FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Commission File Number: 333-13896
Supplement For the month of November 2010.
Total number of pages: 62
The exhibit index is located on page 1
NIDEC CORPORATION
(Translation of registrant’s name into English)
338 KuzeTonoshiro-Cho,
Minami-Ku,Kyoto 601-8205 Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F X Form 40-F __
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes __ No X
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_____
Information furnished on this form:
EXHIBITS
Exhibit Number
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 25, 2010 | ||||
NIDEC CORPORATION | ||||
By: /S/ Masahiro Nagayasu | ||||
General Manager, Investor Relations |
2
NEWS RELEASE
NIDEC CORPORATION
New York Stock Exchange symbol: NJ
Stock exchange code (Tokyo, Osaka): 6594
FOR IMMEDIATE RELEASE
Contact: | |
Masahiro Nagayasu | |
General Manager | |
Investor Relations | |
+81-75-935-6140 | |
ir@jp.nidec.com |
QUARTERLY FINANCIAL STATEMENTS (U.S. GAAP)
RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED SEPTEMBER 30, 2010 (Unaudited)
(FROM APRIL 1, 2010 TO SEPTEMBER 30, 2010)
CONSOLIDATED
Released on November 25, 2010
3
NIDEC CORPORATION
338 Kuzetonoshiro-cho,
Minami-ku, Kyoto 601-8205 Japan
CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER AND THE SIX MONTHS ENDED SEPTEMBER 30, 2010 (Unaudited) |
CONSOLIDATED STATEMENTS OF INCOME
Yen in millions | U.S. dollars in thousands | ||
(except per share amounts) | |||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales | ¥145,257 | ¥169,991 | $2,028,048 |
Operating income | 18,037 | 24,519 | 292,520 |
Income from continuing operations before income taxes | 13,724 | 20,321 | 242,436 |
Income from continuing operations attributable to Nidec Corporation | 8,836 | 13,231 | 157,850 |
Loss on discontinued operations attributable to Nidec Corporation | (867) | - | - |
Net income attributable to Nidec Corporation | ¥7,969 | ¥13,231 | $157,850 |
Per share data | |||
Earning per share - basic | |||
Income from continuing operations attributable to Nidec Corporation | ¥63.43 | ¥95.00 | $1.13 |
Loss on discontinued operations attributable to Nidec Corporation | (6.22) | - | - |
Net income attributable to Nidec Corporation | 57.21 | 95.00 | 1.13 |
Earning per share - diluted | |||
Income from continuing operations attributable to Nidec Corporation | 63.43 | 94.29 | 1.12 |
Loss on discontinued operations attributable to Nidec Corporation | (6.22) | - | - |
Net income attributable to Nidec Corporation | ¥57.21 | ¥94.29 | $1.12 |
4
CONSOLIDATED STATEMENTS OF INCOME
Yen in millions | U.S. dollars in thousands | ||
(except per share amounts) | |||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales | ¥268,743 | ¥340,791 | $4,065,748 |
Operating income | 28,321 | 51,522 | 614,674 |
Income from continuing operations before income taxes | 22,474 | 41,293 | 492,639 |
Income from continuing operations attributable to Nidec Corporation | 14,717 | 27,014 | 322,286 |
Loss on discontinued operations attributable to Nidec Corporation | (929) | - | - |
Net income attributable to Nidec Corporation | ¥13,788 | ¥27,014 | $322,286 |
Per share data | |||
Earning per share - basic | |||
Income from continuing operations attributable to Nidec Corporation | ¥105.65 | ¥193.94 | $2.31 |
Loss on discontinued operations attributable to Nidec Corporation | (6.66) | - | - |
Net income attributable to Nidec Corporation | 98.99 | 193.94 | 2.31 |
Earning per share - diluted | |||
Income from continuing operations attributable to Nidec Corporation | ¥105.65 | 193.22 | 2.31 |
Loss on discontinued operations attributable to Nidec Corporation | (6.66) | - | - |
Net income attributable to Nidec Corporation | ¥98.99 | ¥193.22 | $2.31 |
5
CONSOLIDATED BALANCE SHEETS
Yen in millions | U.S. dollars in thousands | ||
2010 | |||
March 31 | September 30 | September 30 | |
Current assets | ¥374,883 | ¥370,143 | $4,415,927 |
Investments | 18,076 | 15,020 | 179,194 |
Property, plant, equipment and others | 299,832 | 354,641 | 4,230,983 |
Total assets | 692,791 | 739,804 | 8,826,104 |
Current liabilities | 262,265 | 208,091 | 2,482,594 |
Long-term liabilities | 28,995 | 128,400 | 1,531,854 |
Total liabilities | 291,260 | 336,491 | 4,014,448 |
Total Nidec Corporation shareholders’ equity | 340,309 | 344,184 | 4,106,228 |
Noncontrolling interests | 61,222 | 59,129 | 705,428 |
Total liabilities and equity | ¥692,791 | ¥739,804 | $8,826,104 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net cash provided by operating activities | ¥47,642 | ¥34,487 | $411,441 |
Net cash used in investing activities | (14,890) | (81,325) | (970,234) |
Net cash (used in) provided by financing activities | (107,082) | 18,969 | 226,306 |
Effect of exchange rate changes on cash and cash equivalents | (7,225) | (7,648) | (91,243) |
Net decrease in cash and cash equivalents | (81,555) | (35,517) | (423,730) |
Cash and cash equivalents at beginning of period | 200,966 | 123,309 | 1,471,117 |
Cash and cash equivalents at end of period | ¥119,411 | ¥87,792 | $1,047,387 |
6
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended) about Nidec Corporation and its group companies (the "Nidec Group"). These forward-looking statements are based on the current expectations, assumptions, estimates and projections of the Nidec Group in light of the information currently available to it. These forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "intend," "plan," "forecast" or similar words. These statements discuss future expectations, identify strategies, contain pr ojections of the results of operations or financial condition of the Nidec Group, or state other forward-looking information. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contained in any forward-looking statement. The Nidec Group cannot promise that the expectations expressed in these forward-looking statements will turn out to be correct. Actual results could be materially different from and worse than our expectations as a result of certain factors, including, but not limited to (i) the Nidec Group's ability to design, develop, mass produce and win acceptance of its products, (ii) general economic conditions in the computer, information technology, automobile and other relevant product markets, particularly levels of consumer spending, (iii) exchange rate fluctuations, particularly between the Japanese yen and the U.S. dollar and other currencies in which the Nidec Group makes significant sales or in which the Nidec Group's assets and liabilities are denominated, (iv) the Nidec Group's ability to acquire and successfully integrate companies with complementary technologies and product lines, including, but not limited to, Emerson Electric Co.'s motors and controls ("EMC") business, and (v) adverse changes in laws, regulations or economic policies in any of the countries where the Nidec Group has manufacturing or other operations.
As used in this document, references to “we,” ”our,” “us” and "Nidec Group" are to Nidec Corporation and, except as the context otherwise requires, its consolidated subsidiaries; “U.S. dollar” or “$” means the lawful currency of the United States of America, and "Japanese yen," “yen” or “¥” means the lawful currency of Japan; and “U.S. GAAP” means accounting principles generally accepted in the United States, and “Japanese GAAP” means accounting principles generally accepted in Japan.
7
Results of Operations — Three and Six Months Ended September 30, 2010 Compared to Three and Six Months Ended September 30, 2009 (Unaudited)
Net Sales
(Yen in millions) For the three months ended September 30 | ||||
2009 | 2010 | Inc/Dec | Inc/Dec % | |
Net sales: | ||||
Small precision motors: | ||||
Hard disk drives spindle motors | ¥52,478 | ¥51,847 | ¥(631) | (1.2)% |
Other small precision brushless DC motors | 20,082 | 18,536 | (1,546) | (7.7) |
Brushless DC fans | 8,824 | 8,486 | (338) | (3.8) |
Other small precision motors | 4,745 | 4,626 | (119) | (2.5) |
Sub-total | 86,129 | 83,495 | (2,634) | (3.1) |
General motors * | 16,127 | 23,345 | 7,218 | 44.8 |
Machinery | 9,299 | 20,800 | 11,501 | 123.7 |
Electronic and optical components | 26,972 | 34,141 | 7,169 | 26.6 |
Others | 6,730 | 8,210 | 1,480 | 22.0 |
Consolidated total | ¥145,257 | ¥169,991 | ¥24,734 | 17.0% |
(Yen in millions) For the six months ended September 30 | ||||
2009 | 2010 | Inc/Dec | Inc/Dec % | |
Net sales: | ||||
Small precision motors: | ||||
Hard disk drives spindle motors | ¥97,630 | ¥104,379 | ¥6,749 | 6.9% |
Other small precision brushless DC motors | 35,996 | 39,991 | 3,995 | 11.1 |
Brushless DC fans | 16,161 | 17,326 | 1,165 | 7.2 |
Other small precision motors | 8,614 | 9,486 | 872 | 10.1 |
Sub-total | 158,401 | 171,182 | 12,781 | 8.1 |
General motors * | 31,831 | 48,105 | 16,274 | 51.1 |
Machinery | 16,898 | 38,021 | 21,123 | 125.0 |
Electronic and optical components | 49,278 | 66,521 | 17,243 | 35.0 |
Others | 12,335 | 16,962 | 4,627 | 37.5 |
Consolidated total | ¥268,743 | ¥340,791 | ¥72,048 | 26.8% |
* Note: From the three months ended September 30, 2010, the product category has been renamed from "Mid-size motors" to "General motors," due to the addition of "Large-size motors for industrial use" to this category resulting from our acquisition of Emerson Electric Co.'s motors and controls business on September 30, 2010.
8
Our net sales increased ¥24,734 million, or 17.0 %, from ¥145,257 million for the three months ended September 30, 2009 to ¥169,991 million for the three months ended September 30, 2010. This increase was primarily due to the gradual economic recovery in recent months from the world-wide recession, which negatively impacted our business in previous quarterly periods. Net sales of small precision motors, however, decreased for the three months ended September 30, 2010, compared to the same period of the previous fiscal year primarily due to the further appreciation of the Japanese yen against the U.S. dollars, as described below. With the increases in financial deficits and credit deterioration of some European countries, triggered by Greece’s financial crisis, there are increasing concerns about the possibility of a second recession which could affect the global economy and in turn affect our net sales.
The strong Japanese yen particularly against the U.S. dollar has had, and is expected to continue to have, an adverse impact on our results of operations and financial condition, particularly net sales and shareholders’ equity, as unit prices of many of our products are denominated in U.S. dollars and we have expanded, and continue to seek opportunities to expand, our overseas operations. For example, on September 30, 2010, we acquired Emerson Electric Co.'s motors and controls ("EMC") business, as described below. Appreciation of the Japanese yen against other currencies will also affect our foreign currency translation adjustments, which will in turn negatively affect our shareholders’ equity. The Japanese yen appreciated approximately 8% against the U.S. dollar to ¥85.90 to the U.S. dollar on a three-month average basis between the three months ended September 30, 2009 and 2010. As of November 22, 201 0, the exchange rate between the two currencies was ¥83.58 to the U.S. dollar. We expect the Japanese yen to further appreciate against the U.S. dollar at least for the remainder of the fiscal year ending March 31, 2011.
Our net sales increased ¥72,048 million, or 26.8 %, from ¥268,743 million for the six months ended September 30, 2009 to ¥340,791 million for the six months ended September 30, 2010.
(Small precision motors)
Net sales of small precision motors decreased ¥2,634 million, or 3.1%, from ¥86,129 million for the three months ended September 30, 2009 to ¥83,495 million for the three months ended September 30, 2010. Net sales of each product group included in “small precision motors” are discussed below.
Net sales of small precision motors increased ¥12,781 million, or 8.1%, from ¥158,401 million for the six months ended September 30, 2009 to ¥171,182 million for the six months ended September 30, 2010. On a six-month average basis, the Japanese yen exchange rate for the six months ended September 30, 2009 and 2010 appreciated approximately 7% to ¥88.95 against the U.S. dollar, having a smaller negative impact on net sales compared to the 8% appreciation on a three-month average basis between the three months ended September 30, 2009 and 2010.
9
Hard disk drives spindle motors
Net sales of hard disk drives ("HDDs") spindle motors decreased ¥631 million, or 1.2%, from ¥52,478 million for the three months ended September 30, 2009 to ¥51,847 million for the three months ended September 30, 2010. This decrease was primarily due to an 8% appreciation of the Japanese yen against the U.S. dollar compared to the three months ended September 30, 2009, which was offset in part by a 7% increase in unit shipments of our hard disk drives spindle motors for the three months ended September 30, 2010. Unit shipment and sales of our spindle motors for 2.5-inch HDDs increased 25% and 10%, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. The difference in the increase rate between 25% and 10% was primarily due to the 8% appreciation of the Japanese yen against the U.S. dollar and a 4% decrease in the average unit price on U.S. dol lar basis of spindle motors for 2.5-inch HDDs. Unit shipment and sales of our spindle motors for 3.5-inch HDDs decreased 5% and 8%, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.
Net sales of hard disk drives spindle motors accounted for 36.1% of total net sales for the three months ended September 30, 2009 and 30.5% of total net sales for the three months ended September 30, 2010.
Net sales of hard disk drives spindle motors increased ¥6,749 million, or 6.9%, from ¥97,630 million for the six months ended September 30, 2009 to ¥104,379 million for the six months ended September 30, 2010.
Other small precision brushless DC motors
Net sales of other small precision brushless DC motors decreased ¥1,546 million, or 7.7%, from ¥20,082 million for the three months ended September 30, 2009 to ¥18,536 million for the three months ended September 30, 2010. This decease was primarily due to a ¥1,998 million, or 16%, decrease in sales by Nidec Corporation and its direct subsidiaries primarily reflecting weaker demand for small precision brushless DC motors for optical disk drives, which was offset in part by an increase in sales of small precision brushless DC motors by the Nidec Servo group.
Net sales of other small precision brushless DC motors accounted for 13.8% of total net sales for the three months ended September 30, 2009 and 10.9% of total net sales for the three months ended September 30, 2010.
Net sales of other small precision brushless DC motors increased ¥3,995 million, or 11.1%, from ¥35,996 million for the six months ended September 30, 2009 to ¥39,991 million for the six months ended September 30, 2010.
Brushless DC fans
Net sales of brushless DC fans decreased ¥338 million, or 3.8%, from ¥8,824 million for the three months ended September 30, 2009 to ¥8,486 million for the three months ended September 30, 2010. This decrease was primarily due to a ¥635 million, or 9%, decrease in sales of brushless DC fans by Nidec Corporation and its direct-line subsidiaries, which was offset in part by an increase in sales of brushless DC fans by the Nidec Servo group for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.
Net sales of brushless DC fans accounted for 6.1% of total net sales for the three months ended September 30, 2009 and 5.0% of total net sales for the three months ended September 30, 2010.
Net sales of brushless DC fans increased ¥1,165 million, or 7.2%, from ¥16,161 million for the six months ended September 30, 2009 to ¥17,326 million for the six months ended September 30, 2010.
10
Other small precision motors
Net sales of other small precision motors decreased ¥119 million, or 2.5%, from ¥4,745 million for the three months ended September 30, 2009 to ¥4,626 million for the three months ended September 30, 2010. This decrease was primarily due to a decrease in sales by the Nidec Sankyo group.
Net sales of other small precision motors accounted for 3.3% of total net sales for the three months ended September 30, 2009 and 2.7% of total net sales for the three months ended September 30, 2010.
Net sales of other small precision motors increased ¥872 million, or 10.1%, from ¥8,614 million for the six months ended September 30, 2009 to ¥9,486 million for the six months ended September 30, 2010.
(General motors)
From the three months ended September 30, 2010, this product category has been renamed from "Mid-size motors" to "General motors," due to the addition of "Large-size motors for industrial use" to this category resulting from our acquisition of the EMC business on September 30, 2010.
Net sales of general motors increased ¥7,218 million, or 44.8%, from ¥16,127 million for the three months ended September 30, 2009 to ¥23,345 million for the three months ended September 30, 2010. Sales of general motors for home appliances and industrial use increased ¥5,702 million, or 73%, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to an increase in sales of ¥3,720 million of sales at Nidec Sole Motors S.R.L and its subsidiary, which were newly consolidated during the three months ended March 31, 2010. Sales of general motors for automobiles increased ¥1,516 million, or 18%, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This was primarily due to an increase in demand for automotive motors in North America and Europe because of the recent market recovery in the automotive i ndustry.
Net sales of general motors accounted for 11.1% of our total net sales for the three months ended September 30, 2009 and 13.7% of total net sales for the three months ended September 30, 2010.
Net sales of general motors increased ¥16,274 million, or 51.1%, from ¥31,831 million for the six months ended September 30, 2009 to ¥48,105 million for the six months ended September 30, 2010.
(Machinery)
Net sales of machinery increased ¥11,501 million, or 123.7%, from ¥9,299 million for the three months ended September 30, 2009 to ¥20,800 million for the three months ended September 30, 2010. Both the amount and rate of increase in sales of this product category were higher than those of any of our remaining product categories for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.
11
This increase was primarily due to stronger sales at the Nidec Sankyo group of such products as LCD panel handling robots, which increased ¥5,730 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009, and also due to stronger sales at the Nidec-Read group, the Nidec-Shimpo group, the Nidec-Kyori group, the Nidec Tosok group and the Nidec Copal group which increased ¥1,716 million, ¥1,390 million, ¥1,326 million, ¥710 million and ¥557 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to increased capital expenditures by our customers.
Net sales of machinery accounted for 6.4% of our total net sales for the three months ended September 30, 2009 and 12.2% of total net sales for the three months ended September 30, 2010.
Net sales of machinery increased ¥21,123 million, or 125.0%, from ¥16,898 million for the six months ended September 30, 2009 to ¥38,021 million for the six months ended September 30, 2010.
(Electronic and optical components)
Net sales of electronic and optical components increased ¥7,169 million, or 26.6%, from ¥26,972 million for the three months ended September 30, 2009 to ¥34,141 million for the three months ended September 30, 2010. This increase was due in part to an increase of ¥3,598 million, or 25%, in sales at the Nidec Copal group of such products as shutters and lens units for digital cameras primarily due to stronger consumer demand for digital cameras, compared to the three months ended September 30, 2009. The increase in net sales of electronic and optical components was also due to an increase of ¥2,120 million, or 40%, in sales at the Nidec Copal Electronics group of such products as circuit components and sensors, and an increase of ¥1,452 million, or 20%, in sales at the Nidec Sankyo group, compared to the three months ended September 30, 2009, with customer demand increasing as the overall economic en vironment gradually improved in recent months.
Net sales of electronic and optical components accounted for 18.6% of our total net sales for the three months ended September 30, 2009 and 20.1% of total net sales for the three months ended September 30, 2010.
Net sales of electronic and optical components increased ¥17,243 million, or 35.0%, from ¥49,278 million for the six months ended September 30, 2009 to ¥66,521 million for the six months ended September 30, 2010.
(Others)
Net sales of other products increased ¥1,480 million, or 22.0%, from ¥6,730 million for the three months ended September 30, 2009 to ¥8,210 million for the three months ended September 30, 2010. This was primarily due to an increase of ¥1,241 million, or 25%, in sales at the Nidec Tosok group of automotive parts compared to the three months ended September 30, 2009. Sales at the Nidec Total Service group and the Nidec Logistics group also increased compared to the three months ended September 30, 2009.
Net sales of other products accounted for 4.6% of total net sales for the three months ended September 30, 2009 and 4.9% of total net sales for the three months ended September 30, 2010.
Net sales of other products increased ¥4,627 million, or 37.5%, from ¥12,335 million for the six months ended September 30, 2009 to ¥16,962 million for the six months ended September 30, 2010.
12
Cost of Products Sold
Our cost of products sold increased ¥15,748 million, or 14.4%, from ¥109,010 million for the three months ended September 30, 2009 to ¥124,758 million for the three months ended September 30, 2010. This increase mainly corresponded to the overall increase in sales.
As a percentage of net sales, our cost of products sold decreased from 75.0% for the three months ended September 30, 2009 to 73.4% for the three months ended September 30, 2010. This decrease was primarily due to cost reductions achieved through our streamlining of manufacturing process, increased in-sourcing of product manufacturing, enhanced economies of scale and an increase in unit volumes of products with higher margins.
Our cost of products sold increased ¥43,884 million, or 21.4%, from ¥205,228 million for the six months ended September 30, 2009 to ¥249,112 million for the six months ended September 30, 2010.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased ¥1,613 million, or 13.4%, from ¥12,050 million for the three months ended September 30, 2009 to ¥13,663 million for the three months ended September 30, 2010. This increase was due mainly to an increase in personnel expenses as personnel expenses in the previous fiscal year reflected a temporary reduction of employee salaries in Japan.
As a percentage of net sales, our selling, general and administrative expenses decreased from 8.3% for the three months ended September 30, 2009 to 8.1% for the three months ended September 30, 2010.
Our selling, general and administrative expenses increased ¥3,617 million, or 15.4%, from ¥23,433 million for the six months ended September 30, 2009 to ¥27,050 million for the six months ended September 30, 2010.
Research and Development Expenses
Our research and development expenses increased ¥891 million, or 14.5%, from ¥6,160 million for the three months ended September 30, 2009 to ¥7,051 million for the three months ended September 30, 2010. This increase partly reflected the reduced research and development expenses for the three months ended September 30, 2009 in accordance with our cost reduction measures implemented at the time. Research and development expenses also increased in the three months ended September 30, 2010 as we increased research and development expenses relating to general motors for automobiles in response to increased demand for our new products for electric vehicles and hybrid electric vehicles.
As a percentage of net sales, our research and development expenses decreased from 4.3% for the three months ended September 30, 2009 to 4.1% for the three months ended September 30, 2010.
Our research and development expenses increased ¥1,346 million, or 11.4%, from ¥11,761 million for the six months ended September 30, 2009 to ¥13,107 million for the six months ended September 30, 2010.
13
Operating Income
As a result of the foregoing, our operating income increased ¥6,482 million, or 35.9%, from ¥18,037 million for the three months ended September 30, 2009 to ¥24,519 million for the three months ended September 30, 2010.
As a percentage of net sales, our operating income increased from 12.4% for the three months ended September 30, 2009 to 14.4% for the three months ended September 30, 2010.
Our operating income increased ¥23,201 million, or 81.9%, from ¥28,321 million for the six months ended September 30, 2009 to ¥51,522 million for the six months ended September 30, 2010.
Other Income (Expense)
Our other expenses decreased ¥115 million, or 2.7%, from ¥4,313 million for the three months ended September 30, 2009 to ¥4,198 million for the three months ended September 30, 2010. This decrease was mainly due to a ¥629 million, or 13.5%, decrease in foreign exchange loss, primarily resulting from the appreciation of the Japanese yen against the U.S. dollar, from ¥4,653 million for the three months ended September 30, 2009 to ¥4,024 million for the three months ended September 30, 2010.
Our other expenses increased ¥4,382 million, or 74.9%, from ¥5,847 million for the six months ended September 30, 2009 to ¥10,229 million for the six months ended September 30, 2010.
The Japanese yen to U.S. dollar exchange rates were ¥98.23 to the U.S. dollar as of March 31, 2009 and ¥90.21 to the U.S. dollar as of September 30, 2009. The Japanese yen appreciated against the U.S. dollar to ¥93.04 to the U.S. dollar as of March 31, 2010 and ¥83.82 to the U.S. dollar as of September 30, 2010. Foreign exchange fluctuations can have a significant impact on our results of operations and financial condition, as we have a substantial amount of U.S. dollar-based purchases of inventory and sales of products.
Income from Continuing Operations before Income Taxes
As a result of the foregoing, our income from continuing operations before income taxes increased ¥6,597 million, or 48.1%, from ¥13,724 million for the three months ended September 30, 2009 to ¥20,321 million for the three months ended September 30, 2010.
As a percentage of net sales, our income from continuing operations before income taxes increased from 9.4% for the three months ended September 30, 2009 to 12.0% for the three months ended September 30, 2010.
Our income from continuing operations before income taxes increased ¥18,819 million, or 83.7%, from ¥22,474 million for the six months ended September 30, 2009 to ¥41,293 million for the six months ended September 30, 2010.
Income Taxes
Our income taxes increased ¥1,067 million, or 26.6%, from ¥4,011 million for the three months ended September 30, 2009 to ¥5,078 million for the three months ended September 30, 2010. This was primarily due to an increase in income from continuing operations before income taxes.
14
Our income taxes increased ¥4,036 million, or 62.1%, from ¥6,495 million for the six months ended September 30, 2009 to ¥10,531 million for the six months ended September 30, 2010.
The estimated effective income tax rate for the six months ended September 30, 2010 was 25.5%, 3.4 percentage points lower compared with the effective income tax rate for the six months ended September 30, 2009. The main reason for the decrease was the net impact of a decrease in tax (benefit) on undistributed earnings, a decrease in valuation allowance, and an increase in liabilities for unrecognized tax benefits.
For more information, see Note 10 to our unaudited consolidated interim financial statements included elsewhere in this report.
Equity in Net Income of Affiliated Companies
Our equity in net income of affiliated companies decreased ¥26 million, or 92.9%, from ¥28 million for the three months ended September 30, 2009 to ¥2 million for the three months ended September 30, 2010.
We had equity in net income of affiliated companies of ¥4 million for the six months ended September 30, 2010, as compared to equity in net loss of affiliated companies of ¥79 million for the six months ended September 30, 2009.
Income from Continuing Operations
As a result of the foregoing, our income from continuing operations increased ¥5,504 million, or 56.5%, from ¥9,741 million for the three months ended September 30, 2009 to ¥15,245 million for the three months ended September 30, 2010.
Our income from continuing operations increased ¥14,866 million, or 93.5%, from ¥15,900 million for the six months ended September 30, 2009 to ¥30,766 million for the six months ended September 30, 2010.
Loss on Discontinued Operations
We recorded ¥1,193 million of loss on discontinued operations for the three months ended September 30, 2009 but had no such loss for the three months ended September 30, 2010.
We recorded ¥1,287 million of loss on discontinued operations for the six months ended September 30, 2009 but had no such loss for the six months ended September 30, 2010.
Consolidated Net Income
As a result of the foregoing, our consolidated net income increased ¥6,697 million, or 78.3%, from ¥8,548 million for the three months ended September 30, 2009 to ¥15,245 million for the three months ended September 30, 2010.
Our consolidated net income increased ¥16,153 million, or 110.5%, from ¥14,613 million for the six months ended September 30, 2009 to ¥30,766 million for the six months ended September 30, 2010.
15
Net Income Attributable to Noncontrolling Interests
Our net income attributable to noncontrolling interests increased ¥1,435 million, or 247.8%, from ¥579 million for the three months ended September 30, 2009 to ¥2,014 million for the three months ended September 30, 2010. This increase was primarily due to increases in income of some of our group companies, including Nidec Tosok Corporation, Nidec Copal Corporation, Nidec Sankyo Corporation and their respective subsidiaries.
Our net income attributable to noncontrolling interests increased ¥2,927 million, or 354.8%, from ¥825 million for the six months ended September 30, 2009 to ¥3,752 million for the six months ended September 30, 2010.
Net Income Attributable to Nidec Corporation
As a result of the foregoing, our net income attributable to Nidec Corporation increased ¥5,262 million, or 66.0%, from ¥7,969 million for the three months ended September 30, 2009 to ¥13,231 million for the three months ended September 30, 2010.
As a percentage of net sales, our net income increased from 5.5% for the three months ended September 30, 2009 to 7.8% for the three months ended September 30, 2010.
Our net income attributable to Nidec Corporation increased ¥13,226 million, or 95.9%, from ¥13,788 million for the six months ended September 30, 2009 to ¥27,014 million for the six months ended September 30, 2010.
Segment Information
Based on the applicable criteria set forth in ASC 280, "Segment Reporting", we have 13 reportable operating segments on which we report in our consolidated financial statements. For the information required by ASC280, see Note 14 to our unaudited consolidated interim financial statements included elsewhere in this report.
Beginning in the current quarterly reporting period ended September 30, 2010, we have changed our segment reporting so that it is in line with the changes we recently made in our management decision-making process. Our acquired subsidiaries have been grouped into each of these segments for both internal and external management and reporting to the chief operating decision maker. Because the number of our subsidiaries has been increasing due to from our recent acquisitions such as our acquisition of Emerson Electric Co.'s motors and controls business on September 30, 2010, we have made modifications to our management style that are designed to enhance profitability at each group company level. The current segment reporting is based on our modified management decision-making process. All prior period segment information has been reclassified in accordance with the current period presentation to enable comparisons between the relev ant amounts for the three months ended September 30, 2009 and 2010. We have also changed our abbreviations for the reporting segments, as described below.
16
The NCJ segment comprises Nidec Corporation in Japan, which primarily produces and sells hard disk drives spindle motors, DC motors, fans, and general motors for automobiles.
The NIRT (formerly NET) segment comprises Nidec Electronics (Thailand) Co., Ltd., a subsidiary in Thailand, and its consolidated subsidiaries, which primarily produce and sell hard disk drive motors.
The NIPC (formerly NCC) segment comprises Nidec (Zhejiang) Corporation, a subsidiary in China, which primarily produces and sells hard disk drive motors.
The NIDC (formerly NCD) segment comprises Nidec (Dalian) Limited, a subsidiary in China, which primarily produces and sells DC motors and fans but excludes its general motors business for automobiles.
The NILS (formerly NCS) segment comprises Nidec Singapore Pte. Ltd., a subsidiary in Singapore, and its consolidated subsidiary, which primarily sell hard disk drive motors, DC motors, fans, and pivot assemblies.
The NIHC (formerly NCH) segment comprises Nidec (H.K.) Co., Ltd., a subsidiary in Hong Kong, which primarily sells hard disk drive motors, DC motors and fans.
The NILF (formerly NCF) segment comprises Nidec Philippines Corporation, a subsidiary in the Philippines, and its consolidated subsidiaries, which primarily produce and sell hard disk drive motors.
The NSNK segment comprises Nidec Sankyo Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell DC motors, machinery, and electronic parts.
The NCPL segment comprises Nidec Copal Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell optical and electronic parts and machinery.
The NTSC segment comprises Nidec Tosok Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell automotive parts and machinery.
The NCEL segment comprises Nidec Copal Electronics Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell electronic parts.
The NTMC segment comprises Nidec Techno Motor Holdings Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell general motors for home appliances and industrial use.
The NMA segment comprises Nidec Motors & Actuators (Germany) GmbH, other subsidiaries in Europe and North America, and other manufacturing subsidiaries in China, which primarily produce and sell general motors for automobiles.
The All Others segment comprises subsidiaries that are operating segments but not designated as reportable segments due to their immateriality.
17
Nidec Servo Corporation, or NSRV, was not identified as reportable segments in the current period due to its immateriality. The amounts have been reclassified to the All Others segment for all periods presented.
NIDEC evaluates performance based on segmental profit and loss, which consists of sales and operating revenues less operating expenses. All segmental operating income or loss is accounted for under Japanese GAAP, except for NIRT (formerly NET), NIPC (formerly NCC), NIDC (formerly NCD), NILS (formerly NCS), NIHC (formerly NCH), NILF (formerly NCF), NMA. Therefore, our segmental data has not been prepared under U.S. GAAP on a basis that is consistent with our consolidated financial statements or on any other single basis that is consistent between segments. There are several differences between U.S. GAAP and the underlying accounting bases used by management. The principal differences that affect segmental operating income or loss include accounting for pension and severance costs, and leases. Our segmental operating income or loss is presented in accordance with financial reporting principles and practices generally accepted in Ja pan. Management believes that monthly segmental information is available on a timely basis, and that it is sufficiently accurate at the segment income or loss level for management’s purposes.
The first of the following two tables shows net sales to external customers and other operating segments by reportable operating segment for the three months ended September 30, 2009 and 2010. The second table shows operating income or loss by reportable operating segment, which includes inter-segment sales and operating revenues and expenses, for the three months ended September 30, 2009 and 2010:
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
NCJ | |||
Net sales to external customers | ¥15,733 | ¥18,343 | $218,838 |
Net sales to other operating segments | 19,812 | 19,542 | 233,142 |
Sub total | 35,545 | 37,885 | 451,980 |
NIRT | |||
Net sales to external customers | 23,523 | 22,002 | 262,491 |
Net sales to other operating segments | 9,650 | 10,384 | 123,885 |
Sub total | 33,173 | 32,386 | 386,376 |
NIPC | |||
Net sales to external customers | 6,244 | 6,063 | 72,334 |
Net sales to other operating segments | 740 | 612 | 7,301 |
Sub total | 6,984 | 6,675 | 79,635 |
NIDC | |||
Net sales to external customers | 2,086 | 636 | 7,588 |
Net sales to other operating segments | 6,084 | 5,085 | 60,666 |
Sub total | 8,170 | 5,721 | 68,254 |
NILS | |||
Net sales to external customers | 6,758 | 5,539 | 66,082 |
Net sales to other operating segments | 89 | 119 | 1,420 |
Sub total | 6,847 | 5,658 | 67,502 |
NIHC | |||
Net sales to external customers | 13,062 | 14,343 | 171,117 |
Net sales to other operating segments | 1,256 | 348 | 4,152 |
Sub total | 14,318 | 14,691 | 175,269 |
NILF | |||
Net sales to external customers | 2,937 | 2,156 | 25,722 |
Net sales to other operating segments | 6,672 | 7,006 | 83,584 |
Sub total | 9,609 | 9,162 | 109,306 |
NSNK | |||
Net sales to external customers | 17,816 | 24,550 | 292,890 |
Net sales to other operating segments | 36 | 130 | 1,551 |
Sub total | 17,852 | 24,680 | 294,441 |
NCPL | |||
Net sales to external customers | 15,814 | 19,989 | 238,475 |
Net sales to other operating segments | 560 | 752 | 8,972 |
Sub total | 16,374 | 20,741 | 247,447 |
NTSC | |||
Net sales to external customers | 5,392 | 7,236 | 86,328 |
Net sales to other operating segments | 40 | 56 | 668 |
Sub total | 5,432 | 7,292 | 86,996 |
NCEL | |||
Net sales to external customers | 5,679 | 7,859 | 93,760 |
Net sales to other operating segments | 7 | 8 | 95 |
Sub total | 5,686 | 7,867 | 93,855 |
NTMC | |||
Net sales to external customers | 7,743 | 13,392 | 159,771 |
Net sales to other operating segments | 194 | 200 | 2,386 |
Sub total | 7,937 | 13,592 | 162,157 |
NMA | |||
Net sales to external customers | 7,638 | 8,525 | 101,706 |
Net sales to other operating segments | 2,410 | 1,634 | 19,494 |
Sub total | 10,048 | 10,159 | 121,200 |
All Others | |||
Net sales to external customers | 15,111 | 18,912 | 225,625 |
Net sales to other operating segments | 19,381 | 18,879 | 225,232 |
Sub total | 34,492 | 37,791 | 450,857 |
Total | |||
Net sales to external customers | 145,536 | 169,545 | 2,022,727 |
Net sales to other operating segments | 66,931 | 64,755 | 772,548 |
Adjustments (*) | (279) | 446 | 5,321 |
Intersegment elimination | (66,931) | (64,755) | (772,548) |
Consolidated total (net sales) | ¥145,257 | ¥ 169,991 | $2,028,048 |
(*) See Note 11 to our unaudited consolidated interim financial statements included elsewhere in this report.
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Operating income or loss: | |||
NCJ | ¥1,834 | ¥1,578 | $18,826 |
NIRT | 5,877 | 5,808 | 69,291 |
NIPC | 466 | 507 | 6,049 |
NIDC | 1,281 | 472 | 5,631 |
NILS | 39 | 65 | 775 |
NIHC | 147 | 189 | 2,255 |
NILF | 1,625 | 1,515 | 18,074 |
NSNK | 1,566 | 3,337 | 39,812 |
NCPL | 1,422 | 2,502 | 29,850 |
NTSC | 491 | 970 | 11,572 |
NCEL | 410 | 1,355 | 16,166 |
NTMC | 218 | 946 | 11,286 |
NMA | 36 | 327 | 3,901 |
All Others | 3,112 | 4,308 | 51,396 |
Total | 18,524 | 23,879 | 284,884 |
Adjustments (*) | (487) | 640 | 7,636 |
Consolidated total | ¥18,037 | ¥24,519 | $292,520 |
(*) See Note 11 to our unaudited consolidated interim financial statements included elsewhere in this report.
20
Net sales of NCJ increased ¥2,340 million, or 6.6%, from ¥35,545 million for the three months ended September 30, 2009 to ¥37,885 million for the three months ended September 30, 2010. This increase was primarily due to an increase in demand for hard disk drives spindle motors and general motors for automobiles, more than offsetting the negative impact of the Japanese yen appreciating against the U.S. dollar. Net sales to external customers of NCJ increased ¥2,610 million, or 16.6%, from ¥15,733 million for the three months ended September 30, 2009 to ¥18,343 million for the three months ended September 30, 2010. Net sales to other operating segments of NCJ decreased ¥270 million, or 1.4%, from ¥19,812 million for the three months ended September 30, 2009 to ¥19,542 million for the three months ended September 30, 2010. Operating income of NCJ decreased & #165;256 million, or 14.0%, from ¥1,834 million for the three months ended September 30, 2009 to ¥1,578million for the three months ended September 30, 2010. This decrease was due primarily to a decrease in royalty and commission fees from subsidiaries in addition to the negative impact of the appreciation of the Japanese yen against the U.S. dollar.
Net sales of NIRT decreased ¥787 million, or 2.4%, from ¥33,173 million for the three months ended September 30, 2009 to ¥32,386 million for the three months ended September 30, 2010. This was primarily due to the appreciation of the Japanese yen against the U.S. dollar. Operating income of NIRT decreased ¥69 million, or 1.2%, from ¥5,877 million for the three months ended September 30, 2009 to ¥5,808 million for the three months ended September 30, 2010. This was primarily due to an increase in depreciation expenses as a result of increased investments in manufacturing facilities in Thailand.
Net sales of NIPC decreased ¥309 million, or 4.4%, from ¥6,984 million for the three months ended September 30, 2009 to ¥6,675 million for the three months ended September 30, 2010. This was primarily due to the U.S. dollar weakening against the Japanese yen although U.S. dollar-denominated sales volume of hard disk drives spindle motors increased with increasing demand from a major customer in China. Operating income of NIPC increased ¥41 million, or 8.8%, from ¥466 million for the three months ended September 30, 2009 to ¥507 million for the three months ended September 30, 2010. This increase was primarily due to improved production cost management through such measures as increased in-sourcing of product manufacturing and streamlining of our manufacturing processes.
21
Net sales of NIDC decreased ¥2,449 million, or 30.0%, from ¥8,170 million for the three months ended September 30, 2009 to ¥5,721 million for the three months ended September 30, 2010. This decrease was primarily due to a decrease in sales volume of DC motors as a result of inventory adjustments made by main customers. Operating income of NIDC decreased ¥809 million, or 63.2%, from ¥1,281 million for the three months ended September 30, 2009 to ¥472 million for the three months ended September 30, 2010. This decrease was primarily due to increases in wages and raw material costs in addition to lower sales.
Net sales of NILS decreased ¥1,189 million, or 17.4%, from ¥6,847 million for the three months ended September 30, 2009 to ¥5,658 million for the three months ended September 30, 2010, primarily due to decreases in demand for DC motors and hard disk drives spindle motors. Operating income of NILS increased ¥26 million, or 66.7%, from ¥39 million for the three months ended September 30, 2009 to ¥65 million for the three months ended September 30, 2010. This was primarily due to an increase in sales of products with higher margins.
Net sales of NIHC increased ¥373 million, or 2.6%, from ¥14,318 million for the three months ended September 30, 2009 to ¥14,691 million for the three months ended September 30, 2010. This increase was primarily due to an increase in sales of DC fans as a result of stronger customer demand. Operating income of NIHC increased ¥42 million, or 28.6%, from ¥147 million for the three months ended September 30, 2009 to ¥189 million for the three months ended September 30, 2010. This increase was mainly due to an increase in sales and improved sales margin.
Net sales of NILF decreased ¥447 million, or 4.7%, from ¥9,609 million for the three months ended September 30, 2009 to ¥9,162 million for the three months ended September 30, 2010. This was primarily due to the appreciation of the Japanese yen against the U.S. dollar although U.S. dollar-denominated sales increased. Operating income of NILF decreased ¥110 million, or 6.8%, from ¥1,625 million for the three months ended September 30, 2009 to ¥1,515 million for the three months ended September 30, 2010. This decrease was also primarily due to the appreciation of the Japanese yen against the U.S. dollars despite an increase in U.S. dollar-denominated operating income.
Net sales of NSNK increased ¥6,828 million, or 38.2%, from ¥17,852 million for the three months ended September 30, 2009 to ¥24,680 million for the three months ended September 30, 2010. This was due primarily to a significant increase in demand for LCD panel handling robots. Operating income of NSNK increased ¥1,771 million, or 113.1%, from ¥1,566 million for the three months ended September 30, 2009 to ¥3,337 million for the three months ended September 30, 2010. This was primarily due to an increase in sales of products with higher margins.
Net sales of NCPL increased ¥4,367 million, or 26.7%, from ¥16,374 million for the three months ended September 30, 2009 to ¥20,741 million for the three months ended September 30, 2010. This was due to improved sales resulting from stronger demand for new products for digital cameras. Operating income of NCPL increased ¥1,080 million, or 75.9%, from ¥1,422 million for the three months ended September 30, 2009 to ¥2,502 million for the three months ended September 30, 2010. This was due to the increase in sales.
22
Net sales of NTSC increased ¥1,860 million, or 34.2%, from ¥5,432 million for the three months ended September 30, 2009 to ¥7,292 million for the three months ended September 30, 2010. This was primarily due to a significant increase in demand for automotive parts. Operating income of NTSC increased ¥479 million, or 97.6%, from ¥491 million for the three months ended September 30, 2009 to ¥970 million for the three months ended September 30, 2010. This was due to improved production cost management through an expansion of overseas manufacturing in addition to the increase in sales.
Net sales of NCEL increased ¥2,181 million, or 38.4%, from ¥5,686 million for the three months ended September 30, 2009 to ¥7,867 million for the three months ended September 30, 2010. This increase was primarily due to an increase in demand for electronic circuit components and sensors which was sluggish in the three months ended September 30, 2009 in particular. Operating income of NCEL increased ¥945 million, or 230.5%, from ¥410 million for the three months ended September 30, 2009 to ¥1,355 million for the three months ended September 30, 2010. This was primarily due to cost reductions achieved through enhanced economies of scale, in addition to the increase in sales.
Net sales of NTMC increased ¥5,655 million, or 71.2%, from ¥7,937 million for the three months ended September 30, 2009 to ¥13,592 million for the three months ended September 30, 2010. This was primarily due to an increase in demand for general motors for industrial use in Japan and home appliances use in Asia, in addition to ¥3,720 million of sales at Nidec Sole Motors S.R.L and its subsidiary, which were newly consolidated during the three months ended March 31, 2010. Operating income increased ¥728 million, or 333.9%, from ¥218 million for the three months ended September 30, 2009 to ¥946 million for the three months ended September 30, 2010. This increase was primarily due to the increase in sales, some impact of newly consolidated companies and cost reduction achieved through such measures as in-sourcing of product manufacturing.
Net sales of NMA increased ¥111 million or 1.1%, from ¥10,048 million for the three months ended September 30, 2009 to ¥10,159 million for the three months ended September 30, 2010. This was primarily due to an increase in demand for general motors for automobiles in North America and Europe, resulting from the recent market recovery in the automotive industry. Operating income increased ¥291 million, or 808.3%, from ¥36 million for the three months ended September 30, 2009 to ¥327 million for the three months ended September 30, 2010. This was mainly due to the sales volume increase and production efficiency improvements.
With respect to the All Others segment, net sales increased ¥3,299 million, or 9.6%, from ¥34,492 million for the three months ended September 30, 2009 to ¥37,791 million for the three months ended September 30, 2010. This was primarily due to an increase in demand for machinery as well as logistics and service-related businesses included in the “Others” product group. Operating income of this segment increased ¥1,196 million, or 38.4%, from ¥3,112 million for the three months ended September 30, 2009 to ¥4,308 million for the three months ended September 30, 2010. This increase was primarily due to the increase in sales.
23
Liquidity and Capital Resources
As part of our efforts to enhance liquidity, we continued to focus particularly on efficient use of capital and better management of foreign exchange risks during the six months ended September 30, 2010. For example, we continued to make effective use of our cash management system, which have been shared among our domestic subsidiaries since April 2006. We also expanded our risk mitigation initiatives, including centralized management of foreign exchange risks, to management of the risks associated with exchange rate fluctuations between multiple local currencies. Surplus U.S. dollars owned by our subsidiaries in China were converted into and held in the form of Chinese yuan time deposits in preparation for a possible Chinese currency revaluation.
Our principal capital needs include (1) purchases of property, plant and equipment and other assets, (2) research and development activities, (3) investment in subsidiaries, (4) mergers and acquisitions, (5) repayment of short-term borrowings and long-term debt, (6) purchases of raw materials, and (7) employees’ salaries, wages and other payroll costs. We expect to cover the foregoing capital needs with cash provided by our operating and financing activities.
We acquired the EMC business for ¥56,528 million ($674,398 thousand) in cash on September 30, 2010. In addition, we significantly increased our capital investments and our equity holdings in subsidiaries. We intend to continue to seek opportunities for acquiring other companies and making additional investments in our subsidiaries.
We issued an aggregate principal amount of ¥100,000 million of euro yen convertible-bonds-type bonds with stock acquisition rights due 2015 on September 21, 2010. The net proceeds of the issuance of convertible bonds were applied towards the repayment of existing short-term borrowings. Through the issuance of corporate bonds, we sought to maintain our financial agility in mergers and acquisitions, research and development activities and facility investments by reducing interest and other financing expenses. For more information, see Note 7 to our unaudited consolidated interim financial statements included elsewhere in this report.
A substantial portion of our unsecured funding is raised by the parent company (Nidec Corporation), and is then lent to its subsidiaries to meet their respective capital requirements. Under this subsidiary funding policy, we seek to lower the financing cost, maintain sufficient line of credit, and ensure agile funding for our group companies.
We believe that these funding sources will sufficiently meet our capital requirements for the current fiscal year.
24
Assets, liabilities and Nidec Corporation shareholders’ equity
Our total assets increased ¥47,013 million, or 6.8%, from ¥692,791 million as of March 31, 2010 to ¥739,804 million as of September 30, 2010. Excluding the contribution from the newly consolidated companies, total assets decreased ¥24,359 million from ¥692,791 million as of March 31, 2010 to ¥668,432 million as of September 30, 2010.The increase of ¥47,013 million was mainly due to an increase in goodwill of ¥30,667 million recorded in connection with our acquisition with the EMC business, and an increase in property, plant and equipment of ¥23,497 million as a result of our additional capital investments and our acquisition of the EMC business. For more information regarding our recent acquisitions, see Note 3 to our unaudited consolidated interim financial statements included elsewhere in this report. On the other hand, cash and cash equipment decreased ¥35,517 million as descr ibed below under “Cash Flows” below.
Our total liabilities increased ¥45,231 million, or 15.5%, from ¥291,260 million as of March 31, 2010 to ¥336,491 million as of September 30, 2010. Excluding the contribution from the newly consolidated companies, total liabilities increased ¥30,388 million from ¥291,260 million as of March 31, 2010 to ¥321,648 million as of September 30, 2010. The increase of ¥45,231 million was mainly due to an increase in long-term debt partly as a result of the issuance of corporate bonds described above. On the other hand, short-term borrowings decreased ¥69,441 million partly as a result of repayment with the proceeds from the issuance of corporate bonds described above.
Our working capital, defined as current assets less current liabilities, increased ¥49,434 million, or 43.9%, from ¥112,618 million as of March 31, 2010 to ¥162,052 million as of September 30, 2010. This was mainly due to the repayment of short-term borrowings with the proceeds from the issuance of corporate bonds described above.
Our total Nidec Corporation shareholders’ equity increased ¥3,875 million, or 1.1%, from ¥340,309 million as of March 31, 2010 to ¥344,184 million as of September 30, 2010. This increase was mainly due to an increase in retained earnings of ¥21,442 million, which was partially offset by an increase in negative foreign currency translation adjustments of ¥14,365 million due to the appreciation of the Japanese yen against other currencies. As a result, the ratio of Nidec Corporation shareholders’ equity to total assets decreased 2.6 percentage points from 49.1% as of March 31, 2010 to 46.5% as of September 30, 2010.
25
Cash Flows
Net cash provided by operating activities decreased ¥13,155 million from ¥47,642 million for the six months ended September 30, 2009 to ¥34,487 million for the six months ended September 30, 2010. Although our consolidated net income increased ¥16,153 million, cash inflows from operating activities decreased primarily due to the negative impact of changes in operating assets and liabilities of ¥21,953 million.
For the six months ended September 30, 2010, we had ¥34,487 million of net cash inflows from operating activities primarily due to consolidated net income of ¥30,766 million. On the other hand, net cash provided by operating activities were negatively impacted by changes in operating assets and liabilities of ¥15,944 million, which consisted of an increase in operating assets of ¥18,341 million and an increase in notes and accounts payable of ¥2,397 million. The increase in operating assets of ¥18,341 million was primarily due to increases in some of our customers' demand which also reflected the inventory level.
For the six months ended September 30, 2009, we had ¥47,642 million of net cash inflows from operating activities primarily due to consolidated net income of ¥14,613 million and the positive impact of changes in operating assets and liabilities of ¥6,009 million primarily due to an increase in customer demand.
Net cash used in investing activities increased ¥66,435 million from ¥14,890 million for the six months ended September 30, 2009 to ¥81,325 million for the six months ended September 30, 2010. The increased cash outflows from investing activities were mainly due to an increase in acquisitions of business, net of cash acquired, of ¥49,461 million and an increase in additions to property, plant and equipment of ¥15,086 million, resulting from our increased capital investments.
For the six months ended September 30, 2010, we had ¥81,325 million of net cash outflows relating to investing activities mainly due to acquisitions of business, net of cash acquired, of ¥52,040 million, including our acquisition of the EMC business and additions to property, plant and equipments of ¥28,812 million.
For the six months ended September 30, 2009, we had ¥14,890 million of net cash outflows relating to investment activities mainly due to additions to property, plant and equipments of ¥13,726 million.
We had net cash provided by financing activities of ¥18,969 million for the six months ended September 30, 2010, while we had net cash used in financing activities of ¥107,082 million for the six months ended September 30, 2009.
For the six months ended September 30, 2010, we had ¥18,969 million of net cash inflows from financing activities mainly due to proceeds from the issuance of corporate bonds of ¥100,500 million. On the other hand, we had cash outflows due primarily to a decrease in short-term borrowings of ¥67,952 million, payments for additional investments in subsidiaries of ¥6,375 million and dividends paid to shareholders of Nidec Corporation of ¥5,572 million.
26
For the six months ended September 30, 2009, we had ¥107,082 million of net cash outflows relating to financing activities mainly due to a decrease in short-term borrowings of ¥98,845 million and dividends paid to shareholders of Nidec Corporation of ¥4,179 million.
As a result of the foregoing factors and the effect of exchange rate changes on cash and cash equivalents, our total outstanding balance of cash and cash equivalents decreased ¥35,517 million from ¥123,309 million as of March 31, 2010 to ¥87,792 million as of September 30, 2010. We hold our cash and cash equivalents primarily in U.S. dollars, Japanese yen, Thai bahts and Chinese yuan.
Net cash provided by operating activities decreased ¥6,484 million from ¥20,912 million for the three months ended September 30, 2009 to ¥14,428 million for the three months ended September 30, 2010. Although our consolidated net income increased ¥6,697 million, the decrease in cash inflows from operating activities was primarily due to the negative impact of changes in operating assets and liabilities of ¥5,174 million.
For the three months ended September 30, 2010, we had ¥14,428 million of net cash inflows from operating activities primarily due to consolidated net income of ¥15,245 million. On the other hand, net cash provided by operating activities were negatively impacted by changes in operating assets and liabilities of ¥8,320 million, which consisted of an increase in operating assets of ¥2,105 million and a decrease in notes and accounts payable of ¥6,215 million.
For the three months ended September 30, 2009, we had ¥20,912 million of net cash inflows from operating activities primarily due to consolidated net income of ¥8,548 million. On the other hand, the negative impact of changes in operating assets and liabilities of ¥3,146 million, which consisted of an increase in operating assets of ¥12,421 million and an increase in notes and accounts payable of ¥9,275 million primarily due to an increase in customer demand.
Net cash used in investing activities increased ¥60,703 million from ¥6,804 million for the three months ended September 30, 2009 to ¥67,507 million for the three months ended September 30, 2010. The increase in cash outflows relating to investing activities were mainly due to an increase in acquisitions of business, net of cash acquired, of ¥49,461 million, including our acquisition of the EMC business, and an increase in additions to property, plant and equipment of ¥11,037 million resulting from an increase in capital investments.
For the three months ended September 30, 2010, we had ¥67,507 million of net cash outflows relating to investing activities mainly due to acquisition of business, net cash acquired, of ¥52,040 million, including our acquisition of the EMC business, and additions to property, plant and equipment of ¥16,385 million.
For the three months ended September 30, 2009, we had ¥6,804 million of net cash outflows relating to investing activities mainly due to additions to property, plant and equipment of ¥5,348 million.
We had net cash provided by financing activities of ¥15,069 million for the three months ended September 30, 2010, while we had net cash used in financing activities of ¥48,677 million for the three months ended September 30, 2009.
27
For the three months ended September 30, 2010, we had ¥15,069 million of net cash inflows from financing activities mainly due to proceeds from issuance of corporate bonds of ¥100,500 million which was offset in part by decrease in short-term borrowings of ¥81,387 million.
For the three months ended September 30, 2009, we had ¥48,677 million of net cash outflows relating to financing activities mainly due to a decrease in short-term borrowings of ¥47,780 million.
As a result of the foregoing factors and the effect of exchange rate changes on cash and cash equivalents, our total outstanding balance of cash and cash equivalents decreased ¥39,582 million from ¥127,374 million as of June 30, 2010 to ¥87,792 million as of September 30, 2010.
28
NIDEC CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
March 31, 2010 | September 30, 2010 | September 30, 2010 | |
Current assets: | |||
Cash and cash equivalents | ¥123,309 | ¥87,792 | $1,047,387 |
Trade notes and accounts receivable, net of allowance for doubtful accounts of ¥398 million on March 31, 2010 and ¥513 million ($6,120 thousand) on September 30, 2010 | |||
Notes | 10,968 | 13,844 | 165,163 |
Accounts | 151,430 | 161,110 | 1,922,095 |
Inventories: | |||
Finished goods | 28,323 | 36,040 | 429,969 |
Raw materials | 19,428 | 23,746 | 283,298 |
Work in progress | 17,995 | 21,670 | 258,530 |
Project in progress | 653 | 793 | 9,461 |
Supplies and other | 3,104 | 3,768 | 44,953 |
Other current assets | 19,673 | 21,380 | 255,071 |
Total current assets | 374,883 | 370,143 | 4,415,927 |
Marketable securities and other securities investments | 17,462 | 14,424 | 172,083 |
Investments in and advances to affiliated companies | 614 | 596 | 7,111 |
18,076 | 15,020 | 179,194 | |
Property, plant and equipment: | |||
Land | 39,605 | 40,058 | 477,905 |
Buildings | 127,152 | 131,974 | 1,574,493 |
Machinery and equipment | 269,208 | 278,532 | 3,322,978 |
Construction in progress | 12,436 | 18,988 | 226,533 |
448,401 | 469,552 | 5,601,909 | |
Less - Accumulated depreciation | (247,094) | (244,748) | (2,919,924) |
201,307 | 224,804 | 2,681,985 | |
Goodwill | 72,231 | 102,898 | 1,227,607 |
Other non-current assets, net of allowance for doubtful accounts of ¥1,432 million on March 31, 2010 and ¥1,395 million ($16,643 thousand) on September 30, 2010 | 26,294 | 26,939 | 321,391 |
Total assets | ¥692,791 | ¥739,804 | $8,826,104 |
The accompanying notes are an integral part of these financial statements.
29
NIDEC CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
March 31, 2010 | September 30, 2010 | September 30, 2010 | |
Current liabilities: | |||
Short-term borrowings | ¥115,467 | ¥46,026 | $549,105 |
Current portion of long-term debt | 1,497 | 1,537 | 18,337 |
Trade notes and accounts payable | 109,143 | 116,631 | 1,391,446 |
Other current liabilities | 36,158 | 43,897 | 523,706 |
Total current liabilities | 262,265 | 208,091 | 2,482,594 |
Long-term liabilities: | |||
Long-term debt | 1,745 | 101,991 | 1,216,786 |
Accrued pension and severance costs | 15,542 | 12,003 | 143,200 |
Other long-term liabilities | 11,708 | 14,406 | 171,868 |
Total long-term liabilities | 28,995 | 128,400 | 1,531,854 |
Commitments and contingencies (Note 9) | |||
Equity: | |||
Common stock authorized: 480,000,000 shares issued and outstanding: 145,075,080 shares on March 31, 2010 and 145,075,080 shares on September 30, 2010 | 66,551 | 66,551 | 793,975 |
Additional paid-in capital | 69,090 | 66,456 | 792,842 |
Retained earnings | 257,255 | 278,697 | 3,324,946 |
Accumulated other comprehensive income (loss): | |||
Foreign currency translation adjustments | (29,234) | (43,599) | (520,150) |
Unrealized gains from securities, net of reclassification adjustments | 1,747 | 489 | 5,834 |
Pension liability adjustments | (1,033) | (339) | (4,044) |
Treasury stock, at cost: 5,784,406 shares on March 31, 2010 and 5,784,805 shares on September 30, 2010 | (24,067) | (24,071) | (287,175) |
Total Nidec Corporation shareholders’ equity | 340,309 | 344,184 | 4,106,228 |
Noncontrolling interests | 61,222 | 59,129 | 705,428 |
Total equity | 401,531 | 403,313 | 4,811,656 |
Total liabilities and equity | ¥692,791 | ¥739,804 | $8,826,104 |
The accompanying notes are an integral part of these financial statements.
30
NIDEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Yen in millions | U.S. dollars | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales | ¥145,257 | ¥169,991 | $2,028,048 |
Operating expenses: | |||
Cost of products sold | 109,010 | 124,758 | 1,488,404 |
Selling, general and administrative expenses | 12,050 | 13,663 | 163,003 |
Research and development expenses | 6,160 | 7,051 | 84,121 |
127,220 | 145,472 | 1,735,528 | |
Operating income | 18,037 | 24,519 | 292,520 |
Other income (expense): | |||
Interest and dividend income | 176 | 220 | 2,625 |
Interest expense | (189) | (86) | (1,026) |
Foreign exchange loss, net | (4,653) | (4,024) | (48,008) |
Gain (loss) from marketable securities, net | 255 | (48) | (573) |
Other, net | 98 | (260) | (3,102) |
(4,313) | (4,198) | (50,084) | |
Income from continuing operations before income taxes | 13,724 | 20,321 | 242,436 |
Income taxes | (4,011) | (5,078) | (60,582) |
Equity in net income of affiliated companies | 28 | 2 | 24 |
Income from continuing operations | 9,741 | 15,245 | 181,878 |
Loss on discontinued operations | (1,193) | - | - |
Consolidated net income | 8,548 | 15,245 | 181,878 |
Less: Net income attributable to noncontrolling interests | (579) | (2,014) | (24,028) |
Net income attributable to Nidec Corporation | ¥7,969 | ¥13,231 | $157,850 |
|
|
|
|
Yen | U.S. dollars | ||
Per share data: | |||
Earning per share - basic | |||
Income from continuing operations attributable to Nidec Corporation | ¥63.43 | ¥95.00 | $1.13 |
Loss on discontinued operations attributable to Nidec Corporation | (6.22) | - | - |
Net income attributable to Nidec Corporation | 57.21 | 95.00 | 1.13 |
Earning per share - diluted | |||
Income from continuing operations attributable to Nidec Corporation | 63.43 | 94.29 | 1.12 |
Loss on discontinued operations attributable to Nidec Corporation | (6.22) | - | - |
Net income attributable to Nidec Corporation | 57.21 | 94.29 | 1.12 |
Cash dividends paid | ¥0.00 | ¥0.00 | $0.00 |
The accompanying notes are an integral part of these financial statements.
31
NIDEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME - (Continued)
(Unaudited)
Yen in millions | U.S. dollars | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net income attributable to Nidec Corporation | |||
Income from continuing operations attributable to Nidec Corporation | ¥8,836 | ¥13,231 | $157,850 |
Loss on discontinued operations attributable to Nidec Corporation | (867) | - | - |
Net income attributable to Nidec Corporation | ¥7,969 | ¥13,231 | $157,850 |
The accompanying notes are an integral part of these financial statements.
32
NIDEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Yen in millions | U.S. dollars | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales | ¥268,743 | ¥340,791 | $4,065,748 |
Operating expenses: | |||
Cost of products sold | 205,228 | 249,112 | 2,971,988 |
Selling, general and administrative expenses | 23,433 | 27,050 | 322,715 |
Research and development expenses | 11,761 | 13,107 | 156,371 |
240,422 | 289,269 | 3,451,074 | |
Operating income | 28,321 | 51,522 | 614,674 |
Other income (expense): | |||
Interest and dividend income | 377 | 469 | 5,595 |
Interest expense | (395) | (218) | (2,601) |
Foreign exchange loss, net | (5,703) | (9,670) | (115,366) |
Gain (loss) from marketable securities, net | 240 | (206) | (2,458) |
Other, net | (366) | (604) | (7,205) |
(5,847) | (10,229) | (122,035) | |
Income from continuing operations before income taxes | 22,474 | 41,293 | 492,639 |
Income taxes | (6,495) | (10,531) | (125,638) |
Equity in net (loss) income of affiliated companies | (79) | 4 | 47 |
Income from continuing operations | 15,900 | 30,766 | 367,048 |
Loss on discontinued operations | (1,287) | - | - |
Consolidated net income | 14,613 | 30,766 | 367,048 |
Less: Net income attributable to noncontrolling interests | (825) | (3,752) | (44,762) |
Net income attributable to Nidec Corporation | ¥13,788 | ¥27,014 | $322,286 |
|
|
|
|
Yen | U.S. dollars | ||
Per share data: | |||
Earning per share - basic | |||
Income from continuing operations attributable to Nidec Corporation | ¥105.65 | ¥193.94 | $2.31 |
Loss on discontinued operations attributable to Nidec Corporation | (6.66) | - | - |
Net income attributable to Nidec Corporation | 98.99 | 193.94 | 2.31 |
Earning per share - diluted | |||
Income from continuing operations attributable to Nidec Corporation | 105.65 | 193.22 | 2.31 |
Loss on discontinued operations attributable to Nidec Corporation | (6.66) | - | - |
Net income attributable to Nidec Corporation | 98.99 | 193.22 | 2.31 |
Cash dividends paid | ¥30.00 | ¥40.00 | $0.48 |
The accompanying notes are an integral part of these financial statements.
33
NIDEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME - (Continued)
(Unaudited)
Yen in millions | U.S. dollars | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net income attributable to Nidec Corporation | |||
Income from continuing operations attributable to Nidec Corporation | ¥14,717 | ¥27,014 | $322,286 |
Loss on discontinued operations attributable to Nidec Corporation | (929) | - | - |
Net income attributable to Nidec Corporation | ¥13,788 | ¥27,014 | $322,286 |
The accompanying notes are an integral part of these financial statements.
34
NIDEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Yen in millions | U.S. dollars | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Cash flows from operating activities: | |||
Consolidated net income | ¥14,613 | ¥30,766 | $367,048 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 15,357 | 15,967 | 190,492 |
(Gain) loss from marketable securities, net | (240) | 206 | 2,458 |
Loss (gain) on sales, disposal or impairment of property, plant and equipment | 764 | (58) | (692) |
Equity in net loss (income) of affiliated companies | 79 | (4) | (48) |
Foreign currency adjustments | 5,583 | 3,873 | 46,206 |
Changes in operating assets and liabilities: | |||
Increase in notes and accounts receivable | (10,434) | (5,658) | (67,502) |
Decrease (increase) in inventories | 972 | (12,683) | (151,312) |
Increase in notes and accounts payable | 15,471 | 2,397 | 28,597 |
Other | 5,477 | (319) | (3,806) |
Net cash provided by operating activities | 47,642 | 34,487 | 411,441 |
Cash flows from investing activities: | |||
Additions to property, plant and equipment | (13,726) | (28,812) | (343,737) |
Proceeds from sales of property, plant and equipment | 344 | 316 | 3,770 |
Acquisitions of business, net of cash acquired | (2,579) | (52,040) | (620,854) |
Other | 1,071 | (789) | (9,413) |
Net cash used in investing activities | (14,890) | (81,325) | (970,234) |
Cash flows from financing activities: | |||
Decrease in short-term borrowings | (98,845) | (67,952) | (810,690) |
Repayments of long-term debt | (867) | (845) | (10,081) |
Proceeds from issuance of corporate bonds | - | 100,500 | 1,198,998 |
Purchases of treasury stock | (3) | (4) | (48) |
Payments for additional investments in subsidiaries | (2,573) | (6,375) | (76,056) |
Dividends paid to shareholders of Nidec Corporation | (4,179) | (5,572) | (66,476) |
Dividends paid to noncontrolling interests | (629) | (819) | (9,771) |
Other | 14 | 36 | 430 |
Net cash (used in) provided by financing activities | (107,082) | 18,969 | 226,306 |
Effect of exchange rate changes on cash and cash equivalents | (7,225) | (7,648) | (91,243) |
Net decrease in cash and cash equivalents | (81,555) | (35,517) | (423,730) |
Cash and cash equivalents at beginning of period | 200,966 | 123,309 | 1,471,117 |
Cash and cash equivalents at end of period | ¥119,411 | ¥87,792 | $1,047,387 |
The accompanying notes are an integral part of these financial statements.
35
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of preparation:
The accompanying interim consolidated financial statements of NIDEC Corporation (the "Company", and together with its consolidated subsidiaries, "NIDEC") have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The interim consolidated financial statements are unaudited but include all adjustments, consisting of only normal recurring adjustments, which the Company considers necessary for a fair statement of the consolidated financial position and the consolidated results of its operations and cash flows. Results for the six months ended September 30, 2010 are not necessarily indicative of results that may be expected for the full year. The consolidated balance sheet at March 31, 2010, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for comp lete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended March 31, 2010, included on Form 20-F.
U.S. dollar amounts are included solely for the convenience of readers at the rate of ¥83.82 = US$1, the approximate current exchange rate at September 30, 2010.
As of September 30, 2009, NIDEC discontinued its semiconductor manufacturing equipment business. The results of the semiconductor manufacturing equipment business were previously recorded in the NTSC reporting segments. The operating results of the discontinued businesses and exit costs with related taxes were recorded as "loss on discontinued operations" in the consolidated statement of income in accordance with ASC 205-20, "Presentation of Financial Statements- Discontinued Operations".
2. New accounting pronouncements:
Accounting Changes
As of April 1, 2010, NIDEC adopted FASB Accounting Standards Codification™ (ASC) 860 “Transfers and Servicing” updated by Accounting Standards Update (ASU) No. 2009-16, “Accounting for Transfers of Financial Assets”. ASU 2009-16 requires more disclosure about transfers of a portion of a financial assets as sale, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 also eliminates the concept of a “qualifying special-purpose entity,” which changes the criteria for derecognizing financial assets. The adoption of this standard did not have a material impact on NIDEC’s consolidated financial position, results of operations or liquidity.
36
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of April 1, 2010, NIDEC adopted ASC 810 “Consolidation” updated by ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” ASU 2009-17 requires an enterprise to perform an analysis to identify the primary beneficiary of all variable interest entities and also requires ongoing reassessments of whether an enterprise is the primary beneficiary of all variable interest entities. The adoption of this standard did not have a material impact on NIDEC’s consolidated financial position, results of operations or liquidity.
Recent Accounting Pronouncements to be adopted in future periods
All newly issued ASU which NIDEC has not yet adopted are either not applicable or are expected to have a minimal impact on NIDEC’s consolidated financial position, results of operations or liquidity.
3. Acquisitions
On August 4, 2009, NIDEC acquired the additional 60.0% of the voting rights of NTN-Nidec (Zhejiang) Corporation, currently Nidec Bearing (Zhejiang) Corporation (“NBCC”), and NTN-Nidec (Thailand) Co.,Ltd., currently Nidec Bearing (Thailand) Co., Ltd. (“NBTC”). NIDEC previously owned 40.0% of the voting rights of NBCC and NBTC. As a result, NIDEC acquired all of the voting rights of NBCC and NBTC. These acquisitions did not have a material impact on NIDEC’s consolidated financial position, results of operations or liquidity.
On January 26, 2010, NIDEC acquired all of the voting rights of the household motor business of Appliances Components Companies S.p.A.. As a result, NIDEC has included Nidec Sole Motor Corporation S.R.L. (“NSMC”) in its scope of consolidation as wholly owned subsidiaries of NIDEC. This acquisition did not have a material impact on NIDEC’s consolidated financial position, results of operations or liquidity.
On February 26, 2010, NIDEC acquired 864,000 shares (or, 90.0%) of SC WADO Co., Ltd. This acquisition did not have a material impact on NIDEC’s consolidated financial position, results of operations or liquidity.
On September 30, 2010, NIDEC acquired all of the assets, the liabilities and the voting rights of Emerson Electric Co.’s motors and controls (“EMC”) business which consists of industrial, air conditioning and home appliance motor business for cash of ¥56,528 million ($674,398 thousand) in order to address the need of rapidly globalizing customers by securing a strong presence in North America to complement existing operations in Asia and Europe. NIDEC also aims to complement and expand its product lineup and accelerate operational growth by effectively blending NIDEC’s industry-leading brushless motor technologies with the EMC business.
37
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at acquisition date for the six months ended September 30, 2010. Because of the proximity of this transaction to September 30, 2010, the values of certain assets and liabilities are based on preliminary valuations and are subject to adjustment as additional information is obtained.
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30, 2010 | For the six months ended September 30, 2010 | ||
Current assets | ¥26,692 | $318,444 | |
Goodwill | 31,755 | 378,848 | |
Other non-current assets | 12,924 | 154,187 | |
Non-current assets | 44,679 | 533,035 | |
Total assets acquired | 71,371 | 851,479 | |
Total liabilities assumed | 14,843 | 177,081 | |
Net assets acquired | ¥56,528 | $674,398 |
The following represents the unaudited pro forma results of operations of NIDEC for the six months ended September 30, 2009 and 2010, as if the acquisition in these companies had occurred on April 1, 2009 and 2010. The unaudited pro forma results of operations are presented for comparative purposes only and are not necessarily indicative of the results of operations that may occur in the future or that would have occurred had the acquisitions been in effect on the dates indicated.
Yen in millions | U.S. dollars in thousands | |||||
For the six months ended September 30 (Unaudited) | For the six months ended September 30, | |||||
2009 | 2010 | 2010 | ||||
(Unaudited) | ||||||
Pro forma net sales | ¥308,086 | ¥382,212 | $4,559,914 | |||
Pro forma net income | 15,261 | 29,711 | 354,462 | |||
Yen | U.S. dollars | |||||
Pro forma net income attributable to Nidec Corporation per share | ||||||
- basic | ¥109.56 | ¥213.31 | $2.54 | |||
- diluted | 109.56 | 212.51 | 2.54 |
38
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
4. Goodwill
The changes in the carrying amount of goodwill for the six months ended September 30, 2010 are as follows:
Yen in millions | U.S dollars in thousands | |
Balance as of April 1, 2010 | ||
Goodwill | ¥72,818 | $868,742 |
Accumulated impairment losses | (587) | (7,003) |
72,231 | 861,739 | |
Acquisition | 31,755 | 378,848 |
Translation adjustments and Others | (1,088) | (12,980) |
Balance as of September 30, 2010 | ||
Goodwill | 103,485 | 1,234,610 |
Accumulated impairment losses | (587) | (7,003) |
¥102,898 | $1,227,607 | |
39
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
5. Marketable securities and other securities investments:
Marketable securities and other securities investments include debt and equity securities of which the aggregate fair value, gross unrealized gains and losses and cost are as follows:
Yen in millions | ||||
March 31, 2010 | ||||
Cost | Gross unrealized gains | Gross unrealized losses | Fair value | |
Available-for-sale | ||||
Equity securities | ¥8,993 | ¥7,714 | ¥143 | ¥16,564 |
Held-to-maturity | ||||
Japanese government debt securities | 200 | - | - | 200 |
¥9,193 | ¥7,714 | ¥143 | ¥16,764 | |
Securities not practicable to fair value | ||||
Equity securities | ¥698 | |||
|
|
|
|
|
Yen in millions | ||||
September 30, 2010 | ||||
Cost | Gross unrealized gains | Gross unrealized losses | Fair value | |
Available-for-sale | ||||
Equity securities | ¥8,815 | ¥5,185 | ¥332 | ¥13,668 |
Held-to-maturity | ||||
Japanese government debt securities | 200 | 4 | - | 204 |
¥9,015 | ¥5,189 | ¥332 | ¥13,872 | |
Securities not practicable to fair value | ||||
Equity securities | ¥556 | |||
|
|
|
|
|
40
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
U.S. dollars in thousands | ||||
September 30, 2010 | ||||
Cost | Gross unrealized gains | Gross unrealized losses | Fair value | |
Available-for-sale | ||||
Equity securities | $105,166 | $61,859 | $3,961 | $163,064 |
Held-to-maturity | ||||
Japanese government debt securities | 2,386 | 48 | - | 2,434 |
$107,552 | $61,907 | $3,961 | $165,498 | |
Securities not practicable to fair value | ||||
Equity securities | $6,633 | |||
The net unrealized gain on available-for-sale securities included as a component of accumulated other comprehensive income, net of applicable taxes, decreased by ¥1,258 million ($15,008 thousand) during the six months ended September 30, 2010, and increased by ¥2,164 million during the year ended March 31, 2010.
Proceeds from sales of available-for-sale securities was ¥1 million ($12 thousand) for the three months ended September 30, 2010. On those sales, gross realized gains were ¥0 million ($0 thousand) and gross realized losses were ¥0 million ($0 thousand) for the three months ended September 30, 2010.
Proceeds from sales of available-for-sale securities was ¥51 million ($608 thousand) for the six months ended September 30, 2010. On those sales, gross realized gains were ¥6 million ($72 thousand) and gross realized losses were ¥0 million ($0 thousand) for the six months ended September 30, 2010.
NIDEC holds long-term investment securities that are classified as “marketable securities and other securities investments.” The securities issued by various non-public companies are recorded at cost, as their fair values are not readily determinable. NIDEC’s management employs a systematic methodology to assess the recoverability of such investments by reviewing the financial position of the underlying companies and the prevailing market conditions in which these companies operate to determine if NIDEC’s investment in each individual company is impaired and whether the impairment is other-than-temporary. If any impairment is determined to be other-than-temporary, the cost of the investment is written-down by the impaired amount and the amount is recognized currently as a realized loss.
41
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table presents the gross unrealized losses on, and fair value of, NIDEC’s investment securities, aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position.
Yen in millions | ||||
March 31, 2010 | ||||
Less than 12 months | 12 months or more | |||
Fair value | Unrealized loss | Fair value | Unrealized loss | |
Equity securities | ¥359 | ¥30 | ¥349 | ¥113 |
Yen in millions | ||||
September 30, 2010 | ||||
Less than 12 months | 12 months or more | |||
Fair value | Unrealized loss | Fair value | Unrealized loss | |
Equity securities | ¥1,530 | ¥180 | ¥384 | ¥152 |
U.S. dollars in thousands | ||||
September 30, 2010 | ||||
Less than 12 months | 12 months or more | |||
Fair value | Unrealized loss | Fair value | Unrealized loss | |
Equity securities | $18,253 | $2,148 | $4,581 | $1,813 |
NIDEC presumes the value of investment securities is impaired if the fair value is below the original cost. Among the impaired investment securities, NIDEC presumes a decline in value of equity securities is other-than-temporary if the fair value is 20% or more below the original cost for an extended period of time. The presumption of an other-than-temporary impairment may be overcome if there is evidence to support that the decline is temporary in nature due to the existence of other factors which overcome the duration or magnitude of the decline. On the other hand, even if a decline is less than 20%, there may be cases where impairment losses are recognized when specific factors indicate the decline in the fair value is other-than-temporary. As of September 30, 2010, NIDEC determined that the decline in value for equity securities with unrealized losses shown in the above table is temporary in nature.
As of September 30, 2010 and March 31, 2010, held-to-maturity securities of ¥200 million ($2,386 thousand) and ¥200 million were pledged as collateral for the deferred payments of certain taxes based on the Japanese Custom Act and Consumption Tax Law, respectively.
42
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
6. Equity:
A summary of the changes in equity in the consolidated balance sheet for the six months ended September 30, 2009 and 2010 was as follows:
Yen in millions | |||
Nidec Corporation total | Noncontrolling interests | Total equity | |
For the six months ended September 30, 2009: | |||
Balance at March 31, 2009 | ¥297,148 | ¥60,539 | ¥357,687 |
Comprehensive income: | |||
Net income | 13,788 | 825 | 14,613 |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | (7,610) | (669) | (8,279) |
Unrealized gains from securities, net of reclassification adjustment | 1,407 | 284 | 1,691 |
Pension liability adjustments | 6 | 8 | 14 |
Total comprehensive income | 7,591 | 448 | 8,039 |
Purchase of treasury stock | (3) | - | (3) |
Dividends paid to shareholders of Nidec Corporation | (4,179) | - | (4,179) |
Dividends paid to noncontrolling interests | - | (629) | (629) |
Capital transaction with consolidated subsidiaries and other | 59 | (2,681) | (2,622) |
Balance at September 30, 2009 | ¥300,616 | ¥57,677 | ¥358,293 |
|
|
|
|
For the six months ended September 30, 2010: | |||
Balance at March 31, 2010 | ¥340,309 | ¥61,222 | ¥401,531 |
Comprehensive income: | |||
Net income | 27,014 | 3,752 | 30,766 |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | (14,365) | (1,033) | (15,398) |
Unrealized losses on securities, net of reclassification adjustment | (1,258) | (274) | (1,532) |
Pension liability adjustments | 694 | 6 | 700 |
Total comprehensive income | 12,085 | 2,451 | 14,536 |
Purchase of treasury stock | (4) | - | (4) |
Dividends paid to shareholders of Nidec Corporation | (5,572) | - | (5,572) |
Dividends paid to noncontrolling interests | - | (819) | (819) |
Capital transaction with consolidated subsidiaries and other | (2,634) | (3,725) | (6,359) |
Balance at September 30, 2010 | ¥344,184 | ¥59,129 | ¥403,313 |
43
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
U.S. dollars in thousands | |||
Nidec Corporation total | Noncontrolling interests | Total equity | |
For the six months ended September 30, 2010: | |||
Balance at March 31, 2010 | $4,059,997 | $730,398 | $4,790,395 |
Comprehensive income: | |||
Net income | 322,286 | 44,762 | 367,048 |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | (171,379) | (12,324) | (183,703) |
Unrealized losses on securities, net of reclassification adjustment | (15,008) | (3,269) | (18,277) |
Pension liability adjustments | 8,280 | 72 | 8,352 |
Total comprehensive income | 144,179 | 29,241 | 173,420 |
Purchase of treasury stock | (48) | - | (48) |
Dividends paid to shareholders of Nidec Corporation | (66,476) | - | (66,476) |
Dividends paid to noncontrolling interests | - | (9,771) | (9,771) |
Capital transaction with consolidated subsidiaries and other | (31,424) | (44,440) | (75,864) |
Balance at September 30, 2010 | $4,106,228 | $705,428 | $4,811,656 |
The Company purchased additional interests in major subsidiaries from each noncontrolling interest. These purchases of additional interests were primarily related to NSNK and NCPL. As a result, these capital transactions primarily increased the Company’s interests in NSNK and NCPL from 73.8% and 59.6% to 75.4% and 63.6%, respectively.
7. Long term debts:
Detail of Zero coupon convertible bonds, due 2015 is as follow;
Yen in millions | U.S. dollars in thousands | ||
September 30, 2010 | September 30, 2010 | ||
Principal amount | ¥100,000 | $1,193,033 | |
Unamortized discount | 497 | 5,929 | |
Total | ¥100,497 | $1,198,962 |
The yen denominated zero coupon convertible bonds with stock acquisition rights due 2015, which are listed at Singapore Stock Exchange, were issued on September 21, 2010, and are redeemable at 100% of face value on September 18, 2015 (maturity date). Concerning stock acquisition rights, the conversion price per share is ¥10,626 ($127) and the number of convertible shares is 9,410,878 as of September 30, 2010.
44
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
8. Pension and severance plans:
The amounts of net periodic benefit cost in pension and severance plans for the three months ended September 30, 2009 and 2010 were as follows:
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net periodic pension cost for defined benefit plans: | |||
Service cost | ¥312 | ¥285 | $3,400 |
Interest cost | 136 | 108 | 1,288 |
Expected return on plan assets | (31) | (47) | (561) |
Amortization of net actuarial loss | 31 | 27 | 322 |
Amortization of prior service credit | (15) | (34) | (406) |
Net periodic pension cost for defined benefit plans | 433 | 339 | 4,043 |
Cost for multiemployer pension plans | 40 | 56 | 668 |
Cost for defined contribution plans | ¥92 | ¥131 | $1,563 |
The amounts of net periodic benefit cost in pension and severance plans for the six months ended September 30, 2009 and 2010 were as follows:
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net periodic pension cost for defined benefit plans: | |||
Service cost | ¥672 | ¥584 | $6,967 |
Interest cost | 274 | 217 | 2,589 |
Expected return on plan assets | (62) | (94) | (1,121) |
Amortization of net actuarial loss | 62 | 55 | 656 |
Amortization of prior service credit | (31) | (68) | (811) |
Gains from curtailments and settlements | - | (186) | (2,219) |
Net periodic pension cost for defined benefit plans | 915 | 508 | 6,061 |
Cost for multiemployer pension plans | 89 | 105 | 1,253 |
Cost for defined contribution plans | ¥183 | ¥266 | $3,173 |
45
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
9. Earnings per share:
The tables below set forth a reconciliation of the differences between basic and diluted income attributable to Nidec Corporation per share for the three and six months ended September 30, 2009 and 2010:
Yen in millions | Thousands of shares | Yen | U.S. dollars | |
Net income (loss) attributable to Nidec Corporation | Weighted- average shares | Net income (loss) attributable to Nidec Corporation per share | ||
For the three months ended September 30, 2009: | ||||
Basic net income attributable to Nidec Corporation per share: | ||||
Income from continuing operations attributable to Nidec Corporation | ¥8,836 | 139,292 | ¥63.43 | |
Loss on discontinued operations attributable to Nidec Corporation | (867) | 139,292 | (6.22) | |
Net income attributable to Nidec Corporation | 7,969 | 139,292 | 57.21 | |
Diluted net income attributable to Nidec Corporation per share: | ||||
Income from continuing operations attributable to Nidec Corporation | 8,836 | 139,292 | 63.43 | |
Loss on discontinued operations attributable to Nidec Corporation | (867) | 139,292 | (6.22) | |
Net income attributable to Nidec Corporation | ¥7,969 | 139,292 | ¥57.21 | |
For the three months ended September 30, 2010: | ||||
Basic net income attributable to Nidec Corporation per share: | ||||
Net income attributable to Nidec Corporation | ¥13,231 | 139,290 | ¥95.00 | $1.13 |
Effect of dilutive securities: | ||||
Zero coupon convertible bonds | (1) | 1,023 | ||
Diluted net income attributable to Nidec Corporation per share: | ||||
Net income attributable to Nidec Corporation | ¥13,230 | 140,313 | ¥94.29 | $1.12 |
46
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Yen in millions | Thousands of shares | Yen | U.S. dollars | |
Net income (loss) attributable to Nidec Corporation | Weighted- average shares | Net income (loss) attributable to Nidec Corporation per share | ||
For the six months ended September 30, 2009: | ||||
Basic net income attributable to Nidec Corporation per share: | ||||
Income from continuing operations attributable to Nidec Corporation | ¥14,717 | 139,292 | ¥105.65 | |
Loss on discontinued operations attributable to Nidec Corporation | (929) | 139,292 | (6.66) | |
Net income attributable to Nidec Corporation | 13,788 | 139,292 | 98.99 | |
Diluted net income attributable to Nidec Corporation per share: | ||||
Income from continuing operations attributable to Nidec Corporation | 14,717 | 139,292 | 105.65 | |
Loss on discontinued operations attributable to Nidec Corporation | (929) | 139,292 | (6.66) | |
Net income attributable to Nidec Corporation | ¥13,788 | 139,292 | ¥98.99 | |
For the six months ended September 30, 2010: | ||||
Basic net income attributable to Nidec Corporation per share: | ||||
Net income attributable to Nidec Corporation | ¥27,014 | 139,290 | ¥193.94 | $2.31 |
Effect of dilutive securities: | ||||
Zero coupon convertible bonds | (1) | 515 | ||
Diluted net income attributable to Nidec Corporation per share: | ||||
Net income attributable to Nidec Corporation | ¥27,013 | 139,805 | ¥193.22 | $2.31 |
NIDEC has no dilutive securities outstanding for the three and six months ended September 30, 2009, and therefore there is no difference between basic and diluted income attributable to Nidec Corporation per share.
47
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
10. Income taxes:
NIDEC is subject to a number of different income taxes, which, in the aggregate, indicate statutory rates in Japan of approximately 41.0% for the six months ended September 30, 2009 and 2010. Reconciliation of the differences between the statutory tax rates and the estimated effective income tax rates are as follows:
For the Six months ended September 30 | ||
2009 | 2010 | |
Statutory tax rate | 41.0% | 41.0% |
Increase (reduction) in taxes resulting from: | ||
Tax benefit in foreign subsidiaries | (19.9) | (20.4) |
Tax (benefit) on undistributed earnings | 3.1 | (1.0) |
Valuation allowance | 2.1 | 0.4 |
Liabilities for unrecognized tax benefits | 3.5 | 5.0 |
Other | (0.9) | 0.5 |
Estimated effective income tax rate | 28.9% | 25.5% |
The estimated effective income tax rate for the six months ended September 30, 2010 was 25.5%, 3.4 percentage points lower compared with the effective income tax rate for the six months ended September 30, 2009. The main reason for the decrease was the net impact of a decrease in tax (benefit) on undistributed earnings, a decrease in valuation allowance, and an increase in liabilities for unrecognized tax benefits.
11. Contingencies:
NIDEC has guaranteed approximately ¥130 million ($1,551 thousand) of bank loans for employees in connection with their housing costs at September 30, 2010. If an employee defaults on his/her loan payments, NIDEC would be required to perform under the guarantee.
The maximum undiscounted amount of NIDEC’s obligation to make future payments in the event of defaults is approximately ¥130 million ($1,551 thousand). The current carrying amount of the liabilities for NIDEC’s obligations under the guarantee is zero.
48
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
12. Derivatives:
NIDEC manages the exposure to fluctuations in interest rate, foreign exchange rate, and commodity prices movements through the use of derivative financial instruments which include foreign exchange forward contracts, interest rate currency swap and commodities agreements. NIDEC does not hold derivative financial instruments for trading purpose. NIDEC is exposed to credit risk in the event of non-performance by counterparties to the derivative contracts, but such risk is considered mitigated by the high credit rating of the counterparties.
Cash flow hedges
There are derivatives designated as hedges or accounted for as hedges under ASC 815, “Derivatives and Hedging” since September 30, 2010. NIDEC uses foreign exchange forward contracts and commodities agreements designated as cash flow hedges to protect against foreign exchange rate risks and commodity prices risks inherent in its forecasted transactions related to purchase commitments.
Derivatives not designated as hedges
NIDEC uses derivatives such as foreign exchange forward contracts and interest rate currency swap to protect against foreign exchange rate risks and interest rate risks. NIDEC is unable or has elected not to apply hedge accounting to some of these derivatives. The changes in the fair value of these contracts are recorded in ‘Other income (expense)’.
The Contracted Amounts Outstanding of Derivative Instruments
Derivatives designated as hedging instruments under ASC 815 are as follows:
Yen in millions | U.S. dollars in thousands | |||||
March 31, 2010 | September 30, 2010 | September 30, 2010 | ||||
Foreign exchange forward contracts | - | ¥4,842 | $57,767 | |||
Commodities | - | 1,253 | 14,949 | |||
Total Derivatives | - | ¥6,095 | $72,716 |
Derivatives not designated as hedging instruments under ASC 815 are as follows:
Yen in millions | U.S. dollars in thousands | |||||
March 31, 2010 | September 30, 2010 | September 30, 2010 | ||||
Foreign exchange forward contracts | ¥123 | ¥- | $- | |||
Interest rate currency swap agreements | 48 | 24 | 286 | |||
Total Derivatives | ¥171 | ¥24 | $286 |
49
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Fair Values of Derivative Instruments
Derivatives designated as hedging instruments under ASC 815 are as follows:
Asset Derivatives [Booked as Other current assets] | Yen in millions | U.S. dollars in thousands | ||||
March 31, 2010 | September 30, 2010 | September 30, 2010 | ||||
Foreign exchange forward contracts | - | ¥566 | $6,753 | |||
Commodities | - | 212 | 2,529 | |||
Total Derivatives | - | ¥778 | $9,282 |
Derivatives not designated as hedging instruments under ASC 815 are as follows:
Asset Derivatives [Booked as Other current assets] | Yen in millions | U.S. dollars in thousands | ||||
March 31, 2010 | September 30, 2010 | September 30, 2010 | ||||
Interest rate currency swap agreements | - | ¥2 | $24 |
Liability Derivatives [Booked as Other current liabilities] | Yen in millions | U.S. dollars in thousands | ||||
March 31, 2010 | September 30, 2010 | September 30, 2010 | ||||
Foreign exchange forward contracts | ¥2 | - | - | |||
Interest rate currency swap agreements | 0 | - | - | |||
Total Derivatives | ¥2 | - | - |
13. Fair Value:
Under Statement of ASC 820, “Fair Value Measurements and Disclosures”, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect NIDEC’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarch y is broken down into three levels.
50
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs (other than quoted prices) that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 inputs are unobservable inputs for the asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and liabilities that are measured at Fair Value on a Recurring Basis:
The following table provides information by level for assets and liabilities that are measured at fair value, as defined by ASC 820, on a recurring basis.
Yen in millions | ||||
Fair Value at | Fair Value Measurements Using Inputs Considered as | |||
March 31, 2010 | Level 1 | Level 2 | Level 3 | |
Assets: | ||||
Marketable securities | ¥16,564 | ¥16,564 | - | - |
Liabilities: | ||||
Derivatives | ¥2 | - | ¥2 | - |
Yen in millions | ||||
Fair Value at | Fair Value Measurements Using Inputs Considered as | |||
September 30, 2010 | Level 1 | Level 2 | Level 3 | |
Assets: | ||||
Marketable securities | ¥13,668 | ¥13,668 | - | - |
Derivatives | ¥780 | - | ¥780 | - |
Total Assets | ¥14,448 | ¥13,668 | ¥780 | - |
U.S. dollars in thousands | ||||
Fair Value at | Fair Value Measurements Using Inputs Considered as | |||
September 30, 2010 | Level 1 | Level 2 | Level 3 | |
Assets: | ||||
Marketable securities | $163,064 | $163,064 | - | - |
Derivatives | $9,306 | - | $9,306 | - |
Total Assets | $172,370 | $163,064 | $9,306 | - |
51
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Level 1 marketable securities are comprised primarily of equity securities, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions. Level 2 derivatives including foreign exchange contracts and commodity futures are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates, interest rates and market prices for commodity futures.
Fair value of financial instruments:
The estimated fair values of NIDEC’s financial instruments, excluding those disclosed elsewhere, are summarized as follows:
Yen in millions | ||
March 31, 2010 | ||
Carrying amount | Estimated fair value | |
Asset (Liability): | ||
Cash and cash equivalents | ¥123,309 | ¥123,309 |
Short-term investments | 3,891 | 3,891 |
Short-term loan receivable | 158 | 158 |
Long-term loan receivable | 358 | 363 |
Short-term borrowings | (115,467) | (115,467) |
Long-term debt including the current portion and excluding capital lease obligation | ¥(641) | ¥(579) |
Yen in millions | U.S. dollars in thousands | |||
September 30, 2010 | September 30, 2010 | |||
Carrying amount | Estimated fair value | Carrying amount | Estimated fair value | |
Asset (Liability): | ||||
Cash and cash equivalents | ¥87,792 | ¥87,792 | $1,047,387 | $1,047,387 |
Short-term investments | 3,856 | 3,856 | 46,003 | 46,003 |
Short-term loan receivable | 168 | 168 | 2,004 | 2,004 |
Long-term loan receivable | 336 | 342 | 4,009 | 4,080 |
Short-term borrowings | (46,026) | (46,026) | (549,105) | (549,105) |
Long-term debt including the current portion and excluding capital lease obligation | ¥(101,109) | ¥(104,697) | $(1,206,263) | $(1,249,069) |
The following are explanatory notes relating to the financial instruments.
Cash and cash equivalents, short-term investments (time deposits), short-term loans receivable and short-term borrowings: In the normal course of business, substantially all cash and cash equivalents, short-term investments, short-term loans receivable and short-term borrowing are highly liquid and are carried at amounts that approximate fair value.
52
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Long-term loan receivable: The fair value of long-term loans was estimated by discounting expected future cash flows.
Long-term debt: The fair value of bonds issued by NIDEC was estimated based on their market price which was influenced by, and corresponded to stock price. The fair value of long-term bank loans (including the current portion and excluding the capital lease obligation) was estimated based on the discounted amounts of future cash flows using NIDEC’s current incremental borrowing rates for similar liabilities.
14. Segment data:
(1) Enterprise-wide information
The following table provides product information for the three months ended September 30, 2009 and 2010:
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales: | |||
Small precision motors: | |||
Hard disk drives spindle motors | ¥52,478 | ¥51,847 | $618,552 |
Other small precision brushless DC motors | 20,082 | 18,536 | 221,141 |
Brushless DC fans | 8,824 | 8,486 | 101,241 |
Other small precision motors | 4,745 | 4,626 | 55,189 |
Sub-total | 86,129 | 83,495 | 996,123 |
General motors | 16,127 | 23,345 | 278,513 |
Machinery | 9,299 | 20,800 | 248,151 |
Electronic and optical components | 26,972 | 34,141 | 407,313 |
Others | 6,730 | 8,210 | 97,948 |
Consolidated total | ¥145,257 | ¥169,991 | $2,028,048 |
53
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table provides product information for the six months ended September 30, 2009 and 2010:
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales: | |||
Small precision motors: | |||
Hard disk drives spindle motors | ¥97,630 | ¥104,379 | $1,245,276 |
Other small precision brushless DC motors | 35,996 | 39,991 | 477,106 |
Brushless DC fans | 16,161 | 17,326 | 206,705 |
Other small precision motors | 8,614 | 9,486 | 113,171 |
Sub-total | 158,401 | 171,182 | 2,042,258 |
General motors | 31,831 | 48,105 | 573,908 |
Machinery | 16,898 | 38,021 | 453,603 |
Electronic and optical components | 49,278 | 66,521 | 793,617 |
Others | 12,335 | 16,962 | 202,362 |
Consolidated total | ¥268,743 | ¥340,791 | $4,065,748 |
The product category has been changed from “Mid-size motors” to “General motors” due to the addition of Large-size motors for industrial use, resulting from the acquisition of Emerson Electric Co.’s motors and controls business on September 30, 2010.
(2) Operating segment information
Beginning in the current quarterly reporting period ended September 30, 2010, NIDEC has changed its segment reporting so that it is in line with the changes NIDEC recently made in its management decision-making process. The Company’s acquired subsidiaries have been grouped into each of these segments for both internal and external management and reporting to the chief operating decision maker, because the number of its subsidiaries has been increasing due to recent acquisitions such as the acquisition of Emerson Electric Co.'s motors and controls business on September 30, 2010 and NIDEC have made modifications to its management style that are designed to enhance profitability at each group company level. The current segment reporting is based on our modified management decision-making process. All prior period segment information has been reclassified in accordance with the current period presentation to enable comparisons between the relevant amounts for the three and six months ended September 30, 2009 and 2010. NIDEC has also changed its abbreviations for the reporting segments, as described below.
The NCJ segment comprises Nidec Corporation in Japan, which primarily produces and sells hard disk drives spindle motors, DC motors, fans, and general motors for automobiles.
The NIRT (formerly NET) segment comprises Nidec Electronics (Thailand) Co., Ltd., a subsidiary in Thailand, and its consolidated subsidiaries, which primarily produce and sell hard disk drive motors.
54
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The NIPC (formerly NCC) segment comprises Nidec (Zhejiang) Corporation, a subsidiary in China, which primarily produces and sells hard disk drive motors.
The NIDC (formerly NCD) segment comprises Nidec (Dalian) Limited, a subsidiary in China, which primarily produces and sells DC motors and fans but excludes its general motors business for automobiles.
The NILS (formerly NCS) segment comprises Nidec Singapore Pte. Ltd., a subsidiary in Singapore, and its consolidated subsidiary, which primarily sell hard disk drive motors, DC motors, fans, and pivot assemblies.
The NIHC (formerly NCH) segment comprises Nidec (H.K.) Co., Ltd., a subsidiary in Hong Kong, which primarily sells hard disk drive motors, DC motors and fans.
The NILF (formerly NCF) segment comprises Nidec Philippines Corporation, a subsidiary in the Philippines, and its consolidated subsidiaries, which primarily produce and sell hard disk drive motors.
The NSNK segment comprises Nidec Sankyo Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell DC motors, machinery, and electronic parts.
The NCPL segment comprises Nidec Copal Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell optical and electronic parts and machinery.
The NTSC segment comprises Nidec Tosok Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell automotive parts and machinery.
The NCEL segment comprises Nidec Copal Electronics Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell electronic parts.
The NTMC segment comprises Nidec Techno Motor Holdings Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell general motors for home appliances and industrial use.
The NMA segment comprises Nidec Motors & Actuators (Germany) GmbH, other subsidiaries in Europe and North America, and other manufacturing subsidiaries in China, which primarily produce and sell general motors for automobiles.
All Others segment comprises subsidiaries that are operating segments but not designated as reportable segments due to their immateriality.
55
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Nidec Servo Corporation, or NSRV was not identified as reportable segments in the current period due to their immateriality. The amounts have been reclassified to the All Others segment for all periods presented.
NIDEC evaluates performance based on segmental profit and loss, which consists of sales and operating revenues less operating expenses. All segmental operating income or loss are accounted for under Japanese GAAP, except for NIRT (formerly NET), NIPC (formerly NCC), NIDC (formerly NCD), NILS (formerly NCS), NIHC (formerly NCH), NILF (formerly NCF), and NMA. Therefore segmental data has not been prepared under U.S. GAAP on a basis that is consistent with the consolidated financial statements or on any other single basis that is consistent between segments. There are several differences between U.S. GAAP and the underlying accounting bases used by management, the principal differences that affect segmental operating income or loss are accounting for pension and severance costs, and leases. Our segmental operating income or loss is presented in accordance with financial reporting principles and practices generally accepted in Japan . Management believes that the monthly segmental information is available on a timely basis, and that it is sufficiently accurate at the segment income or loss level for management’s purposes.
56
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following tables show revenue from external customers and other financial information by operating segment for the three and six months ended September 30, 2009 and 2010, respectively:
Business segment
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales to external customers: | |||
NCJ | ¥15,733 | ¥18,343 | $218,838 |
NIRT (formerly NET) | 23,523 | 22,002 | 262,491 |
NIPC (formerly NCC) | 6,244 | 6,063 | 72,334 |
NIDC (formerly NCD) | 2,086 | 636 | 7,588 |
NILS (formerly NCS) | 6,758 | 5,539 | 66,082 |
NIHC (formerly NCH) | 13,062 | 14,343 | 171,117 |
NILF (formerly NCF) | 2,937 | 2,156 | 25,722 |
NSNK | 17,816 | 24,550 | 292,890 |
NCPL | 15,814 | 19,989 | 238,475 |
NTSC | 5,392 | 7,236 | 86,328 |
NCEL | 5,679 | 7,859 | 93,760 |
NTMC | 7,743 | 13,392 | 159,771 |
NMA | 7,638 | 8,525 | 101,706 |
All Others | 15,111 | 18,912 | 225,625 |
Total | 145,536 | 169,545 | 2,022,727 |
Adjustments*1 | (279) | 446 | 5,321 |
Consolidated total | ¥145,257 | ¥169,991 | $2,028,048 |
*1 US GAAP adjustments related to the differences of revenue recognition between recognition at the time of shipment and at the time of customer receipt are main components of Adjustments.
57
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Business segment
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales to external customers: | |||
NCJ | ¥30,174 | ¥36,891 | $440,122 |
NIRT (formerly NET) | 42,813 | 44,140 | 526,605 |
NIPC (formerly NCC) | 11,248 | 12,731 | 151,885 |
NIDC (formerly NCD) | 3,489 | 2,155 | 25,710 |
NILS (formerly NCS) | 12,630 | 12,048 | 143,737 |
NIHC (formerly NCH) | 23,587 | 29,096 | 347,125 |
NILF (formerly NCF) | 4,648 | 4,042 | 48,222 |
NSNK | 33,095 | 47,888 | 571,319 |
NCPL | 28,324 | 38,499 | 459,306 |
NTSC | 9,659 | 14,529 | 173,336 |
NCEL | 10,675 | 15,780 | 188,261 |
NTMC | 16,195 | 28,244 | 336,960 |
NMA | 14,241 | 17,532 | 209,162 |
All Others | 28,364 | 36,380 | 434,024 |
Total | 269,142 | 339,955 | 4,055,774 |
Adjustments*1 | (399) | 836 | 9,974 |
Consolidated total | ¥268,743 | ¥340,791 | $4,065,748 |
*1 US GAAP adjustments related to the differences of revenue recognition between recognition at the time of shipment and at the time of customer receipt are main components of Adjustments.
58
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales to other operating segments: | |||
NCJ | ¥19,812 | ¥19,542 | $233,142 |
NIRT (formerly NET) | 9,650 | 10,384 | 123,885 |
NIPC (formerly NCC) | 740 | 612 | 7,301 |
NIDC (formerly NCD) | 6,084 | 5,085 | 60,666 |
NILS (formerly NCS) | 89 | 119 | 1,420 |
NIHC (formerly NCH) | 1,256 | 348 | 4,152 |
NILF (formerly NCF) | 6,672 | 7,006 | 83,584 |
NSNK | 36 | 130 | 1,551 |
NCPL | 560 | 752 | 8,972 |
NTSC | 40 | 56 | 668 |
NCEL | 7 | 8 | 95 |
NTMC | 194 | 200 | 2,386 |
NMA | 2,410 | 1,634 | 19,494 |
All Others | 19,381 | 18,879 | 225,232 |
Total | 66,931 | 64,755 | 772,548 |
Intersegment elimination | ¥(66,931) | ¥(64,755) | $(772,548) |
Consolidated total | - | - | - |
59
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Net sales to other operating segments: | |||
NCJ | ¥36,778 | ¥40,466 | $482,773 |
NIRT (formerly NET) | 18,766 | 21,260 | 253,639 |
NIPC (formerly NCC) | 1,677 | 1,790 | 21,355 |
NIDC (formerly NCD) | 11,644 | 11,529 | 137,545 |
NILS (formerly NCS) | 153 | 242 | 2,887 |
NIHC (formerly NCH) | 2,604 | 859 | 10,248 |
NILF (formerly NCF) | 12,986 | 16,341 | 194,953 |
NSNK | 122 | 294 | 3,508 |
NCPL | 948 | 1,460 | 17,418 |
NTSC | 64 | 108 | 1,288 |
NCEL | 14 | 16 | 191 |
NTMC | 392 | 440 | 5,249 |
NMA | 4,275 | 3,101 | 36,996 |
All Others | 31,626 | 40,391 | 481,878 |
Total | 122,049 | 138,297 | 1,649,928 |
Intersegment elimination | ¥(122,049) | ¥(138,297) | $(1,649,928) |
Consolidated total | - | - | - |
60
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
For the three months ended September 30 | |||
2009 | 2010 | 2010 | |
Operating income or loss: | |||
NCJ | ¥1,834 | ¥1,578 | $18,826 |
NIRT (formerly NET) | 5,877 | 5,808 | 69,291 |
NIPC (formerly NCC) | 466 | 507 | 6,049 |
NIDC (formerly NCD) | 1,281 | 472 | 5,631 |
NILS (formerly NCS) | 39 | 65 | 775 |
NIHC (formerly NCH) | 147 | 189 | 2,255 |
NILF (formerly NCF) | 1,625 | 1,515 | 18,074 |
NSNK | 1,566 | 3,337 | 39,812 |
NCPL | 1,422 | 2,502 | 29,850 |
NTSC | 491 | 970 | 11,572 |
NCEL | 410 | 1,355 | 16,166 |
NTMC | 218 | 946 | 11,286 |
NMA | 36 | 327 | 3,901 |
All Others | 3,112 | 4,308 | 51,396 |
Total | 18,524 | 23,879 | 284,884 |
U.S. GAAP adjustments to accrue pension and severance costs | 90 | (11) | (131) |
Consolidation adjustments mainly related to elimination of intercompany profits | 451 | 810 | 9,664 |
Reclassification *1 | (534) | 373 | 4,450 |
Others | (494) | (532) | (6,347) |
Consolidated total | ¥18,037 | ¥24,519 | $292,520 |
*1 Some items are reclassified from other expenses (income) and included in operating expenses (income). Reclassification mainly includes gain (loss) from sales (or disposal) of fixed assets.
.
61
NIDEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Yen in millions | U.S. dollars in thousands | ||
For the six months ended September 30 | |||
2009 | 2010 | 2010 | |
Operating income or loss: | |||
NCJ | ¥3,217 | ¥4,681 | $55,846 |
NIRT (formerly NET) | 10,123 | 11,716 | 139,776 |
NIPC (formerly NCC) | 639 | 1,261 | 15,044 |
NIDC (formerly NCD) | 1,927 | 1,705 | 20,341 |
NILS (formerly NCS) | 78 | 144 | 1,718 |
NIHC (formerly NCH) | 283 | 382 | 4,558 |
NILF (formerly NCF) | 2,613 | 3,460 | 41,279 |
NSNK | 2,012 | 6,540 | 78,024 |
NCPL | 1,808 | 4,818 | 57,480 |
NTSC | 700 | 1,932 | 23,049 |
NCEL | 682 | 2,613 | 31,174 |
NTMC | 453 | 2,162 | 25,793 |
NMA | (152) | 484 | 5,774 |
All Others | 3,636 | 8,740 | 104,272 |
Total | 28,019 | 50,638 | 604,128 |
U.S. GAAP adjustments to accrue pension and severance costs | 180 | 171 | 2,040 |
Consolidation adjustments mainly related to elimination of intercompany profits | 286 | (52) | (621) |
Reclassification *1 | (574) | 422 | 5,034 |
Others | 410 | 343 | 4,093 |
Consolidated total | ¥28,321 | ¥51,522 | $614,674 |
*1 Some items are reclassified from other expenses (income) and included in operating expenses (income). Reclassification mainly includes gain (loss) from sales (or disposal) of fixed assets.
15. Subsequent events:
Dividends for the first half of the fiscal year ending March 31, 2011
Subsequent to September 30, 2010, the Company’s Board of Directors declared a cash dividend of ¥5,572 million ($66,476 thousand) payable on December 3, 2010 to stockholders as of September 30, 2010.
62