Olympus 2013 Annual Report Download - page 34

64 OLYMPUS Annual Report 2013 65OLYMPUS Annual Report 2013
Risk Information
2. Olympus may acquire companies for the purpose
ofbusiness expansion. Inability to integrate
acquiredbusinesses in accordance with the Group’s
management strategies or inability to effi ciently utilize
the management resources of existing businesses
oracquired businesses may affect the Group’s
operations, business performance, or fi nancial position
for such reasons as the recording of impairment of
goodwill, loss on sales of businesses associated with
business reorganizations, or expenses for business
liquidation.
3. As of March 31, 2013, the Olympus Group held listed
stocks with a total value of ¥43,904 million and
unlisted stocks with a total value of ¥2,584 million as
investments for the purpose of facilitating business
alliances. The stock price of listed stocks is
determined based upon market principles.
Accordingly, fluctuations in market trends could
cause the value of these stocks to decline. For
unlisted stocks, it is possible that the estimated value
of these stocks could decline due to changes in the
financial position of the company in question. Such
price fluctuations could force the Group to record
loss on valuation of investment securities, and the
Group’s earnings or financial position could be
affected as a result.
(4) Risks Associated with Financing
The Group obtains fi nancing by means of borrowings
from fi nancial institutions and other sources, and
changes in conditions in the fi nancial markets may
affectthe Group’s fi nancing. In addition, an increase
infi nancing costs as a result of such factors as
deterioration in the Group’s business performance
mayadversely affect the Group’s fi nancing.
(5) Risks Associated with Leakage of Information
The Group possesses important confidential
information, such as technical information and personal
information of customers and other interested parties.
The Group has taken various measures to prevent
leakage of such information outside the Group,
including the preparation of internal regulations,
thorough employee education, and the strengthening
of security systems. Nevertheless, leakage of such
information due to unforeseen circumstances may
affect the Group’s business performance or financial
position as a result of such factors as damage to the
Group’s corporate value, loss of public trust, or the
payment of compensation to customers or other
interested parties affected by the leakage.
(6) Risks Associated with Deferred Posting
of Past Losses
A case is pending in the Tokyo District Court in which the
Company is charged with violations of the Securities and
Exchange Act and the Financial Instruments and
Exchange Act with respect to the Company’s deferring of
the posting of losses on investment securities, etc., since
around the 1990s and the use, via multiple funds, of
both the fees paid to fi nancial advisors and funds to buy
back preferred stock in relation to the acquisition of
Gyrus Group PLC as well as the funds for the acquisition
of three domestic companies (Altis Co., Ltd., NEWS
CHEF, Inc., and Humalabo Co., Ltd.) to resolve unrealized
losses on investment securities, etc., by deferring the
posting of these losses. In its closing argument, the
prosecution sought ¥1.0 billion in fi nes for the violations.
The results of these proceedings may affect the Group’s
business performance or fi nancial position. Furthermore,
shareholders of the Company have fi led legal complaints
against the Company as a result of the Company’s
inappropriate fi nancial reporting, and there is the risk that
other shareholders and shareholder groups will claim
damages or fi le lawsuits against the Company, which
may affect the Group’s business performance or fi nancial
position. As of the publishing date of the Company’s
securities fi lings, the following major lawsuits have been
fi led against the Company.
1. On July 23, 2012, Terumo Corporation, a shareholder
of the Company, fi led a complaint against the
Company seeking damages of ¥6,612 million and 5%
per annum interest on this amount for the period from
August 22, 2005, up to the payment of the principal.
2. On June 28, 2012, 49 plaintiffs (of which one
company withdrew its claim before the complaint was
received), including the Teachers’ Retirement System
of the State of Illinois as well as non-Japanese
institutional investors and pension funds that are
shareholders of the Company, fi led a complaint
against the Company (the date the Company received
the complaint was November 12, 2012) seeking
damages of ¥19,138 million and 5% per annum
interest on this amount for the period from October
14, 2011, up to the payment of the principal. (On
March 15, 2013, a petition to change the claim was
submitted, and the damages sought were changed
to¥20,851 million and 5% per annum interest on
thisamount for the period from November 8, 2011,
upto the payment of the principal accordingly.)
3. On December 13, 2012, 68 plaintiffs (of which two
companies withdrew their claims after the complaint
was sent), including California Public Employees’
Retirement System as well as non-Japanese investors
and pension funds that are shareholders of the
Company, fi led a complaint against the Company (the
date the Company received the complaint was March
29, 2013) seeking damages of ¥5,892 million (which
was reduced to ¥5,875 million following the above-
mentioned withdrawals) and 5% per annum interest on
this amount for the period from October 14, 2011, up
to the payment of the principal.
In addition, the Company missed the submission
deadline under the Financial Instruments and Exchange
Act for the quarterly securities report pertaining to the
second quarter of the fi scal year ended March 31, 2012
(within 45 days after the end of the second quarter), and
the misrepresentation in fi nancial reports and other
documents resulting from the above-mentioned deferred
posting of past losses confl ict with the disclosure and
warranties clause and covenants clause with respect to
aportion of borrowings from fi nancial institutions (long-
term borrowings of ¥320,000 million). However, on
August 29, 2012, the Company held consultations with
the correspondent fi nancial institutions and concluded
agreements with them to amend the relevant clauses on
the basis of the consultations, and the infringements
were cancelled as a result.
(7) Risks Associated with Internal Control Systems, etc.
The Company has striven to improve and develop its
internal control systems in response to the designation of
the Company’s stock as Security on Alert by the Tokyo
Stock Exchange (TSE) on January 21, 2012.
Nevertheless, if three years after the designation the TSE
deems that problems remain with the Company’s internal
control systems, etc., or if the TSE deems that there are
unlikely to be improvements in the Company’s internal
control systems, etc., even though the TSE has
requested submission of written affi rmation on the internal
control system, the Company’s shares may be delisted,
which may affect the Olympus Group’s business
performance and fi nancial position. Even after the
removal of this designation, the Company will continue
torevise its internal control systems to minimize risks.
However, it is still possible that a legal violation may
occur and the Company’s performance may be
impacted.
Further, the Security on Alert designation was lifted
from the Company’s stock on June 11, 2013.
(8) Other General Risks
Through its domestic and overseas subsidiaries and
affi liates, etc., the Company operates its various
businesses around the world, including the Medical
Business, which is a regulated industry. These regulated
businesses may from time to time be subject to various
investigations by domestic and overseas authorities and
involve discussions with or reporting to authorities with
respect to compliance with laws (for instance, response
to investigations concerning compliance with the
Antimonopoly Act or Pharmaceutical Affairs Act or
voluntary disclosure to the U.S. Department of Justice
regarding compliance with the Foreign Corrupt Practices
Act (FCPA)), and the results of such investigations and
consultations may affect earnings. In addition, the
occurrence of natural disasters, disease, wars, terrorist
attacks, or other incidents or the occurrence of greater
than expected interest rate increases or exchange rate
fl uctuations may affect earnings.