Hitachi Kokusai Electric is a provider of information communication systems
that offer borderless capabilities through compatibility with global standards
on which the next generation of mobile communication systems will be
based. We also offer total support of broadcasting and video systems that
shape our image culture, and are also moving forward with research and
development on the provision of mobile multimedia products and systems.
Next-generation advanced information and communication systems will be
based on semiconductors. Hitachi Kokusai Electric is therefore also moving
ahead with semiconductor manufacturing systems.
Contents
Financial Highlights ... 1
To Our Stakeholders... 2
Results and Outlook by Segment ... 4-6 · Wireless Communications and Information Systems Segment...4
· Broadcasting and Video Systems Segment...5
· Semiconductor Manufacturing Systems Segment...6
Financial Review ... 7
Consolidated Balance Sheets ... 8
Consolidated Statements of Income ... 10
Consolidated Statements of Shareholders’ Equity ... 11
Consolidated Statements of Cash Flows ... 12
Notes to Consolidated Financial Statements ... 13
Independent Auditors’ Report ... 25
Global Network... 26
Corporate Data ... 27
Shareholder Information ... 28
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 markets
For the Year:
Net sales...
Operating income ...
Net income ...
At Year-End:
Total assets ...
Total shareholders’ equity ...
Per share of common stock (in Yen and U.S. Dollars):
Net income ...
Cash dividends applicable to the year ...
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 ¥105.69 to $1, the rate of exchange at March 31, 2004.
142,998
151,201
129,361
6,592
(1,687)
544
186,922
194,484
169,781
2004 2003
2002 2002 2003 2004 2002 2003 2004
Net sales
(Millions of Yen)
Operating income (loss)
(Millions of Yen)
Total assets
(Millions of Yen)
0 50,000 100,000 150,000 200,000
0 40,000 80,000 120,000 160,000
-2,000 0 2,000 4,000 6,000 8,000
Financial Highlights
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Years ended March 31
Thousands of Millions of Yen U.S. Dollars
Yen U.S. Dollars
2004
¥142,998
6,592
1,748
¥186,922
81,930
2003
¥129,361
544
1,504
¥169,781
80,278
2004
$1,352,995
62,371
16,539
$1,768,587
775,192
2004
¥ 16.19
6.00
2003
¥ 13.53
4.00
2004
$ 0.15
To Our Stakeholders
On June 23, I became Chief Executive Officer of
Hitachi Kokusai Electric. Amid the turbulent
changes that shape today’s corporate management
environment, I am acutely aware of the weight of
my responsibilities and intend to do everything in
my power to ensure the future progress and
development of the Hitachi Kokusai Electric Group.
Operating Results
Our operating segments were all able to post year-on-year
gains. Net sales during fiscal 2004 amounted to ¥142,998
million, an increase of 11% compared to the preceding
year. Net income rose 16%, to ¥1,748 million, an increase
attributable to higher sales of semiconductor
manufac-turing equipment and new products for terrestrial digital
broadcasting applications, and to the effect of efforts to
reduce costs and expenses.
Sales by Segment
In Wireless Communications and Information Systems,
sales of mobile telephone base-stations declined due to
cutbacks on capital investment by mobile communication
companies and falling prices. However, the move to digital
wireless systems by public utilities and services pushed up
sales of disaster management wireless systems and digital
radio systems for public utilities.
In Broadcasting and Video Systems, sales of transmitters
and antennas for terrestrial digital broadcasting
applica-tions increased, and growing demand for security systems
boosted sales of monitoring systems for roads, rivers and
railroads.
In Semiconductor Manufacturing Systems, there was a
major increase in orders from DRAM manufacturers in
Japan and overseas, reflecting the rapid recovery and
expansion of the global market for semiconductors.
Restructuring Measures
In order to make efficient use of corporate resources, we
have been consolidating bases, consolidating subsidiaries
and adjusting personnel levels. During the period under
review, the following measures were implemented to
stimulate flagging sales caused by a slowdown in capital
investment in the mobile communications business.
At the end of December, the Chitose Works and the Yagi
Memorial Information & Communication Systems
the development and production operations of the
Wireless Communications and Information Systems
division were concentrated in the Hamura and the
Koganei Works, in Tokyo. Along with these moves, the
Company promoted voluntary retirement for employees in
administrative and indirect departments. These measures
have helped to trim fixed costs. As of March 31, 2004, the
number of employees stood at 2,682, a decrease of 282
compared to the preceding year. Through these and other
measures, we will continue our efforts to improve the
Company’s profit structure and business results.
Spin-off of the Yagi Antenna Division
To further strengthen Hitachi Kokusai Electric’s efforts in
terrestrial digital broadcasting products markets, it was
decided that on October 1, 2004, the Yagi Antenna
Division will be split off and established as a new
company, Yagi Antenna Inc. This will make it possible to
utilize the Yagi brand and to strengthen and expand our
sales channels in the areas of consumer receiving
products, community receiving facilities and CATV
systems and other receiving equipment, resulting in a
more flexible and nimble business management system.
The new company will be mainly responsible for handling
the receiving-equipment business of the Hitachi Kokusai
Electric Group.
Fiscal 2005
In fiscal 2005, ending March 31, 2005, investment by the
semiconductor sector is expected to be strong, and there
will be replacement demand for wireless systems as public
services move to digital systems, and further growth in
terrestrial digital broadcasting systems and products. Hitachi
Kokusai Electric is responding to these market movements
by marketing distinctive products tailored to customers’
needs. The main aim of the October spin-off of the Yagi
Antenna Division is also to be able to better respond to the
our customers’ needs. In the face of falling prices across all
product lines, we are endeavoring to achieve growth by
continuing to cut costs and provide products that are
cost-competitive.
Specific measures and policies being taken include the
following.
Restructuring that emphasizes selection and
concentration:
Management resources are being
invested in rapid-growth market sectors, such as
digital wireless and terrestrial digital broadcasting,
video monitoring systems and semiconductor
manufacturing equipment.
Responding to emerging markets and
strength-ening business operations:
To strengthen our core
business, we are increasing our activities in markets
related to digital products and systems.
Streamlining measures:
To make our products more
competitive, we are trimming cost prices, raising
value-added, and responding to changes in the business
environment by aggressively reducing fixed and
variable costs to achieve a leaner, high-profit structure.
Developing new businesses:
With a view to our
future progress and development, we are refining our
core technologies and building new business models,
something that is of great importance. Specifically, we
are building business models based on such core
technologies as software wireless communication
systems, wireless broadband, intelligent antennas and
nanometric semiconductor films.
Speed and the Challenge of Change:
“Speed” and
“the challenge of change” are keywords with respect
to Hitachi Kokusai Electric’s future progress and
development. Things are speeding up in all areas of
business. For example, in development, manufacturing
and sales, lead times are shrinking. This is an area in
which we have to do better. We will be placing
increasing emphasis on an awareness of speed and
change.
We will use the above measures and policies to achieve
sustainable growth, improve efficiency, boost
competi-tiveness and strengthen our business operations in the area
of digital products and systems and other such
rapidly-advancing areas.
October 2004
Kunio Hasegawa
Results and Outlook by Segment
Consolidated orders received by the Wireless Communications and Information Systems segment during fiscal 2004 rose ¥2,097 million (4%) year on year, to ¥57,454 million. Net sales amounted to ¥57,487 million, an increase of ¥2,840 million (5%).
Sales of mobile telephone base-stations declined due to cutbacks on capital investment by mobile communication companies and falling prices. However, the move to digital wireless systems by public utilities and services pushed up sales of disaster management wireless systems and digital radio systems for public utilities. Operating income came to ¥1,242 million, a decrease of ¥48 million (4%) from the preceding year.
This segment is building on its achievements in the domestic market to push forward with the global expansion of mobile telephone base-stations for the infrastructure of third-generation cellular telephone systems. In particular, Hitachi Kokusai Electric expanded sales of third-generation amplifiers to China. Also, in addition to its existing station amplifier products, the company is developing miniature wireless base-stations and optical communication systems for use in enclosed spaces, such as buildings and underground train stations.
With respect to wireless systems solutions for public services, the company is expanding its market share in the area of wireless communication systems for public services such as fire-fighting services, taxi services, railroads and airports, and large-scale disaster management communication systems for regional governments, where the move to digital systems is under way. Hitachi Kokusai Electric intends to further grow this area of business operations by participating in large-scale projects.
0 20,000 40,000 60,000 69,163
57,487
2004 2003 2002
Net sales
(Millions of Yen)
54,647
80,000
3,672
1,242
2004 2003 2002
0 1,000 2,000 3,000
Operating income
(Millions of Yen)
1,290
4,000
Wireless Communications and Information Systems Segment
Transition to digital technology and broadband, and expansion of overseas markets
Main Products
Station Equipment for Digital Cellular Telephones, Radio Equipment for Packet Communication Systems, Digital Wireless Systems for Public Business, On-premises Digital Wireless Communication Systems, Disaster Management Communication Systems, Disaster Information Systems, Wireless Communication Antennas, Train Communication Systems, Airport MCA Wireless Systems, Stock-Price Display Systems, Assorted Display Boards and Display Devices
Handset of Airport MCA digital wireless systems
Consolidated orders received by the Broadcasting and Video Systems segment during fiscal 2004 amounted to ¥44,539 million, ¥1,809 million (4%) more than the preceding year. Net sales increased ¥1,752 million (4%), to ¥45,388 million.
Sales of transmitters and antennas for terrestrial digital broadcasting applications increased, and growing demand for security systems boosted sales of monitoring systems for roads, rivers and railroads. Operating income rose ¥1,040 million, to ¥1,313 million.
Focusing on the December, 2003, launch of terrestrial digital broadcasting in Tokyo, Nagoya and Osaka, Hitachi Kokusai Electric started selling transmission relay
equipment and transmitters to broadcasting stations. In October 2004, the Yagi Antenna Division has been split off and established as a new company, Yagi Antenna Inc. Antenna and other receiving-equipment business operations are centralized in the new company, strengthening the product areas of non-linear digital video editing systems, transmitters and broadcast relay equipment for broadcasting stations.
In response to rising demand for monitoring systems generated by increasing concerns over security, the company is expanding related operations by releasing new network-based monitoring system products, a market sector that is growing with the spread of the high-speed network infrastructure.
0 10,000 20,000 30,000 40,000 46,252
45,388
43,636
2004 2003 2002
Net sales
(Millions of Yen)
50,000
(227)
273
1,313
2004 2003 2002
Operating income (loss)
(Millions of Yen)
-300 0 300 600 900 1,200 1,500
Broadcasting and Video Systems Segment
Expanding sales of new products for terrestrial digital broadcasting applications and network
monitoring systems
Main Products
Digital Microwave Relay Equipment, Digital Relay Transmitters, Digital TV Transmission Systems, FM/AM Broadcasting Equipment, FPU and Portable Tracking Receivers, Non-linear Digital Video Editing, Recording and Transmission Systems, Digital TV Cameras, Satellite Broadcasting and Receiving Equipment, CATV Equipment, Interference and Bad Reception Safeguard Equipment, Assorted Commercial Cameras and Monitors, Wide-Area Monitoring Systems (for Roads, Rivers and Railroad Networks), Security
Consolidated orders received by the Semiconductor Manufacturing Systems segment amounted to ¥43,893 million, ¥15,293 million (543%) more than the preceding year. Net sales rose ¥9,045 million (29%), to ¥40,123 million.
There was a major increase in orders from DRAM manufacturers in Japan and overseas, reflecting the rapid recovery and expansion of the global market for semiconductors. As a result, operating income amounted to ¥4,037 million, ¥5,056 million more than the preceding year.
The increase in orders received generated by the expansion of semiconductor production for PCs and digital consumer electronics and the acceleration of capital investment by manufacturers, helped the segment achieve a major year-on-year improvement in earnings. New products also did well. Hitachi Kokusai Electric is concentrating on expanding the sales ratio of new, strategic, high-profit products for 65nm to 90nm line applications using 300mm wafers, not only in Japan but overseas, including in China, a market in which major growth is expected.
The company also intends to continue to strengthen its ability to withstand the projected course of the silicon cycle.
35,786
40,123
31,078
2004 2003 2002
Net sales
(Millions of Yen)
0 10,000 20,000 30,000 40,000 50,000
(5,132)
4,037
2004 2003 2002
-4,000
-6,000 0 4,000
2,000
-2,000
Operating income (loss)
(Millions of Yen)
(1,019)
6,000
Semiconductor Manufacturing Systems Segment
Growing sales of new, strategic products
Main Products
Vertical Diffusion/LPCVD Systems, Load Lock Vertical
Diffusion/LPCVD Systems, Vertical QTAT Systems, Vertical ALD Systems, Vertical SiGe Epitaxial Growth Systems, Vertical High-temperature Annealing Systems, Single Wafer MMT Plasma Nitriding Systems, Silicon Epitaxial Growth Systems, Single Wafer Diffusion/LPCVD Systems, Ashing Systems, High Performance Tube Controllers
Financial Review
Operating Results
Financial Position
Cash Flows
Operating results for the consolidated fiscal year under review were as follows.
Orders were up in all areas of operations, and as a result, orders received during fiscal 2004 amounted to ¥145,887 million, an increase of ¥19,198 million (15%) compared to the preceding year. All segments also posted gains in sales, pushing net sales up ¥13,637 million (11%) year on year, to ¥142,998 million.
Income was boosted by higher sales of semiconductor manufacturing equipment and new products for terrestrial digital broadcasting applications and by lower costs and expenses. Operating income amounted to ¥6,592 million, representing year-on-year increases of ¥6,048 million.
After accounting for an extraordinary loss of ¥3,296 million for retirement benefits and the like, as part of the Company’s emergency management measures, net income amounted to ¥1,748 million, an increase of ¥244 million (16%) year on year.
Looking at results by geographical segment, in Japan sales of Semiconductor Manufacturing Systems moved up, reflecting
investment in large-scale facilities by domestic DRAM manufac-turers, and major orders for terrestrial broadcasting transmitters helped push up sales by Broadcasting and Video Systems. Thus, net sales in Japan amounted to ¥138,495 million, an increase of ¥14,560 million (12%) compared to the preceding year, while operating income rose ¥6,641 million, to ¥6,749 million.
In North America, sales amounted to ¥8,524 million, ¥1,581 million (16%) less than the preceding year, and there was an operating loss of ¥244 million, compared to an operating income of ¥54 million the preceding year. These results can be attributed to a reorganization of subsidiaries related to
Semiconductor Manufacturing Systems operations.
In other areas, from the consolidated statement of operations of the fiscal year under review, gains and losses by Kokusai Electric Korea Co., Ltd. are being accounted for as investment gains or losses under the equity method. As a result, sales amounted to ¥3,224 million, a decrease of ¥2,384 (43%) from the preceding year, and operating income amounted to ¥75 million, a decrease of ¥298 million (80%).
Total assets as of the end of fiscal 2004 stood at ¥186,922 million, ¥17,141 million more than the preceding year. Part of this increase was due to an increase of ¥8,137 million in cash and time deposits, and an increase of ¥7,299 million in deposits with Hitachi, Ltd., an increase in sales receipts from higher sales, and ¥6,000 million raised from zero coupon convertible notes with stock acquisition rights issued last December.
Other increases included one of ¥5,159 million in trade notes and trade accounts receivable due to the higher sales. There was a reduction of ¥4,062 million in property, plant and equipment as a result of a rigorous prioritization of capital expenditures.
Total liabilities increased ¥15,471 million, to ¥104,892 million. Components contributing to the increase included an increase of ¥6,417 million in notes and accounts payable due to higher
sales, and the ¥6,000 million in zero coupon convertible notes with stock acquisition rights issued last December. Another component was an increase of ¥886 million as accrual for business restructuring costs incurred by the closing of the Chitose Works and the Yagi Memorial Information &
Communication Systems Research Laboratory, Sendai Division. With respect to shareholders’ equity, compared to the preceding year, retained earnings increased by ¥1,037 million, and unrealized gains on available-for-sale securities increased ¥983 million, reflecting an end-of-year recovery in the stock market. As a result, total shareholders’ equity increased ¥1,652 million, to amounted to ¥81,930 million. Thus, the shareholders’ equity ratio was 43.8%, a decrease of 3.5 points from the previous year.
Consolidated cash and cash equivalents (hereinafter "cash") at the end of the year stood at ¥59,989 million, an increase of ¥15,480 million (35%). The main factors involved in cash flows in the fiscal year under review were as follows.
Net cash provided by operating activities amounted to ¥11,156 million, an improvement of ¥4,274 million (62%) compared to the preceding year. The main items contributing to the increase were an increase of ¥6,680 million in notes and accounts payables and an increase of ¥4,012 million in non-cash depreciation expenses, which exceeded decrease components such as the increase of ¥5,392 million in notes and accounts receivable.
Net cash provided by investing activities amounted to ¥1,819 million, ¥217 million (11%) less than the preceding year. The
cash primarily comprised proceeds of ¥1,923 million from sales of property, plant and equipment and ¥1,347 million from refund from group life insurance due to maturity, which exceeded decrease components such as expenditures of ¥1,813 million to purchases of property, plant and equipment.
ASSETS
CURRENT ASSETS:
Cash and time deposits (Note 3) ... Deposits with Hitachi, Ltd. (Notes 3 and 16) ... Receivables (Note 16):
Trade notes ... Trade accounts ... Unconsolidated subsidiaries and associated companies ... Other ... Allowance for doubtful receivables ... Inventories ... Deferred tax assets (Note 8) ... Prepaid expenses and other current assets ... Total current assets ...
PROPERTY, PLANT AND EQUIPMENT (Note 5):
Land ... Buildings and structures ... Machinery and equipment ... Furniture and fixtures ... Construction in progress ... Total ... Accumulated depreciation ... Net property, plant and equipment ...
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 4) ... Investments in unconsolidated subsidiaries and associated companies... Long-term loans receivable ... Deferred tax assets (Note 8) ... Other assets ... Total investments and other assets ...
TOTAL...
See notes to consolidated financial statements.
Consolidated Balance Sheets
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
March 31, 2004 and 2003
Thousands of U.S. Dollars Millions of Yen (Note 1)
2004
¥ 20,711 39,420
2,751 44,071 1,346 652 (50) 22,515
7,633 399 139,448
7,840 42,097 16,800 24,864 305 91,906 (64,305)
27,601
4,154 580 39 12,317 2,783 19,873 ¥186,922
2003
¥ 12,574 32,121
2,164 40,033 813 1,985 (526) 20,392
5,550 707 115,813
8,187 45,159 18,304 27,804 416 99,870 (68,207)
31,663
2,608 724 81 14,635 4,257 22,305 ¥169,781
2004
$ 195,960 372,978
26,029 416,984 12,735 6,169 (473) 213,029
72,221 3,773 1,319,405
74,179 398,306 158,955 235,254 2,886 869,580 (608,429)
261,151
Thousands of U.S. Dollars Millions of Yen (Note 1)
2004
¥ 3,068 20,006
3,230 25,059 271 1,427 886 11,149 3,762 68,858
6,000
25,802 575 3,461 196 36,034
100
10,058 26,151 44,799 1,206 (161) 82,053
(123) 81,930 ¥186,922
2003
¥ 6,061 14
3,578 18,406 158 1,327 814 8,270 3,087 41,715
20,006
24,267 646 2,574 213 47,706
82
10,058 26,148 43,762 223 168 80,359 (81) 80,278 ¥169,781
2004
$ 29,028 189,289
30,561 237,099 2,564 13,502 8,383 105,488 35,595 651,509
56,770
244,129 5,440 32,747 1,854 340,940
946
95,165 247,431 423,872 11,411 (1,523) 776,356
(1,164) 775,192 $1,768,587 LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank loans (Note 5) ... Current portion of long-term debt (Note 5)... Payables (Note 16):
Trade notes ... Trade accounts ... Unconsolidated subsidiaries and associated companies ... Other ... Income taxes payable... Accrued expenses ... Other current liabilities ... Total current liabilities ...
LONG-TERM LIABILITIES:
Long-term debt (Note 5) ... Liability for retirement benefits:
Employees (Note 6) ... Directors and executive officers (Note 6) ... Accrual for business restructuring ... Other long-term liabilities ... Total long-term liabilities ...
MINORITY INTERESTS ...
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 10, 11 and 12)
SHAREHOLDERS’ EQUITY (Notes 7 and 14):
Common stock—authorized, 400,000,000 shares;
issued, 105,221,259 shares in 2004 and 2003 ... Capital surplus ... Retained earnings ... Unrealized gain on available-for-sale securities ... Foreign currency translation adjustments ... Total ... Treasury stock—at cost, 268,083 shares in 2004 and 206,348 shares in 2003... Total shareholders’ equity ...
NET SALES (Note 16) ...
COST OF SALES (Note 9) ...
Gross profit ...
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 9)...
Operating income ...
OTHER INCOME (EXPENSES):
Interest income ... Dividend income ... Interest expense ... Write-down of inventories... Equity in earnings of associated companies ... Foreign exchange gain (loss) ... Gain on sale of property, plant and equipment ... Loss on disposals of property, plant and equipment ... Gain on exemption from future pension obligation
of the governmental program ... Business restructuring charge ... Loss on liquidation of subsidiaries and associated company ... Other—net ...
Other income (expenses)—net ...
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS...
INCOME TAXES (Note 8):
Current ... Deferred ...
Total income taxes ...
MINORITY INTERESTS IN EARNINGS OF
CONSOLIDATED SUBSIDIARIES...
NET INCOME ...
PER SHARE OF COMMON STOCK (Notes 2.r and 13):
Net income ... Diluted net income ... Cash dividends applicable to the year ...
See notes to consolidated financial statements.
Thousands of U.S. Dollars Millions of Yen (Note 1)
2004 ¥142,998
108,932
34,066
27,474
6,592
53 63 (629) (710) 120 181 354 (341)
(3,296)
121
(4,084)
2,508
1,150 (412)
738
22
¥ 1,748
2003 ¥129,361
95,938
33,423
32,879
544
117 71 (803) (365)
(231) 574 (200)
5,548
(1,195) (144)
3,372
3,916
958 1,220
2,178
234
¥ 1,504
2004 $1,352,995
1,030,675
322,320
259,949
62,371
501 596 (5,951) (6,718) 1,135 1,713 3,349 (3,226)
(31,186)
1,146
(38,641)
23,730
10,881 (3,898)
6,983
208
$ 16,539
Yen U.S. Dollars ¥ 16.19
15.95 6.00
¥ 13.53
4.00
$ 0.15 0.15 0.06
Consolidated Statements of Income
BALANCE, APRIL 1, 2002 ...
Net income ... Bonuses to directors... Increase in treasury stock
(178,281 shares) ... Net decrease in unrealized gain on
available-for-sale securities... Net change in foreign currency
translation adjustments ...
BALANCE, MARCH 31, 2003...
Paid-in capital from treasury
stock transaction ... Net income ... Bonuses to directors... Cash dividends, ¥6 per share ... Increase in treasury stock
(61,735 shares) ... Net increase in unrealized gain on
available-for-sale securities... Net change in foreign currency
translation adjustments ...
BALANCE, MARCH 31, 2004...
BALANCE, MARCH 31, 2003...
Paid-in capital from treasury
stock transaction ... Net income... Bonuses to directors ... Cash dividends, $0.06 per share ... Increase in treasury stock
(61,735 shares) ... Net increase in unrealized gain on
available-for-sale securities ... Net change in foreign currency
translation adjustments ...
BALANCE, MARCH 31, 2004...
See notes to consolidated financial statements.
Millions of Yen Thousands
Retained Earnings ¥ 42,286
1,504 (28)
43,762
1,748 (81) (630)
¥ 44,799 Capital
Surplus ¥ 26,148
26,148
3
¥ 26,151 Common
Stock ¥ 10,058
10,058
¥ 10,058 Issued
Number of Shares of Common Stock
105,221
105,221
105,221
Unrealized Gain on Available-for-sale Securities
¥ 797
(574)
223
983
¥ 1,206
Foreign Currency Translation Adjustments
¥ 117
51
168
(329)
¥ (161)
Treasury Stock ¥ (15)
(66)
(81)
4
(46)
¥ (123)
Consolidated Statements of Shareholders’ Equity
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Years Ended March 31, 2004 and 2003
Thousands of U.S. Dollars (Note 1)
Retained Earnings $414,060
16,539 (766) (5,961)
$423,872 Capital
Surplus $247,403
28
$247,431 Common
Stock $ 95,165
$ 95,165
Unrealized Gain on Available-for-sale Securities
$ 2,110
9,301
$ 11,411
Foreign Currency Translation Adjustments
$ 1,590
(3,113)
$ (1,523)
Treasury Stock $ (766)
38
(436)
OPERATING ACTIVITIES:
Income before income taxes and minority interests... Adjustments for:
Income taxes—paid ... Income taxes—refunded ... Depreciation and amortization ... Loss on disposal of property, plant and equipment ... Gain on sale of property, plant and equipment... Provision for employees’ retirement benefits ... (Provision for) reversal of directors’ and executive officers’
retirement benefits ... Increase (decrease) in accrual for business restructuring... Gain on exemption from future pension obligation of
the governmental program... Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivables ... Increase in inventories ... Decrease (increase) in other current assets... Increase in notes and accounts payables ... Increase (decrease) in other current liabilities ... Other—net ... Total adjustments ... Net cash provided by operating activities ...
INVESTING ACTIVITIES:
Payments for time deposits ... Maturities of time deposits ... Proceeds from sales of short-term investments... Purchases of investment securities ... Proceeds from sales of investment securities ... Purchases of property, plant and equipment ... Proceeds from sales of property, plant and equipment ... Decrease in short-term loans receivable ... Refund from group life insurance due to maturity ... Increase in other assets ... Net cash provided by investing activities ...
FINANCING ACTIVITIES:
Decrease in short-term bank loans—net ... Redemption of long-term debt ... Proceeds from issuance of long-term debt ... Dividends paid ... Other—net ... Net cash provided by (used in) financing activities ...
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS...
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES....
CASH AND CASH EQUIVALENTS DECREASED BY
EXCLUSION FROM CONSOLIDATION OF SUBSIDIARY...
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3) ...
Thousands of U.S. Dollars Millions of Yen (Note 1)
2004
¥ 2,508
(1,142) 106 4,012 432 (354) 1,538 (72) 886 (5,392) (2,328) 1,373 6,680 3,678 (769) 8,648 11,156 (161) 200 323 (1,813) 1,923 6 1,347 (6) 1,819 (2,632) 6,000 (637) (41) 2,690 (185) 15,480 44,509 ¥59,989 2003
¥ 3,916
(412) 2,046 4,696 200 (645) 2,190 191 (3,123) (5,548) 5,975 (1,264) (1,232) 3,215 (4,465) 1,142 2,966 6,882 (316) 1,534 240 (26) 611 (2,548) 1,706 9 1,036 (210) 2,036 (2,742) (14,143) (29) (66) (16,980) (136) (8,198) 22 (620) 53,305 ¥44,509 2004
$ 23,730
(10,805) 1,003 37,960 4,087 (3,349) 14,552 (681) 8,383 (51,017) (22,027) 12,991 63,204 34,800 (7,277) 81,824 105,554 (1,523) 1,892 3,056 (17,154) 18,195 57 12,745 (57) 17,211 (24,903) 56,770 (6,027) (388) 25,452 (1,751) 146,466 421,128 $567,594
Consolidated Statements of Cash Flows
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Notes to Consolidated Financial Statements
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries
Years Ended March 31, 2004 and 2003
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure require-ments 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 2003 financial statements to conform to the classifications used in 2004.
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 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 ¥105.69 to $1, the rate of exchange at March 31, 2004. 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.
a. Consolidation—The consolidated financial statements include the accounts of the Company and 19 (23 in 2003) 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.
Investments in 1 (1 in 2003) associated company are accounted for by the equity method.
Investments in the remaining 7 unconsolidated sub-sidiaries and 1 associated 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 the Company’s investments in consolidated subsidiaries and associated companies over its equity in the net assets at the respective dates of acquisition is being amortized over its estimated useful lives, or 5 years in circumstances in which the useful lives cannot be estimated.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unreal-ized profit included in assets resulting from transactions within the Group is eliminated.
b. Cash Equivalents—Cash equivalents 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 months of the date of acquisition.
c. Inventories—Finished products and work in process are stated at cost substantially on a specific identification method. Certain finished products and work in process are stated at cost determined by the moving-average method or average method and mass-produced finished products and work in process which experience sharp fluctuations in price are stated at the lower of cost, on a specific identification method or determined by the moving-average method, or market.
Raw materials are substantially stated at the lower of cost, determined by the average method, or market. Certain raw materials are stated at the lower of cost, on a specific identification method or determined by the moving-average method, or market.
d. Investment Securities—Investments in unconsolidated subsidiaries and associated company are stated at cost determined by the moving-average method.
Available-for-sale securities, which are not classified as either trading securities nor held-to-maturity debt securi-ties, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders’ equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, invest-ment securities are reduced to net realizable value by a charge to income.
f. Other Assets—Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line method. Software which is internally used by the Company is amortized by the straight-line method over 5 years. Notes issue costs were charged to income as incurred.
g. Allowance for Doubtful Receivables—The allowance for doubtful receivables is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.
h. Retirement Benefit Plans—The liability for employees’ retirement benefits is stated at amounts based on pro-jected benefit obligations and plan assets at the balance sheet date. Unrecognized prior service cost is amortized by the straight-line method over 16 years. Unrecognized actuarial gain or loss is recognized by the straight-line method from 14 to 17 years.
The liability for directors’ and executive officers’ retirement benefits for the Company is provided at the amount which would be required if all directors and execu-tive officers retired at the balance sheet date. The above liability includes a liability for directors’ retirement benefits for certain of the Company’s consolidated subsidiaries.
i. Accrual for Business Restructuring—The accrual for business restructuring is stated at the amounts consid-ered to be appropriate based on the estimated future costs for restructuring surplus facilities, terminating employees and other costs at certain subsidiaries.
j. Research and Development Costs—Research and development costs are charged to income as incurred.
k. Revenue Recognition—The Company applies the per-centage-of-completion method to some contracts con-tracted by construction agreements.
l. Leases—All leases are accounted for as operating leases. Under Japanese accounting standards for leases, finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized, while other finance leases are permitted to be accounted for as oper-ating lease transactions if certain “as if capitalized” infor-mation is disclosed in the notes to the lessee’s financial statements.
m. Income Taxes—The provision for income taxes is com-puted based on the pretax income included in the consoli-dated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are
measured by applying currently enacted tax laws to the temporary differences.
n. Appropriations of Retained Earnings—Appropriations of retained earnings are reflected in the financial statements for the following year upon shareholders’ approval.
o. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables denomi-nated in foreign currencies are translated into Japanese yen at the exchange rate at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statements of income to the extent that they are not hedged by forward exchange contracts.
p. Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for shareholders’ equity, which is translated at the historical rate.
Differences arising from such translations were shown as “Foreign currency translation adjustments” in a separate component of shareholders’ equity.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the current
exchange rate.
q. Derivatives and Hedging Activities—The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange. Foreign exchange for-ward contracts are utilized by the Group to reduce foreign currency exchange risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: (a) all derivatives be recognized as either assets or liabili-ties and measured at fair value, and gains or losses on derivative transactions are recognized in the statements of income and (b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
Foreign currency forward contracts are utilized to hedge foreign currency exposures in sales of products to overseas customers. Trade receivables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompany-ing consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.
s. Bonuses to Directors and Executive Officers— The compensation committee of the Company approves bonuses to directors and executive officers of the Company. On the other hand, bonuses to directors of certain of the Company’s consolidated subsidiaries were accounted for as a reduction of retained earnings after approval of appropriation of retained earnings at the general shareholders meeting of the subsidiaries.
t. New Accounting Pronouncements—In August 2002, the Business Accounting Council issued a Statement of Opinion, “Accounting for Impairment of Fixed Assets,” and in October 2003 the Accounting Standards Board of Japan (“ASB”) issued ASB Guidance No. 6, “Guidance for Accounting Standard for Impairment of Fixed Assets.” These new pronouncements are effective for fiscal years beginning on or after April 1, 2005 with early adoption permitted for fiscal years ending on or after March 31, 2004.
The new accounting standard requires an entity to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
The Company is currently in the process of assessing the effect of adoption of these pronouncements.
Cash and time deposits ... Deposits with Hitachi, Ltd. ... Less—time deposits with maturities over 3 months ... Total ...
Millions of Yen 2004
¥20,711 39,420 (142) ¥59,989
2003 ¥12,574
32,121 (186) ¥44,509
Thousands of U.S. Dollars
2004 $195,960
372,978 (1,344) $567,594
Deposits with Hitachi, Ltd. represents a deposit to Hitachi, Ltd. under the Hitachi Pooling System for concentration of
surplus deposits of Hitachi group companies.
4. INVESTMENT SECURITIES
Investment securities as of March 31, 2004 and 2003 consisted of the following:
Investment securities:
Marketable equity securities ... Other ... Total ...
Millions of Yen 2004
¥3,747 407 ¥4,154
2003
¥2,199 409 ¥2,608
Thousands of U.S. Dollars
2004
$35,453 3,851 $39,304
3. CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, cash and cash equivalents at March 31, 2004 and 2003
Carrying Amount
Available-for-sale securities whose fair value was not readily determinable as of March 31, 2004 and 2003 were as follows:
Proceeds from sales of available-for-sale securities for the years ended March 31, 2004 and 2003 were ¥323 million ($3,056 thousand) and ¥110 million, respectively. Gross realized gains and losses on these sales, computed on the moving-average cost basis, were ¥238 million ($2,252 thousand) and nil, respectively, for the year ended March 31, 2004 and ¥10 million and ¥2 million, respectively, for the
year ended March 31, 2003.
For other than temporary declines in fair value, marketable and investment securities which are reduced to net realizable value by a charge to income for the years ended March 31, 2004 and 2003 were ¥3 million ($28 thousand) and ¥284 million, respectively.
Information regarding each category of the securities classified as available-for-sale at March 31, 2004 and 2003 was as follows:
Securities classified as available-for-sale equity securities ...
Millions of Yen 2004 Unrealized
Gains ¥2,077 Cost
¥1,744
Unrealized Loss
¥ 74
Fair Value
¥3,747
Securities classified as available-for-sale equity securities ...
Thousands of U.S. Dollars 2004
Unrealized Gains $19,652 Cost
$16,501
Unrealized Loss $ 700
Fair Value $35,453
Available-for-sale:
Equity securities ... Total ...
Millions of Yen 2004
¥407 ¥407
2003
¥409 ¥409
Thousands of U.S. Dollars
2004
$3,851 $3,851
5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans were made under general security agreements with banks.
Long-term debt at March 31, 2004 and 2003 consisted of the following:
Unsecured 2.825% yen notes, due 2004... Zero coupon convertible notes with stock acquisition rights,
convertible into common stock at ¥1,232 per share, due 2008 ... Loans from banks, due serially to March 31, 2005
with interest average rates 2.0% in 2004 and 2003 ... Total... Less current portion ... Long-term debt, less current portion ...
Millions of Yen 2004
¥20,000
6,000
6 26,006 (20,006) ¥ 6,000
2003 ¥20,000
20 20,020 (14) ¥20,006
Thousands of U.S. Dollars
2004 $189,232
56,770
57 246,059 (189,289) $ 56,770
Securities classified as available-for-sale equity securities ...
Millions of Yen 2003 Unrealized
Gains ¥ 569 Cost
¥1,824
Unrealized Loss
¥ 194
Fair Value
Projected benefit obligation ... Fair value of plan assets... Unrecognized prior service cost ... Unrecognized actuarial loss ... Net liability ...
Millions of Yen 2004
¥62,345 (26,135)
652 (11,060) ¥25,802
2003 ¥53,988
(19,143) 684 (11,262) ¥24,267
Thousands of U.S. Dollars
2004 $589,886
(247,280) 6,169 (104,646) $244,129
Annual maturities of long-term debt at March 31, 2004 were as follows:
Year Ending March 31
2005... 2009... Total...
Millions of Yen ¥ 20,006
6,000 ¥ 26,006
Thousands of U.S. Dollars
$189,289 56,770 $246,059
The carrying amounts of assets pledged as collateral for short-term debt of ¥450 million ($4,258 thousand) at March 31, 2004 were as follows:
Land
Buildings and structures—net of accumulated depreciation ... Total ...
Millions of Yen ¥ 141
284 ¥ 425
Thousands of U.S. Dollars
$1,334 2,687 $4,021
The liability for employees’ retirement benefits at March 31, 2004 and 2003 consisted of the following:
6. RETIREMENT BENEFIT PLANS
The Company has severance payment plans for employees, directors and executive officers. Moreover, the Company’s certain consolidated subsidiaries have severance payment plans for employees and directors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to
larger payments if the termination is involuntary, by retire-ment at the mandatory retireretire-ment age, by death, or by volun-tary retirement at certain specific ages prior to the mandatory retirement age.
Liability for directors’ and executive officers’ retirement benefits of the Company is paid subject to the approval of the compensation committee of the Company. On the other hand, liability for directors’ retirement benefits of the Company’s certain consolidated subsidiaries is paid subject to the approval of the shareholders.
The stock acquisition rights are able to be convertible notes since December 19, 2003 until November 21, 2008 and were
not convertible at March 31, 2004. The conversion prices are subject to adjustments in certain circumstances.
Service cost ... Interest cost ... Expected return on plan assets ... Amortization of prior service cost ... Recognized actuarial loss ... Gain on exemption from future pension obligation of the governmental program ... Net periodic benefit costs ...
Millions of Yen 2004
¥2,046 1,533 (478)
(49) 1,195
¥4,247
2003 ¥ 2,423
2,933 (1,621)
(166) 934 (5,548) ¥(1,045)
Thousands of U.S. Dollars
2004 $19,359
14,505 (4,523)
(464) 11,307
$40,184
Discount rate ... Expected rate of return on plan assets ... Amortization period of prior service cost... Recognition period of actuarial loss ...
2004 2.5% 2.5% 16 years From 14 to 17 years
2003 2.5% 3.5% 16 years From 14 to 17 years Assumptions used for the years ended March 31, 2004 and 2003 are set forth as follows:
7. SHAREHOLDERS’ EQUITY
Japanese companies are subject to the Japanese
Commercial Code (the “Code”) to which certain amendments became effective from October 1, 2001.
The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no par value and at least 50% of the issue price of new shares is required to be recorded as common stock and the remaining net proceeds as additional paid-in capital, which is included in capital surplus. The Code permits Japanese companies, upon approval of the Board of Directors, to issue shares to existing shareholders without consideration as a stock split. Such issuance of shares generally does not give rise to changes within the shareholders’ accounts.
The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other appropriations of retained earnings associated with cash outlays applicable to each period shall be appropri-ated as a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equals 25% of common stock. The amount of total additional paid-in capital and legal reserve that exceeds 25% of the common stock may be available for dividends by resolution of the shareholders. In addition, the Code permits the transfer of a portion of additional paid-in capital and legal reserve to the common stock by resolution of the Board of Directors.
The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies to repurchase treasury stock by a resolution of the shareholders at the general shareholders meeting and dispose of such treasury stock by resolution of the Board of Directors begin-ning April 1, 2002. The repurchased amount of treasury stock cannot exceed the amount available for future dividend plus amount of common stock, additional paid-in capital or legal reserve to be reduced in the case where such reduction was resolved at the general shareholders meeting.
The amount of retained earnings available for dividends under the Code was ¥32,957 million ($311,827 thousand) as of March 31, 2004, based on the amount recorded in the parent company’s general books of account. In addition to the provision that requires an appropriation for a legal reserve in connection with the cash payment, the Code imposes certain limitations on the amount of retained earnings available for dividends.
For the company which adopted the committees system, dividends are approved by the Board of Directors and reported to the shareholders at a meeting held subsequent to the fiscal year to which the dividends are applicable.
8. INCOME TAXES
Deferred tax assets (current):
Inventories ... Accrued bonuses ... Tax loss carryforwards ... Other ... Less valuation allowance ... Total (current) ...
Net deferred tax assets (current)...
Deferred tax assets (non-current):
Employees’ retirement benefits ... Depreciation ... Directors’ and executive officers’ retirement benefits ... Deferred assets... Tax loss carryforwards ... Accrual for business restructuring ... Devaluation of investments in subsidiaries and associated companies ... Other ... Less valuation allowance ... Total (non-current) ...
Deferred tax liabilities (non-current):
Special depreciation reserve ... Unrealized gain on available-for-sale securities ... Total (non-current) ... Net deferred tax assets (non-current) ... Net deferred tax assets ...
Millions of Yen 2004
¥ 1,713 1,625 2,614 2,039 (358) 7,633 7,633 9,813 1,319 262 68 2,871 1,374 2,885 436 (5,763) 13,265 (152) (796) (948) 12,317 ¥19,950 2003
¥ 1,755 1,226 1,517 1,530 (478) 5,550 5,550 8,961 1,787 405 119 5,785 947 2,968 594 (6,566) 15,000 (213) (152) (365) 14,635 ¥20,185 Thousands of U.S. Dollars 2004
$ 16,208 15,375 24,733 19,292 (3,387) 72,221 72,221 92,847 12,480 2,479 643 27,164 13,000 27,297 4,126 (54,527) 125,509 (1,438) (7,532) (8,970) 116,539 $188,760
A reconciliation between the normal effective statutory tax rate and the actual effective tax rates reflected in the
accom-panying consolidated statements of income for the years ended March 31, 2004 and 2003 is as follows:
Normal effective statutory tax rate ... Dividend income eliminated in consolidation ... Expenses permanently not deductible for income tax purposes ... Income not taxable for income tax purposes ... Valuation allowance ... Effect of tax rate reduction ... Inhabitants taxes—per capita ... Difference incurred by preceding fiscal year’s tax payment... Tax loss carryforwards ... Other—net ... Actual effective tax rate ...
2004 40.9% 18.6 5.5 (19.7) (13.0) 2.4 3.2 15.6 (24.0) (0.1) 29.4% 2003 40.9% 1.9 4.7 (2.4) (3.3) 11.0 2.3 0.5 55.6% The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets and
liabilities at March 31, 2004 and 2003 are as follows: The Company and its domestic subsidiaries are subject to
Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate
9. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥12,363 million ($116,974 thousand) and ¥16,755 million for
the years ended March 31, 2004 and 2003, respectively.
10. LEASES
The Group leases certain machinery, computer equipment, furniture and fixtures and other assets.
Total lease expenses payments under finance leases that do not transfer ownership of the leased property to the lessee
included in cost of sales and selling and administrative expenses for the years ended March 31, 2004 and 2003 were ¥404 million ($3,822 thousand) and ¥429 million, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, depreciation expense, interest expense of finance
leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2004 and 2003 was as follows:
Acquisition cost... Accumulated depreciation ... Net leased property...
2003
2004
Millions of Yen
Machinery and Equipment
¥ 326 195 ¥ 131 Total
¥1,310 809 ¥ 501 Furniture and
Fixtures and Other
¥1,076 656 ¥ 420 Machinery
and Equipment
¥ 234 153 ¥ 81
Furniture and Fixtures and
Other ¥1,184
685 ¥ 499
Total ¥1,510
880 ¥ 630
Acquisition cost... Accumulated depreciation ... Net leased property...
Thousands of U.S. Dollars 2004
Total $12,395
7,655 $ 4,740 Furniture and
Fixtures and Other $10,181
6,207 $ 3,974 Machinery
and Equipment
$ 2,214 1,448 $ 766
Due within one year ... Due after one year ... Total ...
Millions of Yen 2004
¥ 266 247 ¥ 513
2003 ¥ 325
316 ¥ 641
Thousands of U.S. Dollars
2004 $2,517
2,337 $4,854
Obligations under finance leases:
Depreciation expense ... Interest expense...
Millions of Yen 2004
¥ 389 10
2003 ¥ 416
15
Thousands of U.S. Dollars
2004 $3,681
95
Depreciation expense and interest expense under finance leases:
Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of
Due within one year ... Due after one year ... Total ...
Millions of Yen 2004
¥ 50 16 ¥ 66
2003 ¥ 81
74 ¥155
Thousands of U.S. Dollars
2004 $473
151 $624
The minimum rental commitments under noncancelable operating leases at March 31, 2004 and 2003 were as follows:
11. DERIVATIVES
The Group enters into foreign currency forward contracts to hedge foreign exchange risk for import and export transac-tions in the normal course of business as of March 31, 2004 and 2003.
The Group enters into foreign currency forward contracts associated with trade receivables, trade payables and signing agreements denominated in foreign currencies; and therefore, the Group does not hold or issue derivatives for trading purposes.
Foreign currency forward contracts are subject to foreign exchange risk. Because the counterparties to those foreign currency forward contracts are limited to major international
banks, the Group does not anticipate any losses arising from credit risk.
Foreign currency forward contracts entered into by the Group have been in accordance with internal rules and each foreign currency forward contracts transaction is periodically reported to and approved by the executive officer in charge.
All the amounts of foreign currency forward contracts entered into by the Group are assigned to associated assets or liabilities and are reflected on the balance sheet at year end; and therefore, they are not subject to the disclosure of market value information at March 31, 2004 and 2003.
Trade notes endorsed... Guarantees and similar items of bank loans...
Millions of Yen
¥37 4
Thousands of U.S. Dollars
$350 38
12. CONTINGENT LIABILITIES
At March 31, 2004, the Group had the following contingent liabilities:
Year Ended March 31, 2004
Basic EPS—Net income available to common shareholders... Effect of dilutive securities—Stock acquisition rights ... Diluted EPS—Net income for computation ...
Year Ended March 31, 2003
Basic EPS—Net income available to common shareholders...
EPS Thousands
of Shares Weighted-average
Shares 104,989
1,570 106,559
105,112 Millions of
Yen
Net Income ¥ 1,700
¥ 1,700
¥ 1,423
Yen
¥ 16.19
¥ 15.95
¥ 13.53
U.S. Dollars
$ 0.15
$ 0.15
Year-end cash dividends, ¥4 ($0.03) per share ...
Millions of Yen ¥ 420
Thousands of U.S. Dollars
$3,974
14. SUBSEQUENT EVENT
The following appropriations of retained earnings at March 31, 2004 were approved at the Company’s Board of Directors
meeting held on May 27, 2004:
13. NET INCOME PER SHARE
Details of basic net income per share (“EPS”) for the year ended March 31, 2004 and 2003, and reconciliation of the
(1) Industry Segments
a. Sales and Operating Income
Sales to customers ... Total sales ... Operating expenses ... Operating income ...
Millions of Yen 2004
Broadcast and Video Systems ¥ 45,388
45,388 44,075 ¥ 1,313 Wireless
Communications and Information
Systems ¥ 57,487
57,487 56,245 ¥ 1,242
Semiconductor Manufacturing
Systems ¥ 40,123
40,123 36,086 ¥ 4,037
Eliminations/
Corporate Consolidated ¥142,998
142,998 136,406 ¥ 6,592
b. Total Assets, Depreciation and Capital Expenditures
Total assets... Depreciation ... Capital expenditures ...
Millions of Yen 2004
Broadcast and Video Systems ¥ 44,103
635 457 Wireless Communications and Information Systems ¥ 46,084
1,516 604
Semiconductor Manufacturing
Systems ¥ 37,735
1,861 1,353
Eliminations/ Corporate ¥ 59,000
Consolidated ¥186,922
4,012 2,414
a. Sales and Operating Income
Sales to customers ... Total sales ... Operating expenses ... Operating income ...
Thousands of U.S. Dollars 2004
Broadcast and Video Systems $ 429,445
429,445 417,022 $ 12,423 Wireless
Communications and Information
Systems $ 543,921
543,921 532,170 $ 11,751
Semiconductor Manufacturing
Systems $ 379,629
379,629 341,432 $ 38,197
Eliminations/
Corporate Consolidated $1,352,995 1,352,995 1,290,624 $ 62,371
b. Total Assets, Depreciation and Capital Expenditures
Total assets... Depreciation ... Capital expenditures ...
Thousands of U.S. Dollars 2004 Broadcast and Video Systems $ 417,286 6,008 4,324 Wireless Communications and Information Systems $ 436,030 14,344 5,715 Semiconductor Manufacturing Systems $ 357,035 17,608 12,801 Eliminations/ Corporate $ 558,236 Consolidated $1,768,587 37,960 22,840
a. Sales and Operating Income (Loss)
Sales to customers ... Total sales ... Operating expenses ...
Millions of Yen 2003
Broadcast and Video Systems ¥ 43,636
43,636 43,363 Wireless Communications and Information Systems ¥ 54,647
54,647 53,357
Semiconductor Manufacturing
Systems ¥ 31,078
31,078 32,097 Eliminations/ Corporate Consolidated ¥129,361 129,361 128,817
15. SEGMENT INFORMATION
Information about industry segments, geographic segments and sales to foreign customers of the Company and
