Revenue by Segment Total ¥185,181 million Total ¥185,181 million Japan ¥97,074 million
Note: The revenue are calculated based on the customers’ locations. Other, Adjustments
and eliminations ¥843 million
Eco- and Thin Film Processing ¥88,025 million U.S.A. ¥16,185 million Korea ¥25,386 million Taiwan ¥16,573 million
Europe and others ¥10,664 million Other Asia ¥19,299 million 52.0% 52.4% 10.4% 10.4% 13.7% 9.0% 8.7% 5.8% 5.8% 47.5% 0.5% 0.5%
（Millions of Yen） （Millions of Yen）
Revenue by Region
Cautionary Statement with Respect to Forward-looking Statements:
Statements made in this annual report with respect to the Company’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 the Company’s markets, exchange rates and the Company’s ability to continue to win customers’ acceptance of its products, which are ofered in highly competitive market characterized by continual new product introductions and rapid developments in technology.
Revenue / Net sales Operating income Total assets
Hitachi Kokusai Electric Inc. (the "Company") 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 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 multimedia products and systems. Next-generation advanced information and communication systems will be based on semiconductors. The Company is also moving forward with semiconductor manufacturing systems.
The Company is already a leading manufacturer of semiconductor manufacturing systems that are held in high regard by semiconductor manufacturers the world over. The Company is constantly utilizing its advanced research and development capabilities to provid e new, nex t- generation pro du c t s that incorporate the latest advances in semiconductor manufacturing technology.
Consolidated Statements of Financial Position ... 14
Consolidated Statements of Proit and Loss ... 16
Consolidated Statements of Comprehensive Income ... 17
Consolidated Financial Highlights... 1
A Message from the President ... 2
Review of Operation ... 4
Video and Wireless Network ¥96,313 million
（Millions of Yen）
Contents
Profile
Millions of Yen (Except as otherwise noted)2015 IFRS JGAAP ¥185,181 19,829 17,471 20,508 3,310 3,403 9,909
For the Year Ended March 31:
Revenue / Net sales Operating income
Capital investment
Depreciation and amortization Research and development costs Net income attributable to owners of the parent / Net income (loss)
2014 ¥165,327 17,108 15,592 18,722 9,596 3,236 11,205 2015 ¥183,632 21,103 14,712 17,950 3,206 3,399 9,909 2014 ¥167,365 16,976 15,326 19,580 9,596 3,238 11,205 2013 ¥138,801 6,130 6,165 8,816 2,681 3,147 11,158 2012 ¥147,184 8,314 5,120 5,479 3,434 3,397 12,596 2011 ¥142,706 3,956 (5,065) (5,518) 3,425 4,244 14,172 ¥189,283 95,022 At Year-End: Total assets
Total equity / Total net assets
¥187,147 90,045 ¥188,189 93,099 ¥188,083 91,101 ¥152,520 85,162 ¥152,065 78,243 ¥149,784 73,703
¥ 7,745 (6,700) (13,278)
Cash Flows:
Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash used in financing activities
¥15,644 (4,722) (2,035)
¥ 7,726 (6,676) (13,280) ¥15,657 (4,720) (2,043) ¥(2,245) 5,967 (1,624) ¥7,607 (6,141) (1,963) ¥3,655 (2,468) (1,892) ¥170.05 923.64 36.00
Per Share Information:
Basic earnings per share / Net income (loss)(Yen) Equity attributable to owners of the parent/ Net assets (Yen) Cash dividends (Yen)
¥151.72 827.63 28.00 ¥143.19 904.93 36.00 ¥149.13 838.62 28.00
¥ 59.97 790.76 14.00
¥ 49.80 726.75 12.00 ¥ (49.25) 690.11 12.00 Financial Indicators:
Price earnings ratio (PER) (times) Dividends payout ratio (%)
Ratio of equity attributable to owners of the parent to total assets/ Equity ratio (%)
Return on attributable to owners of the parent/ Return on equity (ROE) (％)
Return on assets (ROA) (％)
19.4 10.5 50.1 9.5 21.2 20.4 10.4 45.4 8.2 18.5 16.4 11.4 49.4 11.3 25.1 18.3 10.2 45.8 8.3 18.8 7.9 4.2 53.3 14.4 23.3 7.0 5.7 49.1 15.2 24.1 (6.7) 2.5 47.4 ̶ ̶
Net income attributable to owners of the parent / Net income (loss)
Notes: 1. The Company has adopted International Financial Reporting Standards (IFRS) for the fiscal year ended March 31, 2015. 2. Diluted earnings per share is not presented because there were no dilutive potential shares.
Comprehensive income attributable to owners of the parent / Comprehensive income
183,632 185,181
21,103 19,829
100,000 150,000
200,000 188,189 189,283
Years Ended March 31
Consolidated Financial Highlights
Revenue by Segment Total ¥185,181 million Total ¥185,181 million Japan ¥97,074 million
Note: The revenue are calculated based on the customers’ locations. Other, Adjustments
and eliminations ¥843 million
Eco- and Thin Film Processing ¥88,025 million U.S.A. ¥16,185 million Korea ¥25,386 million Taiwan ¥16,573 million
Europe and others ¥10,664 million Other Asia ¥19,299 million 52.0% 52.4% 10.4% 10.4% 13.7% 9.0% 8.7% 5.8% 5.8% 47.5% 0.5% 0.5% 2013 2012 2011
（Millions of Yen） （Millions of Yen）
2014 2015
20142015 2011201220132014 2015 2014 2015 20112012201320142015 2014 2015
Revenue by Region
Cautionary Statement with Respect to Forward-looking Statements:
Statements made in this annual report with respect to the Company’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 the Company’s markets, exchange rates and the Company’s ability to continue to win customers’ acceptance of its products, which are ofered in highly competitive market characterized by continual new product introductions and rapid developments in technology.
Revenue / Net sales Operating income Total assets
Hitachi Kokusai Electric Inc. (the "Company") 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 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 multimedia products and systems. Next-generation advanced information and communication systems will be based on semiconductors. The Company is also moving forward with semiconductor manufacturing systems.
The Company is already a leading manufacturer of semiconductor manufacturing systems that are held in high regard by semiconductor manufacturers the world over. The Company is constantly utilizing its advanced research and development capabilities to provid e new, nex t- generation pro du c t s that incorporate the latest advances in semiconductor manufacturing technology.
Consolidated Statements of Financial Position ... 14
Consolidated Statements of Proit and Loss ... 16
Consolidated Statements of Comprehensive Income ... 17
Consolidated Statements of Changes in Equity... 18
Consolidated Statements of Cash Flows ... 20
Notes to Consolidated Financial Statements... 22
Independent Auditor’s Report ... 71
Corporate Data / Investor Information ... 72
Consolidated Financial Highlights... 1
A Message from the President ... 2
Review of Operation ... 4
Topics... 6
Corporate Governance ... 8
Directors and Executive Oicers ... 10
Global Network ... 11
Research and Development... 12
Financial Review ... 13
Video and Wireless Network ¥96,313 million
（Millions of Yen）
Contents
Profile
Millions of Yen (Except as otherwise noted)2015 IFRS JGAAP ¥185,181 19,829 17,471 20,508 3,310 3,403 9,909
For the Year Ended March 31:
Revenue / Net sales Operating income
Capital investment
Depreciation and amortization Research and development costs Net income attributable to owners of the parent / Net income (loss)
2014 ¥165,327 17,108 15,592 18,722 9,596 3,236 11,205 2015 ¥183,632 21,103 14,712 17,950 3,206 3,399 9,909 2014 ¥167,365 16,976 15,326 19,580 9,596 3,238 11,205 2013 ¥138,801 6,130 6,165 8,816 2,681 3,147 11,158 2012 ¥147,184 8,314 5,120 5,479 3,434 3,397 12,596 2011 ¥142,706 3,956 (5,065) (5,518) 3,425 4,244 14,172 ¥189,283 95,022 At Year-End: Total assets
Total equity / Total net assets
¥187,147 90,045 ¥188,189 93,099 ¥188,083 91,101 ¥152,520 85,162 ¥152,065 78,243 ¥149,784 73,703
¥ 7,745 (6,700) (13,278)
Cash Flows:
Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash used in financing activities
¥15,644 (4,722) (2,035)
¥ 7,726 (6,676) (13,280) ¥15,657 (4,720) (2,043) ¥(2,245) 5,967 (1,624) ¥7,607 (6,141) (1,963) ¥3,655 (2,468) (1,892) ¥170.05 923.64 36.00
Per Share Information:
Basic earnings per share / Net income (loss)(Yen) Equity attributable to owners of the parent/ Net assets (Yen) Cash dividends (Yen)
¥151.72 827.63 28.00 ¥143.19 904.93 36.00 ¥149.13 838.62 28.00
¥ 59.97 790.76 14.00
¥ 49.80 726.75 12.00 ¥ (49.25) 690.11 12.00 Financial Indicators:
Price earnings ratio (PER) (times) Dividends payout ratio (%)
Ratio of equity attributable to owners of the parent to total assets/ Equity ratio (%)
Return on attributable to owners of the parent/ Return on equity (ROE) (％)
Return on assets (ROA) (％)
19.4 10.5 50.1 9.5 21.2 20.4 10.4 45.4 8.2 18.5 16.4 11.4 49.4 11.3 25.1 18.3 10.2 45.8 8.3 18.8 7.9 4.2 53.3 14.4 23.3 7.0 5.7 49.1 15.2 24.1 (6.7) 2.5 47.4 ̶ ̶
Net income attributable to owners of the parent / Net income (loss)
Notes: 1. The Company has adopted International Financial Reporting Standards (IFRS) for the fiscal year ended March 31, 2015. 2. Diluted earnings per share is not presented because there were no dilutive potential shares.
Comprehensive income attributable to owners of the parent / Comprehensive income
JGAAP IFRS 183,632 185,181 21,103 19,829 0 50,000 100,000 150,000 200,000 JGAAP IFRS 188,189 189,283 0 50,000 100,000 150,000 200,000 JGAAP IFRS -5,000 0 5,000 10,000 15,000 20,000 25,000 17,471 14,712
A Message from the President
Manabu Shinomoto
President and Chief Executive Oicer
Aiming to become a social innovator trusted by
customers and creating new value in the next era
As a company that strives to realize a society of security, safety and
happiness, creates value by applying advanced technologies and
pushes the boundaries of tomorrow, Hitachi Kokusai Electric Group
aims to become a social innovator trusted by customers and
creating new value in the next era.
As for the market environment surrounding Hitachi Kokusai Electric Inc. and its consolidated subsidiaries (the “Group”) in iscal 2014, developed countries have experienced a mild steady economic growth. Meanwhile, developing countries saw an economic stagnation. As a whole, the economic situation continued to remain unsettled. On the other hand, with regards to the domestic situation, we saw a irm rise in demand in the public works sector due to the Japanese government’s continued economic stimulus measures.
Under these market conditions, the Group strengthened the competitiveness of our existing businesses and vigorously promoted sales activities, along with promoting measures towards the expansion of global businesses and new businesses.
As for the business conditions of this term, we saw a irm rise in investment in the domestic public works sector and in the capital investment of semiconductor makers in Asia. As a whole, the orders received totaled ¥190,406 million, a decrease of 2.2% compared with iscal 2013. Revenue rose 12.0%, to ¥185,181 million. In accordance with the increase in revenue, operating income and net income attributable to owners of the
In the global economy, it is predicted that an adjustment phase of the economy will be continued in emerging countries, while the economies of advanced countries will grow gently. The Japanese economy is estimated to grow gently due to the continued governmental measures for stimulating the economy, but the domestic and international markets are changing rapidly, and competitions are getting iercer.
Under this business environment, we will promote the improvement in cash low through “Hitachi Smart Transformation Project,” procure funds for achieving the sustainable growth of our businesses, and implement the following measures, with the purpose of attaining the goals for iscal 2015, which is the last iscal year in the Medium-term management plan “HK-AV10＊.”
Video and Wireless Network
Strengthening of Core Domestic Business
In order to fortify our competitive businesses, including the radio communication system for disaster preventive administration, we will strengthen the cooperation within the Group and with the Hitachi group, and aim to boost the high additional values of
1. Business Results
for the Fiscal Year Ended
March 31, 2015 (Fiscal 2014)
3
Annual Report 2015
＊Medium-term Management Plan “HK-AV10”
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 ilm processing solutions
Target
To achieve an operating income margin of 10% in Fiscal 2015
Manabu Shinomoto
President and Chief Executive Oicer
Expansion of Global Businesses
We aim to increase the ratio of overseas sales for establishing the future business foundation, by strengthening the business structure through the establishment of local subsidiary in Asia, enhancing global production system at subsidiaries in South America, reinforcing the cooperation with subsidiaries in North America and business partners in the Middle East, and so on.
Launch of Next-generation Businesses
We will develop projects to launch next-generation businesses in the ields of the systems related to Internet of Things (IoT), advanced wide-area security systems, etc. for the growth of our businesses.
Enrichment of the Solution Service Business
We will strengthen the cooperation within the Group and with the Hitachi group, aim to expand the business for private-sector systems and the community-based small-scale solutions business, and promote measures for growing social innovation businesses.
Eco- and Thin Film Processing
Maintenance and Expansion of the Share of Vertical Equipment
We will conduct aggressive business operation utilizing the features of vertical equipment by promoting proposal-based sales promotion which predicts customers' needs and enhancing joint development with customers, and aim to maintain and further expand our market share by releasing highly productive next-generation products.
Establishment of New Fields and New Businesses We will enhance measures for meeting customers' demands for new process solutions, such as miniaturization and three-dimensional processing in response to the rapid evolution of semiconductor production processes,, with the aim of establishing
next pillars for new processes in the new ields.
Improvement of Production and Development Systems
We will develop a system for responding to customers’ demands swiftly by sophisticating quality management and improving production capacity, and maintain the lexible production system that can tolerate the rapid changes in the market environment, by optimizing material procurement, rationalizing design, etc.
Enhancement of Local Production for Local Consumption
At a South Korean subsidiary for which we made a tender ofer to reorganize it into a wholly owned subsidiary, we will clarify the division of the roles, promote personnel exchange inside the Group, enhance local production and procurement, and improve services, with the aim of streamlining our businesses, improving customer satisfaction level and expanding our businesses.
Sophistication of Service Businesses
We will further improve our service business, which is steadily growing as the product life cycle business, and aim to further increase sales by utilizing business opportunities accompanying the increase of the equipment we have provided.
Video and Wireless Network
Wireless Communication Systems, Information Solutions,
Broadcasting Systems, Surveillance Cameras and Video Processing Systems
Review of Operation
●Wireless Communication Systems Infrastructure for Mobile Telecommunications Public Protection Disaster-Relieve (PPDR) Systems Radio Communication Systems for Transportation Radio Communication Systems for Fire Departments Land Mobile Radio Communication Products High-speed Wireless Repeaters
Wireless Packet Communication Unit for Cellular Systems Radiophone Equipment for Flight Control
Aircraft Communication Systems and Shipboard Communication Systems
●Information Solutions
CRM System for Securities and Financial Establishments Contents Delivery Service for Securities Companies and Financial Institutions
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
V-Low Multimedia Broadcasting Systems CATV System
● Surveillance Cameras and Video Processing Systems Wide-area Network Surveillance Systems
Plant Monitoring Systems Security Surveillance Systems Industrial Video Cameras
86,125 81,129 80,503 2,880 302 （5,160）
（Millions of Yen）
3,181 4,724
90,156
Revenue/Net sales Operating income
2013 2012
2011 2014 2015 2014 2015
94,764 88,030 96,313 5,234 6,105 0 25,000 50,000 75,000 100,000 0 2,000 4,000 6,000 8,000
52.0
%8.6
%¥96,313
million
Revenue/Net sales and operating income
Share of net sales Overseas sales ratio
JGAAP IFRS
As the investment in public works was steady, the Video and Wireless Network segment made steady eforts to meet demands in the product category of the radio communication system for disaster preventive administration, surveillance systems, etc., and conducted active sales activities.
As a result, this segment’s orders received came to ¥100,625 million, an increase of 3.0% compared with the previous iscal year, and revenue totaled ¥96,313 million, a year-on-year increase of 9.4%.
Since revenue increased and cost
was reduced, operating income
amounted to ¥5,234 million, a year-on-year increase of 64.5%.
■
5
Annual Report 2015
■
■ Product Line
Eco- and Thin Film Processing
Semiconductor Manufacturing and Other Systems
●Semiconductor Manufacturing Systems Batch Thermal Process System
Batch High Temperature Anneal Processing System Batch SiGe/Si Epitaxial Growth System
Single Wafer Plasma Nitridation/Oxidation System Single Wafer Plasma Dry Strip System
The Eco- and Thin Film Processing segment actively proposed products and services, as semiconductor makers in Asia steadily invested in equipment.
As a result, this segment’s orders received came to ¥88,915 million, a decrease of 7.4% compared with the previous iscal year, and revenue totaled ¥88,025 million, a year-on-year increase of 15.2%.
In accordance with the increase in revenue, operating income amounted to ¥16,260 million, a year-on-year increase of 23.9%.
Batch Thermal Process Equipment Batch SiGe/Si Epitaxial Growth Equipment Single Wafer Plasma Nitridation/Oxidation Equipment 51,945
8,293 9,313
65,330 61,405
3,287
76,298 76,386 12,800 13,121
88,025 15,646
88,025 16,260
（Millions of Yen）
Revenue/Net sales Operating income
2013 2012
2011 2014 2015 2014 2015
0 25,000 50,000 75,000 100,000
0 5,000 10,000 15,000 20,000
47.5
%90.8
%¥88,025
million
Revenue/Net sales and operating income
Share of net sales Overseas sales ratio
Topics
The Company is currently accelerating eforts to expand its global business in the Video and Wireless Network segment in order to achieve the goals set for the Medium-term Management Plan "HK-AV10."
In April 2015, the Company made Comark Communications LLC (Southwick, Massachusetts, U.S.), which became an equity method ailiate after we invested in the company in June 2014, into a consolidated subsidiary of Hitachi Kokusai Electric America, Ltd. (New York, U.S.), a wholly owned company of the Company (“Hitachi Kokusai America”), with the aim of strengthening our broadcasting transmitter business in North America. In addition, the corporate name has been changed from Comark Communications LLC to Hitachi Kokusai Electric Comark LLC (“Hitachi Kokusai Comark”). At the same time, we integrated the business of selling and maintaining broadcast transmitters and codecs handled by the Midwest Oice (Elgin, Illinois, U.S.) of Hitachi Kokusai America into Hitachi Kokusai Comark.
Purpose of the Reorganization
In the U.S., the digital terrestrial transmitters currently being used are expected to be replaced or upgraded in the near future. In addition, the U.S. government plans to reprogram frequency bands in or after 2016 to secure and auction new frequencies for wireless broadband communications, which also increases the likelihood of growing demand for replacements and upgrades of digital terrestrial transmitters. Furthermore, broadcasting organizations in the U.S., Latin America, the Middle East and Asia are expected to continue their investment in equipment as digital terrestrial
About Hitachi Kokusai Electric America, Ltd. Name Hitachi Kokusai Electric America, Ltd.
Established 1963
Head oice location 150 Crossways Park Drive, Woodbury, New York, 11797, U.S.
About Hitachi Kokusai Electric Comark LLC Name Hitachi Kokusai Electric Comark LLC
Established 1978
Head oice location 104 Feeding Hills Road, Southwick, Massachusetts, 01077, U.S.
broadcasting spreads across these regions.
In this kind of market, we expect the following to result from this business reorganization:
1.Enhanced governance and eicient business operations resulting from the integration of business operations
2.Expanded business opportunities in markets related to frequency reprogramming in the U.S.
3.Improved development eiciency of broadcasting transmitters, expanded product lineups and enhanced competitiveness, through cooperation with Hitachi Kokusai Linear Equipamentos Eletrônicos S/A (Santa Rita, Brazil; "Hitachi Kokusai Linear") 4.Increased orders in Latin America, the Middle East
and Asia by our company group, led by Hitachi Kokusai America, Hitachi Kokusai Comark, Hitachi Kokusai Linear and Hitachi Kokusai Electric Asia (Singapore) Pte. Ltd., which was newly established in April 2015, due to an expansion of aggressive business activities
5.Synergized business resulting from the provision of one-stop solutions for the projects that combine camera and broadcasting transmitter businesses that have until now been handled by Hitachi Kokusai America
Through this reorganization, we will change the drive of our business system from exports to global networking. As a result, we will expand our global business by manufacturing locally, and then connecting each region together to form a global network.
Reorganization of Broadcasting Transmitter Business in North America
■
7
Annual Report 2015
In March, 2015, the Company has received Intel Corporation’s prestigious Supplier Continuous Quality Improvement (SCQI) award for our performance in 2014. This supplier has demonstrated outstanding performance to goals and extraordinary, industry-leading commitment across all critical focus areas on which they are measured: quality, cost, availability, technology, customer service, labor and ethics systems and environmental sustainability. The Company provided Thermal Thin Film Processing Solution System, deemed essential to Intel’s success.
The SCQI award is Intel’s highest honor for its suppliers, acknowledging truly exceptional and world-class execution. This award is part of Intel’s Supplier Continuous Quality Improvement program, which encourages Intel’s key suppliers to strive for excellence and continuous improvement. To qualify for this award, suppliers must score at least 95 percent on a report card that assesses performance and ability to meet
cost, quality, availability, technology, environmental, social and governance goals. Suppliers must also achieve 90 percent or greater on a challenging improvement plan and demonstrate solid quality and business systems.
We are honored to receive Intel’s SCQI award for 2014. It demonstrates our commitment to quality and the close partnership we have with Intel to enable continual advances in semiconductor manufacturing technology.
In May, 2015, the Company has been awarded prizes in two categories: The “10 BEST Large Suppliers of Chip Making Equipment＊1” and “THE BEST Suppliers of
Fab Equipment＊2” in the annual customer satisfaction
survey on semiconductor manufacturing systems conducted by VLSI Research Inc.＊3, a market research
company based in California, USA. This is the Company’s eighteenth consecutive winning of the 10 BEST award. We attribute this result to the Company having been highly evaluated for technical leadership and the high product performance and quality of its equipment.
This survey of customer satisfaction consists of 15 categories based on the 3 key factors which are “Supplier Performance,” “Customer Service” and “Product Performance.” The survey was translated into 5 languages and sent to users of semiconductor equipment worldwide by VLSI Research Inc.
To achieve even better customer satisfaction, we will continue to further improve product qualities and
enhance services. By constantly creating higher goals to challenge, we will strive to become a corporation which provides optimal solutions to our customers.
Photo courtesy of Mr. Chip Holley
About Hitachi Kokusai Electric Comark LLC Name Hitachi Kokusai Electric Comark LLC
Established 1978
Head oice location 104 Feeding Hills Road, Southwick, Massachusetts, 01077, U.S.
Representative President & CEO: Richard E. Fiore, Jr.
Description of business
Develops, manufactures, sells, and provides maintenance services for digital terrestrial broadcasting transmitters, etc.
Hitachi Kokusai Electric Inc. Receives Intel’s Prestigious Supplier
Continuous Quality Improvement Award
Hitachi Kokusai Electric Won VLSIresearch’s Customer
Satisfaction Survey 10 BEST award for 18 Consecutive Years
■
■ Eco- and Thin Film Processing March 2015
■
■ Eco- and Thin Film Processing May 2015
＊1 The 10 BEST awards are based on each chip making equipment manufacturer as a whole. The 10 BEST Large Suppliers of Chip Making Equipment include the largest suppliers based on each supplier’s total revenues from all its market segments.
＊2 THE BEST awards include more detailed markets for each manufacturer. The Company’s award was earned in the Fab Equipment category. This category includes silicon wafer fab equipment suppliers based on each supplier’s total silicon wafer fab equipment sales.
Corporate Governance
Basic Structure
The Company has adopted a “Company with Three Committees” system under the Companies Act of Japan to ensure timely decision making as well as transparent management. The Board of Directors has the Nominating Committee, the Audit Committee and the Compensation Committee.
While the Board of Directors, whose predominant members are external appointments, determines the Company’s basic management policies and delegates decision-making authority to Executive Oicers to promote eicacy of the Company’s operations, it oversees and supervises the Company’s operations in unison with each Committee. Through this framework, the Company promotes management reform by placing every emphasis on securing the adequacy of its operations. Within the above framework, Outside Directors remain independent from the Company, actively providing their objective opinions. In this regard, Outside Directors fulill an important role and function in further enhancing the transparency and soundness of the Company’s management.
An overview of the Company’s current framework is provided briely as follows.
(1) The Execution of Business
Within the scope of statutory and regulatory requirements, considerable authority is delegated to Executive Oicers with respect to matters related to the decision of management in an efort to accelerate the decision-making process.
While individual Executive Oicers are provided with decision-making authority and execute operations for their particular areas of responsibility, in accordance with the segregation of duties determined by the Board of Directors, Executive Oicers’ Meeting comprising all Executive Oicers is held to deliberate on matters of major importance from multifaceted perspectives, and Executive Oicers make decision on the matter in order to secure the adequacy of the decision-making.
these internal rules and regulations.
(2) The Monitoring and Audit Functions
In collaboration with each Committee, which is the internal organization, the Board of Directors monitors the overall management including the execution of business.
In addition, the activities of the Board of Directors and each Committee are supported by the responsible departments. A designated specialist department has been established particularly for the Audit Committee to ensure that audits are conducted in an appropriate and efective manner. Employees within this department are not subject to the directions and instructions of Executive Oicers.
a. The Board of Directors
The Board of Directors monitors the management. Accordingly, the Board of Directors receives reports from each Committee in connection with the status of each Committee’s activities. At the same time, the Board of Directors receives reports directly from each Executive Oicer outlining details of the execution of their duties.
b. The Nominating Committee
The Nominating Committee determines candidates for the position of Director, who are then proposed at the Company’s shareholder meetings for approval. In order to make better managerial judgment, the Nominating Committee selects Director candidates from both inside and outside the Company, based on comprehensive criteria that encompass personality, experience, knowledge, ability and other factors, which are necessary for Directors of the Company who contribute to its management.
c. The Audit Committee
9
Annual Report 2015
subject audit policies and plans. Complementing the eicacy of the audit, the Audit Committee promotes the sharing of information and other collaborative measures regarding the audits conducted by the Internal Audit Department, Accounting Auditor, and audit members of Group companies.
d. The Compensation Committee
The Compensation Committee formulates the basic policy for determining the compensation to be paid to the Company’s Directors and Executive Oicers. At the same time, the Compensation Committee evaluates the performance of each Director and Executive Oicer and determines the evaluation amount.
Internal Control / Risk
Management
The Company designates responsible Executive Oicers, formulates internal rules and regulations as well as operating standards in responsible departments and implements internal audits on a regular basis with respect to all risks associated with 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 Oicer and other meetings, Executive Oicers work diligently to identify potential new risks and formulate preventive measures.
The Company requests Group companies to establish a system which is equivalent to that of the Company depending on the size of each company. Also, the Company has developed a system in which important matters related to Group companies are to be deliberated on at the Companies’ Executive Oicer and other meetings.
In connection with its internal reporting systems, the Company has adopted a structure that is supported by legal counsel. Every efort is also made to secure the fairness of the internal reporting systems in order to allow a wide range of personnel including the Company’s full- and part-time employees as well as the employees of Group companies and business partners to look to the system.
Corporate Governance Structure
General Meeting of Shareholders
Nominating Committee
Compensation Committee Board of Directors*
Strategic Planning Management Division Compliance Internal Audit
Accounting Audit Supervision Audit Assistance
Cooperation
Cooperation
Business Execution
Decision-making and Supervision
Executive Officers’ Meeting
Chief Executive Officer Executive Officer
Appointment and Dismissal
Audit Committee
Internal Auditing Office
Accounting Auditor
Appointment and Dismissal
* The Board of Directors is composed of 6 Directors 4 of whom are Outside Directors including 2 Independent Director. Note: The criteria for Outside and Independent Directors conform with those of the Tokyo Stock Exchange.
Directors and Executive Oicers
As of June 29, 2015
Yutaka Saito
Chairman of the Board Outside Director
Manabu Shinomoto
President and Chief Executive Oicer
Member of Nominating Committee and Compensation Committee
Kenshiro Koto
Outside Director
Member of Nominating Committee, Audit Committee and Compensation Committee
Hideto Mitamura
Outside Director
Member of Nominating Committee, Audit Committee and Compensation Committee
Akira Shimizu
Outside Director
Takeo Kawano
Member of Audit Committee
■
President and Chief Executive Oicer
Manabu Shinomoto
Supervising all business activities■
Senior Vice President and Executive Oicer
Nobuo Owada
General Manager of the Semiconductor Equipment Division
Akio Ito
General Manager of the Video & Communication Systems Division, General Manager of the Tokyo Works■
Vice President and Executive Oicer
Shigeru Kimura
Responsible for research & development, sales
Shoichiro Izumi
Deputy General Manager of the Semiconductor Equipment Division
Kiyoshi Komatsu
General Manager of the Sales Management Division, Video & Communication Systems Division and responsible for sales
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Executive Oicer
Fumiyuki Kanai
Deputy General Manager of the Semiconductor Equipment Division, General Manager of the Toyama Works
Satoru Nakamura
Responsible for the promotion of South America business
Hitoshi Machida
General Manager of the Strategic Planning Management Division, and responsible for corporation moral
Kazuro Iida
General Manager of the MONOZUKURI Management Division, the HiKQ Innovation Promotion Division and responsible for information ■
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Directors
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Annual Report 2015
11
Global Network
As of June 30, 2015
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Overseas Network
■
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Domestic Network
Hitachi Kokusai Electric Comark LLC
Hitachi Kokusai Electric Asia (Singapore) Pte. Ltd.
（Group companies）
Research and Development
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■ Eco- and Thin Film Processing
In the wireless communication systems sector, we have developed a dispatch system for taxi companies that use cloud servers to lower initial deployment costs, a canceller for mobile stations that can cancel multi-band interference from other wireless systems, and highly efective power ampliiers for DSB wireless systems.
In the broadcasting systems sector, we have developed a 1.2/2.3 GHz band FPU device to adjust spectrum reallocation as is being promoted by the Ministry of Internal Afairs and Communications, and a 4K broadcasting camera with four HD-MOS sensors for upcoming 4K broadcasts.
In the surveillance systems sector, we have developed a three-plate full HD outdoor platform-integrated highly sensitive camera for public surveillance systems and a digital interface (USB3/GigE) camera designed especially for industrial use. In addition, we have made the screens clearer and decreased the size and weight of portable surveillance devices.
The R&D expenditure for this business is ¥4,270 million.
The Group devotes particular emphasis on its Research and Development (“R&D”) activities methodically in order to contribute to a safe and prosperous society by providing products which serve as a foundation for the ubiquitous society.
Our R&D activities are managed and conducted in relationship with the following three phases. The irst phase entails the development of new products and technologies in which business divisions and the Group companies are involved. The second phase encompasses the development of the next-generation products and technologies undertaken by business divisions. Finally, the third phase applies to the development of next, next-generation technology which provides eicient 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 iscal 2014, the Group undertook R&D expenditures of ¥9,909 million, which accounts for 5.4% of the Group’s total sales.
The basic technologies 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 advantage of technologies in each market sector. Looking ahead, we will continue to deliver new products that address such market needs as digitization, the fusion of communication and broadcasting, higher deinition and miniaturization of semiconductor devices.
10,000 15,000 14,172
12,596
11,158 11,205
9,909
（Millions of Yen）
Video and Wireless Network Eco- and Thin Film Processing
Total R&D Costs
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■ Video and Wireless Network
The semiconductor market is expected to grow even further driven by demands for smartphones, tablet PCs and the Internet of Things (IoT). Higher performance and aggressive scaling of devices will be required in the near future. In order to meet such demands, the Company is promoting the research and development of deposition technologies for high functional ilms and ilms for patterning processes beyond the limitations of lithography, which manufacturers of three-dimensional channel devices, vertically stacked memory and new memory (nonvolatile high speed RAM) will require.
The vertical furnace is our core product and this can deposit ilms on multiple wafers at once. This can provide high functional ilms and conformal ilms for three-dimensional structures at a low cost. However, we are pursuing development of technology with the aim of shortening the processing time, enhancing particle performance and improving thickness uniformity.
Furthermore, with regards to the development of the highly productive single wafer tool which makes use of our unique low temperature heating technology, we will continue to make progress on the product.
Annual Report 2015
13
Financial Review
Financial Review
In this iscal year under review, the Group reports revenue of ¥185,181 million. According to analysis by segment, the sales of the Video and Wireless Network Solutions increased ¥8,283 million (up 9.4%) from the previous iscal year to ¥96,313 million due to steady demand in public works and by surely accommodating it. The revenue of Eco-and Thin Film Processing Solutions increased ¥11,639 million (up 15.2%) from the previous iscal year to ¥88,025 million mainly because the semiconductor manu-facturers in Asian countries contributed to the steady equipment investment.
Cost of sales for the iscal year under review increased ¥14,447 million compared with the previous iscal year to ¥129,232 million. The ratio to sales revenue increased 0.4%.
Meanwhile, selling, general and administrative expenses for the iscal year under review increased ¥825 million compared with the previous iscal year to ¥34,148 million, mainly due to an increase in personnel expenses. Their ratio to sales revenue decreased 1.7% compared with the previous iscal year.
Financial Position
The total assets as of March 31, 2015 increased ¥2,136 million compared with the end of previous iscal year to ¥189,283 million. Current assets increased ¥1,374 million compared with the end of the previous iscal year to ¥151,627 million. It was mainly attributable to the increase in operating receivables and other receivables of ¥4,717 million, increase in inventories of ¥3,034 million, increase in other current assets of ¥2,221 million, increase in other inancial assets of 1,681 million and decrease in cash and cash equivalents of ¥10,279 million. Non-current assets increased ¥762 million compared with the end of the previous iscal year to ¥37,656 million.
Liabilities as of March 31, 2015 stood at ¥94,261 million, a decrease of ¥2,841 million compared with the end of the previous iscal year. This was mainly due to a decrease in net deined beneit liability of ¥9,591 million, an increase in accrued expenses of ¥2,818
million and an increase in short-term debt of ¥2,607 million.
Total equity came in at ¥95,022 million as of March 31, 2015, ¥4,977 million higher than a year earlier.
Cash Flows
Cash and cash equivalents (“funds”) at the end of this iscal year decreased ¥10,279 million compared with the end of previous iscal year to ¥46,870 million. The major movements of cash lows on each activity and the major factors for this iscal year are as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was up ¥7,745 million in the iscal year under review (an increase of ¥15,644 million during the previous iscal year). This was mainly because factors to increase funds such as net income of ¥17,539 million exceeded factors to decrease funds such as retirement and severance beneit of ¥8,745 million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥6,700 million in the iscal year under review (a decrease of ¥4,722 million during the previous iscal year). This was mainly attributable to the payments into time deposits of ¥4,235 million and purchase of property, plant and equipment of ¥2,894 million.
Cash Flows from Financing Activities
March 31, 2015 and 2014, and April 1, 2013
Consolidated Statements of Financial Position
Millions of Yen
Assets March 31, 2015
March 31, 2014
April 1, 2013
Current assets:
Cash and cash equivalents (Notes 5) ……… ¥ 46,870 ¥ 57,149 ¥ 47,413 Trade and other receivables (Notes 6, 7, 24 and 25) ……… 59,226 54,509 42,477 Other inancial assets (Notes 9 and 24) ……… 2,153 472 — Inventories (Note 8) ……… 39,849 36,815 26,757 Other current assets ……… 3,529 1,308 1,461 Total current assets ……… 151,627 150,253 118,108
Non-current assets:
Property, plant and equipment (Notes 10 and 12) ……… 21,743 22,672 18,961 Intangible assets (Notes 11 and 12) ……… 1,761 1,677 2,892 Investments accounted for using the equity method ……… 207 — — Other inancial assets (Notes 9 and 24) ……… 9,895 7,641 7,976 Deferred tax assets (Note 14) ……… 2,860 2,637 1,841 Other non-current assets (Note 12) ……… 1,190 2,267 2,524 Total non-current assets ……… 37,656 36,894 34,194
Total assets ……… ¥189,283 ¥187,147 ¥152,302
15
Annual Report 2015 Millions of Yen
Liabilities March 31, 2015
March 31, 2014
April 1, 2013
Current liabilities:
Short-term debt (Note 24 and 25) ……… ¥ 3,031 ¥ 424 ¥ 551 Trade and other payables (Notes 15 and 24) ……… 46,089 44,283 29,556 Accrued expenses ……… 13,030 10,212 11,519 Other inancial liabilities (Notes 24) ……… 314 338 423 Income tax payable ……… 1,187 1,276 870 Advances received (Notes 7) ……… 10,196 10,673 3,610 Provisions (Note 7 and 16) ……… 1,829 1,531 1,160 Other current liabilities ……… 45 276 221 Total current liabilities ……… 75,721 69,013 47,910
Non-current liabilities:
Long-term debt (Note 24) ……… 92 111 165 Retirement and severance beneits (Note 17) ……… 17,998 27,589 30,548 Provisions (Note 16) ……… 126 66 79 Deferred tax liabilities (Note 14) ……… — 2 221 Other non-current liabilities ……… 324 321 1,574 Total non-current liabilities ……… 18,540 28,089 32,587 Total liabilities ……… 94,261 97,102 80,497
Equity
Equity attributable to owners of the parent:
Common stock (Note 18) ……… 10,058 10,058 10,058 Capital surplus (Note 18) ……… 17,661 26,202 26,202 Retained earnings (Note 18 and 19) ……… 59,609 45,007 30,954 Other components of equity (Note 18) ……… 10,257 6,436 3,412 Treasury stock, at cost (Note 18) ……… (2,700) (2,661) (2,617) Total equity attributable to owners of the parent ……… 94,885 85,042 68,008 Non-controlling interests ……… 137 5,003 3,797 Total equity ……… 95,022 90,045 71,805
Total liabilities and equity ……… ¥189,283 ¥187,147 ¥152,302
Years Ended March 31, 2015 and 2014
Consolidated Statements of Proit and Loss
Millions of Yen
2015 2014
Revenues (Notes 4 and 7) ……… ¥185,181 ¥165,327
Cost of sales (Notes 7 and 8) ……… (129,232) (114,785)
Gross proit ……… 55,949 50,542
Selling, general and administrative expenses ……… (34,148) (33,323)
Other income (Note 20) ……… 644 3,209
Other expenses(Note 20) ……… (2,616) (3,320)
Operating income ……… 19,829 17,108
Financial income (Note 21) ……… 347 543
Financial expenses (Note 21) ……… (331) (70)
Share of loss of investments accounted for using the equity method ……… (40) —
Income before income taxes ……… 19,805 17,581
Income taxes (Note 14) ……… (2,266) (1,102)
Net income ……… ¥ 17,539 ¥ 16,479
Net income attributable to:
Owners of the parent ……… ¥ 17,471 ¥ 15,592 Non-controlling interests ……… 68 887
Yen
2015 2014
Earnings per share attributable to owners of the parent:
Basic (Note 23) ……… ¥ 170.05 ¥ 151.72 Diluted (Note 23) ……… — —
Annual Report 2015
17
Years Ended March 31, 2015 and 2014
Consolidated Statements of Comprehensive Income
Millions of Yen
2015 2014
Net income ……… ¥17,539 ¥16,479
Other comprehensive income (OCI) Items not to be reclassiied into net income
Net changes in inancial assets measured at fair value through OCI (Note 22) ……… 494 65 Remeasurements of deined beneit plans (Note 22)……… 565 1,958
Total items not to be reclassiied into net income ……… 1,059 2,023
Items that can be reclassiied into net income
Foreign currency translation adjustments (Note 22) ……… 2,254 1,597 Share of OCI of investments accounted for using the equity method (Note 22) ……… 39 —
Total items that can be reclassiied into net income ……… 2,293 1,597
Other comprehensive income (OCI) ……… 3,352 3,620
Comprehensive income ……… ¥20,891 ¥20,099
Comprehensive income attributable to:
Owners of the parent ……… ¥20,508 ¥18,722 Non-controlling interest ……… 383 1,377
Years Ended March 31, 2015 and 2014
Consolidated Statements of Changes in Equity
Millions of Yen Equity attributable to owners of the parent
Common stock
Capital surplus
Retained earnings
Other components of equity Net changes
in inancial
assets measured at
fair value through OCI
Foreign currency translation adjustments
Remeasurements of deined beneit plans
Balance at April 1, 2014 ¥10,058 ¥26,202 ¥45,007 ¥3,370 ¥1,106 ¥1,960
Net income 17,471
Other comprehensive income (Note 22) 494 1,977 566
Dividends paid (Note 19) (2,877) Acquisition (disposal) of non-controlling
interests, net (Note 18) (8,542) 1 793 (3)
Acquisition of treasury stock (Note 18)
Disposal of treasury stock (Note 18) 0 Transfer from other components of equity
to retained earnings 7 (7)
Balance at March 31, 2015 ¥10,058 ¥17,661 ¥59,609 ¥3,858 ¥3,876 ¥2,523
Equity attributable to owners of the parent
Non-controlling
interests Total equity Total other
components of equity
Treasury stock, at cost
Total
Balance at April 1, 2014 ¥ 6,436 ¥(2,661) ¥85,042 ¥5,003 ¥90,045
Net income 17,471 68 17,539
Other comprehensive income (Note 22) 3,037 3,037 315 3,352
Dividends paid (Note 19) (2,877) (478) (3,355) Acquisition (disposal) of non-controlling
interests, net (Note 18) 791 (7,751) (4,771) (12,522) Acquisition of treasury stock (Note 18) (38) (38) (38)
Disposal of treasury stock (Note 18) 0 0 0 Transfer from other components of equity to
retained earnings (7)
Balance at March 31, 2015 ¥10,257 ¥(2,700) ¥94,885 ¥ 137 ¥95,022
19
Annual Report 2015 Millions of Yen Equity attributable to owners of the parent
Common stock
Capital surplus
Retained earnings
Other components of equity Net changes
in inancial
assets measured at
fair value through OCI
Foreign currency translation adjustments
Remeasurements of deined beneit plans
Balance at April 1, 2013 ¥10,058 ¥26,202 ¥30,954 ¥3,412 ¥ — ¥ —
Net income 15,592
Other comprehensive income (Note 22) 64 1,106 1,960
Dividends paid (Note 19) (1,644) Acquisition (disposal) of non-controlling
interests, net
Acquisition of treasury stock (Note 18)
Disposal of treasury stock (Note 18) 0 Transfer from other components of equity to
retained earnings 106 (106)
Balance at March 31, 2014 ¥10,058 ¥26,202 ¥45,007 ¥3,370 ¥1,106 ¥1,960
Equity attributable to owners of the parent
Non-controlling
interests Total equity Total other
components of equity
Treasury stock, at cost
Total
Balance at April 1, 2013 ¥3,412 ¥(2,617) ¥68,008 ¥3,797 ¥71,805
Net income 15,592 887 16,479
Other comprehensive income (Note 22) 3,130 3,130 490 3,620
Dividends paid (Note 19) (1,644) (171) (1,816) Acquisition (disposal) of non-controlling
interests, net
Acquisition of treasury stock (Note 18) (45) (45) (45)
Disposal of treasury stock (Note 18) 1 1 1 Transfer from other components of equity to
retained earnings (106)
Balance at March 31, 2014 ¥6,436 ¥(2,661) ¥85,042 ¥5,003 ¥90,045
Years Ended March 31, 2015 and 2014
Consolidated Statements of Cash Flows
Millions of Yen
2015 2014
Cash lows from operating activities:
Net income ……… ¥17,539 ¥16,479 Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization ……… 3,403 3,236 Impairment losses ……… 1,435 1,596 Income tax expense ……… 2,266 1,102 Financial income and expenses ……… (16) (473) Share of proits of investments accounted for using the equity method ……… 40 — Increase in trade and other receivables ……… (4,115) (11,725) Increase in inventories ……… (2,630) (9,447) Increase in trade and other payables ……… 2,391 14,881 Decrease in retirement and severance beneits and provisions ……… (8,745) (692) Other ……… (1,527) 3,739 Subtotal ……… 10,041 18,696 Interest received ……… 254 268 Dividends received ……… 66 69 Interest paid ……… (20) (31) Income taxes paid ……… (2,596) (1,569) Payments for extra retirement beneits ……… — (1,789) Net cash provided by operating activities ……… 7,745 15,644
Cash lows from investing activities:
Payments into time deposits ……… (4,235) (4,063) Proceeds from withdrawal of time deposits ……… 2,661 3,672 Purchase of property, plant and equipment ……… (2,894) (7,562) Proceeds from sale of property, plant and equipment ……… 216 3,342 Purchase of intangible assets ……… (429) (522) Purchase of other inancial assets ……… (1) (151) Proceeds from sale of other inancial assets ……… 43 328 Acquisition of investments accounted for using the equity method ……… (208) — Payments of long-term loans receivable ……… (1,894) (28) Other ……… 41 262 Net cash used in investing activities ……… ¥(6,700) ¥(4,722)
Annual Report 2015
21
Millions of Yen2015 2014
Cash lows from inancing activities:
Increase (decrease) in short-term debt, net ……… ¥ 2,601 ¥ (155) Payments on long-term debt ……… (39) (20) Dividends paid to owners of the parent(Note 19) ……… (2,874) (1,644) Dividends paid to non-controlling interests ……… (483) (173) Increase in treasury stock ……… (38) (43) Purchase of shares of consolidated subsidiaries from non-controlling interests ……… (12,522) — Other ……… 77 — Net cash used in inancing activities ……… (13,278) (2,035)
Efect of exchange rate changes on cash and cash equivalents ……… 1,954 849
Net increase (decrease) in cash and cash equivalents ……… (10,279) 9,736
Cash and cash equivalents at beginning of the year ……… 57,149 47,413
Cash and cash equivalents at end of the year (Note 5) ……… ¥46,870 ¥57,149
Year Ended March 31, 2015
Notes to Consolidated Financial Statements
As the Group meets the requirements of a “Speciied Company” pursuant to Article 1-2 of the Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministry of Finance of Japan No. 28 of 1976), the consolidated inancial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as permitted by the provision of Article 93 of the Ordinance. These are the irst consolidated inancial statements of the Group prepared in accordance with IFRS. The date of transition to IFRS (the transition date) is April 1, 2013, and the Group applied IFRS 1 “First-time Adoption of International Financial Reporting Standards” (IFRS 1). (See note 30.)
Consolidated inancial statements of the Group have been prepared on a historical cost basis, except for assets and liabilities measured at fair value, inancial instruments measured at fair value through proit or loss (FVTPL), inancial instruments at fair value through other comprehensive income (FVTOCI) and assets and liabilities associated with deined beneit plans.
The consolidated inancial statements are presented in millions of Japanese yen.
Management of the Company has made a number of judgments, estimates and assumptions relating to the application of accounting policies, reporting of revenues and expenses and assets and liabilities in the preparation of these consolidated inancial
statements. Actual results could difer from those estimates.
Estimates and assumptions are continually evaluated. The efect of a change in accounting estimates, if any, is recognized in the reporting period in which the change was made and in future periods.
The information regarding judgments used in applying accounting policies that could have a material efect on consolidated inancial statements of the Company is included in the following notes: ・note 3. a Basis of Consolidation
・note 3. d Financial Instruments and note 24. Financial Instruments and Related Disclosures
The information regarding uncertainties arising from assumptions and estimates that could result in material adjustments in the subsequent consolidated inancial statements is included in the following notes:
・note 3. h Impairment of Non-inancial Assets and note 12. Loss on Impairment
・note 3. j Retirement and Severance Beneits and note 17. Employee Beneits
・note 3. k Provisions, note 3. l Contingencies, note. 16. Provisions and note 28. Contingencies
・note 3. m Revenue Recognition and note 7. Construction Contracts
・note 3. n Income Taxes and note 14. Deferred Taxes and Income Taxes
Hitachi Kokusai Electric Inc. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The address of the Company's registered head oice is 4-14-1 Sotokanda, Chiyoda-ku, Tokyo. The Company's consolidated inancial statements for the year ended
March 31, 2015, comprise the accounts of the Company and its subsidiaries and the Company’s interests in associates (the Group). The Group has the following two segments: “Video and Wireless Network Solutions” and “Eco-and Thin Film Processing Solutions.”
1. Nature of Operations
Annual Report 2015
23
3. Summary of Signiicant Accounting Policies
a. Basis of Consolidation (1) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has risks or rights to variable returns from its involvement with the entity and has the ability to use its power over the entity to afect the amount of the variable returns.
The Group consolidates all subsidiaries from the date on which the Group acquires control until the date on which the Group loses control.
Subsidiaries’ inancial statements are adjusted, if necessary, when their accounting policies difer from those of the Group.
Intercompany balances and transactions are eliminated in consolidation. Unrealized proit and loss included in assets resulting from transactions within the Group is eliminated.
The reporting date for Hitachi Kokusai Electric (Shanghai) Co., Ltd. and Hitachi Kokusai Linear Electronic Equipments S/A is December 31 and made additional inancial reports as of and for the year ended March 31, to be used for consolidated accounts. The inancial statements of other subsidiaries are prepared using the same reporting period as the parent company.
Changes in ownership interests in subsidiaries without a loss of control are accounted for as equity transactions. On the other hand, changes in ownership interests in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, non-controlling interests, and other components of equity attributable to the subsidiaries.
(2) Associates (Equity Method)
Associates are entities over which the Group has the ability to exercise signiicant inluence over their operational and inancial policies, but which are not controlled by the Group.
Investments in associates are accounted for using the equity method. The consolidated
inancial statements of the Group include changes in proit or loss and other comprehensive income (OCI) of these associates from the date on which the Group obtains signiicant inluence to the date on which it loses signiicant inluence. The inancial statements of the associates are adjusted, if necessary, when their accounting policies difer from those of the Group.
b. Cash and Cash Equivalents
Cash and cash equivalents are readily convertible into cash and highly liquid investments with insigniicant risk of changes in value, with original maturities of three months or less from the date of acquisition.
c. Foreign Currency Translation
The consolidated inancial statements are presented in Japanese yen, which is the Company’s functional currency.
(1) Foreign Currency Translations
Foreign currency translations are converted into the functional currency of each company using the exchange rate prevailing at the transaction date or a rate that approximates such rate. Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency using the exchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from the currency conversion and settlement are recognized in proit or loss, except where gains and losses on assets or liabilities are recognized in OCI, foreign exchange efects relating to such assets or liabilities are also recognized in OCI, and presented in other components of equity.
(2) Foreign Operations
d. Financial Instruments
The Group has adopted IFRS 9 “Financial Instruments” (IFRS 9) (issued in November 2009, amended in October 2010).
(1) Non-derivative Financial Assets
The Group initially recognizes trade and other receivables on the date such receivables arise. All other inancial assets are initially recognized at the transaction date, that the agreement becomes efective.
The Group derecognizes inancial assets when contractual rights to cash lows from the inancial assets expire or when the contractual rights to receive cash lows from the inancial assets are transferred in transactions where the risks and economic rewards of owning the inancial assets are substantially transferred.
The classiication and measurement model of non-derivative inancial assets is summarized as follows:
Financial Assets Measured at Amortized Cost Financial assets are subsequently measured at amortized cost when they meet the following requirements:
・The inancial asset is held in accordance with the Company's business model whose objective is to hold the asset to collect contractual cash lows.
・The contractual terms of the inancial asset provide cash lows on speciied dates that are solely payments of principal and interest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The carrying amount of inancial assets measured at amortized cost is subsequently measured using the efective interest method. Interest accrued on inancial assets measured at amortized cost is included in interest income in the consolidated statements of proit or loss.
maintaining and strengthening business relations with the investees. These equity instruments are designated by irrevocably as FVTOCI inancial assets at initial recognition. They are initially and subsequently measured at fair value, and the changes in fair value are recognized in OCI. The cumulative amount of OCI is recognized in equity as other components of equity. Dividends on equity instruments designated as FVTOCI are recognized in proit or loss, except where they are considered to be a return of the investment.
FVTPL Financial Assets
Equity instruments not designated as FVTOCI inancial assets and debt instruments not classiied as inancial assets measured at amortized cost are classiied as FVTPL inancial assets. These instruments are subsequently measured at fair value and the changes in fair value are recognized in proit or loss.
Impairment of Financial Assets Measured at Amortized Cost
On a regular basis, but no less frequently than at the end of each quarterly reporting period, the Group evaluates inancial assets measured at amortized cost for impairment. Impairment is deemed to have occurred when there is an objective evidence of impairment resulting from one or more events occurring after initial recognition and when the estimated future cash lows from the inancial assets or group of assets can be reliably measured. Objective evidence of impairment includes historical credit loss experience, existence of overdue payments, extended payment terms, negative evaluation by third party credit rating agencies, and deteriorated inancial position and operating results, such as a capital deicit.
Impairment losses are estimated by future cash lows discounted by the initial efective interest rate or observable market price.
