Olympus 2014 Annual Report Download - page 32

(Millions of yen)
Consolidated 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3
Net sales
Domestic 347,261 373,163 386,502 398,237 287,025 172,583
Overseas 633,542 509,923 460,603 450,311 456,826 540,703
Total 980,803 883,086 847,105 848,548 743,851 713,286
Percentage change compared with
previous year (%) (13.1%) (10.0%) (4.1%) 0.2% (12.3%) (4.1%)
Selling, general and administrative expenses 418,558 347,125 349,306 348,287 343,121 367,011
Percentage of net sales (%) 42.7% 39.3% 41.2% 41.0% 46.1% 51.5%
Percentage of net sales excluding
R&D expenditures (%) 35.5% 32.3% 33.3% 33.8% 37.6% 42.1%
Operating income 42,722 61,160 38,379 35,518 35,077 73,445
Percentage of net sales (%) 4.4% 6.9% 4.5% 4.2% 4.7% 10.3%
Net income (loss) (50,561) 52,527 3,866 (48,985) 8,020 13,627
Percentage of net sales (%) — 5.9% 0.5% — 1.1% 1.9%
EBITDA margin(*1) (%) 10.7% 13.1% 9.9% 9.5% 10.6% 16.8%
EBITDA margin (Medical Business)(*2) (%) 27.0% 29.2% 26.9% 26.6% 29.0% 30.0%
R&D expenditures 70,010 61,850 67,286 61,356 63,379 66,796
Percentage of net sales (%) 7.1% 7.0% 7.9% 7.2% 8.5% 9.4%
Capital expenditures 55,632 34,323 32,699 37,961 28,109 37,810
Depreciation and amortization 44,594 43,099 34,188 33,787 33,899 36,850
Amortization of goodwill 17,363 11,854 11,619 11,103 9,683 9,457
Sales by region
Japan 347,261 373,163 386,502 398,237 287,025 172,583
North America 237,656 196,076 182,009 165,263 177,233 216,098
Europe 257,894 188,527 154,363 156,149 157,179 184,012
Asia and Oceania 114,152 100,045 97,293 107,304 102,395 118,717
Others 23,840 25,275 26,938 21,595 20,019 21,876
Average exchange rates
Yen/U.S. dollar 100.54 92.85 85.72 79.08 83.10 100.24
Yen/Euro 143.48 131.15 113.12 108.98 107.14 134.37
Balance sheet, cash  ows,
and  nancial indicators
Total assets(*3) 1,038,253 1,104,528 1,019,160 966,526 960,239 1,027,475
Total net assets(*3) 110,907 163,131 115,579 48,028 151,907 331,284
Equity ratio (%) 10.0% 14.1% 11.0% 4.6% 15.5% 32.1%
Interest-bearing debt 642,839 661,481 648,787 642,426 560,390 415,831
Net debt 505,763 454,698 435,226 442,338 330,780 163,710
Inventories 95,540 89,959 92,929 102,493 99,307 98,595
Inventory turnover period (months) 1.2 1.3 1.3 1.4 1.6 1.7
Cash and cash equivalents at end of year 132,720 203,013 210,385 198,661 225,782 251,344
Cash fl ow from operating activities 36,864 76,245 30,469 30,889 25,233 72,388
Cash fl ow from investing activities (15,964) (20,967) 19,003 (35,735) 33,455 (20,273)
Cash fl ow from fi nancing activities (3,751) 17,355 (37,359) (5,761) (42,436) (39,693)
Return on equity (ROE) (%) (30.2%) 40.6% 2.9% (62.3%) 8.3% 5.7%
Return on assets (ROA) (%) 4.1% 4.9% 0.4% (4.9%) 0.8% 1.4%
Net income (loss) per share (yen) (188.85) 194.90 14.39 (183.54) 28.96 41.05
Total equity per share(*3) (yen) 387.31 576.63 421.37 167.76 493.30 962.83
Price earnings ratio (PER)(*4) (times) — 15.4 160.8 — 76.4 80.2
Price book-value ratio (PBR) (times) 4.1 5.2 5.5 8.1 4.5 3.4
Outstanding market value (billions of yen) 428.6 813.9 627.7 367.3 675.8 1,127.4
Cash dividends per share (yen) 20 30 30 — — —
Number of employees(*5) 36,503 35,376 34,391 34,112 30,697 30,702
Average number of temporary employees (—) (—) (5,336) (5,009) (2,240) (2,978)
*1. EBITDA = Operating income + Depreciation and amortization that is included in cost of sales or SG&A expenses + Amortization of goodwill that is included in SG&A expenses.
EBITDA margin = EBITDA / Net sales
*2. EBITDA = Segment profi t in the Medical Business + Depreciation and amortization that is included in cost of sales or SG&A expenses + Amortization of goodwill that is included
in SG&A expenses. EBITDA margin (Medical Business) = EBITDA / Net sales
*3. In line with the issuance of IAS No. 19, “Employee Benefits” (revised on June 16, 2011) to be applied for fiscal years beginning on or after January 1, 2013, certain overseas
subsidiaries adopted IAS No. 19 effective this fiscal year and changed their method of recognizing actuarial gain or loss. This change has been applied retrospectively to the figures
for the fiscal year ended March 31, 2013.
*4. Price earnings ratio (PER) for the fi scal years ended March 31, 2009 and 2012 are omitted as Olympus recorded net loss for these fi scal years.
*5. The average number of temporary employees is stated in parentheses from the fi scal year ended March 31, 2011, as the number of temporary employees is over 10% of the total
number of employees.
Financial Summary
(For the fi scal years as of / ended March 31)
Message from the Director in Charge of Finance
Financial Strategy: Improve Capital Effi ciency
In its medium-term vision, Olympus has de ned targets
for the performance indices of return on invested capital
(ROIC), operating margin, free cash  ow, and equity ratio.
We believe that management oriented toward improving
these indices is in effect shareholder-minded management
and will therefore lead to heightened shareholder value.
ROIC is an indicator of how effi ciently we utilize the capital
invested in the Company by our shareholders and fi nancial
institutions, making it an important index for incorporating our
shareholders’ viewpoint into management. In fi scal 2014, we
were able to raise ROIC to 5.9% from fi scal 2013’s 2.7%, an
accomplishment realized by improving our profi tability and fi nan-
cial position. The higher profi tability is indicated by the massive
improvement seen in the operating margin when looked at on
a consolidated basis. By selling and liquidating non-core busi-
nesses, such as the Information & Communication Business,
we were able to raise asset effi ciency. When coupled with the
impressive performance of our mainstay Medical Business, this
increased effi ciency helped us achieve the target of 10% or more
set for the operating margin in the medium-term vision. As this
target was for fi scal 2017, it was met three years in advance.
While addressing the need to improve capital effi ciency
and profi tability, we also managed to recover the Company’s
fi nancial position to a normal standing. Despite the great
extent to which our fi nancial position had deteriorated, we
successfully accomplished this recovery in an incredibly short
period of time. Capital of approximately ¥110 billion was
procured from overseas markets, while operating cash fl ows
were used to reduce interest-bearing debt ahead of schedule.
As a result, the equity ratio was 32% on March 31, 2014, also
achieving the fi scal 2017 target three years early.
Although we managed to improve our fi nancial position to
a level that exceeded our medium-term targets in a very short
period of time, we realize that this level is still insuffi cient when
compared with the fi nancial standings of other global medical
equipment manufacturers. In the Medical Business, considering
approval requirements among other factors, signifi cant time
and money must be invested throughout the process of devel-
oping and commercializing products. It is therefore necessary
to build a fi nancial base that can support these activities over
the long term. In addition, ongoing upfront investments are
crucial to ensure stable growth. For this reason, I believe we
need to further increase the level of capital. Of course, we
must remain aware of the capital costs involved in doing this.
I am not talking about simply raising capital through fund
procurement; rather, we will formulate and implement fi nancial
strategies that boost capital while limiting capital costs and
maintaining a balance with interest-bearing debt.
Being placed in charge of fi nances, I was of course aware
of the growing importance of emphasizing capital effi ciency and
shareholder interests in business operation and evaluation. This
recent trend is exemplifi ed by such indices as the JPX-Nikkei
Index 400. My interactions with shareholders and other investors
over the past two years have only served to reinforce this recogni-
tion. The current target performance indices were decided two
years ago, when Olympus was in a state of crisis, and our aim
at that time was escaping the diffi cult situation in which we found
ourselves. However, we are currently formulating a new medium-
term management plan slated to begin in April 2016. This plan
will incorporate our shareholders’ perspective to an even greater
degree by employing such indices as return on equity (ROE).
Resource Allocation and Shareholder Return Policies
I regret having to report that we have decided to forego
dividend payments for  scal 2014 to pursue the further
reinforcement of our  nancial base. We take a  exible stance
toward shareholder returns, and we aim to resume dividends
at the soonest date possible. We will examine this possibility
when looking at our  nal earnings  gures for  scal 2015.
With regard to medium-to-long-term resource allocations,
we believe that devoting fi nancial resources to strategic invest-
ments for expanding the Medical Business should be our top
priority in order to improve shareholder value. Through these
investments, we hope to accelerate the transformation of
Olympus into a medical equipment manufacturer that can
compete on the global stage. Our next priority will be conducting
the investments necessary to strengthen the foundations of
the Scientifi c Solutions Business and the Imaging Business.
After this measure, another important priority will be preparing
for the unique risks faced by Olympus. These preparations will
include not only responding to the securities litigations the
Company is currently involved in but also addressing the risks
inherent in the Medical Business. Accordingly, we must rein-
force our fi nancial base to ensure we can always secure a
stable supply of internal revenues.
Based on the policies I have just described, and of course
future trends in performance, we hope to develop Olympus
into a company that can continue to issue stable dividends
over the medium-to-long term.
Yasuo Takeuchi
Director, Senior Executive
Managing Offi cer
61
OLYMPUS Annual Report 2014
60 OLYMPUS Annual Report 2014