Omron 2007 Annual Report Download - page 80

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19. Commitments and Contingent Liabilities
The Company has commitments at March 31, 2007 of approxi-
mately ¥29,517 million ($250,144 thousand) related to contracts
for outsourcing computer services through 2013. The contracts
require an annual service fee of ¥6,031 million ($51,110 thou-
sand) for the year ending March 31, 2007. The annual service
fee will gradually decrease each year during the contract term to
¥4,657 million ($39,466 thousand) for 2013. The contract is can-
celable at any time subject to a penalty of 15% of aggregate
service fees payable for the remaining term of the contract.
The Company and certain of its subsidiaries are defendants in
several pending lawsuits. However, based upon the information
currently available to both the Company and its legal counsel,
management of the Company believes that damages from such
lawsuits, if any, would not have a material effect on the consol-
idated financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Companies to
concentrations of credit risk consist principally of short-term cash
investments and trade receivables. The Companies place their
short-term cash investments with high-credit-quality financial
institutions. Concentrations of credit risk with respect to trade
receivables, as approximately 56% of total sales are concen-
trated in Japan, are limited due to the large number of well-
established customers and their dispersion across many indus-
tries. The Company normally requires customers to deposit funds
to serve as security for ongoing credit sales.
Guarantees
The Company provides guarantees for bank loans of other com-
panies. The guarantees for the other companies are made to
ensure that those companies operate with less finance costs.
The maximum payments in the event of default is ¥1,026 million
($8,695 thousand) at March 31, 2007. The carrying amounts of
the liabilities recognized under those guarantees at March 31,
2007 were immaterial.
Bank loans of ¥574 million ($4,864 thousand) of an unaffiliated
company were jointly and severally guaranteed by the Company
and six other unaffiliated companies. According to an agreement
between the seven companies, any loss on these guarantees
are to be borne equally among the companies.
Product Warranties
The Companies issue contractual product warranties under which
they generally guarantee the performance of products delivered
and services rendered for a certain period or term. Changes in
accrued product warranty cost for the years ended March 31,
2007 and 2006 are summarized as follows:
20. Subsequent Events
1) In April 2007, OMRON Entertainment Co., Ltd., a subsidiary
of the Company, had transferred all of its business to third
party. As a result of this business transfer, the Company will
record a gain (pre tax base) of approximately ¥5,200 million
($44,068 thousand) in the year ending March 31, 2008.
(2) On May 16, 2007, the Company’s board of directors approved
a resolution, which is subject to approval at the general meet-
ing of shareholders, outlining a plan to purchase the
Company’s shares. The execution of the plan is at the
Company’s discretion with a maximum aggregate purchase
of ¥10,000 million ($84,746 thousand), or 3,000,000 shares,
for the period up to the date of the June 2008 general meet-
ing of shareholders.
Balance at beginning of year
Addition
Utilization
Balance at end of year
2007 2006 2007
Millions of yen Thousands of
U.S. dollars
¥2,309
1,586
(2,217)
¥1,678
¥1,678
2,082
(1,570)
¥2,190
$14,220
17,644
(13,305)
$18,559