defect detection device series enjoyed robust sales, contributing to
increased profit.
Along with these results, the sale of the diagnostic system busi-
ness to a U.S. Beckman Coulter, Inc. Group company in August 2009
led to an overall decline in profit in the Life Science and Industrial
Systems Business.
Nevertheless, operating income in the Life Science and
Industrial Systems Business remained almost on par with the pre-
vious fiscal year due to the impact on SG&A expenses of the above-
mentioned sale of the diagnostic system business.
Sales in the Imaging System Business dropped 24.9% from the
previous fiscal year to ¥131,417 million (US$1,643 million). During
the fiscal year under review, the Imaging Systems Business record-
ed an operating loss of ¥15,019 million (US$188 million), a turn-
around from operating income of ¥3,314 million (US$41 million) in
the previous fiscal year.
In interchangeable lens type digital cameras, the small and
lightweight Olympus PEN E-PL1 and E-PL2 models, which are
based on the Micro Four Thirds System standard, saw sales growth
in Japan and Asian countries. The Company also introduced the E-5
FINANCIAL REVIEW