Nikon

NIKON
TOM DAVIS
SECTION 001

EXECUTIVE SUMMARY
Nikon took heavy losses for 2010 and are at a break
point. Luckily they have the D3 line producing steady
sales for the professional market but if they do not
follow their projected plans to come up with new
products and streamline production, the company will
loose their place as a leader in the imaging market.
http://www.nikon.com/about/ir/ir_library/ar/pdf/ar2010/1
0annual_e.pdf

Corporate Info
Nobuyoshi Gokyu - President & CEO,
Nikon Inc.
Head Office – Tokyo, Japan
End of fiscal year- March 2010
Specializes in optical technology –
Digital Cameras yielding 72.5% of sales
Main markets- USA, Europe
Overseas market provide 82.3% of net
sales

Audit Report
Outside Corporate Auditors – Toyoshi
Nakano, Susumu Kani, Masatoshi
Kamijo
The independent auditors concluded
that all figures and representations in
the annual report for Nikon for the 2010
fiscal year were completely accurate.

2010 Stock
Stock Price - 2,041 Yen or $25
High- 2,210 Yen
Low- 1,121 Yen
Dividend per share – 8.00 Yen
As of March 31, 2010
Hold – Exciting new products are expected
from Nikon. Projected growth is 30 billion
yen in 2011 and 60 billion yen in 2013. The
D3 flagship line is said to out perform
Nikon’s closest competitors in the DSLR
market.

INDUSTRY OUTLOOK AND NIKON
FUTURE CLAIMS
The digital camera industry has seen a steady rise in growth from the bottom up. Low- cost,
lightweight, easy to use cameras are in demand by the average individuals with little to no
photography experience. These features make it easy for anyone to afford and pick up and a
very promising profit for imaging companies. Middle and Professional range camera’s round out
the advanced amateur and true professional market of consumers. The integration of true high
definition video into Nikon’s cameras has stimulated the industry into increased growth and
creativity.
http://blog.chasejarvis.com/blog/2010/12/reason-2525-why-i-love-hdslrs-eriks-guest-post/
Nikon has responded to 2011 net loss of $135 million by restructuring their business process
for efficiency and adjusting their finances to minimize the effect of changes in Japanese
economy have on profits. Their D3 flagship series of professional cameras are regarded as
near perfect and should continue to achieve steady sales in the prosumer market. Upgrades to
most cameras are in the works, expected to see increased ease of use in the amateur line and
creative new features on mid range and professional cameras, including an innovative, mirror
less design.
http://www.bythom.com/nikonroadmap.htm
http://www.radiantlite.com/2010/07/nikon-plans-mirrorless-camera-system-2011.html

INCOME STATEMENT
Nikon uses a multi step Income Statement.
Page 14
http://www.nikon.com/about/ir/ir_library/result/pdf/2010/10
_f_c_e.pdf
Despite a large increase of gross profit, Nikon took a
huge hit from operations income and net income. Seems
that the economy may not have had such a significant
impact on net income. Internal inefficiencies are more
likely to be at fault.

BALANCE SHEET
Current assets account dropped 34,000, while total assets
only dropped just under 9,000 from year to year. Although
there was a net loss for the 2010 fiscal year, at a glance the
balance sheet looks relatively stable. Until you realize the
figures are in millions of Yen… All accounts took a huge hit
other than current assets and intangibles which nearly
doubled in value.

STATEMENT OF CASH FLOWS
Cash flow difference from 2009 and 2010 are substantial. In 2009, net income was
greater than cash flow from operations which was 28,055 and 10,112 respectively
(millions of Yen). In 2010 however, net income was a loss of 12,615 and cash flow from
operations was 103,497 (millions of Yen).
Nikon did not grow as far as investments in Property, plant, and equipment. Figures
stayed close to the same from year to year with the exception of the Construction in
progress account which increased by 5 billion Yen for what is most likely renovations.
Nikon financing is primarily through stock sales. However, Nikon hopes to increase cash
flows for the 2011 fiscal year by streamlining production and reducing inventories (page
4, item 2) http://www.nikon.com/about/ir/ir_library/result/pdf/2010/10_f_c_e.pdf
Cash assets increased over the past 2 years by nearly 27 billion Yen.

ACCOUNTING POLICIES
Property, plant and equipment are stated at cost. Depreciation of property, plant
and equipment of the Company is principally computed by the declining-balance
method, while the straight-line method is applied to buildings.
Speed of operations without sacrificing quality is important to Nikon. Not meeting
market demands not only results in loss of sales but also excess inventory.
Topics of the notes to the financial statements
1. Basis of Presenting Consolidated Financial Statements 2. Summary of
Significant Accounting Policies 3. Investment Securities 4. Inventories 5.
Long-lived Assets 6. Short-term Borrowings and Long-term Debt 7.
Retirement and Pension Plans 8. Equity 9. Stock Option 10. Selling, General
and Administrative Expenses 11. Income Taxes 12. Research and
Development Costs 13. Leases 14. Financial Instruments and Related
Disclosures 15. Derivatives 16. Contingent Liabilities 17. Net Income per
Share 18. Business Combinations 19. Segment Information

Financial Analysis Liquidity Ratios
Working capital – Working capital decreased a large amount, which means both
assets and liabilities were decreased between 2009 and 2010
2009: 518,935 – 289,335 = 229,600
2010: 484,624- 299,827 = 184,797
Current Ratio – Dropped by nearly two tenths of a point.
2009: 518,935 / 289,335 = 1.79
2010: 484,624 / 299,827 = 1.62
Receivable turnover – High frequency of A/R collection , more cash on hand.
2009 - 879,719 / 121,155 = 7.26
2010 - 785,499 / 113,773 = 6.90
ALL FIGURES STATED IN MILLIIONS OF YEN

Profitability Ratios
Profit margin – 2010’s net loss sent the profit margin into the negative range.
2009 – (39,180 / 879,719) x 100 = 4%
2010 – ( -17,672 / 785,499) x 100 = -2%
Asset turnover - Lost .11 cents on the dollar between 2009 and 2010, coming much to
only breaking even.
2009 - 879,719 / 749,805 = 1.17
2010- 785,499 / 740,632 = 1.06
Return on assets – Nikon did poorly using assets to generate earnings for 2010
2009 - 28,056 / 749,805 = 3.7%
2010 – (-12,615 / 740,632 ) = -1.7%
Return on equity – Profitability was poor for 2010, in the negative values.
2009 – 28,056 / 397,576 = 7.1%
2010 – (-12,615 / 381,202) = -3.3%
ALL FIGURES STATED IN MILLIIONS OF YEN

Financial Analysis
Solvency Ratio
Debt to equity – Debt to equity ratio from 2009 to 2010 came closer to a 1 to 1 ratio. Reflects
Nikon’s poor leverage and struggle with losses.
2009 - 370,718 / 397,576 = 0.93
2010 – 368,562 / 381,202 = 0.97
ALL FIGURES STATED IN MILLIIONS OF YEN

Market Strength Ratios
For the past two years, calculate and comment on:
Price/earnings per share - Market price of share took a massive hit in 2010.
2009 – 70.76
2010 – (-31.82)
Dividend yield – Ratio at which Nikon paid out dividends relative to share price
decreased by 200%
2009 – 18 / 70.6 = 0.25
2010 – 8 / (-31.82) = -0.25
ALL FIGURES STATED IN JAPANESE YEN