Facts

Analysis of Business Results, Financial Position, and Cash Flows

Analysis of Business Results Company Overview
In the global economy during fiscal 2018, the U.S. economy
continued to recover steadily, and there was also a trend ofmoderate improvement in Europe and China. However, uncertainty over the future continued due to the political trends inthe United States and Europe and increasing geopolitical risks
in East Asia and the Middle East. In the Japanese economy,
amid firm domestic and overseas demand, corporate earnings
and employment conditions improved, and a move toward recovery has been seen in consumer spending, with themoderate recovery trend continuing.
Amid this business environment, the Olympus Group continued to work to achieve sustainable growth in fiscal 2018 bystrategically investing in growth fields and by implementing operational reforms to pursue business efficiency, in accordancewith the “Business to Specialist” Company and One Olympus
basic policies of the five-year medium-term management plan,
2016 Corporate Strategic Plan (16CSP), which was launchedin fiscal 2017.
In the Medical Business, we increased the number ofemployees to strengthen each functional area of the businessand enhanced quality assurance (QA) and regulatory assurance (RA). In the surgical device field, an area positioned for
dramatic growth under 16CSP, we steadily implemented measures aimed at future growth, such as actively introducing new
products in Japan and Europe and acquiring U.S. company
Image Stream Medical, Inc., to strengthen the operating room
systems integration business, a key strategic area. In theScientific Solutions Business, we allocated management
resources to growth fields based on customer groups andpushed ahead with optimizing the business. In the ImagingBusiness, we reinforced sales of high-margin mirrorlesscameras and reorganized production bases. Through these
initiatives, we stepped up efforts to create a business structure
capable of consistently generating profits.
During fiscal 2018, the Olympus Group invested ¥89,469
million in research and development and spent ¥65,255 million
on capital expenditures.
With respect to foreign exchange, the yen depreciatedagainst both the U.S. dollar and the euro in comparison withthe previous fiscal year. The average exchange rate during theyear was ¥110.85 against the U.S. dollar (¥108.38 in theprevious fiscal year) and ¥129.70 against the euro (¥118.79 in
the previous fiscal year), which caused revenue and operating
profit to rise ¥28,784 million and ¥10,689 million, respectively,year on year.
Revenue
Consolidated revenue increased 6.2% year on year, to¥786,497 million, due to increased sales in the Medical
Business and Scientific Solutions Business.
(¥ Billion)
1,000
800

740.6

Imaging
Business–2.5

MedicalBusiness+45.9

Others
– 4.1

786.5

ScientificSolutions Business
+6.6

600
4002000(FY)

2018

2017

Operating Profit
Operating profit was up 13.8% year on year, to ¥81,029
million, as the recording of temporary expenses related to therestructuring of a production bases in the Imaging Business
was offset by increased profits in the Medical Business andScientific Solutions Business.
(¥ Billion)
120

90
71.2
60

Elimination orunallocation+7.4

Imaging
Business–1.4

MedicalBusiness+7.1
ScientificSolutions Business+0.5

81.0

Others–3.8300(FY)

2017

2018

Profit Attributable to Owners of Parent
In addition, the Company posted income taxes of ¥19,573
million. Consequently, profit attributable to owners of parent
was ¥57,064 million, up 33.4% year on year.

Performance by Segment
Medical Business
Consolidated revenue in the Medical Business amounted to¥616,331 million, up 8.1% year on year, and operating profit
amounted to ¥121,784 million, up 6.2%.
In the gastrointestinal endoscope field, although themainstay endoscopy systems are reaching the later stagesof their product cycles, steady sales were maintained. In thesurgical device field, sales of surgical endoscopy systems
equipped with 4K technologies, 3D laparoscopy systems,
80

One Olympus Report 2018

and the THUNDERBEAT energy device integrating bothadvanced bipolar and ultrasonic energy continued to grow.
In the endotherapy device field, sales of the VisiGlide 2TM disposable guidewire product for use in endoscopic diagnosis
and treatment of biliary and pancreatic ducts and otherproducts were strong.
Despite a deterioration in profits due to the product mix andother factors, operating profit in the Medical Business increased
year on year, supported by the effect of the weaker yen.

Scientific Solutions Business
Consolidated revenue in the Scientific Solutions Businessamounted to ¥100,016 million, up 7.1% year on year, andoperating profit amounted to ¥6,425 million, up 8.4%.
Sales of products for hospitals and life science researchwere strong in Japan and China. Moreover, in addition tostrong sales of industrial microscopes for semiconductor andelectrical component inspections, sales of non-destructive
testing equipment increased overseas, leading to higher
revenue year on year in the Scientific Solutions Business.
Operating profit in the Scientific Solutions Business roseyear on year due to the increase in revenue and the effectof the weaker yen.
Imaging Business
Consolidated revenue in the Imaging Business amounted to¥60,298 million, down 4.0% year on year, and operating loss
amounted to ¥1,200 million, compared with operating profit of¥153 million in the previous fiscal year.
In the mirrorless camera field, sales increased as theOlympus Group maintained steady sales of the OM-D E-M1

Mark II flagship mirrorless camera introduced in the previousfiscal year. Meanwhile, in the compact digital camera field, theOlympus Group limited the number of units sold in line with thecontracting market. Consequently, revenue in the Imaging
Business decreased year on year.
As a result of a decrease in revenue and the recording ofcosts associated with the reorganization of production bases,operating loss was recognized in the Imaging Business.
OthersConsolidated revenue in the Others Business amounted to¥9,852 million, down 29.5% year on year, and operating loss
was ¥4,966 million, compared with operating loss of ¥1,138
million in the previous fiscal year.
Revenue in the Others Business declined as a result of
having reorganized our non-core business domains through initiatives that included transferring shares in Nippon Outsourcing
Corporation, a subsidiary of the Company, on October 31,
2016. Operating loss increased because a gain on sale ofinvestments in subsidiaries was recorded in the previous fiscal
year but absent in fiscal 2018.

Fiscal 2019 Outlook
Looking ahead, the global economy continues to recover at amoderate pace, but there remains a persistent downside risk
due to factors such as policy moves by the U.S. government
and the outlook for China and other emerging economies. In
the Japanese economy, despite the likelihood of ongoing recovery on the back of improved corporate earnings, prospects
ahead remain uncertain amid negative factors that include
growing uncertainties regarding the global economy andvolatility in financial and capital markets.
Given this environment, the Olympus Group will steadilypress forward with 16CSP, the medium-term management
plan that was established during fiscal 2016.
In the Medical Business, we aim to expand the scale ofour operations primarily by providing value in terms of both
early diagnosis and minimally invasive therapies. To this end,
we have been proactively investing in each of this segment’s

business units, namely, the GI&R (gastrointestinal and respiratory), the GS (general surgery), the Uro / Gyn (urology /gynecology), the ENT (ear, nose, and throat), and the MS(medical service) business units. We will work to improve
profitability in the Medical Business by achieving dramatic
growth in both the endotherapy device and surgical device
fields, which entails maintaining our overwhelming competitive strengths in the gastrointestinal endoscope field andstrengthening operations involving single-use devices. In theScientific Solutions Business, we will establish an earnings
base by promoting strategies oriented to customer groups
while also taking steps geared toward enhancing sharedbusiness functions and streamlining operations through globally integrated management. In the Imaging Business, we willfurther boost business efficiency aimed at the establishmentof a profitable operating structure.

Financial Position Total Assets
As of March 31, 2018, total assets increased ¥18,631 million
from a year earlier, to ¥978,663 million. As reasons for theincrease in total assets, inventories increased ¥13,990 million,property, plant and equipment increased ¥8,508 million, otherfinancial assets increased ¥5,824 million, and retirement
benefit asset increased ¥4,970 million. Conversely, cash andcash equivalents decreased ¥8,226 million and deferred tax
assets decreased ¥4,302 million.

(¥ Billion)
1,200
960.0
900

Current assets+8.5

Intangible assets Goodwill
–2.5
+1.6

Others+2.4

978.7

Property, plantand equipment
+8.5

600

3000(FY)

2017

2018

One Olympus Report 201881

FactsAnalysis of Business Results, Financial Position, and Cash Flows

Total Liabilities
As for total liabilities, bonds and borrowings in current liabilities
increased ¥20,014 million, other current liabilities increased¥16,060 million, and other non-current liabilities increased¥6,615 million. Meanwhile, bonds and borrowings in non-current liabilities decreased ¥58,010 million and trade and otherpayables decreased ¥13,275 million. As a result, total liabilities
decreased ¥29,400 million compared with the end of theprevious fiscal year, to ¥534,404 million.

Total Equity and Equity Attributable to Owners of Parent to Total Assets
Total equity increased ¥48,031 million compared with the endof the previous fiscal year, to ¥444,259 million, primarily due toan increase in retained earnings owing to profit attributable toowners of parent of ¥57,064 million and a decrease in retained
earnings stemming from dividends of ¥9,583 million.
As a result of the foregoing, equity attributable to owners ofparent to total assets increased from 41.1% at the end of theprevious fiscal year to 45.2%.

(¥ Billion)
500
400

396.2

Share
capital+0

Capitalsurplus– 0.3

Treasuryshares– 3.7

Retained earnings+52.1

Other componentsof equity
– 0.2

300

444.3

Non-controllinginterests–0200
1000(FY)

20172018

Cash Flows Cash Flows from Operating Activities
Net cash provided by operating activities amounted to¥95,146 million. Major factors increasing cash included¥76,665 million in profit before tax as well as adjustments for
non-cash items such as ¥52,913 million in depreciation andamortization, and ¥592 million in loss related to securities

litigation. Decreasing factors mainly included a decrease intrade and other payables of ¥13,709 million, an increase ininventories of ¥13,249 million, and income taxes paid of¥19,281 million.

Cash Flows from Investing Activities
Net cash used in investing activities was ¥53,312 million.
Decreasing factors mainly included ¥48,855 million in purchaseof property, plant and equipment, ¥14,554 million in purchaseof intangible assets, and ¥8,636 million in purchase ofinvestments in subsidiaries resulting in change in scope ofconsolidation. Increasing factors mainly included ¥7,047 million
in proceeds from sales of investments and ¥5,646 million inproceeds from sales of property, plant and equipment.

Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥51,058 million.
Decreasing factors mainly included ¥66,307 million in repayments of long-term borrowings and ¥9,583 million in dividends
paid. Increasing factors mainly included ¥23,551 million inproceeds from long-term borrowings and ¥9,946 million inproceeds from issuance of bonds.
As a result, cash and cash equivalents at the end of fiscal
2018 reached ¥191,239 million, a decrease of ¥8,226 million
compared with the end of the previous fiscal year.

82

One Olympus Report 2018(¥ Billion)
300

Net cash provided byoperating activities
+95.1

250
200

199.5

150

Effect of exchange ratechanges on cash
and cash equivalents
+1.0
191.2

Net cash used ininvesting activities– 53.3
Net cash used infinancing activities– 51.1100500(FY)20172018