Omron 1999 Annual Report Download - page 36

The convertible bonds may be purchased at any time by the Company or its subsidiaries principally at any
price in the open market or otherwise and may be redeemed at the Company’s option prior to maturity. The
convertible bonds are redeemable, in whole or in part, beginning October 1997 at 106% of face value,
decreasing 1% per year.
The number of contingently issuable shares of common stock related to the convertible bonds as of March
31, 1999 was 10,028,661 shares.
The conversion price per share at March 31, 1999 was ¥2,965 ($24.51), subject to antidilutive provisions.
As is customary in Japan, additional security must be given if requested by a lending bank, and banks have
the right to offset cash deposited with them against any debt or obligation that becomes due and, in case of
default and certain other specified events, against all debt payable to the banks. The Companies have never
received any such requests.
As is customary in Japan, the Company and domestic subsidiaries maintain deposit balances with banks with
which they have short- or long-term borrowings. Such deposit balances are not legally or contractually
restricted as to withdrawal.
Total interest cost incurred and charged to expense for the years ended March 31, 1999, 1998 and 1997
amounted to ¥2,518 million ($20,810 thousand), ¥2,412 million and ¥3,557 million, respectively.
The Companies have operating lease agreements primarily involving offices and equipment for varying periods.
Leases that expire generally are expected to be renewed or replaced by other leases. At March 31, 1999, future
minimum rental payments applicable to noncancelable leases having initial or remaining noncancelable lease
terms in excess of one year were as follows:
Thousands of
Years ending March 31, Millions of yen U.S. dollars
2000 ............................................................................................................................ ¥1,909 $15,777
2001 ............................................................................................................................ 1,703 14,074
2002 ............................................................................................................................ 804 6,645
2003 ............................................................................................................................ 738 6,099
2004 ............................................................................................................................ 606 5,008
2005 and thereafter..................................................................................................... 2,426 20,050
Total ........................................................................................................................ ¥8,186 $67,653
Rental expense amounted to ¥15,193 million ($125,562 thousand), ¥13,917 million and ¥11,105 million for the
years ended March 31, 1999, 1998 and 1997, respectively.
Since December 1997, the Company has entered into an agreement with an outside service organization for
outsourcing computer services. The contract requires an annual service fee of ¥4,460 million ($36,860 thou-
sand) for the year ending March 31, 1999. The annual service fee will gradually decrease each year during the
initial contract term of 10 years to ¥3,769 million for 2008. The contract is cancelable subject to a penalty of 15%
of aggregate service fees payable for the remaining term of the contract.
The Company and its domestic subsidiaries sponsor termination and retirement benefit plans which cover
substantially all domestic employees. Benefits are based on the employee’s years of service, with some plans
considering compensation and certain other factors. If the termination is involuntary, the employee is usually
entitled to greater payments than in the case of voluntary termination.
The Company and its domestic subsidiaries fund a portion of the obligations under these plans. The general
funding policy is to contribute amounts computed in accordance with actuarial methods acceptable under
Japanese tax law. The Company and substantially all domestic subsidiaries have a contributory termination
and retirement plan which is interrelated with the Japanese government social welfare program and consists of
a basic portion requiring employee and employer contributions plus an additional portion established by the
employers.
Periodic pension benefits required under the basic portions, prescribed by the Japanese Ministry of Health
and Welfare, commence at age 60 and continue until the death of the surviving spouse. Benefits under the
additional portion are usually paid in a lump sum at the earlier of termination or retirement, although periodic
payments are available under certain conditions.
34
6. Leases
7. Termination and
Retirement
Benefits