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  "documentTitle": "Nidec Corp. (6594 JP)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2016-12-13 00:00:00",
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  "notes": "The slide contains footnotes referencing ASC 330-10-35-7 and clarifying the definition of 'profitable' as EBIT margin.",
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      "text": "This view appears to completely contravene U.S. GAAP, which provides that “if a business is expected to lose money for a sustained period, the inventory shall not be written down to offset a loss inherent in the subsequent operations.”",
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      "text": "On the Q3 2012 call when Nidec announced the upcoming write-offs, Mr. Nagamori stated that the company was writing off the inventory in anticipation of losses on it in the future. This view appears to completely contravene U.S. GAAP...",
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      "kind": "paragraph",
      "text": "The Automotive product group is key to the bull thesis on Nidec. It is well-known that Nidec’s core business of HDD motors is in long-term structural decline. The below table of overall EBIT margins makes clear that Nidec is no more profitable today than it was five years ago. It is clear to us that Nidec’s lofty valuation is largely due to high expectations about the future of Automotive.",
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      "kind": "paragraph",
      "text": "Mr. Nagamori said on the call “We believe that from here onwards, it will not be like in the past, whereby the prices went steadily down... So we believe that in that sense it is a very healthy market...",
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      "kind": "paragraph",
      "text": "inventory accounting standard that provides for write-offs only for inventory that has not moved for one year (or when it is apparent there is no possibility of future use or sale).",
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      "kind": "paragraph",
      "text": "...There was a slight buildup in [Hard Disk Drive chain inventory levels] at the end of June but we believe that now it is returned to an appropriate level... It seems like things change in a matter of 2, 3 weeks or 4 weeks, whereby things are dropped very quickly.”",
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      "text": "“We believe that from here onwards, it will not be like in the past, whereby the prices went steadily down. Now, naturally, there is the change in the product mix and also the customers will not be reducing the prices of the hard disks that easily.” — Mr. Nagamori",
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      "text": "40 ASC 330-10-35-7\n41 Mr. Nagamori was discussing the entire amount of the charges (JPY 40 billion including personnel-related costs), so the implication is that he was describing PP&E impairments and inventory write-offs.\n42 “Profitable” here refers to EBIT margin.",
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      "kind": "title",
      "text": "Manipulating Profitability of Automotive",
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