Nintendo 2014 Annual Report Download - page 12

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statements of Nintendo are detailed in the section of “V. Financial Information, Consolidated financial
statements, etc., Basis of Presenting Consolidated Financial Statements.”
(2) Factors which may have a significant impact on operating results
Nintendo operates as a business in the field of home entertainment, in which the availability of hit titles and their
sales volumes may have a significant impact on its operating results. In addition, the field of entertainment is
wide in scope, and any successful non-gaming propositions that provide consumers with more entertainment
value and surprises may also have an impact.
Approximately 70% of Nintendo’s total sales are generated in the overseas markets, with most transactions
carried out in local currencies. While Nintendo has attempted to increase dollar-based purchases in order to
reduce the impact of exchange rate fluctuations, it is difficult to completely eliminate their risk. As a result,
exchange rate fluctuations may have an impact on Nintendo’ s financial performance.
While video game systems and their compatible software, which are Nintendo’s main products, represent a
majority of total sales, hardware and software have very different profit margins, and fluctuations of their
proportions of the total sales may have an impact on gross profit and the gross profit percentage to sales.
In addition, there may be other fluctuating factors as described in “II. Business Overview, 2. Risk factors.”
(3) Analysis of operating results for the fiscal year ended March 31, 2014
Sales and profits decreased when compared to the previous fiscal year.
(Net sales and operating income)
Net sales decreased from the previous fiscal year by ¥63.6 billion to ¥571.7 billion (U.S.$5,550 million; a
decrease of 10% on a year-over-year basis) due to decreased sales of the “Wii U” and “Nintendo 3DS”
hardware, despite the increase in “Nintendo 3DS” software sales. As the proportion of hardware in sales,
which has relatively low profit margins, decreased, and the profitability of the “Nintendo 3DS” hardware
improved, gross profit increased from the previous fiscal year by ¥22.8 billion to ¥163.2 billion (U.S.$1,584
million; an increase of 16.3% on a year-over-year basis). On the other hand, mainly due to an increase in
research and development expenses and advertising expenses, total selling, general and administrative
expenses increased from the previous fiscal year by ¥32.8 billion, exceeding gross profit, resulting in an
operating loss of ¥46.4 billion (U.S.$450 million; compared with an operating loss of ¥36.4 billion in the
previous fiscal year).
(Non-operating income and expenses, and ordinary income)
Non-operating income increased by ¥5.6 billion from the previous fiscal year, resulting in net non-operating
income of ¥52.5 billion (U.S.$509 million), due mainly to foreign exchange gains and gain on redemption of
securities generated by yen depreciation. As a result, ordinary income was ¥6.0 billion (U.S.$59 million; a
decrease of 41.9% on a year-over-year basis).
(Net income)
Net income decreased by ¥30.3 billion, mainly due to the balance of deferred tax assets reduced in relation to
the losses carried over in the United States, to a net loss of ¥23.2 billion (U.S.$225 million; compared with a
net income of ¥7.0 billion in the previous fiscal year).
(4) Financial position
Total assets decreased overall by ¥141.4 billion, compared with the previous fiscal year, to ¥1,306.4 billion
(U.S.$12,683 million) mainly due to a decrease in short-term investment securities and inventories. Total
liabilities decreased by ¥32.3 billion compared to the previous fiscal year to ¥187.9 billion (U.S.$1,824 million)
mainly due to a decrease in notes and accounts payable - trade. Net assets decreased by ¥109.0 billion compared
to the previous fiscal year to ¥1,118.4 billion (U.S.$10,858 million) mainly from the acquisition of treasury
shares.
Cash flow information is described in “II. Business Overview, 1. Overview of operating results and cash flow,
(2) Cash flow.”
(5) Liquidity of funds
The current ratio as of March 31, 2014, is 658%, and the ratio of total liabilities to cash and cash equivalents is
1.8 times.