Olympus 2014 Annual Report Download - page 35

2. Olympus may acquire companies for the purpose
ofbusiness expansion. Inability to integrate ac-
quiredbusinesses in accordance with the Group’s man-
agement strategies or inability to effi ciently utilize the
management resources of existing businesses orac-
quired 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, 2014, the Olympus Group held listed
stocks with a total value of ¥51,070 million and un-
listed stocks with a total value of ¥2,595 million as
investments for the purpose of facilitating business
alliances. The stock price of listed stocks is deter-
mined based upon market principles. Accordingly,
fluctuations in market trends could cause the value of
these stocks to decline. For unlisted stocks, it is pos-
sible 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 invest-
ment 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 chang-
es 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 informa-
tion, such as technical information and personal infor-
mation 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 un-
foreseen circumstances may affect the Group’s busi-
ness 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 compen-
sation 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. Furthermore,
shareholders of the Company have fi led legal complaints
against the Company as a result of the Company’s inappro-
priate 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 June 26, 2014, the following major lawsuits have
been fi led against the Company with pending claims
totaling ¥86.3 billion.
In regard to the pending lawsuits in fi scal 2014, the
Company recorded ¥11,000 million as provision for loss on
litigation in current liabilities in consideration of the state of
progress of the lawsuits 1. and 3. mentioned below.
1. 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. On June 28, 2013,
two companies withdrew their claims, which totaled ¥9
million. For this reason, the damages sought for this
complaint currently totals ¥20,842 million and 5% per
annum interest on this amount for the period from No-
vember 8, 2011, up to the payment of the principal.
2. On December 13, 2012, 68 plaintiffs, including California
Public Employees’ Retirement System as well as non-
Japanese investors and pension funds that are share-
holders 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
and 5% per annum interest on this amount for the period
from October 14, 2011, up to the payment of the princi-
pal. On April 4, 2013, two companies withdrew their
claims, which totaled ¥18 million, and the damages
sought were changed to ¥5,875 million and 5% per
annum interest on this amount for the period from Octo-
ber 14, 2011, up to the payment of the principal accord-
ingly. On September 11, 2013, four companies withdrew
their claims, which totaled ¥112 million, and the damag-
es sought were changed to ¥5,763 million and 5% per
annum interest on this amount for the period from Octo-
ber 14, 2011, up to the payment of the principal accord-
ingly. On February 4, 2013, one company withdrew its
claim, which totaled ¥2 million, and the damages sought
were changed to ¥5,762 million and 5% per annum inter-
est on this amount for the period from October 14, 2011,
up to the payment of the principal accordingly. Lastly, on
May 14, 2014, one company withdrew its claim, which
totaled ¥3 million. For this reason, the damages sought
for this complaint currently totals ¥5,759 million and 5%
per annum interest on this amount for the period from
October 14, 2011, up to the payment of the principal.
3. On June 27, 2013, 43 plaintiffs, including California State
Teachers’ 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 July 16,
2013) seeking damages of ¥16,832 million and 5% per
annum interest on this amount for the period from No-
vember 8, 2011, up to the payment of the principal.
4. On April 7, 2014, six plaintiffs, including Mitsubishi UFJ
Trust and Banking Corporation and fi ve other trust
banks, fi led a complaint against the Company (the date
the Company received the complaint was April 17, 2014)
seeking damages of ¥27,915 million and the interest ac-
crued to the damages incurred relating to each of the
shares at the rate of 5% per annum for the period from
the day immediately following the share acquisition trade
date of each of the shares that incurred losses up to the
payment of the incurred losses of the shares.
Furthermore, 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. A settlement
was reached with regard to this complaint on November
18, 2013, and the Company paid a settlement package to
Terumo of ¥6,000 million during fi scal 2014. This amount was
recorded under extraordinary loss as “settlement charge.”
(7) Risks Associated with Internal Control Systems, etc.
The Company has striven to improve and develop its in-
ternal 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. Neverthe-
less, 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 sub-
mission of written affi rmation on the internal control sys-
tem, 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 desig-
nation, the Company will continue torevise its internal
control systems to minimize risks. However, it is still pos-
sible 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) Risks Associated with Withdrawal
from the Biologics Business
The Olympus Group decided to withdraw from the bio-
logics business on February 28, 2014, and recorded a
total of ¥14,672 million in extraordinary losses for fi scal
2014, composed of ¥3,645 million in impairment loss on
fi xed assets and ¥11,027 million in loss on liquidation of
business. Depending on the progress of procedures as-
sociated with the withdrawal, it is possible that the with-
drawal will impact on the Group’s business performance
or fi nancial position during fi scal 2015 or in subsequent
fi scal years due to such factors as the recognition of
additional costs.
(9) Other General Risks
Through its domestic and overseas subsidiaries and affi li-
ates, 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 discus-
sions with or reporting to authorities with respect to
compliance with laws (for instance, response to investi-
gations 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.
Risk Information
67
OLYMPUS Annual Report 2014
66 OLYMPUS Annual Report 2014