Olympus 2013 Annual Report Download - page 38

72 OLYMPUS Annual Report 2013 73OLYMPUS Annual Report 2013
Millions of yen
Thousands of
U.S. dollars (Note 1)
2011
As restated
(Note 1)
2012 2013 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests ¥ 19,938 ¥ (9,495) ¥ 19,142 $ 203,638
Adjustments to reconcile income (loss) before
income taxes and minority interests to net cash provided by operating activities:
Depreciation and amortization 34,188 33,787 33,899 360,628
Impairment loss on fi xed assets (Note 19) 482 15,839 7,600 80,851
Amortization of goodwill 12,249 12,283 9,683 103,011
Amortization of negative goodwill (2,408) — — —
Commission fee for contract modifi cation — — 3,392 36,085
Settlement package (Note 26) — — 1,231 13,096
Extra severance payments for voluntary retirement (Note 25) — — 1,336 14,213
Increase (decrease) in provision for retirement benefi t (150) 1,445 794 8,447
(Increase) decrease in prepaid pension cost (1,581) 2,051 4,018 42,745
Decrease in provision for warranty costs (1,170) (716) (419) (4,457)
Interest income (831) (859) (1,002) (10,659)
Interest expense 12,744 14,026 13,942 148,319
Equity in earnings of affi liates, net (574) (144) (22) (234)
Gain on transfer of business (2,696) — — —
(Gain) loss on available-for-sale securities, net 2,346 (1,163) (999) (10,628)
Increase (decrease) in provision for loss on business liquidation — 3,205 (3,060) (32,553)
(Gain) loss on sale of investment securities in subsidiaries and affi liates, net 77 38 (20,026) (213,043)
(Increase) decrease in accounts receivable 9,969 (11,681) (10,063) (107,053)
(Increase) decrease in inventories (3,452) (9,742) 1,048 11,149
Increase (decrease) in accounts payable (5,731) 6,792 6,707 71,351
Increase (decrease) in other payables (3,825) 260 3,217 34,223
Increase in accrued expense 1,565 3,719 1,458 15,511
(Increase) decrease in non-current lease receivables (903) 2,145 (6,969) (74,138)
Increase in allowance for doubtful accounts on funds 2,448 — — —
Loss on funds (Note 21) 327 — — —
Other 1,937 1,182 (1,203) (12,799)
Sub-total 74,949 62,972 63,704 677,703
Interest and dividends received 1,708 1,836 1,843 19,606
Interest paid (13,081) (13,990) (13,852) (147,362)
Commission fee for contract modifi cation — — (3,392) (36,085)
Settlement charge (Note 26) — — (1,231) (13,096)
Extra severance payments for voluntary retirement (Note 25) — — (1,336) (14,213)
Outfl ow of money from funds (Note 30) (2,448) — — —
Income taxes paid (30,659) (19,929) (20,503) (218,117)
Net cash provided by operating activities 30,469 30,889 25,233 268,436
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits in time deposits (4,810) (2,007) (3,846) (40,915)
Withdrawals from time deposits 5,227 3,719 2,913 30,989
Purchases of property, plant and equipment (20,243) (22,761) (24,023) (255,564)
Purchases of intangible assets (9,381) (12,483) (3,942) (41,936)
Purchases of investment securities (3,745) (1,076) (373) (3,968)
Sales of investment securities 7,756 4,155 6,506 69,213
Payments for acquisition of newly consolidated subsidiaries (Note 28) (12,328) (6,584) — —
Net increase from sales of investments in subsidiaries resulting
in change in scope of consolidation (Note 29) 201 27 52,629 559,883
Payments for acquisition of subsidiaries (5,817) (624) — —
Payments for loans receivable (3,578) (1) (2,053) (21,840)
Proceeds from loans receivable 120 2,408 3,885 41,330
Payments for transfer of business (6,529) — — —
Proceeds from transfer of business 5,797 — — —
Collection of assets held by the Funds (Note 31) 65,553 — — —
Other 780 (508) 1,759 18,712
Net cash provided by (used in) investing activities 19,003 (35,735) 33,455 355,904
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (13,980) 2,722 (27,782) (295,553)
Proceeds from long-term borrowings 34,501 60,244 — —
Repayments of long-term borrowings (18,908) (63,197) (42,935) (456,755)
Redemption of bonds (20,040) (240) (20,040) (213,191)
Proceeds from issuance of new shares of common stock — — 49,953 531,415
Payments for acquisition of treasury stock (10,006) (152) (4) (42)
Dividends paid (8,099) (4,004) — —
Dividends paid to minority shareholders (40) (22) (75) (798)
Other (787) (1,112) (1,553) (16,523)
Net cash used in fi nancing activities (37,359) (5,761) (42,436) (451,447)
Effect of exchange rate changes on cash and cash equivalents (5,931) (1,220) 10,701 113,840
Net increase (decrease) in cash and cash equivalents 6,182 (11,827) 26,953 286,733
Cash and cash equivalents at beginning of year 203,013 210,385 198,661 2,113,416
Net increase in cash and cash equivalents associated with newly consolidated subsidiaries 1,190 103 168 1,787
Cash and cash equivalents at end of year (Note 27) ¥210,385 ¥198,661 ¥225,782 $2,401,936
See accompanying notes to consolidated fi nancial statements.
Consolidated Statements of Cash Flows
Olympus Corporation and Consolidated Subsidiaries
For the years ended March 31, 2011, 2012 and 2013
Notes to the Consolidated Financial Statements
Olympus Corporation and Consolidated Subsidiaries
1. Summary of Signifi cant Accounting Policies
(a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated fi nancial 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 Act and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements from International Financial Reporting Standards.
Effective April 1, 2008, the Company adopted the “Practical Solution on Unifi cation of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (“PITF No. 18”). In accordance with PITF No. 18, the accompanying consolidated
fi nancial statements have been prepared by using the accounts of foreign consolidated subsidiaries prepared in accordance with either
International Financial Reporting Standards (“IFRS”) or accounting principles generally accepted in the United States as adjusted for certain
items including those for goodwill, actuarial differences and capitalized development costs.
The accompanying consolidated fi nancial statements have been reformatted and translated into English (with some expanded descrip-
tions) from the consolidated fi nancial statements of the Company prepared in accordance with Japanese GAAP and fi led with the appropri-
ate Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Certain supplementary information
included in the statutory Japanese language consolidated fi nancial statements is not presented in the accompanying consolidated fi nancial
statements.
On November 8, 2011, based on the fi ndings of the independent Third Party Committee, the Company announced that it had deferred
recognition of losses on securities investments from around the 1990s and was using a number of non-consolidated funds (collectively, the
“Funds”) for the acquisition transactions for three domestic subsidiaries (Altis Co., Ltd., NEWS CHEF, Inc. and Humalabo Co., Ltd., herein-
after, collectively, the “Three Domestic Subsidiaries”) and Gyrus Group PLC (“Gyrus”) to settle such losses.
Based on such fi ndings of the investigation of the independent Third Party Committee, it was determined that the Company substan-
tially controlled the Funds, which had losses on securities investments and had not previously been consolidated for the purpose of deferring
recognition of losses. Accordingly, the Company has restated its consolidated fi nancial statements by consolidating the Funds and refl ecting
such losses on the consolidated fi nancial statements for the relevant fi scal years. Additionally, restatements were made to the accounting for
the acquisition of the Three Domestic Subsidiaries as well as the fees and the amounts paid to buy back preferred shares to illegitimate
fi nancial advisors in connection with the acquisition of Gyrus, which were used to offset the losses. These restatements also included the
cancellation of goodwill incurred from these acquisitions on the consolidated balance sheets, and the cancellation of amortization and
impairment losses of such goodwill on the consolidated statements of operations.
As a result, the impact of the restatement on the 2011 consolidated fi nancial statements is as follows:
Millions of yen
As previously
reported
(A)
As restated
(B)
Restatement
(B-A)
April 1, 2010:
Retained earnings .................................................................................................................................. ¥ 168,238 ¥ 114,719 ¥(53,519)
Total net assets...................................................................................................................................... 216,891 163,131 (53,760)
March 31, 2011:
Net sales ............................................................................................................................................... ¥ 847,105 ¥ 847,105 ¥ —
Operating income .................................................................................................................................. 35,360 38,379 3,019
Income before income taxes and minority interests ................................................................................ 22,759 19,938 (2,821)
Net income ............................................................................................................................................ 7,381 3,866 (3,515)
Total assets ........................................................................................................................................... 1,063,593 1,019,160 (44,433)
Total net assets...................................................................................................................................... 166,836 115,579 (51,257)
Further, the impact of the restatement and consolidation of the Funds has been refl ected in the consolidated fi nancial statements as follows:
• Upon consolidation of the Funds, the Company consolidated cash held by the Funds as part of fund investment assets
(Note 31 “Collection of assets held by the funds”) and recorded management fees incurred by the fund managers (Note 21 “Loss on funds”).
• Upon discovery of the illegitimate payments to external collaborators, the Company recorded a non-current receivable and off-setting al-
lowance for doubtful accounts of the Funds (Notes 12 “Allowance for doubtful accounts,” 22 “Provision of allowance for doubtful accounts
on funds” and 30 “Outfl ow of money from funds”).
• In connection with the restatement of the fi nancial statements and investigation of the events, the Company incurred fees of approximately
¥2,000 million ($21,277 thousand) for the year ended March 31, 2012.
• As an indirect consequence of these events, the Company (a) made a settlement payment to its former president (Note 28 “Cash fl ow re-
lated to payments for acquisition of newly consolidated subsidiaries”), (b) received service of complaint in connection with various lawsuits
brought against the Company (Note 40 “Supplemental information”) and (c) modifi ed the terms of its syndicated loan due to violation of