H i t a c h i K o k u s a i E l e c t r i c
Sales by Industry
Segments
Total ¥147,184 million Total ¥147,184 million Japan ¥83,785 million Other, Adjustments and eliminations ¥725 millionEco- and Thin Film Processing ¥65,330 million North America ¥12,372 million Korea ¥23,334 million Taiwan ¥14,141 million
Europe and others ¥2,360 million Other Asia ¥11,192 million
55.1%
56.9%
7.6%
7.6%
15.9%
9.6%
8.4%
1.6%
1.6%
44.4%
0.5%
0.5%
（ ） （ ） （ ）Sales by Geographical
Countries or Areas
Cautionary Statement With Respect to Forward-looking Statements: Statements made in this annual report with respect to Hitachi Kokusai Electric’s plans and projections as well as other statements that are not historical facts are forward-looking statements, which involve risks and uncertainties. Potential risks and uncertainties include, without limitation, general economic conditions in Hitachi Kokusai Electric’s markets, exchange rates and Hitachi Kokusai Electric’s ability to continue to win customers’ acceptance of its products, which are offered in highly competitive market characterized by continual new product introductions and rapid developments in technology.
Note: Effective from fiscal 2011, Hitachi Kokusai Electric has reclassified its business segments. Data for fiscal 2009 and 2010 has been adjusted to conform to the revised classification to enable a comparison with fiscal 2009 and 2010.
Contents
Hitachi Kokusai Electric is a provider of information
communication systems that offer borderless
capa-bilities through compatibility with global standards
on which the next generation of mobile
communica-tion systems will be based. We offer total support of
broadcasting and video systems that shape our
image culture, and are moving forward with research
and development on the provision of mobile
multi-media products and systems. Next-generation
advanced information and communication systems
will be based on semiconductors. Hitachi Kokusai
Electric is also moving forward with semiconductor
manufacturing systems.
Hitachi Kokusai Electric is already a leading
manufac-turer of semiconductor manufacturing systems that
are held in high regard by semiconductor
manufac-turers the world over. The Company is constantly
utilizing its advanced research and development
capabilities to provide new, next-generation
prod-ucts that incorporate the latest advances in
semicon-ductor manufacturing technology.
Consolidated Statement of Operations 16
Consolidated Statement of Comprehensive Income 17 Consolidated Statement of Changes in Net Assets 18
Consolidated Statement of Cash Flows 19
Notes to Consolidated Financial Statements 21
Report of Independent Auditors 44
Corporate Data 45
Investor Information 46
Consolidated Financial Highlights 1
Top Message 2
Topics 6
Hitachi Kokusai Electric at a Glance 8
Corporate Governance 10
R&D 12
Financial Review 13
Consolidated Balance Sheet 14
FY2010 FY2011
（Millions of Yen） （Millions of Yen） （Millions of Yen）
FY2012 FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 0
50,000 100,000 150,000
0 1,000 2,000 3,000 4,000 5,000 6,000
0 50,000 100,000 150,000 200,000
Net sales
Operating income (loss)
Net income (loss)
Capital investment
Depreciation
Total assets
122,089
4,592
1,796
149,784 149,066
（Millions of Yen）
0 2,500 5,000 10,000 7,500
-7,500 -5,000 -2,500
FY2010 FY2011 FY2012
（1,808）
（4,299） （5,065） 3,956 142,706
4,244 147,184
3,425 3,434 3,397
152,065 8,314
5,120
Millions of Yen
Thousands of U.S. Dollars
For the Year ended March 31:
2012 2011 2010 2012Net sales 147,184 142,706 122,089 1,790,777
Operating income (loss) 8,314 3,956 (4,299) 101,156
Net income (loss) 5,120 (5,065) (1,808) 62,295
Cash dividends 1,234 1,234 1,029 15,014
Capital investment 3,434 3,425 1,796 41,781
Depreciation 3,397 4,244 4,592 41,331
R&D costs 12,596 14,172 15,028 153,255
Millions of Yen
Thousands of U.S. Dollars
At Year-End:
2012 2011 2010 2012Total assets 152,065 149,784 149,066 1,850,164
Total net assets 78,243 73,703 78,201 951,977
Yen U.S. Dollars
Per Share Data:
2012 2011 2010 2012Net income (loss) 49.80 (49.25) (17.57) 0.61
Cash dividends 12.00 12.00 10.00 0.15
Note: The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82.19 to $1, the rate of exchange at March 31, 2012.
Diluted net income per share is not disclosed because it is anti-dilutive the years ended March 31, 2012 and 2011.
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Years Ended March 31
In the fiscal 2011, Hitachi Kokusai Electric Inc. and its
consolidated subsidiaries (“the Hitachi Kokusai Electric
Group” or “the Group”) continued to confront a harsh
operating environment. This was largely attributable to
uncertainties surrounding the global economy due mainly
to financial instability in Europe and cutbacks in capital
expenditure in Japan in the wake of the Great East Japan
Earthquake. Despite these difficult conditions there were
indications of a partial turnaround. This was primarily
evident in a pickup in investment activity by major
semiconductor manufacturers against the backdrop of
reconstruction demand following the Great East Japan
Earthquake.
Under these circumstances, the Hitachi Kokusai
Electric Group took steps to bolster its business structure.
In addition to engaging in strategic project activities
aimed at leveraging the upswing in reconstruction
demand to trigger an increase in orders, the Group
continued to promote business structure reform and
curtail operating expenses. As a specific globalization
measure, Hitachi Kokusai Electric acquired shares of a
major Brazilian broadcast transmitter manufacturer. The
newly acquired company was included in the Company’s
scope of consolidation as a subsidiary company under the
name Hitachi Kokusai Linear Equipamentos Eletrônicos
S/A (“HKL”) in October 2011.
Taking the aforementioned and other factors into
consideration, orders received in fiscal 2011 climbed
¥8,723 million, or 6.0%, compared with fiscal 2010 to
¥153,453 million. Net sales also increased ¥4,478 million,
or 3.1%, year on year to ¥147,184 million. From a profit
perspective, operating income surged ¥4,358 million, or
110.2%, to ¥8,314 million owing mainly to the
improvement in net sales as well as the positive flow-on
effects of business structure reform. Ordinary income
jumped ¥4,947 million, or 134.1%, compared with fiscal
2010 to ¥8,636 million. Net income for fiscal 2011
amounted to ¥5,120 million. This was compared with the
net loss of ¥5,065 million incurred in fiscal 2010.
Operating conditions by business segment for fiscal
Hitachi Kokusai Electric will build an optimal
and robust business structure across the entire
Group by business structure reform focusing
on the video and wireless network segment,
production system synergies and relationships
between Group companies.
Top
Message
1. Business Results
for the Fiscal Year Ended
March 31, 2012 (Fiscal 2011)
2011 were as follows.
(1) Video and wireless network
During fiscal 2011, demand in this segment mainly for
disaster prevention wireless and monitoring systems
remained firm. This largely reflected the growing
awareness toward disaster prevention amid the pickup in
reconstruction demand following the Great East Japan
Earthquake. In addition to pushing forward such initiatives
as the earthquake disaster reconstruction program and
the sales expansion project in an effort to increase the
amount of orders received, the Group worked diligently
to improve its earnings by promoting business structure
reform and reducing operating expenses.
As a result, order received came to ¥92,585 million.
This represented a ¥16,308 million, or 21.4%, increase
compared with fiscal 2010. Net sales, on the other hand,
remained subdued totaling ¥81,129 million, a nominal
¥626 million, or 0.8%, improvement year on year.
Buoyed by this modest upswing in net sales as well
as business structure reform and successful efforts to
reduce costs, operating income in this segment totaled
¥302 million, a massive turnaround from the operating
loss of ¥5,160 million recorded in fiscal 2010.
(2) Eco- and thin film processing (semiconductor
manufacturing and other systems)
Due largely to the slump in semiconductor business
conditions, this segment is operating within a market that
is showing growing signs of polarization between
manufacturers that continue to engage in proactive
investment and manufacturers that have decided to
forego future capital expenditure. Against this backdrop,
the Company has endeavored to nurture close-knit ties
with its customers, channeled its energies toward the
development of high value-added products and worked
to strengthen its service business. Through these means,
every effort has been made to steadfastly capture
demand.
Despite these endeavors, orders received amounted
to ¥60,175 million, a drop of ¥7,450 million, or 11.0%,
compared with fiscal 2010. Net sales, on the other hand,
totaled ¥65,330 million, an increase of ¥3,925 million, or
6.4%, year on year.
Mid-term Managerial Plan “HK-AV 10”
Mission
- To be a social innovator trusted by customers and creating new value in the next era
Goal
- To become the top global company in video and wireless network system solutions
- To become the top global company in eco- and thin film processing solutions
the numerical management targets identified under
HK-AV 10, namely a three-year average operating income
margin of 10% in fiscal 2015.
(1) Strengthen the business structure
In fiscal 2012, Hitachi Kokusai Electric will build an optimal
and robust business structure across the entire Group. To
this end, the Company will further strengthen business
structure reform focusing mainly on the video and
wireless network segment, create production system
synergies by integrating business bases and rebuild
relationships between Group companies.
In addition, Hitachi Kokusai Electric will actively
participate in the Hitachi Group’s Smart Transformation
Project which places the utmost emphasis on cost
structure reform. Moving forward, the Company will
make every effort to achieve the two core objectives of
the Project: transform to a cost structure that will allow
Hitachi Kokusai Electric to prevail globally; and shift the
focus of technologies to creating high-quality products at
low cost.
(2) Bolster strategic business development
In order to excel in markets that are increasingly
competitive, Hitachi Kokusai Electric will clarify and carry
out its business strategies with a greater sense of urgency.
Focusing on expanding within the global market, the
Company will bolster strategic business development by
expanding its business through increased collaboration
with other companies including the Hitachi Group, and
adopted a policy of business selection and concentration.
(3) Reinforce efforts to incorporate market needs into
product planning and development
Hitachi Kokusai Electric will place additional weight on
promoting a market-in approach in order to more
accurately and quickly grasp customer needs, which lie at
the heart of its business strategy. This spring, for example,
On the earnings front, operating income in this
segment declined ¥1,020 million, or 11.0%, compared
with fiscal 2010 to ¥8,293 million. Despite higher net
sales, this decrease was largely attributable increased
costs on the back of strategic new product and business
field investment.
Buffeted by prolonged financial instability in Europe as
well as the flow-on effects of soft economic activity in
developed countries, the global economy as a whole
including developing countries is showing signs of
weakness. Despite the benefits of reconstruction demand
following the Great East Japan Earthquake, the Japanese
economy is far removed from a substantial turnaround
and is in fact witnessing increasingly intense competition.
Turning to the Company’s HK-AV 10, mid-term
managerial plan, launched in May 2010, Hitachi Kokusai
Electric extended the term of the plan by one year to
fiscal 2015. This decision to extend the plan was based
on changing business conditions and the ability of the
Company to achieve established targets.
Under these circumstances, and with an eye to
clarifying the Group’s ideal future image as well as the
significance of its existence, Hitachi Kokusai Electric
revised its fundamental management policies and put in
place a new corporate and management philosophy
(Corporate Statement and Hitachi Kokusai Electric Way)
as well as a Group Code of Conduct. Guided by this new
corporate management philosophy that emphasizes the
Company’s focus on realizing a society of security, safety
and happiness through the creation of value and the
application of advanced technologies that push the
boundaries of tomorrow, Hitachi Kokusai Electric will
promote the following measures in an effort to achieve
the Company reorganized its research and development
activities while putting in place a structure that promotes
increasingly close-knit ties with business divisions. In this
manner, every effort will be made to ramp up the
development of technologies that have the capacity to
lead the market, and to further hone core technologies
that match the Company’s business strategies. In addition,
steps were taken to integrate the divisions that oversee
and control domestic and overseas sales and marketing.
In this manner, Hitachi Kokusai Electric has laid the
foundation to more accurately identify markets and needs
and to engage in dynamic business development by
effectively injecting marketing capabilities and resources.
(4) Promote globalization
Looking ahead, Hitachi Kokusai Electric will build a
business structure that does not overly depend on exports
as a part of efforts to expand business in global markets
that are expected to enjoy future growth. Positioning
operations in Japan at the core of coordinating activities
and the driving force behind research and development
as well as production, the Company will work to unify the
resolve of production, sales and service bases all over the
world while engaging in optimal production as well as
sales and marketing activities that match the circumstances
of each region based on a policy of local production for
local consumption.
(5) Contribute to disaster recovery and restoration
Hitachi Kokusai Electric will continue to engage in
restoration and reconstruction support activities in Japan
following the Great East Japan Earthquake. As a corporate
group that is responsible for providing society with
essential infrastructure, steps will be taken to participate
in a wide range of businesses that focus on the
reconstruction of safe and secure cities.
Guided by a new corporate philosophy, and as a member
of the Hitachi Group, the Hitachi Kokusai Electric Group
will strive to become a social innovator trusted by
customers that creates new value in the next era.
Hitachi Kokusai Electric has positioned the ongoing and
stable payment of cash dividends as a key management
priority. In determining the level of cash dividend payment,
the Company also takes into account such factors as
performance as well as the status of cash flow.
In fiscal 2011, Hitachi Kokusai Electric brought to
account an extraordinary loss to cover business structure
improvement costs. Taking into consideration, however,
the aforementioned basic policy which emphasizes the
payment of stable cash dividends as well as future
performance forecasts, the Company paid a period-end
cash dividend of ¥8 per share. Coupled with the interim
cash dividend of ¥4 per share paid in December 2011, the
annual cash dividend totaled ¥12 per share. Moving
forward to fiscal 2012, Hitachi Kokusai Electric is
anticipating an improvement in its operating results from
the second half of the period. On this basis, the forecast
cash dividend for fiscal 2012 is ¥12 per share comprising
an interim cash dividend of ¥4 per share and a
period-end cash dividperiod-end of ¥8 per share.
Turning to internal reserves, every effort will be made
to strengthen the Company’s management structure
while streamlining investment in new technology and
product development. Based on these initiatives, Hitachi
Kokusai Electric will strive diligently to enhance its
corporate value.
Manabu Shinomoto
Video and Wireless Network
Eco- and Thin Film Processing
New Concept Thermal Process System
“QUINTEX”
Entering the Brazilian Digital Terrestrial Digital Broadcasting Market through
the Acquisition of Shares in a Leading Local Manufacturer
Hitachi Kokusai Electric launched a new product at the SEMICON JAPAN Exhibition held in December 2011.
QUINTEX utilizes a distinctive reaction chamber-type structure and gas flow to achieve a synchronous deposition process. Based on an innovative concept that balances the needs for high productivity and through-put, this new product boasts the following attributes.
Features:
(1) High productivity utilizing an ultra fast deposition process
(2) Varied deposition utilizing a reaction chamber that enables plasma processing (innovative turn table design facilitating plasma enhance-ment)
(3) High speed transfer based on a dual arm conveyance systems (extendable dual arm robot systems facilitating high mechanical through-put)
Looking ahead, Hitachi Kokusai Electric will expand sales of this new product, which is expected to contribute to advanced device manufacturing processes. QUINTEX is representative of the Company’s efforts to address the demands of semiconductor device manufacturers, who place the utmost emphasis on miniaturization, sophistication and high productivity. Brazil’s broadcasting equipment market is expected to expand dramatically as analog broadcasting comes to a close in 2016.
In an effort to enter the broadcasting market in Brazil and other South American countries, where the decision has been made to adopt the Japanese broadcasting standard with respect to terrestrial digital broadcasting equipment, Hitachi Kokusai Electric acquired the shares of Linear Equipamentos Eletrônicos S/A (Minas Gerais, Brazil; “Linear”), a leading Brazilian manufacturer of broadcasting transmitter equipment. Following the acquisition of shares, operations commenced at the newly named company, Hitachi Kokusai Linear Equipamentos Eletrônicos S/A (“HKL”), in October 2011.
A number of major events are scheduled to be held in Brazil over the next several years. Chief among these events are the 2014 FIFA World Cup and the Summer Olympics to be held in Rio de Janeiro in 2016. In response to the projected increase in renewal demand for digital broadcasting equipment, HKL will take steps to quickly put in place a timely supply structure and systems. Utilizing the reliability of its digital technologies as well as planning and manufacturing know-how that Hitachi Kokusai Electric has accumulated in Japan in combination with the product capabilities of Linear and its strengths within the local Brazil-ian market, steps will be taken to expand market share and to further develop business globally.
* FIFA: Federation Internationale de Football Association
OCTOBER 2011
DECEMBER 2011
Name Hitachi Kokusai Linear Equipamentos Eletrônicos S/A Location Santa Rita do Sapucai, the State of Minas Gerais, the
Federative Republic of Brazil
Representative Shigeru Kimura, Chairman of the Board and CEO (Executive Officer, responsible for South American business promotion, Hitachi Kokusai Electric Inc.) Number of Employees 320
Hitachi Kokusai Electric Launches the HD-SDeye Series of Surveillance Camera
Systems with the Release of New Products Compatible with HD-SDI Standards
Hitachi Kokusai Electric launched two models and a multi-unit in its new HD-SDeye series of surveillance cameras compatible with HD-SDI standards.
The two surveillance camera models are full-HD color cameras equipped with a 1/3-type 2.2 million pixel MOS compatible with HD-SDI standards. Both models boast new MOS sensors and adaptive noise reduction functions coupled with a minimum subject illuminance of 0.2lx for high sensitivity to facilitate color image recording during the day and black and white image recording at night. This is turn helps realize 24-hour, 365-day continuous surveillance. Moreover, images taken by these cameras can be transmitted without compressing allowing for immediate real time display.
In addition, the HD-SDI standard can accommodate the same coaxial cable used in analog cameras. Accordingly, installation and assembly is simple. Moreover, taking into consideration a maximum of 100m for HD-SDI non-compressed transmission and a maximum of 300m video transmission for HD-VLC compressed transmission in combination with the MU-HD101 multi-unit, the changeover from analog cameras to high-definition surveillance full HD cameras can be realized without the concern of wiring distance.
Harnessing the characteristic features of full HD high picture quality and easy installation, Hitachi Kokusai Electric will work to realize a safe and secure environment across a wide range of fields.
* Hitachi Kokusai Electric has lodged an application for trademark registration for HD-SDeye. * HD-VLC compression: A transmission method that extends the existing transmission distance from
100m to 300m without incurring High Definition Serial Digital Interface (HD-SDI) signal deterioration with delays comparable to HD-SDI. HD-VLC™ is a registered trademark of Gennum Corporation.
Hitachi Kokusai Electric received Intel Corporation’s Fiscal 2011 Supplier Continuous Quality Improvement award. Recognized for the fifth consecutive year, Hitachi Kokusai Electric is one of nine companies to be acknowledged for its extraordinary commitment to quality and its exceptional performance in achieving Intel’s established goals.
In order to get qualified for SCQI award, suppliers must score at least 95% on a report card that assesses performance and the ability to meet specified cost, quality, availability, technology, environmental, social and governance goals. At the same time, suppliers must achieve 90% or higher on a challenging improvement plan while demonstrating solid quality and business systems. Based on these criteria, the SCQI award is Intel’s highest honor for its suppliers acknowledging world-class performance.
Hitachi Kokusai Electric supplied Intel with diffusion furnace semiconductor production equipment. A diffusion furnace is a device that is employed in the thermal process used to make thin film on the surface of an Si wafer substrate, that is essential step to make electronic circuit on the substrate. The award recognizes the Company’s quality, economy and overall service.
Acknowledged for the fifth consecutive year, Hitachi Kokusai Electric is honored to again receive this SCQI award for its wide-ranging contributions to advanced manufacturing technology in the semiconductor industry. Moving forward, the Company will use this acclaim for its products, services and quality as motivation to reach even loftier goals.
Note: Intel is a trademark of Intel Corporation in the United States and other countries. Other company and product names are the trademarks or registered trademarks of each company generally.
Hitachi Kokusai Electric Receives Intel’s Prestigious Supplier Continuous
Quality Improvement (SCQI) Award
Photo courtesy of Mr. Jeff Caroli.
APRIL 2012
APRIL 2012
Video and Wireless Network
Eco- and Thin Film Processing
55.1
%
¥81,129 million
Share of net sales
44.4
%
¥65,330 million
Share of net sales
81,129
302
0 20,000 40,000 60,000 80,000 100,000
FY2009 FY2010 FY2011
94,718
(2,934)
80,503
(5,160)
Net sales Operating income (loss)
Note: Effective from fiscal 2011, Hitachi Kokusai Electric has reclassified its business segments. Data for fiscal 2009 and 2010 has been adjusted to conform to the revised classification to enable a comparison with fiscal 2009 and 2010.
65,330
0 20,000 40,000 60,000 80,000
-10,000 0 200 400 600 800 1,000
-2,000 0 5,000 10,000 15,000 20,000
FY2009 FY2010 FY2011
27,371
(1,365)
8,293 61,405
9,313
Net sales Operating income (loss)
Net sales and operating income
Net sales and operating income
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Year Ended March 31, 2012
Product Line
Product Line
Wireless Communication Systems
Infrastructure for Mobile Telecommunications
Public Protection Disaster-Relieve (PPDR) Systems
Radio Communication Systems for Transportation
Local Area Wireless Communication Systems
Radio Communication Systems for Fire Departments
Land Mobile Radio Communication Products
High-speed Wireless Repeaters
Information Solutions
Financial Solution Systems
Financial Information Display Systems
Multimedia Information Display Systems
Broadcasting Systems
Tapeless Servers Systems
Transmitter Systems
Short Wave Digital Radio Broadcasting Systems
Receiver Systems
Broadcasting Cameras
Area One-seg Systems
Home Receiver Equipments
Surveillance Cameras and
Video Processing Systems
Wide-area Network Surveillance Systems
Plant Monitoring Systems
Security Surveillance Systems
Industrial Video Cameras
Semiconductor Manufacturing Systems
Batch Thermal Process System
Batch High Temperature Anneal Processing System
Batch SiGe/Si Epitaxial Growth System
Basic Structure
Hitachi Kokusai Electric has adopted the company with
committees system as a part of efforts to ensure timely
decision making as well as transparent management.
The Company places every emphasis on securing the
adequacy, relevance and efficacy of its operations as
the means to promote management reform. To this
end, Hitachi Kokusai Electric maintains a Board of
Directors, half of whose members are external
appointments. The Board of Directors deter mines the
Company’s basic management policies and delegates
decision-making authority to Executive Officers.
Working in unison with each committee, the Board of
Directors serves as Hitachi Kokusai Electric’s principal
oversight authority, supervising executive officers in the
execution of their duties. Within this framework, outside
directors remain independent from the Company,
actively providing their objective and unbiased opinions.
In this regard, outside directors fulfill an important role
and function in further enhancing the transparency and
soundness of Hitachi Kokusai Electric’s management.
An overview of the current status of the Company’s
corporate governance structure and systems is provided
briefly as follows.
(1) The execution of business activities and duties
Within the scope of statutory and regulatory
requirements, considerable authority is delegated
to Executive Officers with respect to important
matters as they relate to the Company’s business
operations in an effort to accelerate the
decision-making process. While individual Executive Officers
are provided with decision-making authority for
their particular areas of responsibility, in accordance
with the segregation of duties determined by the
Board of Directors, Executive Officers’ Meeting,
comprising all Executive Officers are held to
deliberate on matters of major importance. The
Executive Officers’ Meeting is designed to facilitate
discussion that incorporates wide-ranging and
diverse input and opinions prior to a decision being
made.
The type and details of all other matters for
determination by Executive Officers are defined in
the Company’s internal rules and regulations. All
necessary procedures are taken as and when
required in accordance with these internal rules
and regulations.
(2) The monitoring and audit functions
In collaboration with such internal organizations as
the Nomination, Audit and Compensation
committees, the Board of Directors monitors the
overall manage ment of the Company including the
execution of duties.
In addition, the activities of the Board of
Directors and each committee are supported by
their own departments. A designated specialist
department has been established particularly for
the Audit Committee to ensure that audits are
conducted in an appropriate and effective manner.
Employees within this department are not subject
to the directions and instructions of Executive
Officers.
a. The Board of Directors
The Board of Directors monitors the overall
management of the Company. Accordingly,
the Board of Directors receives reports from
the Nomination, Audit and Compensation
committees in connection with the status of
each committee’s activities. At the same time,
the Board of Directors receives reports directly
from each Executive Officer outlining details
of the execution of Executive Officer duties.
b. The Nomination Committee
The Nomination Committee selects and
determines candidates for the position of
Director, who are then proposed at the
Company’s
shareholders’
meetings
for
approval. In order to ensure the highest quality
management, the Nomination Committee
selects Director candidates from both inside
and outside the Company based on a
comprehensive criteria than encompasses
personality, experience, knowledge, ability
and numerous other factors.
c.
The Audit Committee
In addition to determining the Company’s
audit policies and plans, the Audit Committee
engages in follow up activities to ensure that
designated employees conducting each audit
do so in accordance with subject audit policies
and plans. Complementing these initiatives
aimed at securing the efficacy of each audit,
the Audit Committee also promotes and
monitors the sharing of information and other
collaborative measures among the Internal
Audit Department, Independent Auditors and
corporate auditors of Group subsidiaries.
d. The Compensation Committee
The Compensation Committee formulates the
basic policy for determining the compensation
be paid to the Company’s Directors and
Executive Officers. At the same time, the
Compensation Committee evaluates the
performance of each Director and Executive
Officer and determines the evaluation
amount.
Internal Control / Risk Management
The Company designates Executive Officers, formulates
internal rules and regulations as well as management
and operating standards and implements internal audits
on a regular basis with respect to all risks associated
with the management and control of the Company’s
business activities including compliance, information
security, the environment, disaster, quality assurance
and exports. Drawing on deliberations undertaken at
and reports tabled to Executive Officer and other
meetings, Executive Officers work diligently to identify
potential additional new risks and to formulate
preventive measures.
In connection with its internal reporting systems,
the Company has adopted a structure that is supported
by legal counsel. Every effort is also made to secure the
widest possible coverage, with internal reporting
systems extending across the Company’s full- and
part-time employees as well as the employees of Group
companies and business partners. Through these
means, Hitachi Kokusai Electric is endeavoring to ensure
an open and fair internal reporting system.
Corporate Governance Structure
General Meeting of Shareholders
Nomination Committee
Compensation Committee Board of Directors
CSR Promotion Center Compliance Internal Audit
Accounting Audit Supervision Audit
Assistance
Cooperation
Cooperation
Business Execution
Board of Directors Office
Decision-making and Supervision
Executive Officers, Executive Officers’ Meeting
Chief Executive Officer Executive Officer
Appointment and Dismissal
Audit Committee
Internal Auditing Office
Accounting Auditor
The Hitachi Kokusai Group devotes particular emphasis
on its R&D activities methodically in order to contribute
to a safe and prosperous society by providing products
across such wide-ranging fields as communication/
information, broadcasting/video and semiconductor
manufacturing, which form the very basis of a ubiquitous
society.
Our R&D activities are managed and conducted in
relationship with the following three broad phases. The
first phase entails the development of new products
and technologies in which individual business divisions
and Group companies are involved. The second phase
encompasses the development of the next-generation
products and technologies undertaken by the
Information & Communication Equipment System
Laboratory and the Semiconductor Equipment System
Laboratory. Finally, the third phase applies to the
development of next, next-generation technology
which provides efficient application products compatible
with state-of-the-art technology, which is conducted in
collaboration with such external organizations as the
research institutes of Hitachi, Ltd. and universities. As
we engage in this three-phase R&D with a mission of a
vision that traverses the present through to the future,
we anticipate achieving sustainable growth of the
Group.
In the fiscal year under review, the Hitachi Kokusai
Group undertook R&D expenditures of ¥12,596 million,
which accounts for 8.6% of the Group’s total sales.
The basic technologies created and possessed by
the Group are in the areas of wireless communication,
video/image processing and thermal processing for
semiconductor devices. We have provided cutting-edge
products to customers, taking full advantage of
technologies in each market sector and area. Looking
ahead, we will continue to deliver new products that
address market needs amid expanding trends in
digitization, the fusion of communication and
broadcasting, higher quality and miniaturization of
semiconductor devices.
Video and Wireless Network
In the wireless communication areas, we developed a
new terminal for local area communication systems in
response to the needs of the wireless system for
in-plant communication centering on large scale in-plants of
basic materials industries. In our disaster-preventive
administration wireless systems operations, we were
successful in developing systems and wireless terminals
in accordance with standard specifications issued by
the Fire and Disaster Management Agency toward
digitization of the firefighting headquarters in the
nation. In addition, we expanded product line-up of
disaster preventive communication systems, having
realized products development of regional broadcasting
systems and high-functional map display screen that
use 400MHz zone wave. With respect to the areas of
monitoring systems, we developed encoder, decoder
and recorder that materialized monitoring with
high-definition video up to full HD for the network monitoring
system that enabled concentrated monitoring over a
wide range. In response to the needs for the higher
definition in the monitoring market, we also developed
a new method camera with features such as free of
delay, capable of image transmission via present coaxial
cable. R&D expenditure pertaining to this business
totaled ¥6,181 million.
Eco- and Thin Film Processing
In the midst of the course of the progressing studies
of new structure/new materials of semiconductor
devices, we are promoting device development of
semiconductor manufacturing systems for
state-of-the-art technologies. We are engaged in
environment-conscious product development such as energy saving
technologies of devices, coupled with development of
necessary technologies for 3D chip stacking processes
and new memories such as non-volatile RAM, etc.
While the study on pattern formation beyond resolution
limit of lithography was being conducted as an example
of the device miniaturization, we promoted development
of technologies capable of precise control calling this
ultra-resolution technology as SRP (Super Resolution
Patterning). Thus, we have enabled film formation on
such materials on which film formation was not possible
heretofore with conventional technologies. With respect
to our main product, batch processing systems, we
continue to engage in the development of high
throughput single wafer processing systems as well
utilizing our unique low temperature heating technology.
Further, we continue to engage in development of SiC
device and device for photovoltaics as likely candidates
for energy saving power devices. We are promoting
efficient development of new material supply, reactor
chamber and exhaust categories making full use of our
simulation technologies, accelerating development of
state-of-the-art technologies through proactive
joint-development with universities, various research
organizations and device manufacturers. R&D
expenditure in this business was ¥6,415 million.
Financial Review
In the consolidated fiscal year under review, the Hitachi
Kokusai Electric Group reported net sales of ¥147,184.
According to analysis by segment, net sales of video and
wireless network increased ¥626 million (up 0.8%)
compared with the previous fiscal year to ¥81,129 million
due to solid shift in demand centering on disaster-preventive
wireless communication and monitoring systems, that
reflected start-up of the restoration works, increased
awareness of disaster prevention, etc.
Net sales of eco- and thin film processing increased
¥3,925 million (up 6.4%) from the previous fiscal year to
¥65,330 million, having attracted demand consistently by
strengthening our service business.
Cost of sales for the consolidated fiscal year under
review decreased ¥2,261 million compared with the previous
fiscal year to ¥106,149 million. Its ratio to net sales declined
3.8% due to increased high added value products.
Meanwhile, selling and general administrative expenses
for the consolidated fiscal year under review increased
¥2,381 million to ¥32,721 million, and their ratio to net sales
increased 1% compared with the previous consolidated
fiscal year. It was mainly due to increase of R&D expenses,
etc. in the eco- and thin film processing.
Non-operating profit for the consolidated fiscal year
under review increased ¥152 million compared with the
previous fiscal year to ¥1,033 million. Meanwhile,
non-operating expenses decreased by ¥437 million to ¥711
million.
Financial Position
Total assets as of March 31, 2012 stood at ¥152,065 million,
an increase of ¥2,281 million compared with the end of the
previous fiscal year. It was mainly attributable to the decrease
in inventories (merchandise and finished goods, work in
process and raw materials and supplies), which declined
¥1,054 million. Total non-current assets increased ¥2,748
million compared with the end of the previous fiscal year to
¥31,121 million. This was mainly attributable to the increase
in goodwill, which increased ¥2,015 million, etc.
Total liabilities as of March 31, 2012 stood at ¥73,822
million, a decrease of ¥2,259 million compared with the end
of the previous fiscal year. This represented reduction in
other current liabilities and other non-current liabilities
mainly as a result of ¥1,865 million reduction in the assets
transfer amount to the defined contribution pension
system.
Total net assets came in at ¥78,243 million as of March
31, 2012, ¥4,540 million higher than a year earlier.
Cash Flows
Cash and cash equivalents (hereafter, “funds”) stood at
¥43,989 million, down ¥640 million or 1.4% compared
with the end of the previous fiscal year. The major movements
of cash flows in each activity and the factors for the fiscal
year ended March 31, 2012 were as follows.
(Cash Flows from Operating Activities)
Net cash provided by operating activities amounted to
¥7,607 million, an increase of ¥3,952 million or 108.1%
compared with the previous fiscal year. This was mainly
because factors to increase such as net income before tax of
¥6,588 million and non-cash item, depreciation expenses of
¥3,397 million exceeded factors to decrease such as payment
of income taxes of ¥1,925 million and payment of special
retirement benefits of ¥1,244 million.
(Cash Flows based from the Investing Activities)
Net cash used in investing activities came to ¥6,141 million.
This represented a ¥3,673 million, 148.8% increase
compared with the previous fiscal year. This was mainly
attributable to the purchase of stocks of subsidiaries
resulting in a change in the scope of consolidation of ¥3,384
million and acquisition of tangible non-current assets of
¥2,566 million.
(Cash Flows from Financing Activities)
Net cash used in financing activities was ¥1,963 million, up
¥71million, or 3.8%, compared with the previous fiscal
year. The main component was the dividends paid
amounting to ¥1,238 million.
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
ASSETS 2012 2011 2012
CURRENT ASSETS:
Cash and time deposits (Note 3) ……… ¥ 12,001 ¥ 10,775 $ 146,015
Deposits with Hitachi Group (Notes 3 and 15) ……… 32,741 34,140 398,357
Receivables (Notes 14, 15 and 17):
Trade notes ……… 717 1,819 8,724
Trade accounts ……… 38,805 38,105 472,138
Unconsolidated subsidiaries and affiliated companies ……… 183 120 2,227
Other ……… 899 1,397 10,937
Allowance for doubtful receivables ……… (110) (132) (1,338)
Inventories (Note 5) ……… 28,988 30,042 352,695
Deferred tax assets (Note 9) ……… 5,103 4,324 62,088
Prepaid expenses and other current assets ……… 1,617 821 19,674
Total current assets ……… 120,944 121,411 1,471,517
PROPERTY, PLANT AND EQUIPMENT:
Land ……… 6,156 6,182 74,900
Buildings and structures……… 41,517 41,756 505,134
Machinery and equipment ……… 17,930 16,975 218,153
Furniture and fixtures ……… 21,839 22,304 265,714
Construction in progress ……… 564 344 6,862
Total ……… 88,006 87,561 1,070,763
Accumulated depreciation……… (66,558) (66,562) (809,807)
Net property, plant and equipment ……… 21,448 20,999 260,956
INVESTMENTS AND OTHER ASSETS:
Goodwill (Note 19) ……… 3,090 1,075 37,596
Investment securities (Note 4) ……… 1,296 1,725 15,768
Investments in unconsolidated subsidiaries and affiliated companies ……… 52 52 633
Long-term loans receivable ……… 143 56 1,740
Deferred tax assets (Note 9) ……… 1,233 1,366 15,002
Claims provable in bankruptcy, claims provable in rehabilitation and other …… 147 367 1,788
Allowance for doubtful receivables ……… (252) (471) (3,066)
Other intangible assets ……… 2,136 1,391 25,989
Other assets ……… 1,828 1,813 22,241
Total investments and other assets……… 9,673 7,374 117,691
TOTAL ……… ¥152,065 ¥149,784 $1,850,164
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
March 31, 2012
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
LIABILITIES AND NET ASSETS 2012 2011 2012
CURRENT LIABILITIES:
Short-term bank loans (Note 6) ……… ¥ 554 ¥ 815 $ 6,740
Payables (Notes 15 and 17):
Trade notes ……… 425 548 5,171
Trade accounts ……… 30,458 28,124 370,580
Unconsolidated subsidiaries and affiliated companies ……… 97 141 1,180
Other ……… 3,280 3,627 39,908
Income taxes payable ……… 784 925 9,539
Accrued expenses ……… 10,250 10,614 124,711
Provision for product warranties ……… 1,712 1,936 20,830
Provision for loss on construction contracts ……… 6 351 73
Other current liabilities ……… 3,034 3,842 36,915
Total current liabilities ……… 50,600 50,923 615,647
LONG-TERM LIABILITIES:
Liabilities for retirement benefits (Note 7):
Employees ……… 19,312 20,061 234,968
Directors and executive officers ……… 179 310 2,178
Long-term payables ……… 218 32 2,652
Asset retirement obligations ……… 135 137 1,643
Other long-term liabilities (Note 9) ……… 3,378 4,618 41,099
Total long-term liabilities ……… 23,222 25,158 282,540
NET ASSETS (Notes 8 and 16):
Common stock—authorized, 400,000,000 shares;
issued, 105,221,259 shares in 2012 and 2011 ……… 10,058 10,058 122,375
Capital surplus ……… 26,203 26,204 318,810
Retained earnings ……… 43,218 39,124 525,830
Treasury stock—at cost, 2,413,291 shares in 2012 and
2,393,583 shares in 2011 ……… (2,607) (2,595) (31,719)
Total shareholders’ equity ……… 76,872 72,791 935,296
Unrealized gain on available-for-sale securities ……… 61 150 742
Foreign currency translation adjustments ……… (2,217) (1,979) (26,974)
Total accumulated other comprehensive income ……… (2,156) (1,829) (26,232)
Minority interests ……… 3,527 2,741 42,913
Total net assets ……… 78,243 73,703 951,977
TOTAL ……… ¥152,065 ¥149,784 $1,850,164
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2012 2011 2012 NET SALES……… ¥147,184 ¥142,706 $1,790,777 COST OF SALES (Note 11) ……… 106,149 108,410 1,291,507
Gross profit ……… 41,035 34,296 499,270
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 11) ………… 32,721 30,340 398,114
Operating income ……… 8,314 3,956 101,156
OTHER INCOME (EXPENSES):
Interest income ……… 132 116 1,606
Dividend income ……… 98 114 1,192
Interest expense ……… (41) (18) (499)
Equity in earnings of affiliated company ……… — 156 —
Foreign exchange loss ……… (84) (108) (1,022)
Loss on disposals of property, plant and equipment ……… (63) (77) (767)
Gain on sales of investment securities ……… 251 12 3,054
Rent income ……… 92 99 1,119
Loss from devaluation of securities ……… (15) (27) (183)
Loss from devaluation of inventories ……… (159) — (1,935)
Gain on reversal of allowance for doubtful accounts ……… 123 142 1,497
Maintenance cost for idle assets ……… (121) (141) (1,472)
Subsidy income ……… 115 3 1,399
Compensation expenses ……… (9) (567) (110)
Gain on step acquisitions ……… — 451 —
Business structure improvement expenses (Note 20) ……… (2,634) (5,234) (32,048)
Loss on sales of subsidiaries’ stocks ……… (112) — (1,363)
Loss on transfer to defined contribution pension plan ……… (111) (1,051) (1,351)
Loss on disaster ……… — (307) —
Loss on adjustment for changes of accounting standard for
asset retirement obligations ……… — (96) —
Gain on insurance ……… 809 — 9,843
Other, net ……… 3 29 40
Other expenses—net ……… (1,726) (6,504) (21,000)
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS 6,588 (2,548) 80,156 INCOME TAXES (Note 9):
Current ……… 1,361 1,432 16,559
Deferred ……… (724) 800 (8,809)
Total income taxes ……… 637 2,232 7,750
Income (loss) before minority interests ……… 5,951 (4,780) 72,405
MINORITY INTERESTS ……… 831 285 10,111 NET INCOME (LOSS) ……… ¥ 5,120 ¥ (5,065) $ 62,295
Yen
U.S. Dollars (Note 1)
2012 2011 2012 PER SHARE OF COMMON STOCK (Notes 2.r. and 16):
Net income (loss) ……… ¥ 49.80 ¥ (49.25) $ 0.61
Cash dividends applicable to the year ……… 12.00 12.00 0.15
Diluted net income per share is not disclosed because it is anti-dilutive the years ended March 31, 2012 and 2011. See accompanying notes to consolidated financial statements.
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Year Ended March 31, 2012
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2012 2011 2012 INCOME (LOSS) BEFORE MINORITY INTERESTS ……… ¥5,951 ¥(4,780) $72,405 OTHER COMPREHENSIVE INCOME (LOSS) (Note 10)
Unrealized gain on available-for-sale securities ……… (89) (123) (1,083)
Foreign currency translation adjustment ……… (383) (496) (4,660)
Share of other comprehensive income of associates accounted
for using equity method ……… — (119) —
Total other comprehensive loss……… (472) (738) (5,743)
COMPREHENSIVE INCOME (LOSS) ……… ¥5,479 ¥(5,518) $66,662 Total comprehensive income (loss) attributable to:
Shareholders of Hitachi Kokusai Electric Inc. ……… 4,793 (5,813) 58,316
Minority interests ……… 686 295 8,346
See accompanying notes to consolidated financial statements.
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Year Ended March 31, 2012
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2012 2011 2012 Shareholders’ equity
Common stock
Balance at beginning of year ……… ¥10,058 ¥10,058 $122,375
Balance at end of year ……… 10,058 10,058 122,375
Capital surplus
Balance at beginning of year ……… 26,204 26,204 318,822
Disposal of treasury stock ……… (1) (0) (12)
Balance at end of year ……… 26,203 26,204 318,810
Retained earnings
Balance at beginning of year……… 39,124 45,546 476,019
Cash dividends ……… (1,026) (1,234) (12,484)
Net income (loss) ……… 5,120 (5,065) 62,295
Change in scope of consolidation ……… — (123) —
Balance at end of year ……… 43,218 39,124 525,830
Treasury stock
Balance at beginning of year……… (2,595) (2,573) (31,573)
Purchase of treasury stock ……… (13) (22) (158)
Disposal of treasury stock ……… 1 (0) 12
Balance at end of year ……… (2,607) (2,595) (31,719)
Total shareholders’ equity
Balance at beginning of year……… 72,791 79,235 885,643
Cash dividends ……… (1,026) (1,234) (12,484)
Net income (loss) ……… 5,120 (5,065) 62,295
Change in scope of consolidation ……… — (123) —
Purchase of treasury stock ……… (13) (22) (158)
Disposal of treasury stock ……… 0 (0) 0
Balance at end of year ……… 76,872 72,791 935,296
Accumulated other comprehensive income
Unrealized gain on available for sale securities
Balance at beginning of year ……… 150 274 1,825
Net changes in items other than those in shareholders’ equity ……… (89) (124) (1,083)
Balance at end of year ……… 61 150 742
Foreign currency translation adjustments
Balance at beginning of year ……… (1,979) (1,366) (24,078)
Net changes in items other than those in shareholders’ equity ……… (238) (613) (2,896)
Balance at end of year ……… (2,217) (1,979) (26,974)
Total accumulated other comprehensive income
Balance at beginning of year ……… (1,829) (1,092) (22,253)
Net changes in items other than those in shareholders’ equity ……… (327) (737) (3,979)
Balance at end of year ……… (2,156) (1,829) (26,232)
Minority interests
Balance at beginning of year……… 2,741 58 33,350
Net changes in items other than those in shareholders’ equity ………… 786 2,683 9,563
Balance at end of year ……… 3,527 2,741 42,913
Total net assets
Balance at beginning of year……… 73,703 78,201 896,739
Cash dividends ……… (1,026) (1,234) (12,484)
Net income (loss) ……… 5,120 (5,065) 62,295
Change in scope of consolidation ……… — (123) —
Purchase of treasury stock ……… (13) (22) (158)
Disposal of treasury stock ……… 0 (0) 0
Net changes in items other than those in shareholders’ equity ………… 459 1,946 5,585
Balance at end of year ……… ¥78,243 ¥73,703 $951,977
See accompanying notes to consolidated financial statements.
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Year Ended March 31, 2012
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2012 2011 2012 OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests ……… ¥6,588 ¥(2,548) $80,156
Adjustments for:
Income taxes—paid ……… (1,925) (1,380) (23,421)
Income taxes—refunded ……… 165 313 2,008
Depreciation and amortization ……… 3,397 4,244 41,331
Business structure improvement expenses ……… 2,634 5,234 32,048
Loss on transfer to defined contribution pension plan ……… 62 1,051 754
Loss on disposals of property, plant and equipment ……… 56 75 681
Gain on sales of property, plant and equipment ……… (89) (12) (1,083)
Decrease in allowance for doubtful accounts ……… (286) (217) (3,480)
Decrease in liability for employees’ retirement benefits……… (804) (1,215) (9,782)
Decrease in liability for directors’ and executive officers’
retirement benefits ……… (131) (10) (1,594)
Increase (decrease) in provision for product warranties ……… (202) 977 (2,458)
Decrease in provision for loss on construction contracts ……… (344) (115) (4,185)
Changes in assets and liabilities
Decrease in notes and accounts receivables ……… 793 246 9,648
Decrease (increase) in inventories ……… 416 (5,347) 5,061
Decrease (increase) in other current assets ……… (832) 230 (10,123)
Decrease in claims provable in bankruptcy and rehabilitation ………… 219 195 2,665
Increase in notes and accounts payables ……… 1,826 1,298 22,217
Increase (decrease) in other current liabilities ……… (3,120) 453 (37,961)
Payments for extra retirement payments ……… (1,244) — (15,136)
Other, net ……… 428 183 5,208
Total adjustments ……… 1,019 6,203 12,398
Net cash provided by operating activities ……… 7,607 3,655 92,554
INVESTING ACTIVITIES:
Payments into time deposits ……… (636) (668) (7,738)
Proceeds from withdrawal of time deposits ……… 187 997 2,275
Purchases of investment securities ……… (2) (19) (24)
Proceeds from sales of investment securities ……… 503 14 6,120
Purchases of property, plant and equipment ……… (2,566) (1,707) (31,220)
Proceeds from sales of property, plant and equipment ……… 166 33 2,020
Purchase of intangible assets ……… (448) (511) (5,451)
Net decrease in short-term loans receivable ……… 49 4 596
Purchase of shares of newly consolidated subsidiaries (Note 3) ……… (3,384) (522) (41,173)
Other ……… (10) (89) (122)
Net cash used in investing activities ……… (6,141) (2,468) (74,717)
FORWARD ……… ¥1,466 ¥1,187 $17,837
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Year Ended March 31, 2012
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2012 2011 2012 FORWARD ……… ¥ 1,466 ¥ 1,187 $ 17,837
FINANCING ACTIVITIES:
Decrease in short-term bank loans-net ……… (406) (602) (4,940)
Dividends paid ……… (1,238) (1,266) (15,063)
Increase in treasury stock—net ……… (13) (23) (158)
Other, net ……… (306) (1) (3,723)
Net cash used in financing activities ……… (1,963) (1,892) (23,884)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS ……… (143) (325) (1,740) NET DECREASE IN CASH AND CASH EQUIVALENTS ……… (640) (1,030) (7,787) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ……… 44,629 45,659 542,998 CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3) ……… ¥43,989 ¥44,629 $535,211
a. Consolidation—The consolidated financial statements as of March 31, 2012 include the accounts of the Company and its 18 significant (16 in 2011) subsidiaries (together, the “Group“).
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
Affiliated company accounted for by the equity method is nil (nil in 2011). Investments in the remaining two unconsolidated subsidiaries and one affiliated company are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The excess of cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the respective dates of acquisition is being amortized over 5 years by the straight-line method.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.
b. Cash Equivalents—Cash equivalents deposits are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificate of
deposits and mutual funds investing in bonds, all of which mature or become due within three month from the date of acquisition.
c. Inventories—Finished products and work in process are stated at the lower of cost, determined by substantially on a specific identification method, or net realisable value. Certain mass-produced finished products and work in process are stated at the lower of cost, determined by the moving-average method or the average method, or net realisable value.
Raw materials are substantially stated at the lower of cost, determined by the average method, or net realisable value. Certain raw materials are stated at the lower of cost, determined by the specific identification method or the moving-average method, or net realisable value.
d. Investment Securities—Investments in unconsolidated subsidiaries and affiliated companies are stated at cost determined by the moving-average method.
Available-for-sale securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of net assets.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP“), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the comparative 2011 financial information to conform to the classifications used in 2012.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Hitachi Kokusai Electric Inc. (the “Company“) is incorporated and mainly operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82.19 to $1, the rate of exchange at March 31, 2012. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
