Olympus 2014 Annual Report Download - page 34

Analysis of Business Results, Financial Position, and Cash Flows
Financial Position
Total Assets
As of March 31, 2014, total assets stood at ¥1,027,475
million, up ¥67,236 million from a year earlier. Total current
assets increased ¥35,475 million largely due to higher cash
and deposits, and non-current assets rose ¥31,761 million
following capital expenditures.
960.2
1,027.5
2013/3 2014/3
Current assets
+35.5
Property, plant
and equipment
+5.6
Intangible assets
(1.0)
Investments and
other assets
+27.2
(¥ Billion)
0
300
600
900
1,200
Liabilities
As of March 31, 2014, total liabilities amounted to
¥696,191 million, down ¥112,141 million from a year
earlier. This decline was due mainly to decreases in
borrowings (long-term and short-term) of ¥109,559
million and current maturities of long-term bonds of
¥35,000 million.
Net Assets and Equity Ratio
Net assets at the end of the fi scal year totaled ¥331,284
million, up ¥179,377 million from the previous fi scal year-
end. This rise was primarily due to an increase in total
accumulated other comprehensive income of ¥53,952
million, which resulted from fl uctuations in foreign exchange
and stock prices, as well as increases in common stock of
¥51,189 million and in capital surplus of ¥52,083 million,
resulting from the disposal of treasury stock and the issu-
ance of new shares through public offering (offering through
a book building method).
As a result of the above, the equity ratio increased
from 15.5% at the end of the previous fi scal year to 32.1%.
0
100
200
300
400
151.9
331.3
2013/3 2014/3
Shareholders’
equity
+127.0
Total accumulated
other
comprehensive
income
＋54.0
Minority
interests
(1.7)
Stock acquisition
rights
+0.1
(¥ Billion)
Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥72,388
million, up ¥47,155 million from the previous fi scal year.
Major factors increasing cash included the recording of loss
on liquidation of business of ¥11,591 million; increase in
provision for loss on litigation of ¥11,000 million; decrease
in accounts receivable of ¥1,950 million, compared with
increase in accounts receivable of ¥10,063 million in the
previous fi scal year; and a ¥19,739 million decrease in gain
on sale of investment securities in subsidiaries and affi li-
ates, net. Major factors decreasing cash included the
recording of decrease in other payables of ¥3,659 million,
compared with increase inother payables of ¥3,217 million
in the previous fi scal year, as well as a decrease of ¥4,651
million in increase inaccounts payable.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥20,273 million,
compared with net cash provided by investing activities
of ¥33,455 million in the previous fi scal year. Major factors
decreasing cash included a ¥47,775 million decrease in net
increase from sales of investments in subsidiaries resulting
in changes in scope of consolidation and a ¥5,310 million
decrease in sales of investment securities. Major factors
increasing cash included a ¥3,183 million increase in
withdrawals from time deposits.
Cash Flows from Financing Activities
Net cash used in fi nancing activities was ¥39,693 million,
down ¥2,743 million compared with the previous fi scal year.
Major factors increasing cash included a ¥51,641 million
increase in proceeds from issuance of common stock and
the recording of proceeds from disposal of treasury stock of
¥11,067 million. Major factors decreasing cash included a
¥47,339 million increase in repayments of long-term borrow-
ings and a ¥14,960 million increase in redemption of bonds.
As a result, cash and cash equivalents at end of year
amounted to ¥251,344 million, an increase of ¥25,562
million compared with the end of the previous fi scal year.
225.8
251.3
Net cash
provided by
operating
activities
+72.4
Net cash
used in
investing
activities
(20.3)
Net cash
used in
financing
activities
(39.7)
Effect of
exchange rate
changes on
cash and cash
equivalents
+13.1
(¥ Billion)
2013/3 2014/3
0
100
200
300
65
OLYMPUS Annual Report 2014
64 OLYMPUS Annual Report 2014
Risk Information
A number of factors could signifi cantly affect the busi-
ness performance of the Olympus Group. To respond
tosuch risks, Olympus formed the CSRCommittee in
2011 and is strengthening activities pertaining to risk
management. In addition, Olympus has established risk
management rules, the Risk Management Promotion
Committee based on those rules, and made decisions
onrisk management policies and evaluation, verifi cation,
and procedural guidelines.
Moreover, in October 2012, the former Risk
Management Bureau was revised and renamed the
RiskManagement Department to further strengthen
theCompany’s risk management structure. Within the
RiskManagement Department, we have assembled
afull-time staff that collects and assesses information,
formulates countermeasures, and ensures their effec-
tiveness. In addition, the department works with each
regional business center, business division, and affiliate
to develop risk management structures. Should any
risks arise that could have a significant impact on the
maintenance ofthe Company’s corporate value, such
risks are immediately reported to the president and
theCSR Committee, which collaborate with related
divisions todetermine appropriate countermeasures
and ensure prompt resolution of the issue. Olympus
isalso developing a structure to respond to rapidly
developing crises and thereby minimize the impact
on corporate value.
The following are the main factors, other than man-
agement decisions, and risks inherit to operations that
may give rise to changes in the Group’s business perfor-
mance. Forward-looking statements in this section are
based on the Group’s judgment as of the end of the
fi scal year under review.
Business Risks
(1) Risks Associated with Sales Activities
1. In the Medical Business, it is possible that healthcare
policies may be amended in an unforeseeable and
material manner due to healthcare system reforms or
that some other signifi cant change may occur in the
medical industry. If the Olympus Group is unable to
adapt to such environmental changes or obtain the
licenses and approvals in various countries necessary
for its business activities in a timely manner, earnings
may be affected.
2. In the life science sector of the Scientifi c Solutions
Business, the supply of systems for research funded
by national budgets of countries accounts for a high
proportion of earnings, and the curtailment of national
budgets for such reasons as macroeconomic changes
may affect earnings.
3. In the digital camera fi eld of the Imaging Business,
market conditions are growing ever harsher. If the
market contracts more rapidly than anticipated, the
Group may be unable to adequately counter the re-
sulting sales decline with its restructuring measures,
and earnings may be impacted as a result.
(2) Risks Associated with Production
and Development Activities
1. In the Imaging Business, core production operations
are located in China. Accordingly, a rise in the value
ofthe yuan would result in cost increases, which may
affect earnings. In addition, the destabilization of con-
ditions or the deterioration of public safety in China, or
anti-Japan sentiment, among others, may affect pro-
duction activities.
2. The Group depends on certain specifi c suppliers
forprocesses from development to production of
products and components that cannot be developed
and produced within the Group. Accordingly, procure-
ment constraints resulting from conditions impacting
these suppliers may affect production and supply
capacity.
3. Olympus products, including products consigned to
outside suppliers, are manufactured in accordance
with strict quality standards. Nevertheless, the occur-
rence of product defects may result in substantial
costs, such as for product recalls, as well as loss of
confi dence in the Olympus Group, which may affect
earnings.
4. The Group is making continuous advances in the devel-
opment of products that incorporate cutting-edge tech-
nologies. Nevertheless, technical progress is rapid, and
the inability to suffi ciently foresee market changes and
develop new products that meet customer needs in a
timely manner may affect earnings.
5. The Group applies various intellectual property rights
in its R&D and production activities and believes that
these are rights owned by the Group or rights for
which the Group has legally obtained licenses. How-
ever, assertion by a third party that the Group has un-
knowingly infringed on intellectual property rights and
the occurrence of a dispute may affect earnings.
(3) Risks Associated with Business Partnerships
and Corporate Acquisitions
1. Olympus has formed long-term strategic partnerships
related to technologies and product development with
leading companies in the industry. Inability to maintain
such partnerships due to the occurrence of fi nancial or
other business-related issues with strategic partners,
changes in goals, or other reasons may hinder the
Group’s business activities.