Sharp 2015 Annual Report Download - page 23

for and minimize damage in the event of large-
scale natural disasters such as earthquakes and ty-
phoons, and is working hard to avoid the impact
of such disasters. However, if Sharp or its partners’
business activities are impaired directly or indi-
rectly due to the occurrence of an unprecedented
large-scale natural disaster, it may affect Sharp’s
business results and financial position.
(16) Risks Accompanying the Nuclear Power Plant Disaster
Electric power generation problems, caused by the
nuclear power plant accident accompanying the
Great East Japan Earthquake, have had various
adverse effects on both Japanese and overseas
markets, which is affecting Sharp’s business re-
sults and financial position. The Japanese govern-
ment has signaled its intention to reinstate nuclear
power generation following cabinet approval of a
basic energy plan defining nuclear as an “impor-
tant baseload power source.” In the absence of
a timeframe for reinstatement, however, power
generation problems remain unsolved at the pres-
ent time. Any possible future restrictions on elec-
tricity usage or hikes in electricity prices stemming
from electricity shortages could cause plant opera-
tions to be reduced and/or costs to increase, which
may affect Sharp’s business results and financial
position.
(17) Competition to Secure Skilled Personnel
Exceptional human resources in such fields as
technology and management are crucial to Sharp’s
future growth and development. However, since
demand for talented personnel in various fields
exceeds supply, competition to secure human re-
sources is intensifying. In the event that Sharp is
unable to attract new personnel or prevent the
departure of existing employees, or is unable to
improve the skills of key personnel engaged in
business management, its business results and fi-
nancial position may be affected.
(18) Other Key Variable Factors
In addition to the aforementioned risks, Sharp’s
business results may be significantly affected by
human-induced calamities such as accidents, con-
flicts, insurrections or terrorism; the spread of a
new strain of influenza or other infectious dis-
ease; or major fluctuations in the stock and bond
markets.
(19) Outline of Significant Events Relating to
Assumed Going Concern
In the two-year period through fiscal 2012, Sharp
consecutively posted large operating losses and
net losses, as well as negative major operating
cash flows, and its financial position weakened as
a result. In response, Sharp formulated a Medium-
Term Management Plan in May 2013 and has
since worked diligently to achieve recovery and
growth. With respect to performance, therefore,
Sharp returned to profitability in fiscal 2013, with
consolidated net income of ¥11,559 million. On
the funding side, Sharp has received continuous
support from financial institutions, including a syn-
dicated loan, enabling redemption of bonds upon
maturity. Sharp also secured funds and strength-
ened its financial base, by issuing new shares via
public offering and third-party allotment, etc. In
fiscal 2014, however, Sharp once again incurred a
substantial operating loss and net loss due to fall-
ing prices of small- and medium-size LCDs, loss on
related to valuation reserve for inventory purchase
commitments, impairment losses, restructuring
charges, and other measures aimed at improving
its operational foundation. These factors made it
difficult to achieve the targets of the Medium-Term
Management Plan. Accordingly, consolidated net
assets have declined significantly, to levels infring-
ing on financial covenants of the syndicated loan
agreement. Moreover, the term of the syndicated
loan expires on March 31, 2016. Although there
are events or conditions that may cast significant
doubt on the entity’s ability to continue as a going
concern, we believe that these conditions will not
cast a material uncertainty about Sharp’s ability to
continue as a going concern, due to implemen-
tation of various measures to resolve these and
other major issues as described below. Therefore,
no further disclosure for the “Going Concern
Assumption” in the notes to the consolidated fi-
nancial statements is necessary.
Sharp has formulated a new Medium-Term
Management Plan for Fiscal 2015 through 2017.
Under the plan, Sharp will strive to build stable
earnings foundation by steadily implementing
three key strategies: (1) Restructure business port-
folio, (2) Reduce fixed costs, and (3) Reorganize
and strengthen corporate/governance systems.
Furthermore, based on the premise of the plan’s
implementation, Sharp will issue preferred shares
totaling ¥200.0 billion to two main banks—Mizuho
Bank, Ltd. and The Bank of Tokyo-Mitsubishi UFJ,
Ltd.—in order to reinforce deteriorated capital
base. Sharp will also issue preferred shares totaling
¥25.0 billion to Japan Industrial Solutions Fund I,
managed by Japan Industrial Solutions Co., Ltd., to
raise investment capital. In both cases, Sharp con-
cluded preferred share subscription agreements
on May 14, 2015, and related proposals (change
to Articles of Incorporation, type of shares issued,
reduction in capital, etc.) received approval at the
121st Ordinary General Meeting of Shareholders,
held on June 23, 2015. Reconciliation among
financial institutions and other matters that rea-
sonably satisfy the underwriting financial insti-
tutions are expected to be completed by the
payment date. Sharp will work steadily to reinforce
its capital base and implement its Medium-Term
Management Plan while helping those institutions
and other related parties reach an understanding
of Sharp’s initiatives as before. Moreover, despite
financial covenants being infringed upon, Sharp’s
main financial institutions indicate that they are
not considering enforcing forfeiture of the benefit
of time. With respect to the expiration of the syn-
dicated loan contract, as well, Sharp has received
informal notice from the financial institutions that
they will continue supporting Sharp during the pe-
riod of the new Medium-Term Management Plan,
subject to the successful completion of the pre-
ferred share underwritings. Accordingly, Sharp will
avoid the risk of capital inadequacy and, thanks to
the continued support of financial institutions, will
implement specific measures outlined in its new
Medium-Term Management Plan.
Risk Factors
21
Risk Factors
Segment Outline
Medium-Term Management Plan
for Fiscal 2015 through 2017
Financial Section
Investor Information
Directors, Audit & Supervisory Board
Members and Executive Officers
Corporate Governance
Contents
Corporate Social
Responsibility (CSR)
Message to our Shareholders
Fiscal 2014 Review by
Product Group
Financial Highlights
SHARP Annual Report 2015