Sales by Segment Total ¥167,365 million Total ¥167,365 million Japan ¥90,756 million
Note: The sales are calculated based on the customers’ locations. Other, Adjustments
and eliminations ¥911 million
Eco- and Thin Film Processing ¥76,298 million U.S.A. ¥14,252 million Korea ¥20,202 million Taiwan ¥20,565 million
Europe and others ¥5,199 million Other Asia ¥16,391 million 53.9% 54.2% 9.8% 9.8% 12.1% 12.3% 8.5% 3.1% 3.1% 45.6% 0.5% 0.5% 2012
（Millions of Yen） （Millions of Yen） （Millions of Yen）
2013 2014 2012 2013 2014 2012 2013 2014
0 50,000 100,000 150,000 200,000 2,000 4,000 6,000 8,000 10,000 0 50,000 100,000 150,000 200,000
Sales 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.
Net sales Operating income
Net income Capital investmentDepreciation 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 Balance Sheet... 14
Consolidated Statement of Income ... 16
Consolidated Statement of Comprehensive Income ... 17
Consolidated Statement of Changes in Net Assets ... 18
Consolidated Statement of Cash Flows ... 21
Notes to Consolidated Financial Statements... 23
Independent Auditor’s Report ... 47
Corporate Data / Investor Information ... 48
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
Video and Wireless Network ¥90,156 million
（Millions of Yen）
15,000 20,000
0 5,000 10,000
2012 2013 2014
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Years Ended March 31, 2014
Consolidated Financial Highlights
Sales by Segment Total ¥167,365 million Total ¥167,365 million Japan ¥90,756 million
Note: The sales are calculated based on the customers’ locations. Other, Adjustments
and eliminations ¥911 million
Eco- and Thin Film Processing ¥76,298 million U.S.A. ¥14,252 million Korea ¥20,202 million Taiwan ¥20,565 million
Europe and others ¥5,199 million Other Asia ¥16,391 million 53.9% 54.2% 9.8% 9.8% 12.1% 12.3% 8.5% 3.1% 3.1% 45.6% 0.5% 0.5% 2012
（Millions of Yen） （Millions of Yen） （Millions of Yen）
2013 2014 2012 2013 2014 2012 2013 2014
0 50,000 100,000 150,000 200,000 2,000 4,000 6,000 8,000 10,000 0 50,000 100,000 150,000 200,000
Sales 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.
Net sales Operating income
Net income Capital investmentDepreciation 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 Balance Sheet... 14
Consolidated Statement of Income ... 16
Consolidated Statement of Comprehensive Income ... 17
Consolidated Statement of Changes in Net Assets ... 18
Consolidated Statement of Cash Flows ... 21
Notes to Consolidated Financial Statements... 23
Independent Auditor’s Report ... 47
Corporate Data / Investor Information ... 48
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
Video and Wireless Network ¥90,156 million
（Millions of Yen）
15,000 20,000
0 5,000 10,000
2012 2013 2014
Contents
Profile
147,184 3,397 3,434 152,065 8,314 5,120 138,801 167,365 3,147 2,681 3,238 9,596 152,520 188,083 6,130 6,165 16,976 15,326 0Millions of Yen Thousands of U.S. Dollars
For the Year Ended March 31: 2014 2013 2012 2014
Net sales ¥167,365 ¥138,801 ¥147,184 $1,626,166
Operating income 16,976 6,130 8,314 164,944
Net income 15,326 6,165 5,120 148,912
Cash dividends 2,877 1,439 1,234 27,954
Capital investment 9,596 2,681 3,434 93,237
Depreciation 3,238 3,147 3,397 31,461
Research and development costs 11,205 11,158 12,596 108,871
Millions of Yen Thousands of U.S. Dollars
At Year-End: 2014 2013 2012 2014
Total assets ¥188,083 ¥152,520 ¥152,065 $1,827,468
Total net assets 91,101 85,162 78,243 885,163
Yen U.S. Dollars
Per Share Data: 2014 2013 2012 2014
Net income ¥149.13 ¥ 59.97 ¥ 49.80 $1.45
Cash dividends 28.00 14.00 12.00 0.27
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 ¥102.92 to $1, the rate of exchange at March 31, 2014.
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.
In iscal 2013, the overseas market environment surrounding Hitachi Kokusai Electric Inc. and its consolidated subsidiaries (the “Group”) saw economic growth stagnate in developing countries, even after the economies in developed countries had shown upward trends following the alleviation of credit uncertainties in Europe and the smoothing out of iscal problems in the United States. In contrast, there was robust demand in Japan’s public works sector due to economic promotion measures taken by the government.
In this business environment, the Group maintained the irm business structure realized through a raft of measures implemented by the previous iscal year. These measures had included the reforms to the business structure, such as the reorganization of domestic Group companies and the integration of business bases. The Group thereby engaged in vigorous business activities by expanding and promoting new business as well as by means of its customer-oriented sales proposal eforts.
With regard to the business conditions in the iscal year 2013, the Group beneited from the recovery in the semiconductor market, and its Eco- and Thin Film Processing segment, with the vigorous sales activities, recorded a strong performance. Thus, orders received in iscal 2013 totaled ¥194,527 million, an increase of
37.1% compared with iscal 2012. Net sales rose 20.6%, to ¥167,365 million. In accordance with the increase in net sales, operating income and ordinary income both rose year on year, the former to ¥16,976 million (an increase of 176.9%), the latter to ¥17,394 million (an increase of 169.2%). Net income for iscal 2013 amounted to ¥15,326 million, an increase of 148.6%, compared with the previous iscal year.
Overall, the global economy is gradually recovering against a backdrop of robust economies in developed countries, and the Japanese economy is also expected to continue its recovery due to the government’s continued economic promotion measures. However, the domestic and overseas markets are undergoing radical changes, and competition is set to intensify.
Based on such a business environment, the measures set out below will be implemented in the Video and Wireless Network segment and in the Eco- and Thin Film Processing segment. These measures will be combined with the continued promotion of cost structure reform through the Hitachi Smart Transformation Project being promoted across the entire Hitachi Group toward achieving the targets of the Medium-term Management Plan “HK-AV 10,” ＊ the
inal year of which will be the next iscal year (iscal 2015, ending March 31, 2016).
1. Business Results
for the Fiscal Year Ended
March 31, 2014 (Fiscal 2013)
Video and Wireless Network
(1) Expansion of Business in Global Market
With regard to its broadcasting system products, the Group is working to expand its sales channels by collaborating with local partners across the world’s regions and by M&A. In addition, the Group is expanding its local production for local consumption strategy by strengthening Brazil’s position as its production base in global business.
As for its wireless and surveillance system products, the Group will expand its business by reinforcing the cooperation with the Hitachi Group, which aims to grow its social innovation business. In conjunction with these, the Group will also actively cultivate new businesses with diferentiating technologies, such as advanced video surveillance systems.
(2) Cultivation of Business in Domestic Market With regard to disaster prevention administrative and land mobile radio system products, the Group will work to maintain and broaden its share of the market through sales proposal activities based on market-in approach. In conjunction with these activities, in the ield of solution services, the Group will strategically promote the provision of community-based, high value-added solution services that fulill customer needs and will ultimately reorganize the segment’s entire business portfolio.
(3) Launch of the Next-Generation Business
In anticipation of a growing need for further advanced solution services, including those with Big Data or cloud computing, the Group will proactively promote the launch of a solutions business for the next generation by collaborating with the Hitachi Group.
Eco- and Thin Film Processing
(1) Development of the Next-Generation Business To win continuously in a market that is constantly undergoing rapid change, such as in device miniaturization and new types of ilm, the Group will promote the development of strategic products with high-quality and high-productivity—compatible with the next generation and the generation after that—by enhancing its joint development with customers.
(2) Service Business Upgrade
In addition to expanding transnational services by the ofering of locally oriented services, including the strengthening of support for local R&D, the Group will strengthen its product life cycle business by formulating service strategies at the product development stage and work to upgrade its service business.
(3) Strengthening of Earnings Structure
By strengthening collaboration with local partners and sharing risks with suppliers, the Group will establish a production system capable of lexibly responding to the drastic changes in the cyclical demand in the semiconductor market and work to strengthen its earning structure.
Based on its corporate statement of “Strives to realize a society of security, safety and happiness, creates value by applying advanced technologies and pushes the boundaries of tomorrow,” the Group will in the years to come aim to become a “social innovator trusted by customers and creating new value in the next era” as a member of the Hitachi Group.
＊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
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
Financial Solution Systems
Financial Information Display Systems Multimedia Information Display Systems
⃝Broadcasting Systems Tapeless Servers Systems Transmitter Systems
Short Wave Digital Radio Broadcasting Systems Receiver Systems
Broadcasting Cameras Area One-seg Systems
V-Low Multimedia Broadcasting Systems Home Receiver Equipments
CATV System
⃝ Surveillance Cameras and Video Processing Systems Wide-area Network Surveillance Systems
Plant Monitoring Systems Security Surveillance Systems Industrial Video Cameras 40,000
80,000 120,000
2012
86,125
2,880
2013 81,129
302 0
（Millions of Yen）
0 2,000 4,000 6,000
2014 4,724 90,156 Net sales Operating income
53.9
%10.0
%¥90,156
million
Net sales and operating income
Share of net sales Overseas sales ratio
Against the backdrop of robust investment in public works, this segment deployed enterprising sales activities through a sales expansion project in the ields of, for example, disaster prevention administrative radio systems and radio communication systems for ire departments.
As a result, this segment’s orders received came to ¥97,685 million, an increase of 8.5% compared with the previous iscal year, and net sales totaled ¥90,156 million, a year-on-year increase of 4.7%. In addition to the increase in net sales, operating income amounted to ¥4,724 million, a year-on-year increase of 64.0%, as a result of promoting cost reduction and the business structure reforms carried out in the previous iscal year.
Radio Communication System
for Disaster Preventive Administration Monitor CameraHD-SDI-type Broadcasting HDVideo Camera
■
■
■ 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
Amid the strong trend for investment in equipment on the part of semiconductor manufacturers that accompanied the recovery on the semiconductor market, this segment deployed sales activities by means of proactive product and service proposals that fully addressed customer needs.
As a result, this segment’s orders received came to ¥95,964 million, an increase of 87.8% compared with the previous iscal year, and net sales totaled ¥76,298 million, a year-on-year increase of 46.9%. In accordance with the increase in net sales, operating income amounted to ¥12,800 million, a year-on-year increase of 289.4%.
Batch Thermal Process Equipment Batch SiGe/Si Epitaxial Growth Equipment Single Wafer Plasma Nitridation/Oxidation Equipment 65,330
0 20,000 40,000 60,000 80,000
0 4,000 8,000 12,000 16,000
2012 8,293
2013 51,945
3,287
2014 76,298
12,800 （Millions of Yen） Net sales Operating income
45.6
%88.0
%¥76,298
million
Net sales and operating income
Topics
The Company has invested in Comark Communications LLC (“COMARK”), which develops, manufactures, and sells digital terrestrial broadcasting transmitters in the U.S.
Digital terrestrial broadcasting started in the U.S. in 1998, which is more than a decade ago. The current leet of digital television (“DTV”) transmitters is expected to be replaced or upgraded in the near future. In addition, the U.S. government plans to repack the UHF DTV frequency band in 2016 to secure new frequencies for wireless broadband communications. This will also increase the likelihood of a growing demand for DTV transmitter replacement and upgrades. Furthermore, broadcasting organizations in Latin America, the Middle East, and Asia are expected to continue their investment in equipment as digital terrestrial broadcasting spreads across these regions.
COMARK has provided competitive products and been extremely successful in the sale of high-power TV transmitters in the U.S. and other key international markets. COMARK has also been engaged in the development, manufacture, sale, and provision of maintenance support and services targeted for major broadcasting organizations in the U.S. The Company
About Comark Communications LLC
Trade name Comark Communications LLC
Year founded 1978
Head oice location Southwick, Massachusetts, USA
Representative CEO: Richard E. Fiore, Jr.
Description of business
Develops, manufactures, sells, and provides maintenance services for digital terrestrial broadcasting transmitters, etc.
has invested in COMARK with the aim of enhancing its transmitter product lines ranging from low power to high power, fully entering the U.S. market through the sales channels of COMARK in the U.S., and accelerating the pace at which it increased its global market share.
The Company has established the goal of increasing the ratio of overseas sales to consolidated sales for this segment to 20% or more by FY 2015, aiming to become one of the world's leading providers of video and wireless network solutions. At the same time, the Company has been expanding its broadcasting equipment business on a global scale through the acquisition of all of the shares of a Brazilian transmitter manufacturer currently known as Hitachi Kokusai Linear Equipamentos Eletrônicos S/A in 2011. Steps have also been taken to set up an overseas subsidiary in Turkey, Hitachi Kokusai Electric Turkey Elektronik Ürünleri Sanayi ve Ticaret A.Ş. in 2013.
Leveraging the sales channels of COMARK, The Company will engage in joint sales activities in the U.S. market, and will collaborate in the development of transmitters as well as in the sales of conventional products and aggressively increase its market share in the U.S., Latin America, the Middle East, and Asia.
■
■ Video and Wireless Network June 2014
The Company received the “Excellent Performance Award,” which is given to the excellent suppliers by Taiwan Semiconductor Manufacturing Company Limited (“TSMC”), the largest dedicated semiconductor foundry.
This award was given to 9 out of hundreds of suppliers of TSMC in 2013 that had demonstrated excellence in all ields including quality, performance, delivery date management and after-sales service.
The Company and its group companies had been jointly making eforts to improve quality and services for the supply of deposition and thermal ilm
manufacturing equipment. These eforts had led us to receive this award. We will unite and continue making eforts to bring more satisfaction to the customers.
The Company has been recognized as one of 18 companies receiving Intel Corporation's Preferred Quality Supplier (PQS) award for their performance in 2013. This award is given to suppliers that had demonstrated 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 received this award for its signiicant contributions providing Intel with deposition and thermal ilm manufacturing equipment, which deemed essential to Intel's success.
The PQS award is part of Intel's Supplier Continuous Quality Improvement (SCQI) program that encourages suppliers to strive for excellence and continuous improvement. To qualify for PQS status, suppliers must score satisfactorily on a report card that assesses performance and ability to meet cost, quality, availability, technology, environmental, social and governance goals. Suppliers must also achieve 80 percent or greater on a challenging improvement plan and demonstrate solid quality and business systems.
This is the 10th straight quality award that the Company received from Intel. It is a great honor to have received the 2013 PQS award in recognition of the commitment to the partnership with Intel and to continuously improving quality in a fast changing marketplace for semiconductor manufacturing. We will continue making eforts to obtain even more trust from our customers.
“PQS award” trophy Excellent Performance Award ■
■ Eco- and Thin Film Processing December 2013
■
■ Eco- and Thin Film Processing April 2014
Hitachi Kokusai Electric Received the
“Excellent Performance Award” from TSMC
Hitachi Kokusai Electric Received the
Corporate Governance
Basic Structure
The Company has adopted a “Company with Committees” system as a part of eforts to ensure timely decision making as well as transparent management. The Company places every emphasis on securing the adequacy, relevance and eicacy of its operations as the means to promote management reform. To this end, the Company maintains a Board of Directors, whose predominant members are external appointments. The Board of Directors deter mines the Company’s basic management policies and delegates decision-making authority to Executive Oicers. Working in unison with each committee, the Board of Directors serves as the Company’s principal oversight authority, supervising Executive Oicers in the execution of their duties. Within this framework, Outside Directors remain independent from the Company, actively providing their objective and unbiased opinions. In this regard, Outside Directors fulill an important role and function in further enhancing the transparency and soundness of the Company’s management.
An overview of the current status of the Company’s corporate governance structure and systems 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 important matters as they relate to the Company’s business operations in an efort to accelerate the decision-making process. While individual Executive Oicers are provided with decision-making authority for their particular areas of responsibility, in accordance with the segregation of duties determined by the Board of Directors, Executive Oicers’ Meeting comprising all Executive Oicers are held to deliberate on matters of major importance. The Executive Oicers’ Meeting is designed to facilitate discussion that incorporates wide-ranging and diverse input and opinions prior to a decision being made.
The type and details of all other matters for determination by Executive Oicers are deined in
the Company’s internal rules and regulations. All necessary procedures are taken as and when required in accordance with these internal rules and regulations.
(2) The Monitoring and Audit Functions
In collaboration with such internal organizations as the Nominating, Audit and Compensation Committees, the Board of Directors monitors the overall manage ment of the Company including the execution of duties.
In addition, the activities of the Board of Directors and each committee are supported by their own departments. A designated specialist department has been established particularly for the Audit Committee to ensure that audits are conducted in an appropriate and 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 overall management of the Company. Accordingly, the Board of Directors receives reports from the Nominating, Audit and Compensation Committees in connection with the status of each committee’s activities. At the same time, the Board of Directors receives reports directly from each Executive Oicer outlining details of the execution of Executive Oicer duties.
b. The Nominating Committee
c. The Audit Committee
In addition to determining the Company’s audit policies and plans, the Audit Committee engages in follow up activities to ensure that a designated member of the Audit Committee has conducted each audit in accordance with subject audit policies and plans. Complementing these initiatives aimed at securing the eicacy of each audit, the Audit Committee also promotes and monitors the sharing of information and other collaborative measures among the Internal Audit Department, Accounting Auditor and Audit & Supervisory Board Members of Group subsidiaries.
d. The Compensation Committee
The Compensation Committee formulates the basic policy for determining the compensation be paid to the Company’s Directors and Executive 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 Executive Oicers, formulates internal rules and regulations as well as management and operating standards and implements internal audits on a regular basis with respect to all risks associated with the management and control of the Company’s business activities including compliance, information security, the environment, disaster, quality assurance and exports. Drawing on deliberations undertaken at and reports tabled to Executive Oicer and other meetings, Executive Oicers work diligently to identify potential additional new risks and to formulate preventive measures.
In connection with its internal reporting systems, the Company has adopted a structure that is supported by legal counsel. Every efort is also made to secure the widest possible coverage, with internal reporting systems extending across the Company’s full- and part-time employees as well as the employees of Group companies and business partners. Through these means, the Company is endeavoring to ensure an open and fair internal reporting 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
Board of Directors Office Decision-making and Supervision
Executive Officers, Executive Officers’ Meeting Chief Executive Officer
Executive Officer
Appointment and Dismissal
Audit Committee
Internal Auditing Office
Accounting Auditor Appointment and Dismissal
Directors and Executive Oicers
Makoto Ebata
Chairman of the Board Outside Director
Member of Nominating Committee, Audit Committee and Compensation Committee
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
Yutaka Saito
Outside Director
Member of Nominating Committee and Compensation Committee
Yoshifumi Nomura
Member of Audit Committee
■ President and Chief Executive Oicer
Manabu Shinomoto
Supervising all business activities
■ Senior Vice President and Executive Oicer
Hideyuki Hagiwara
General Manager of the Video & Communication Systems Division, General Manager of the Tokyo Works
Takeo Kawano
Responsible for the Finance & Accounting and the Human Resources & Corporate Administration
■ Vice President and Executive Oicer
Nobuo Owada
General Manager of the Semiconductor Equipment Division
Shigeru Kimura
General Manager of the Strategic Planning Management Division, and responsible for research & development, sales and corporation moralAkio Ito
Deputy General Manager of the Video & Communication Systems Division (responsible for the global business) and responsible for HiKQ Innovation Promotion
Yoshinao Arai
General Manager of the Information Technology Management Division, General Manager of the MONOZUKURI Management Division and responsible for procurement
■ Executive Oicer
Shoichiro Izumi
Deputy General Manager of the Semiconductor Equipment Division
Fumiyuki Kanai
Deputy General Manager of the Semiconductor Equipment Division, General Manager of the Toyama WorksSatoru Nakamura
Responsible for the promotion of South America business
Kiyoshi Komatsu
General Manager of the Sales Management Division, Video & Communication Systems Division and responsible for sales
Directors (As of June 23, 2014)
Global Network
Overseas Network
Domestic Network
（Major business centers of Group companies）
Research and Development
■
■Eco- and Thin Film Processing
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 2013, the Group undertook R&D expenditures of ¥11,205 million, which accounts for 6.7% 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.
The Group is developing image transmission technologies such as next generation wireless broadband systems and ultra-low latency codec, high compression encoding, and video analysis technologies such as automatic compensation and intruder detection. The Group will challenge the possibilities of system technologies by enhancing our strong points of wireless and video system technologies, and combining those strengths.
Driven by growth and development in smartphones, tablets, and similar devices, the semiconductor market is projected to expand going forward. At the same time, the demand for devices that deliver higher levels of sophistication and integration is increasing. The Group is taking up the challenge of developing advanced technologies that accommodate innovative techniques in such areas as new ilm-type manufacturing equipment, miniature devices, and 3D structure while delivering
high quality and productivity. 0
4,000 8,000 12,000 16,000 2009 15,028 2010 14,172 2011 12,596 2012 11,158 2013 11,205
（Millions of Yen）
Total R&D Costs
Total ¥11,205 million
Eco- and
Thin Film Processing ¥5,497 million
50.9% 49.1%
Video and Wireless Network ¥5,708 million
R&D Costs by Segment
■
■Video and Wireless Network
Financial Review
Financial Review
In the iscal year under review, the Group reports sales of ¥167,365 million. According to analysis by segment, the sales of the Video and Wireless Network increased ¥4,031 million (up 4.7%) from the previous iscal year to ¥90,156 million, due to steady demand in the public works ield. The sales of Eco- and Thin Film Processing increased ¥24,353 million (up 46.9%) from the previous iscal year to ¥76,298 million, mainly because the recovery in semiconductor market contributed the steady equipment investment by semiconductor manufacturers.
Cost of sales for the iscal year under review increased ¥14,867 million compared with the previous iscal year to ¥116,496 million. Their ratio to net sales decreased 3.6%.
Meanwhile, selling, general and administrative expenses for the iscal year under review increased ¥2,851 million compared with the previous iscal year to ¥33,893 million, mainly due to an increase in personnel expenses. Their ratio to net sales decreased 2.1% compared with the previous iscal year.
Non-operating proit for the iscal year under review increased ¥219 million compared with the previous iscal year to ¥979 million. Meanwhile, non-operating expenses increased ¥132 million compared with the previous iscal year to ¥561 million.
Financial Position
Total assets as of March 31, 2014 stood at ¥188,083 million, an increase of ¥35,563 million compared with the end of the previous iscal year. Total current assets increased ¥34,699 million compared with the previous iscal year to ¥157,808 million. It was mainly attributable to the increase in notes and accounts receivables of ¥13,315 million, increase in inventories (inished products, work in process, and raw materials and supplies) of ¥8,461 million, and increase in cash and deposits of ¥5,529 million. Total non-current assets increased ¥864 million compared with the previous iscal year to ¥30,275 million.
Total liabilities as of March 31, 2014 stood at ¥96,982 million, an increase of ¥29,624 million
compared with the end of the previous iscal year. This was mainly due to an increase in notes and accounts payables of ¥15,243 million and an increase in liabilities for retirement beneits of ¥27,589 million despite a decrease in liability for employees’ retirement beneits of ¥18,001 million due to an early application of Accounting Standard for Retirement Beneits.
Total net assets came in at ¥91,101 million as of March 31, 2014, ¥5,939 million higher than a year earlier.
Cash Flows
Cash and cash equivalents (“funds”) at the end of this iscal year stood at ¥57,147 million, up ¥9,993 million compared with the end of the previous iscal year. The major movements of cash lows in each activity and the factors for this iscal year are as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥15,657 million in the iscal year under review (a decrease of ¥2,245 million during the previous iscal year). This was mainly because factors to increase funds such as income before income taxes and minority interests of ¥17,708 million and increase in notes and accounts payables of 14,782 million exceeded factors to decrease funds such as increase in notes and accounts receivables of ¥12,985 million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥4,720 million in the iscal year under review (an increase of ¥5,967 million during the previous iscal year). This was mainly attributable to the purchase of property, plant and equipment of ¥7,562 million and proceeds from sales of property, plant and equipment of ¥3,342 million.
Cash Flows from Financing Activities
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries March 31, 2014
Consolidated Balance Sheet
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
ASSETS 2014 2013 2014
CURRENT ASSETS:
Cash and deposits (Notes 3 and 12) ……… ¥ 14,807 ¥ 9,278 $ 143,869
Deposits with Hitachi Group (Notes 3, 12 and 16) ……… 42,812 37,976 415,974
Receivables (Notes 12, 13, 14 and 16):
Trade notes ……… 2,219 972 21,560
Trade accounts ……… 52,672 40,571 511,776
Unconsolidated subsidiaries and ailiated companies ……… 66 99 641
Other ……… 2,299 1,386 22,338
Allowance for doubtful accounts ……… (213) (118) (2,070)
Inventories (Note 5) ……… 34,812 26,351 338,243
Deferred tax assets (Note 8) ……… 6,973 5,079 67,752
Prepaid expenses and other current assets ……… 1,361 1,515 13,224
Total current assets ……… 157,808 123,109 1,533,307
PROPERTY, PLANT AND EQUIPMENT:
Land ……… 4,874 4,706 47,357
Buildings and structures ……… 33,324 38,307 323,785
Machinery and equipment ……… 17,920 17,905 174,116
Furniture and ixtures ……… 19,108 20,467 185,659
Construction in progress ……… 421 2,930 4,091
Total ……… 75,647 84,315 735,008
Accumulated depreciation ……… (51,383) (63,773) (499,252)
Net property, plant and equipment ……… 24,264 20,542 235,756
INVESTMENTS AND OTHER ASSETS:
Goodwill ……… 341 1,244 3,313
Investment securities (Notes 4 and 12) ……… 1,530 1,516 14,866
Investments in unconsolidated subsidiaries and ailiated companies ……… 3 52 29
Long-term loans receivable ……… 66 103 641
Deferred tax assets (Note 8) ……… 1,020 1,905 9,911
Other intangible assets ……… 998 1,648 9,697
Other assets ……… 2,424 2,700 23,553
Allowance for doubtful accounts ……… (371) (299) (3,605)
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
LIABILITIES AND NET ASSETS 2014 2013 2014
CURRENT LIABILITIES:
Short-term bank loans payable (Note 12) ……… ¥ 424 ¥ 551 $ 4,120
Payables (Notes 12, 14 and 16):
Trade notes ……… 616 528 5,985
Trade accounts ……… 39,545 24,371 384,230
Unconsolidated subsidiaries and ailiated companies ……… 52 71 505
Other ……… 4,190 4,574 40,711
Income taxes payable ……… 1,276 870 12,398
Accrued expenses ……… 9,604 10,908 93,315
Advances received ……… 10,673 3,610 103,702
Provision for product warranties ……… 1,501 1,101 14,584
Provision for loss on construction contracts ……… 51 22 496
Other current liabilities ……… 614 704 5,966
Total current liabilities ……… 68,546 47,310 666,012
LONG-TERM LIABILITIES:
Long-term debt (Note 12) ……… 111 165 1,079
Liabilities for retirement beneits (Note 6):
Employees ……… — 18,001 —
Directors and executive oicers ……… 98 113 952
Net deined beneit liability ……… 27,589 — 268,063
Deferred tax liabilities (Note 8) ……… 349 229 3,391
Asset retirement obligations ……… 66 79 641
Other long-term liabilities ……… 223 1,461 2,167
Total long-term liabilities ……… 28,436 20,048 276,293
NET ASSETS (Notes 7 and 15):
Common stock—authorized, 400,000,000 shares;
issued, 105,221,259 shares in 2014 and 2013 ……… 10,058 10,058 97,726
Capital surplus ……… 26,202 26,202 254,586
Retained earnings ……… 57,868 48,118 562,263
Treasury stock—at cost, 2,467,726 shares in 2014 and
2,431,977 shares in 2013 ……… (2,662) (2,618) (25,865)
Total shareholders’ equity ……… 91,466 81,760 888,710
Unrealized gain on available-for-sale securities ……… 254 219 2,468
Foreign currency translation adjustments ……… 373 (697) 3,624
Remeasurements of deined beneit plans ……… (5,922) — (57,540)
Total accumulated other comprehensive income ……… (5,295) (478) (51,448)
Minority interests ……… 4,930 3,880 47,901
Total net assets ……… 91,101 85,162 885,163 TOTAL ……… ¥188,083 ¥152,520 $1,827,468
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Year Ended March 31, 2014
Consolidated Statement of Income
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2014 2013 2014 NET SALES (Note 16) ……… ¥167,365 ¥138,801 $1,626,166
COST OF SALES (Note 10) ……… 116,496 101,629 1,131,908
Gross proit ……… 50,869 37,172 494,258
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 10) ……… 33,893 31,042 329,314
Operating income ……… 16,976 6,130 164,944
OTHER INCOME (EXPENSES):
Interest income (Note 16) ……… 269 144 2,614
Dividend income ……… 69 71 670
Interest expense ……… (15) (23) (146)
Foreign exchange gain ……… 171 203 1,661
Loss on disposals of property, plant and equipment ……… (155) (45) (1,506)
Gain on sales of investment securities ……… 167 45 1,623
Rent income ……… 81 81 787
Maintenance cost for idle assets ……… (91) (117) (884)
Penalty ……… (119) — (1,156)
Subsidy income ……… — 72 —
Business structure improvement expenses (Note 18) ……… (2,151) (5,242) (20,900)
Gain on sales of property, plant and equipment ……… 2,920 8,710 28,372
Loss on sales of property, plant and equipment ……… (6) (1,721) (58)
Loss on impairment of goodwill (Note 19) ……… (449) (1,155) (4,363)
Other, net ……… 41 (100) 398
Other income—net ……… 732 923 7,112
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS ……… 17,708 7,053 172,056 INCOME TAXES (Note 8):
Current ……… 2,151 1,460 20,900
Deferred ……… (542) (851) (5,266)
Total income taxes ……… 1,609 609 15,634
Income before minority interests ……… 16,099 6,444 156,422 MINORITY INTERESTS ……… 773 279 7,510 NET INCOME ……… ¥ 15,326 ¥ 6,165 $ 148,912
Yen U.S. Dollars(Note 1)
2014 2013 2014 PER SHARE OF COMMON STOCK (Notes 2.r. and 15):
Net income ……… ¥ 149.13 ¥ 59.97 $ 1.45
Cash dividends applicable to the year ……… 28.00 14.00 0.27
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Year Ended March 31, 2014
Consolidated Statement of Comprehensive Income
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2014 2013 2014 INCOME BEFORE MINORITY INTERESTS ……… ¥16,099 ¥6,444 $156,422 OTHER COMPREHENSIVE INCOME (Note 9):
Unrealized gain on available-for-sale securities ……… 35 158 340
Foreign currency translation adjustment ……… 1,638 2,214 15,916
Remeasurements of deined beneit plans ……… 1,808 — 17,567
Total other comprehensive income ……… 3,481 2,372 33,823
COMPREHENSIVE INCOME ……… ¥19,580 ¥8,816 $190,245 Total comprehensive income attributable to:
Shareholders of Hitachi Kokusai Electric Inc. ……… 18,239 7,843 177,215
Minority interests ……… 1,341 973 13,030
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Year Ended March 31, 2014
Consolidated Statement of Changes in Net Assets
Millions of Yen Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Balance at April 1, 2013 10,058 26,202 48,118 (2,618) 81,760
Cumulative efect of the changes in
accounting policies (4,141) (4,141)
Adjusted balance at beginning of year 10,058 26,202 43,977 (2,618) 77,619
Changes of items during the year
Dividends of surplus (1,644) (1,644)
Net income 15,326 15,326
Change of scope of consolidation 209 209
Purchase of treasury shares (45) (45)
Disposal of treasury shares 0 1 1
Net changes of items other than shareholders’ equity
Total changes of items during the year — 0 13,891 (44) 13,847
Balance at March 31, 2014 10,058 26,202 57,868 (2,662) 91,466
Accumulated other comprehensive income
Minority
interests Total net assets Unrealized gain
on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of deined beneit plans
(Note 6)
Total accumulated
other comprehensive
income
Balance at April 1, 2013 219 (697) — (478) 3,880 85,162
Cumulative efect of the changes in
accounting policies (7,730) (7,730) (11,871)
Adjusted balance at beginning of year 219 (697) (7,730) (8,208) 3,880 73,291
Changes of items during the year
Dividends of surplus (1,644)
Net income 15,326
Change of scope of consolidation 209
Purchase of treasury shares (45)
Disposal of treasury shares 1
Net changes of items other than
shareholders’ equity 35 1,070 1,808 2,913 1,050 3,963
Total changes of items during the year 35 1,070 1,808 2,913 1,050 17,810
Thousands of U.S. Dollars (Note 1) Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Balance at April 1, 2013 97,726 254,586 467,528 (25,437) 794,403
Cumulative efect of the changes in
accounting policies (40,235) (40,235)
Adjusted balance at beginning of year 97,726 254,586 427,293 (25,437) 754,168
Changes of items during the year
Dividends of surplus (15,974) (15,974)
Net income 148,912 148,912
Change of scope of consolidation 2,032 2,032
Purchase of treasury shares (438) (438)
Disposal of treasury shares 0 10 10
Net changes of items other than shareholders’ equity
Total changes of items during the year — 0 134,969 (428) 134,541
Balance at March 31, 2014 97,726 254,586 562,263 (25,865) 888,710
Accumulated other comprehensive income
Minority
interests Total net assets Unrealized gain
on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of deined beneit plans
(Note 6)
Total accumulated
other comprehensive
income
Balance at April 1, 2013 2,128 (6,772) — (4,644) 37,699 827,458
Cumulative efect of the changes in
accounting policies (75,107) (75,107) (115,342)
Adjusted balance at beginning of year 2,128 (6,772) (75,107) (79,751) 37,699 712,116
Changes of items during the year
Dividends of surplus (15,974)
Net income 148,912
Change of scope of consolidation 2,032
Purchase of treasury shares (438)
Disposal of treasury shares 10
Net changes of items other than
shareholders’ equity 340 10,396 17,567 28,303 10,202 38,505
Total changes of items during the year 340 10,396 17,567 28,303 10,202 173,046
Millions of Yen Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Balance at April 1, 2012 10,058 26,203 43,218 (2,607) 76,872
Cumulative efect of the changes in accounting policies
Adjusted balance at beginning of year 10,058 26,203 43,218 (2,607) 76,872
Changes of items during the year
Dividends of surplus (1,234) (1,234)
Net income 6,165 6,165
Change of scope of consolidation (31) (31)
Purchase of treasury shares (13) (13)
Disposal of treasury shares (1) 2 1
Net changes of items other than shareholders’ equity
Total changes of items during the year — (1) 4,900 (11) 4,888
Balance at March 31, 2013 10,058 26,202 48,118 (2,618) 81,760
Accumulated other comprehensive income
Minority
interests Total net assets Unrealized gain
on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of deined beneit plans
(Note 6)
Total accumulated
other comprehensive
income
Balance at April 1, 2012 61 (2,217) — (2,156) 3,527 78,243
Cumulative efect of the changes in accounting policies
Adjusted balance at beginning of year 61 (2,217) — (2,156) 3,527 78,243
Changes of items during the year
Dividends of surplus (1,234)
Net income 6,165
Change of scope of consolidation (31)
Purchase of treasury shares (13)
Disposal of treasury shares 1
Net changes of items other than
shareholders’ equity 158 1,520 1,678 353 2,031
Total changes of items during the year 158 1,520 — 1,678 353 6,919
Balance at March 31, 2013 219 (697) — (478) 3,880 85,162
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Year Ended March 31, 2014
Consolidated Statement of Cash Flows
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2014 2013 2014 OPERATING ACTIVITIES:
Income before income taxes and minority interests ……… ¥17,708 ¥7,053 $172,056
Adjustments for:
Income taxes—paid ……… (1,877) (1,586) (18,237)
Income taxes—refunded ……… 65 262 632
Depreciation and amortization ……… 3,238 3,147 31,461
Impairment of goodwill ……… 449 1,155 4,363
Business structure improvement expenses ……… 967 1,463 9,395
Loss on disposals of property, plant and equipment ……… 160 45 1,555
Gain on sales of property, plant and equipment ……… (2,950) (7,001) (28,663)
Increase in allowance for doubtful accounts ……… 232 57 2,254
Decrease in liability for employees’ retirement beneits ……… — (1,330) —
Decrease in net deined beneit liability ……… (1,023) — (9,940)
Decrease in liability for directors’ and
executive oicers’ retirement beneits ……… (15) (66) (146)
Decrease (increase) in provision for product warranties ……… 398 (625) 3,867
Increase in provision for loss on construction contracts ……… 28 16 272
Changes in assets and liabilities
Increase in notes and accounts receivables ……… (12,985) (1,412) (126,166)
Decrease (increase) in inventories ……… (7,814) 3,166 (75,923)
Decrease in other current assets ……… 151 342 1,467
Decrease (increase) in claims provable in bankruptcy and
rehabilitation ……… 16 (89) 155
Increase (decrease) in notes and accounts payables ……… 14,782 (6,306) 143,626
Increase in other current liabilities ……… 5,404 1,033 52,507
Payments for extra retirement payments ……… (1,789) (2,032) (17,382)
Other, net ……… 512 463 4,975
Total adjustments ……… (2,051) (9,298) (19,928)
Net cash provided by (used in) operating activities ……… 15,657 (2,245) 152,128 INVESTING ACTIVITIES:
Payments into time deposits ……… (4,062) (12) (39,467)
Proceeds from withdrawal of time deposits ……… 3,671 641 35,668
Purchases of investment securities ……… (150) (2) (1,457)
Proceeds from sales of investment securities ……… 327 57 3,177
Purchases of property, plant and equipment ……… (7,562) (3,268) (73,475)
Proceeds from sales of property, plant and equipment ……… 3,342 9,889 32,472
Purchase of investments in subsidiaries ……… — (36) —
Purchase of intangible assets ……… (523) (387) (5,082)
Net decrease in short-term loans receivable ……… 8 18 78
Purchase of long-term prepaid expenses ……… — (1,074) —
Other ……… 229 141 2,225
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2014 2013 2014 FORWARD ……… ¥10,937 ¥3,722 $106,267 FINANCING ACTIVITIES:
Decrease in short-term bank loans-net ……… (154) (24) (1,496)
Dividends paid to shareholders ……… (1,644) (1,234) (15,974)
Repayments of long-term debt ……… (20) — (194)
Dividends paid to minority shareholders ……… (173) (343) (1,681)
Increase in treasury stock—net ……… (44) (12) (428)
Other, net ……… (8) (11) (77)
Net cash used in inancing activities ……… (2,043) (1,624) (19,850) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS ……… 840 1,067 8,161 NET INCREASE IN CASH AND CASH EQUIVALENTS ……… 9,734 3,165 94,578 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ……… 47,154 43,989 458,162 INCREASE IN CASH AND CASH EQUIVALENTS FROM
NEWLY CONSOLIDATED SUBSIDIARY ……… 259 — 2,517 CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3) ……… ¥57,147 ¥47,154 $555,257
Hitachi Kokusai Electric Inc. and Consolidated Subsidiaries Year Ended March 31, 2014
Notes to Consolidated Financial Statements
a. Consolidation—The consolidated inancial statements as of March 31, 2014 include the accounts of the Company and its 14 (17 in 2013) subsidiaries (together, the “Group”).
Under the control or inluence 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 signiicant inluence are accounted for by the equity method.
Ailiated company accounted for by the equity method is nil (nil in 2013). Investments in the remaining two ailiated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the efect on the accompanying consolidated inancial statements would not be material.
The excess of cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the respective dates of acquisition is being amortized over 5 years by the straight-line method.
All signiicant intercompany balances and transactions have been eliminated in consolidation. All material unrealized proit included in assets resulting from transactions within the Group is eliminated.
b. Cash Equivalents—Cash equivalents deposits are short-term investments that are readily convertible into cash and that are exposed to insigniicant risk of changes in value.
Cash equivalents include time deposits, certiicate of deposits and mutual funds investing in bonds, all of which mature within three months from the date of acquisition.
c. Inventories—Finished products and work in process are stated at cost, determined by substantially on a speciic identiication method. Certain mass-produced inished products and work in process are stated at cost, determined by the moving-average method.
However, the amount stated in the balance sheet was written down to relect deterioration in proitability.
Raw materials and supplies are substantially stated at cost, determined by the moving-average method. Certain raw materials and supplies are stated at cost, determined by the speciic identiication method or the average method. However, the amount stated in the balance sheet was written down to relect deterioration in proitability.
d. Investment Securities—Investments in unconsolidated subsidiaries and ailiated The accompanying consolidated inancial statements
have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are diferent in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated inancial statements, certain reclassiications and rearrangements have been made to the consolidated inancial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassiications have been made in the comparative 2013 inancial information to conform to the classiications used in 2014.
The consolidated inancial statements are stated in Japanese yen, the currency of the country in which Hitachi Kokusai Electric Inc. (the “Company”) is incorporated and mainly operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥102.92 = $1, the rate of exchange at March 31, 2014. This translation should not be construed as a representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
companies are stated at cost determined by the moving-average method.
Available-for-sale securities, which are not classiied as either trading securities or held-to-maturity debt securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of net assets.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
e. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is computed by the straight-line method. The ranges of useful lives are from 2 to 50 years for buildings and structures, from 2 to 13 years for machinery and equipment, and from 2 to 19 years for furniture and ixtures, respectively. The useful lives for lease assets are the terms of the respective leases.
f. Long-lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate 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 lows 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 future cash lows from the continued use and eventual disposition of the asset or the net selling price at disposition.
g. Intangible 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 Group is amortized by the straight-line method over 5 years and intangible assets other than software are amortized by the straight-line method over 3
years.
h. Allowance for Doubtful Accounts—The allowance for doubtful accounts 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.
i. Retirement Beneit Plans—The Company and consolidated domestic subsidiaries have cash balance plans, unfunded lump-sum severance payment plans and deined contribution pension plans covering a certain portion of employees’ retirement beneits. Certain consolidated overseas subsidiaries have deined contribution pension plans. A premium on employees’ retirement beneits which is not included in the projected beneit obligations may be additionally provided upon retirement of an employee. The liability for employees’ retirement beneits is provided at the amounts based on the projected beneit obligations and plan assets at the balance sheet date.
The liability for directors’ and executive oicers’ retirement beneits for the Company is provided at the amount which would be required if all directors and executive oicers retired at the balance sheet date. The above liability includes a liability for directors’ retirement beneits for certain of the Company’s consolidated subsidiaries. Decisions were made at the Compensation Committee meetings held on April 24, 2008, to abolish the retirement beneit plans for all directors and executive oicers and to pay the retirement beneits for the applicable period to directors and executive oicers at the time of their retirement, subject to resolutions of the Compensation Committee following decisions on their retirement.
(Changes in accounting policy)
