NJDCY Nidec Corporation (PK)

(2) Consolidated Financial Position

(3) Consolidated Results of Cash Flows

2. Dividends (unaudited)

Note:   

“Annual dividend per share” to “earning per share-basic”

3. Forecast of Consolidated Financial Performance (for the fiscal year ending March 31, 2017)

Operating Results by Product Category for This Fiscal Year Compared to the Previous Fiscal Year

Small precision motors-

Machinery-

Other products-

Operating Results by Product Category for This 4Q Compared to This 3Q

Small precision motors-

Machinery-

Other products-

Overview of Cash Flow-

Cash flows from operating activities for the fiscal year ended March 31, 2016 ("this fiscal year") were a net cash inflow of ¥147,610 million. Compared to the fiscal year ended March 31, 2015 ("the prior fiscal year"), our cash inflow from operating activities for this fiscal year increased approximately ¥55,700 million. This increase was mainly due to an increase of approximately ¥14,800 million in our consolidated net income and an increase of approximately ¥20,200 million in net changes in operating assets and liabilities, which consisted of a decrease of approximately ¥37,800 million in operating assets and a decrease of approximately ¥17,600 million in operating liabilities.

Cash flows from investing activities for this fiscal year were a net cash outflow of ¥95,315 million. Compared to the prior fiscal year, our net cash outflow from investing activities for this fiscal year increased approximately ¥14,100 million mainly due to an increase in additions to property, plant and equipment of approximately ¥23,900 million. On the other hand, outflow in acquisitions of businesses, net of cash acquired, decreased approximately ¥17,700 million.

As a result, we had a positive free cash flow of ¥52,295 million for this fiscal year compared to a positive free cash flow of ¥10,645 million for the prior fiscal year.

Cash flows from financing activities for this fiscal year were a net cash inflow of ¥7,775 million. Compared to the prior fiscal year, our net cash inflow from financing activities for this fiscal year increased approximately ¥27,300 million mainly due to an increase in proceeds from issuance of long-term debt of approximately ¥37,800 million. On the other hand, outflow in purchases of treasury stock increased approximately ¥10,000 million.

As a result of the foregoing and the impact of foreign exchange fluctuations, the balance of cash and cash equivalents as of March 31, 2016 was ¥305,942 million, an increase of approximately ¥36,000 million from March 31, 2015.

Notes:

*1. Total market value of Nidec’s shares to total assets is a non-GAAP measure. Total market value is calculated as the closing stock price at fiscal year end multiplied by the number of shares issued at fiscal year end (excluding treasury stock).

*2. Interest-bearing liabilities: Total amount of “short-term borrowings”, “current portion of long-term debt” and “long-term debt” in the consolidated balance sheet

*3. Interest coverage ratio: Net cash provided by operating activities divided by “interest payments” during a fiscal year

*4: To supplement our balance sheets presented on a GAAP basis, we use a non-GAAP measure of balance sheets to analyze our operational balance sheets. The presentation of a non-GAAP measure is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to any balance sheets figures as a measure of financial position.

(3) Business Forecasts for the Fiscal Year ending March 31, 2017

Based on the recent global economic trends that we have identified, while there was a sense of anticipation for continued strength in the U.S. economy, the uncertain effects of future monetary policy on the U.S. and emerging market economies, the slowdown in China as well as geopolitical risks related to Europe and the Middle East and the challenge of appreciating yen on the Japanese economy suggest that optimism is unwarranted.

In this business environment, we aim to push forward in achieving the goals set forth in our new business strategy for the fiscal year ended March 31, 2021.

Set forth below are our business performance forecasts prepared in light of and subject to our current assumptions and uncertainties. See the “Cautionary Note Regarding Forward-Looking Statements” included on p.18 of this report.

Forecast of consolidated results for the fiscal year ending March 31, 2017

Forecast of consolidated results for the six months ending September 30, 2016

Notes:

1.

The exchange rates used for the preparation of the foregoing forecasts are US$1 = ¥110 and €1 = ¥120. The exchange rates between relevant Asian currencies and the Japanese yen used for the preparation of the foregoing forecasts were determined assuming these exchange rates.

2.

The forecasts for the fiscal year ending March 31, 2017 and the six months ending September 30, 2016 are made in accordance with U.S. GAAP, although we have decided to voluntarily adopt IFRS from the first quarter of the fiscal year ending March 31, 2017.

(4) Dividend Policy

We uphold shareholder-oriented management and seek to deliver higher technology solutions while offering higher wages in order to achieve higher growth, profitability and share value so as to build long-term, sustainable growth in shareholder value. We also seek to lay out our vision for the future on a regular and timely basis to keep stakeholders informed on how we intend to respond to changing opportunities and challenges as we continue to strive to succeed in our endeavors. Placing importance on regular dividend payments, we seek to increase our dividend payout to around 30% of our consolidated net income and use reserves to reinforce our management structure, expand our business horizons, and eventually to improve our profitability and shareholder value.

We have determined the year-end dividend to be ¥40.0 per share for the fiscal year ended March 31, 2016. As a result, together with the interim dividend of ¥40.0 per share, the full-year dividend will be ¥80.0 per share. The dividend payout ratio, which is obtained by dividing dividend declared for the year by net income attributable to Nidec Corporation, for this fiscal year is approximately 25.9%.

Our current dividend forecast for the year ending March 31, 2017 is a full-year dividend of ¥80.0 per share (an interim dividend of ¥40.0 per share and a year-end dividend of ¥40.0 per share.) Based on this forecast, the dividend payout ratio for the fiscal year ending March 31, 2017 that we are aiming to achieve is approximately 24.2%.

(5) Risk Factors

The significant risks relating to our business that we recognized as of March 31, 2016 included those relating to:

•

unexpected drastic declines in the global economies,

•

our expansion of business portfolio into new business areas,

•

our dependence on the information storage and communication industry,

•

competition,

•

our research and development activities,

•

product defects,

•

our suppliers,

•

our dependence on production and sales in developing countries,

•

the incomparability of our quarterly operating results,

•

our advanced planning for production and inventory,

•

our M&A strategy,

•

our growth placing strains on management and operational and financial resources,

•

our dependence on our founder, Chairman of the Board, President and CEO, Mr. Shigenobu Nagamori,

•

hiring and retention of qualified personnel,

•

our reliance on monthly financial data from operating segments not prepared on a U.S. GAAP basis,

•

legal and regulatory compliance,

•

our internal controls over financial reporting,

•

patents and other intellectual property rights,

•

leaks of confidential information,

•

our pension plans,

•

impairment of goodwill and long-lived assets,

•

uncertainties relating to deferred tax assets,

•

foreign currency exchange rate fluctuations,

•

interest rate fluctuations,

•

our access to liquidity and capital,

•

natural disasters and other events over which we have little or no control, and

•

a substantial number of our shares of common stock being eligible for future sale.

The foregoing risk factors were identified based on information available at the time of this announcement, and do not contain all of the information that may be important to you. For more information about the significant risks and other key factors that should be considered, please see our annual report on Form 20-F, reports on Form 6-K and other current disclosures that we have publicly released.

Cautionary Note Regarding Forward-Looking Statements

This report 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 projections 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 make any assurances that the expectations expressed in these forward-looking statements will prove to be correct. Actual results could be materially different from and worse than the Nidec Group’s expectations as a result of various factors, including, but not limited to, (i) general economic conditions in the computer, information storage and communication technology, home appliance, industrial and commercial machinery and equipment, automobile and related product markets, particularly levels of consumer spending and capital expenditures by companies, (ii) the Nidec Group’s ability to expand its business portfolio into new business areas in the highly competitive automotive, appliance, commercial and industrial product markets, (iii) the Nidec Group’s ability to design, develop, mass produce and win acceptance of its products, (iv) alleged or actual product defects and malfunctions of any end-product in which our products are incorporated, (v) the effectiveness of measures designed to reduce costs and improve profitability, (vi) the Nidec Group’s ability to acquire and successfully integrate companies with complementary technologies, product lines and marketing and sales networks, (vii) the Nidec Group’s ability to match production and inventory levels with actual demand, (viii) natural and human-caused disasters and other incidents, (ix) the ability to procure raw materials and attract and retain qualified personnel at satisfactory cost levels, (x) 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 and (xi) adverse changes in laws, regulations or economic policies in any of the jurisdictions where the Nidec Group has manufacturing or other operations.

2. The Nidec Group

The Nidec Group comprises Nidec Corporation (“Nidec"), 225 consolidated subsidiaries and 4 affiliated companies. Nidec’s core product categories include: "small precision motors," "automotive, appliance, commercial and industrial products," "machinery," "electronic and optical components" and "others.".

Its reportable segments are as follows.

The Nidec Corporation segment comprises Nidec Corporation in Japan, which primarily develops and sells hard disk drives spindle motors, other small precision motors and automotive products.

The Nidec Electronics (Thailand) segment comprises Nidec Electronics (Thailand) Co., Ltd., a subsidiary in Thailand, and its consolidated subsidiaries, which primarily produce and sell hard disk drives spindle motors. This segment also includes other subsidiaries in Asia which produce components for hard disk drives.

The Nidec Singapore segment comprises Nidec Singapore Pte. Ltd., a subsidiary in Singapore, and its consolidated subsidiary, which primarily sell hard disk drives spindle motors and other small precision motors.

The Nidec (H.K.) segment comprises Nidec (H.K.) Co., Ltd., a subsidiary in Hong Kong, and its consolidated subsidiaries, which primarily sell hard disk drives spindle motors and other small precision motors.

The Nidec Sankyo segment comprises Nidec Sankyo Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell machinery, automotive products, electronic parts and other small precision motors.

The Nidec Copal segment comprises Nidec Copal Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell optical and electronic parts, machinery and other small precision motors.

The Nidec Techno Motor segment comprises Nidec Techno Motor Corporation, a subsidiary in Japan, and its consolidated subsidiaries, which primarily produce and sell commercial and industrial products.

The Nidec Motor segment comprises Nidec Motor Corporation and other subsidiaries in North America, which are subsidiaries of Nidec Americas Holding Corporation, an intermediate holding company in the United States, as well as other subsidiaries in Latin America, Asia and Europe, which primarily produce and sell home appliance, commercial and industrial products.

The Nidec Motors & Actuators segment comprises Nidec Motors & Actuators (Germany) GmbH in Germany and other subsidiaries in Europe, North America, Latin America, Japan and Asia, which primarily produce and sell automotive products.

The All Others segment comprises subsidiaries that are operating segments but not designated as reportable segments due to their immateriality.

The business activities of Nidec Corporation and the Nidec Group’s principal consolidated subsidiaries are as follows:

3. Management Policies

(1) Basic management policies

We aim to become the world’s No. 1 comprehensive motor manufacturer and maximize shareholder value and meet the expectations of shareholders by delivering higher technology solutions while offering higher wages, and thus achieving higher growth, profit and stock prices, over the long-term. We seek to uphold the following three management goals and principles:

1.

Provide employment opportunities created from stable business growth,

2.

Supply universally desired, indispensable products for the common good, and

3.

Pursue the No. 1 position in all that we undertake.

(2) Management targets

We endeavor to pursue profitable growth by setting a new medium-term strategic target for the fiscal year ending March 31, 2021. Its main components are as follows:

1. Consolidated net sales of ¥2 trillion yen (including approximately ¥500 billion yen contributed by new

M&A activity)

2. Consolidated net sales of automotive products of ¥700 billion yen to ¥1 trillion yen

3. Consolidated operating income ratio of at least 15%

4. ROE (return on shareholders’ equity) of at least 18% (assuming shareholders’ equity to total assets of 60%)

5. Establishment of a five-pronged global business management system

(3) The Nidec Group’s mid- to long-term business strategies

To achieve the targets set forth in our new medium-term strategic target, the Nidec Group, acting based on “its organic growth strategy” and “M&A strategy,” seeks to enhance and expand its business portfolio and achieve more uniformity among the group companies.

We are currently shifting from our current business portfolio to an improved and expanded business portfolio consisting of four core business lines—“small precision motors,” “appliance, commercial and industrial motor products,” “automotive products” and “other products.” —and have launched in the fiscal year ended March 31, 2013 a business enhancement system through which we aim to promote a market-oriented approach for each area of operation, particularly in terms of formulating new strategic ideas and operational implementation.

To strengthen the group’s advanced R&D structures, we intend to develop new business and shift to an improved and expanded business portfolio under the leadership of our Chief Technology Officer while actively interacting with external research institutions. Taking advantage of our core technologies, we seek to realize innovation and achieve growth by exploring the market with high value-added products developed by our group’s unique technology and pursuing Technology Application Development to cultivate new market demand.

As a critical part of the growth strategy of the Nidec Group, we plan to continue to actively seek M&A opportunities as we aim to achieve growth quickly and efficiently. In the fiscal year ended March 31, 2016, we have successfully acquired Motortecnica s.r.l., Arisa, S.A., KB Electronics, Inc., E.M.G. Elettromeccanica S.r.l., PT. NAGATA OPTO INDONESIA, and the switched reluctance (SR) motor and drive business of China Tex Mechanical & Electrical Engineering Ltd.

Furthermore, with the purpose of promoting our production technology and realizing profitable applications of new materials, engineering methods, robots and automation equipments, we established in October 2015 the Nidec Center for Industrial Science, the construction of which will begin in Keihanna Science City in October 2016. We seek to build a manufacturing system so as to be better able to stay ahead of the global competition while nurturing our manufacturing engineers.

(4) The Nidec Group’s challenges

1. Continue to enhance the corporate governance system

To further strengthen our corporate governance, we seek to improve the structure of our board of directors by having independent outside directors while planning to reduce the number of inside directors so as to facilitate more vigorous discussions in meetings of our board of directors. For this fiscal year ending March 31, 2017, we plan to have a total of three outside corporate auditors and two outside directors.

Enhance and strengthen our global management infrastructure

As a global company, we continue to enhance our group-wide management system that meets global standards, including financial reporting and disclosure systems.  

In order to strengthen the foundation for our growth strategy, we are currently building our “Five-Pronged Global Business Management System” to accelerate both organic global growth and post-merger integration following acquisitions. Specifically, we are establishing regional headquarters that are responsible for improving management quality (governance, compliance and internal controls), improving management efficiency (high quality, low-cost regional shared services), and actively supporting post-merger integration, while expanding their functionalities.

We previously maintained a “federate-style” management system, under which each group company we acquired maintained a high degree of independence and autonomy in managing its business operations. However, in response to globalization, we are now quickly moving towards unified group management.

Our Operational Management and Audit Department, the department responsible for group-wide internal controls, seeks to establish a global audit system in an effort to strengthen the supervision in the area of prevention of improper conduct as the global management system is further enhanced, and further enhance our internal control system based on the experience and know-how gained through the past audits of our financial statements and the implementation of measures to comply with the U.S. Sarbanes-Oxley Act of 2002.  We also seek to improve our disclosure system and policy through enhanced cooperation between a committee responsible for information disclosure and other relevant specialized departments.

Such specialized departments and offices, including the Compliance Office, the Risk Management Office, and the CSR (corporate social responsibility) Promotion Office, also collaborate with one another and other departments as appropriate. We seek to find ways to create jobs and otherwise contribute to society based on our basic management policy as a good corporate citizen.

4. Basic rationale for selection of accounting standards

We have decided to voluntarily adopt International Financial Reporting Standards (IFRS) from the fiscal year ending March 31, 2017 in order to further strengthen the infrastructure and improve the efficiency of the group’s financial reporting.

5. Consolidated Financial Statements (U.S. GAAP) (unaudited)