Hitachi 2011 Annual Report Download

Download and view the complete annual report

Please find the complete 2011 Hitachi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 137

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137

Year ended March 31, 2011
Annual Report 2011

Table of contents

  • Page 1
    Annual Repor t 2011 Year ended March 31, 2011

  • Page 2
    ... Systems 27 Electronic Systems & Equipment 28 Construction Machinery 29 High Functional Materials & Components 30 Automotive Systems 31 Components & Devices 32 Digital Media & Consumer Products 33 Financial Services 34 Others 36 Research and Development 37 Intellectual Property 38 CSR Management...

  • Page 3
    Global Expansion with...through the development of superior, original technology and products Staying true to the corporate credo carried on since its foundation, Hitachi will continue to promote its Social Innovation Business, which supplies advanced social infrastructure linked by information ...

  • Page 4
    .... Annual Report 2011 Our Smart Stores Financial Institutions Buildings Energy Renewable Energy Smart Grids Next-Gene Public Facilities Houses Community Energy Management Schools Communications Data Home Energy Management Energy I Hitachi's Participation in Projects to Build Smart Cities...

  • Page 5
    ... batteries and systems (home energy management systems) that utilize IT to improve the efficient operation of energy-consuming equipment in the household. In the Guangzhou Knowledge City, Hitachi aims to participate at the upstream stage of proposing ideas for urban planning, and aims to develop...

  • Page 6
    ...provided daily commodities and relief supplies, construction machinery and other equipment. We have also dispatched employees from Hitachi workplaces across Japan to provide support in the restoration of public infrastructure including electric power, communications, water, and sewage facilities. By...

  • Page 7
    ... catastrophic damage over a wide area of Eastern Japan impacting an array of business activities from production to sales. Hitachi was no exception. After experiencing damage to buildings, production facilities and in-process products, we were forced to make production adjustments. While impacted by...

  • Page 8
    ... on our performance in fiscal 2011, our management targets for fiscal 2012 remain unchanged from those figures disclosed during 2010, with the exception of adjustments for business portfolio reorganization. As a result, we Fiscal 2012 Mid-term Management Plan Initiatives Growth Driven by Social...

  • Page 9
    ... third is value that epitomizes our role and mission as a manufacturer. In more specific terms, shared value is generated by collaborating with customers in the creation of products and services that are truly needed by the market and regional communities. This value is lasting, and represents the...

  • Page 10
    ... city business, working closely with central and municipal governments and other partners in China, Hitachi participates in the Sino-Singapore Tianjin Eco-City, the SinoSingapore Guangzhou Knowledge City and various works with Dalian City. Specifically, Hitachi 8 Hitachi, Ltd. Annual Report 2011

  • Page 11
    ... the delivery of products and services across a wide spectrum including energy management and IT platforms. Building on this accumulated experience and expertise in China, we will expand into smart city-related businesses in regions around the world. We will also leverage technologies and knowledge...

  • Page 12
    ... of new cities in Japan. In the hydroelectric power generation systems business, we will establish a joint-venture company with Mitsubishi Electric Corporation and Mitsubishi Heavy Industries, Ltd. in October 2011 with the goal of securing a leading position in the field of variable speed pumped...

  • Page 13
    ... in materials, electronics and activities aimed at strengthening R&D bases with close ties to the global market. Research and development has been and will continue to be the source of Hitachi's competitive strength. Accordingly, we will continue to channel both capital and human resources to this...

  • Page 14
    ...secure stable free cash flow. A New Resolve The Hitachi Group includes many outstanding individuals who work well as a team and also excel individually. I am convinced this is the key to generating maximum value. Hitachi is fortunate to attract outstanding human capital from all around the world. In...

  • Page 15
    .... Utilizing this system to its maximum advantage, we will work to strategically assign human capital to areas in which we intend to adopt an "offensive" posture. Harnessing our workforce and technologies, we will adhere strictly to a policy of global management. Today, the global community and...

  • Page 16
    ... Business Industrial, Transportation and Urban Development Systems •฀Eco-city Cloud฀ computing •฀Consulting Data฀centers Storage •฀฀ Construction฀ machinery Water฀treatment •฀Elevators฀and฀escalators •฀Green฀mobility •฀Healthcare •฀฀ Energy...

  • Page 17
    ...boasts a world-class share of the high-end storage products, Hitachi is working diligently to expand the global network of its consulting business while making plans to launch an integrated IT service business. Looking ahead, Hitachi will further strengthen its operations in Japan and promote growth...

  • Page 18
    ... functions including project planning, construction and risk management. On this basis, Hitachi Power Europe GmbH, in Germany, and Hitachi Power Systems America, Ltd., take the lead for projects in Europe and Africa as well as North America, respectively. Compared with previous technologies, the...

  • Page 19
    .... It takes advantage of the lightweight and high-speed technologies developed in Japan and was modified to fit railway specifications in the United Kingdom. It was the first time Hitachi won the maintenance contract for the rolling stock as well. Maintenance work is done at the newly built base in...

  • Page 20
    ... infrastructure projects in such emerging countries as China. The island of Male' in the Indian Ocean stretches 2.5 kilometers from east to west and 1.5 kilometers from north to south. One-third of the population lives in the crowded capital of the Maldives. 18 Hitachi, Ltd. Annual Report 2011

  • Page 21
    ... makes wire for power plants and cable for rolling stock. Hitachi Chemical Co., Ltd. handles negative electrodes for lithium-ion batteries used in hybrid and electric vehicles, and also parts for optical and wireless telecommunications equipment, including antennas for radar systems in cars. Hitachi...

  • Page 22
    ... -400 08 09 10 (FY) 08 09 10 (FY) 08 09 10 (FY) Capital investment/ Depreciation (Billions of yen) 800 R&D expenditures (Billions of yen) 500 400 300 600 400 200 200 100 0 0 08 { Capital investment 09 { Depreciation 10 (FY) 08 09 10 (FY) 20 Hitachi, Ltd. Annual Report 2011

  • Page 23
    ... rate of ¥83=U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Market as of March 31, 2011. See note 3 of the accompanying notes to the consolidated financial statements. 2. In order to be consistent with financial reporting principles and practices generally accepted in Japan...

  • Page 24
    ... Magnetic Materials and Components • High Grade Casting Components and Materials 22 Hitachi, Ltd. Annual Report 2011 • Engine Management Systems • Electric Powertrain Systems • Drive Control Systems • Car Information Systems • HDDs • LCDs • Information Storage Media • Batteries

  • Page 25
    ... Distribution Center • Optical Disk Drives • Flat-Panel Television Sets • LCD Projectors • Room Air Conditioners • Refrigerators • Washing Machines • Air-Conditioning Equipment • Leasing • Loan Guarantees • Logistics • Property Management Hitachi, Ltd. Annual Report 2011 23

  • Page 26
    ... year on year. In specific terms, software increased year on year due mainly to higher sales of middleware and storage management software. Services, on the other hand, decreased year on year as a result of systems integration decline reflecting cutbacks in domestic IT-related investment. In overall...

  • Page 27
    ... operations. P Nuclear Power Generation Systems Sales decreased year on year. In the fiscal year under review, new plant construction was firm in Japan. This positive environment was unable to offset the substantial drop in preventative maintenance projects and delays in product shipments as well as...

  • Page 28
    ...2010, the Company and Mitsubishi Heavy Industries, Ltd. entered into a basic agreement to work cooperatively in the field of intra-city railway systems for overseas markets. In October of the same year, Hitachi executed an agreement on strategic alliance in electrical components for rolling stock in...

  • Page 29
    ... a return to the black in the fiscal year under review despite temporary suspensions in factory operations due to the earthquake and other factors. This positive turnaround was the result of higher sales of semiconductor manufacturing systems-related products and the cutting of costs. P Hitachi Koki...

  • Page 30
    ..., results were buoyed by strong sales of hydraulic excavators and other machinery in such emerging markets as China and Southeast Asia as well as Australia. In March 2010, Hitachi Construction Machinery Co., Ltd. raised its equity interest in Telco Construction Equipment Co., Ltd. to make it...

  • Page 31
    ... and power plants together with Kobe Steel, Ltd., IHI Corporation and Kawasaki Heavy Industries, Ltd. P Hitachi Cable, Ltd. decided in January 2011 to establish a production base for the manufacture of wires for rolling stock as well as heat-resistant wires in Suzhou, China. P Hitachi Chemical...

  • Page 32
    ...sales across all business divisions including engine management systems. The segment benefited from the recovery in globalscale automobile production on the back of increased new vehicle sales mainly in the United States and emerging countries. Earnings improved substantially returning to the black...

  • Page 33
    ...Fiscal 2010 Topics P Hitachi decided in March 2011 to transfer its HDD business to Western Digital Corporation. P Hitachi Displays, Ltd. granted its IPS LCD technology to Taiwanese LCD manufacturer Chimei Innolux Corporation; contracted production of medium-sized IPS liquid crystal panels for use in...

  • Page 34
    ...ected the fruits of past business structure reforms in ï¬,at-panel TV operations as well as higher sales of air conditioning equipment and room air conditioners. M Fiscal 2010 Topics P Hitachi Appliances, Inc. merged with Hitachi Lighting, Ltd., the lighting business company, in October 2010. 600...

  • Page 35
    ... financing costs in the U.S. and Europe, and the recording of earnings related to receivables that were recorded as gains on sales up through to March 31, 2010 in line with the consolidation of securitization entities based on new U.S. GAAP accounting standards. Hitachi, Ltd. Annual Report 2011...

  • Page 36
    ... third-party logistics solutions operations which encompass contract services of procurement through to sales both in and outside Japan. Results were also buoyed by acquisitions in North America, Europe, China and Asia aimed at expanding the company's global network. Earnings rose substantially...

  • Page 37
    Hitachi, Ltd. Annual Report 2011 35

  • Page 38
    ... platforms and manufacturing technologies. In addition to three newly formed research laboratories, the Technology Strategy Office has been established to formulate medium- to long-term technology and development plans linked to business strategies, and to propose strategic R&D projects that involve...

  • Page 39
    ... of IP Activities Field Key Themes Global Fusion Storage Systems Smart Grids Information Platform for Social Infrastructure New฀Power฀Devices฀ Inverters Lithium-ion Batteries Green Mobility Environment Strengthening International Standardization Activities Hitachi is aggressively promoting...

  • Page 40
    ...CSR management, we formulated the CSR Policy of the Hitachi Group as a common policy platform. In addition, we use the CSR Self-Assessment Tools developed in collaboration with Group companies to clarify important CSR issues as they relate to business activities as a global company. These tools also...

  • Page 41
    ... of tonnes/year) 100 100 million tonnes/year including highly efficient gas turbines and hard disk drives as well as energy saving products used in auto parts and other materials helped in the control of emissions. In addition, the cumulative number of Hitachi Eco-Products in fiscal 2010 was...

  • Page 42
    ... the Committee System under the Companies Act of Japan (the "Companies Act"). By demarcating responsibilities for management oversight and those for the execution of business operations, Hitachi is working to create a framework for quick business operation, while making management highly transparent...

  • Page 43
    ... Control Committee Office Internal Audit Report Internal Auditing Office Monitoring Certification, Management Assessment Report In-House Companies, Principal Group Companies *CFO: Chief Financial Officer The New York Stock Exchange Corporate Governance Listing Standards Hitachi's ADSs are listed...

  • Page 44
    ... America, Ltd. Representative Executive Officer, Executive Vice President and Executive Officer Chairman of the Board, Hitachi Plant Technologies, Ltd. Representative Executive Officer and President Outside Director Outside Director, Advisor, Showa Denko K.K. Outside Director, Chairman, Member...

  • Page 45
    ... systems business Information & telecommunication systems business Procurement and consumer business Human capital, legal and corporate communications, government & external relations, corporate brand and corporate auditing Battery systems business Yoshito Tsunoda Hitachi, Ltd. Annual Report 2011...

  • Page 46
    ... that this is useful to investors in comparing the Company's financial results with those of other Japanese companies. Under accounting principles generally accepted in the United States of America, restructuring charges, net gain or loss on sales and disposal of rental assets and other property and...

  • Page 47
    ... and Electronic Systems & Equipment segments. Such revenue increases were mainly the result of strong demand for construction machinery in emerging countries and recovery of demand in the electronics and automotive industries. This increase was partially offset by the effects of the March 2011...

  • Page 48
    ... mainly of a gain from the sale of a substantial portion of our shares of IPS Alpha Technology. Other income in the year ended March 31, 2011 also includes a gain of ¥8.6 billion on a bargain purchase related to the acquisition of Aloka Co., Ltd., currently Hitachi Aloka Medical, Ltd., by our...

  • Page 49
    ... capital markets. We rely for our liquidity principally on cash and other working capital as well as the issue of debentures, medium-term notes and commercial paper, bank loans and other uncommitted sources of financing. As of March 31, 2011, we maintained commitment line agreements with a number...

  • Page 50
    ...financing. We seek to improve our credit ratings in order to ensure financial flexibility for liquidity and capital management, and to continue to maintain access to sufficient funding resources through the capital markets. We issued 1,150,000,000 shares of common stock for ¥253.5 billion and ¥100...

  • Page 51
    ... from March 31, 2010. As of March 31, 2011, long-term debt (excluding current portion), consisting mainly of debentures, debentures with stock acquisition rights, medium-term notes and loans principally from banks and insurance companies, amounted to ¥1,300.3 billion, a decrease of ¥311.6 billion...

  • Page 52
    ...7) ...Short-term investments (note 4) ...Trade receivables: Notes (notes 7, 18 and 29) ...Accounts (notes 7 and 29) ...Allowance for doubtful receivables (note 29) ...Net trade receivables ...Investments in leases (notes 6, 7 and 29) ...Current portion of financial assets transferred to consolidated...

  • Page 53
    ... comprehensive loss (notes 7 and 16) ...Treasury stock, at cost (note 15) ...Total Hitachi, Ltd. stockholders' equity ...Noncontrolling interests ...Total equity ...Total liabilities and equity ...See accompanying notes to consolidated financial statements. 2011 2010 ¥ 472,588 338,218 190,868...

  • Page 54
    ...337) Net income (loss) attributable to Hitachi, Ltd. stockholders per share (note 22): Basic ...Diluted ...See accompanying notes to consolidated financial statements. Yen U.S. dollars (note 3) ¥52.89 49.38 ¥(29.20) (29.20) ¥(236.86) (236.87) $0.64 0.59 52 Hitachi, Ltd. Annual Report 2011

  • Page 55
    Consolidated Statements of Equity Hitachi, Ltd. and Subsidiaries Years ended March 31, 2011, 2010 and 2009 Millions of yen 2011 2010 2009 Thousands of U.S. dollars (note 3) 2011 Common stock (notes 10 and 12): Balance at beginning of year ...Change in common stock: Issuance of common stock ......

  • Page 56
    .... . Dividends to Hitachi, Ltd. stockholders ...Acquisition of treasury stock ...Sales of treasury stock ...Total change in total Hitachi, Ltd. stockholders' equity ...Balance at end of year ...,121 (899,603) (272,048) (243,181) (2,205) 185,892 2,090,892 $29,414,325 54 Hitachi, Ltd. Annual Report 2011

  • Page 57
    ...) (144,570) (213,095) (26,357) (3,584) (387,606) ¥(1,182,726) $ 3,652,121 (1,052,759) 193,687 (64,482) 23,951 (899,603) $ 2,752,518 Hitachi, Ltd. Annual Report 2011 55

  • Page 58
    ... in short-term debt, net ...Proceeds from long-term debt ...Payments on long-term debt...Proceeds from issuance of common stock ...Proceeds from sale of common stock by subsidiaries ...Dividends paid to Hitachi, Ltd. stockholders ...Dividends paid to noncontrolling interests ...Acquisition of common...

  • Page 59
    ... and telecommunication systems, power systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, components and devices, digital media and consumer products, financial services, and...

  • Page 60
    ... currency financial statements have been translated in accordance with ASC 830, "Foreign Currency Matters." Under this guidance, the assets and liabilities of the Company's subsidiaries located outside Japan are translated into Japanese yen at the rates of exchange in effect at the balance sheet...

  • Page 61
    ... in assessing whether an indication of other-than-temporary impairment exists include the achievement of business plan objectives and milestones including cash flow projections and the results of planned financing activities, the financial condition and prospects of each investee company, the...

  • Page 62
    ... and Other." In addition, the Company and its subsidiaries develop certain computer software to be sold where related costs are capitalized after establishment of technological feasibility in accordance with ASC 985, "Software." The annual amortization of such capitalized costs is the greater of the...

  • Page 63
    ... Instruments The Company accounts for derivative financial instruments in accordance with ASC 815, "Derivatives and Hedging." This guidance requires that all derivative financial instruments, such as forward exchange and interest rate swap contracts, be recognized in the financial statements as...

  • Page 64
    .... The Company's policy is not to accept product returns unless the products are defective. The conditions of delivery are governed by the terms of the contract or customer arrangement and those not meeting the predetermined specification are not recorded as revenue. When the final payment is subject...

  • Page 65
    ... or acceptance by the customer include information technology system products, construction equipment, displays, disk drives, televisions, air conditioners, batteries, magnetic tapes, high functional materials, cable products, automotive equipment, semiconductor manufacturing equipment, test and...

  • Page 66
    ...common stock that then shared in the earnings of the Company. (x) Guarantees The Company recognizes, at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee in accordance with ASC 460, "Guarantees." 64 Hitachi, Ltd. Annual Report 2011

  • Page 67
    ... and simplify the accounting for business combinations and the reporting of noncontrolling interests in consolidated financial statements. The provisions of ASC 805 require an acquiring entity in a business combination to recognize all the assets acquired, liabilities assumed and any noncontrolling...

  • Page 68
    ... TRANSLATION The accompanying consolidated financial statements are expressed in yen and, solely for the convenience of the reader, have been translated into United States dollars at the rate of ¥83=U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31...

  • Page 69
    ...value of available-for-sale securities by the consolidated balance sheet classifications as of March 31, 2011 and 2010. Millions ...Gross gains Gross losses Aggregate fair value 2011 Short-term investments: Government debt securities ...Corporate ...$35,470 $2,366,687 Hitachi, Ltd. Annual Report 2011 67

  • Page 70
    ... primarily of stocks issued by Japanese listed companies. Government debt securities consist primarily of Japan treasury bonds. Corporate debt securities consist primarily of structured bonds. Other securities consist primarily of investments funds. The purchases of available-for-sale securities for...

  • Page 71
    ...balance sheet as of March 31, 2011 are as follows: Millions of yen Held-tomaturity Availablefor-sale Total 2011 Held-tomaturity Thousands of U.S. dollars Availablefor-sale Total 2011...investments in affiliated companies, for which a quoted market price was available, as of March 31, 2011 and 2010, ...

  • Page 72
    ...financial information relating to Renesas Technology Corp. (Renesas), Casio Hitachi Mobile Communications Co., Ltd. (CHMC) and other affiliated companies...645,257 465,209 1,110,466 617,825 100,779 718,604 391,862 ¥1,023,479 768... sales ...Gross profit (loss) ...Selling,...Hitachi, Ltd. Annual Report 2011

  • Page 73
    ... Company received a 16.7% interest in NEC CASIO Mobile Communications, Ltd. and accounts for the investment under the cost method of accounting. NEC CASIO Mobile Communications, Ltd. increased its capital by allocating new shares to shareholders other than the Company in June 2010, and as a result...

  • Page 74
    ... the future minimum lease receivables of financing leases as of March 31, 2010: Millions of yen Financing leases Years ending March 31 Operating leases 2011 Thousands of U.S. dollars Financing leases Operating leases 2011 2012...2013...2014...2015...2016...Thereafter ...Total minimum payments to be...

  • Page 75
    ... with any SPEs. The majority of their involvement with SPEs related to the securitization activities are assisting in the formation and financing of an entity, providing limited credit enhancements, servicing the assets and receiving fees for services provided. Hitachi, Ltd. Annual Report 2011 73

  • Page 76
    ... provided credit facilities to the former QSPEs in accordance with the service agency business contracts from which temporary payments on behalf of the former QSPEs were made. As of March 31, 2010, the Company and its subsidiaries had three QSPEs with outstanding balances of transferred receivables...

  • Page 77
    ...,755 ¥ 92,051 98,817 ¥190,868 Non-recourse borrowings of consolidated securitization entities: Loans, mainly from banks ...Beneficial interests in trusts ... ¥ 51,359 34,053 ¥ 85,412 ¥ - 131,196 ¥131,196 - 2,958 ¥ 2,958 ¥ ¥ 51,359 168,207 ¥219,566 Hitachi, Ltd. Annual Report 2011 75

  • Page 78
    ... entities and accounted for as sales. Those financial assets are transferred mainly to SPEs sponsored by financial institutions. Securitizations of lease receivables: Hitachi Capital Corporation and certain other financing subsidiaries sold lease receivables to unconsolidated SPEs and other...

  • Page 79
    ... due Thousands of U.S. dollars Principal amount of Total principal receivables 90 amount of days or more receivables past due Net credit loss 2011 Net credit loss 2011 Total assets managed or transferred: Lease receivables ...Assets transferred ...Assets held in portfolio ... ¥1,025,462 (158,461...

  • Page 80
    ...credit loss 2011 Total assets managed or transferred: Trade receivables excluding mortgage loans receivable ...Assets transferred ...Assets held in portfolio ... ¥ 733,090 (232,374) ¥ 500,716 ¥2,698 ¥1,025 $ 8,832,410 (2,799,687) $ 6,032,723 $32,506 $12,349 78 Hitachi, Ltd. Annual Report...

  • Page 81
    ... of the Company's subsidiaries, through March 31, 2011. During the year ended March 31, 2011, proceeds from the transfer of trade receivables excluding mortgage loans receivable to the former QSPEs and net losses recognized on those transfers were immaterial and there is no outstanding balance of...

  • Page 82
    ... costs for software to be sold, leased or otherwise marketed is charged to cost of sales. The amounts charged during the years ended March 31, 2011, 2010 and 2009 were ¥38,899 million ($468,663 thousand), ¥40,128 million and ¥85,841 million, respectively. 80 Hitachi, Ltd. Annual Report 2011

  • Page 83
    ...Years ending March 31 2012...2013...2014...2015...2016... ¥82,896 64...Construction Materials & tion Systems Machinery Components Other Reportable Segments Components & Devices Total 2011 Balance at beginning of year...Acquisition ...Impairment loss ...Translation adjustment and other . . Balance...

  • Page 84
    ... to be written-off. The main component of goodwill acquired during the year ended March 31, 2010 was related to the additional acquisition of the ownership interests in a former affiliated company, Telco Construction Equipment Co., Ltd. to make it a subsidiary. 9. INCOME TAXES Components of income...

  • Page 85
    .... The Company and certain subsidiaries have adopted the consolidated taxation systems. Under the consolidated taxation system in Japan, the Company and certain Japanese subsidiaries consolidated, for Japanese tax purpose, all wholly owned domestic subsidiaries. Hitachi, Ltd. Annual Report 2011 83

  • Page 86
    ... around the world, many of which have statutory tax rates lower than Japan. The favorable differences in tax rates of foreign subsidiaries primarily occur in Asia, including China, Taiwan and Singapore. In particular, a certain subsidiary conducting business in Singapore made a relatively...

  • Page 87
    ...scheduled reversals of deferred tax liabilities and projected future taxable income, including the execution of certain available tax strategies if needed, in making this assessment. Based on these factors, management believes it is more likely than not the Company will realize the benefits of these...

  • Page 88
    ...have any distribution of earnings, including the payment of dividends and the issuance of additional capital stock, submitted to them for prior approval and also grant them the right to request additional securities or mortgages on property, plant and equipment. 86 Hitachi, Ltd. Annual Report 2011

  • Page 89
    ... per share. The closing price of the shares on August 28, 2007, as reported by Tokyo Stock Exchange, was ¥1,344 per share. The stock acquisition rights may be exercised by the holder of the bonds during any particular calendar quarter only if the closing price of the shares for any 20 trading days...

  • Page 90
    ...' cash contributions ...Benefits paid ...Acquisitions and divestitures ...Transfer to defined contribution pension plan ...Settlements...Foreign currency exchange rate changes ...Fair value of plan assets at end of year ...Funded status ...88 Hitachi, Ltd. Annual Report 2011 ¥2,193,449 71,881 54...

  • Page 91
    ... ended March 31, 2011, 2010 and 2009 are as follows: 2011 2010 2009 Discount rate ...Expected long-term return on plan assets ...Rate of compensation increase... 2.5% 2.9% 2.6% 2.6% 3.0% 2.7% 2.5% 3.4% 2.7% The expected long-term rate of return on plan assets is developed for each asset class...

  • Page 92
    ...'s investment policy is to ensure a stable return from the plans' investments over the long term, which allows the Company's and certain subsidiaries' pension funds to meet their future obligations, and the Company and certain subsidiaries attempt to maintain the pension funds in sound condition. In...

  • Page 93
    ... in Japan-listed stocks as of March 31, 2011 and 2010, respectively. Approximately 25 percent and 15 percent of equity securities are invested in stocks listed overseas as of March 31, 2011 and 2010, respectively. Equity securities are primarily valued at quoted market prices. (b) Approximately...

  • Page 94
    ... assets owned by the funds, divided by the number of units outstanding. The following table presents the reconciliation of the beginning and ending balances of Level 3 assets for the years ended March 31, 2011 and 2010. Millions of yen Actual return Realized gain Beginning on plan assets or loss on...

  • Page 95
    ...stock for the years ended March 31, 2011 and 2010 were accounted for in accordance with the provisions of the Japanese Company Law by crediting one-half of the issue price or the conversion price to each of the common stock accounts and the capital surplus accounts. Hitachi, Ltd. Annual Report 2011...

  • Page 96
    ... The purchase of five listed subsidiaries' ownership interests is related to the purchase of the noncontrolling interests of Hitachi Information Systems, Ltd., Hitachi Software Engineering Co., Ltd., Hitachi Systems & Services, Ltd., Hitachi Plant Technologies, Ltd. and Hitachi Maxell, Ltd. for the...

  • Page 97
    ... 2,205 (300,759) $ 16,518 Sales of treasury stock for the year ended March 31, 2011 includes exchange of treasury stock to noncontrolling interest holders in order to convert Hitachi Plant Technologies, Ltd. and Hitachi Maxell, Ltd. to wholly owned subsidiaries. Hitachi, Ltd. Annual Report 2011 95

  • Page 98
    ... Accumulated other comprehensive loss, net of related tax effects, displayed in the consolidated statements of equity is classified as follows: Millions of yen 2011 2010 2009 Thousands of U.S. dollars 2011 Foreign currency translation adjustments: Balance at beginning of year ...Other comprehensive...

  • Page 99
    ... of reclassification adjustments: Foreign currency translation adjustments ...Pension liability adjustments ...Net unrealized holding gain on available-for-sale securities ...Cash flow hedges ... ¥ (90,643... (5,530) (413,445) - (88,927) 59,482 (7,664) $ (37,109) Hitachi, Ltd. Annual Report 2011 97

  • Page 100
    ... of reclassification adjustments: Foreign currency translation adjustments ...Pension liability adjustments ...Net unrealized holding gain on available-for-sale securities ...Cash flow hedges ... ¥ 8,487 116... (3,584) ¥(387,606) - 52,276 15,161 2,370 ¥ 69,807 98 Hitachi, Ltd. Annual Report 2011

  • Page 101
    ... accordance with the terms of the credit card business customer service contracts. In addition, the Company and HCC provide loan commitments to affiliates and others. The outstanding balance of these revolving lines of credit, credit facilities and loan commitments as of March 31, 2011 is as follows...

  • Page 102
    ...to secure a financing source for business operations. The unused lines of credit as of March 31, 2011 amounted to ¥400,078 million ($4,820,217 thousand), primarily related to unused lines of credit belonging to the Company. The Company maintains commitment line agreements with a number of banks and...

  • Page 103
    ... and have not been finally adjudicated. These actions when ultimately concluded and determined will not, in the opinion of management, have a material adverse effect on the consolidated financial position or results of operations of the Company and subsidiaries. Hitachi, Ltd. Annual Report 2011 101

  • Page 104
    ... long-lived property, plant and equipment located in Japan. The Digital Media & Consumer Products segment recognized a loss of ¥51,695 million primarily in its plasma TV business due to the decision to reorganize sourcing for glass panel components from in-house manufacturing to an outside supplier...

  • Page 105
    ... for the year ended March 31, 2010 by reportable segment: 1. The Automotive Systems segment restructured in order to reorganize the automotive products business, which encountered severe deterioration in the market. The accrued special termination benefits expensed and paid during the year ended...

  • Page 106
    ... Hitachi Aloka Medical, Ltd. Refer to note 30 for the nature and financial effect of the acquisition of Aloka. Other income for the year ended March 31, 2009 represents a gain of ¥5,203 million on the sale of a subsidiary's mobile communication business. 104 Hitachi, Ltd. Annual Report 2011

  • Page 107
    ...Advertising expense ...Maintenance and repairs ...Rent ...Research and development expense ... ¥140,240 31,170 80,878 131,533 395,180 ¥124,019 28,877 72,065 142,077 372,470 ¥148,145 38,598 78,242 148,401 416,517 $1,689,639 375,542 974,434 1,584,735 4,761,205 Hitachi, Ltd. Annual Report 2011...

  • Page 108
    ... through the Euro markets to finance their overseas long-term operating capital. As a result, the Company and its subsidiaries are exposed to market risks from changes in foreign currency exchange rates and interest rates. The Company and its subsidiaries are also exposed to credit-related losses in...

  • Page 109
    ... rate to a variable rate to manage fluctuations in fair value resulting from interest rate risk. Under the interest rate swaps, certain financing subsidiaries receive fixed interest rate payments associated with long-term debt, including medium-term notes, and make variable interest rate payments...

  • Page 110
    ... in other income (deductions). Derivative financial instruments designated as fair value hedges include forward exchange contracts associated with operating transactions, cross currency swap agreements and interest rate swaps associated with financing transactions. Exchange loss for the year ended...

  • Page 111
    ... test Derivatives Location Millions of yen Thousands of U.S. dollars 2011 Forward exchange contracts Cross currency swap agreements Interest rate swaps Other income ...Other income ...Interest charges ... ¥ (682) 1,412 54 ¥ 784 $(8,217) 17,012 651 $ 9,446 Hitachi, Ltd. Annual Report 2011...

  • Page 112
    ... ... Ineffective portion and amount excluded from effectiveness test Derivatives Location Forward exchange contracts Cross currency swap agreements Interest rate swaps Other deductions ...Other deductions ...Interest charges ... ¥ 227 (2,065) (58) ¥(1,896) 110 Hitachi, Ltd. Annual Report 2011

  • Page 113
    ... (loss) recognized in OCI Effective portion of derivatives designated as hedging instruments Derivatives Millions of yen Forward exchange contracts ...Cross currency swap agreements...Interest rate swaps ...Option contracts... ¥1,323 2,435 (2,469) 639 ¥1,928 Hitachi, Ltd. Annual Report 2011 111

  • Page 114
    ... ...Other deductions ... ¥(1,623) (1,080) 830 (1,492) ¥(3,365) Location Millions of yen Forward exchange contracts Cross currency swap agreements Interest rate swaps Other deductions ...Other deductions ...Interest income ... ¥(1,598) (358) 120 ¥(1,836) 112 Hitachi, Ltd. Annual Report 2011

  • Page 115
    ... the Company's and its subsidiaries' market interest rates for the same contractual terms. Cash and cash equivalents, trade receivables, short-term debt and trade payables The carrying amount approximates the fair value because of the short maturity of these instruments. Financial assets transferred...

  • Page 116
    ... active markets; quoted prices associated with transactions that are not distressed for identical or similar assets or liabilities in markets that are not active; or valuations whose significant inputs are derived from or corroborated by observable market data. 114 Hitachi, Ltd. Annual Report 2011

  • Page 117
    ...-for-sale securities such as listed stocks on exchange markets, debt securities such as Japan treasury bonds and U.S. treasury bonds and exchange traded funds. In the absence of an active market for investment securities, quoted prices for similar investment securities, quoted prices associated...

  • Page 118
    ...as of March 31, 2011 and 2010. The carrying value on the consolidated balance sheets are recorded by... securities ...Other ...Derivatives ...Subordinated interests resulting from securitization . . Liabilities: Derivatives ... - 28,933 - - 115,417 ¥144,350 ¥ - ¥ 116 Hitachi, Ltd. Annual Report 2011

  • Page 119
    ... to the change in unrealized gains or losses relating to assets still held at the reporting date ... ¥26,532 (271) (15) 2,687 ¥28,933 ¥123,465 (11,275) 3,588 ¥149,997 (11,546) 3,573 (361) 2,326 ¥115,417 ¥144,350 ¥ (14) ¥ 3,534 ¥ 3,520 Hitachi, Ltd. Annual Report 2011 117

  • Page 120
    ... market prices of comparable companies, and discounted cash flow using unobservable inputs, is included in Level 3. The Company has calculated discounted cash flows of these equity-method investments based on business forecasts, market trends, and assumptions of projected business plans. The Company...

  • Page 121
    ... technology equipment, manufacturing machinery and equipment and construction machinery, typically secured by underlying assets. The primary locations of finance leases are Japan, United States, United Kingdom and China mainland. The lease term ranges from three to six years. The non-specific...

  • Page 122
    ... financing receivables from residential loan arrangements for individuals. Mortgage loans are usually arranged with collateral. The primary location of mortgage loans is Japan; more than fifty percent of mortgage loans are arranged for employees of the Company and its domestic subsidiaries. The term...

  • Page 123
    ...relating to receivables which arose from sales of product or services and have contractual maturity of one year or less is ¥43,628 million ($525,639 thousand). 30. ACQUISITIONS AND DIVESTITURES On March 9, 2011, Hitachi Transport System, Ltd. (Hitachi Transport System), a subsidiary of the Company...

  • Page 124
    ... noncontrolling interest in Vantec, a listed entity, is determined by quoted market price and included in Level 1. On a pro forma basis, the effect on revenue, net income and the per share information of the Company for the year ended March 31, 2011 with assumed acquisition dates for Vantec of April...

  • Page 125
    ... a definitive agreement to transfer its Hard Disc Drive business, in the Components & Devices segment, to Western Digital Corporation (WD). The Company will sell all shares of Hitachi Global Storage Technologies' holding company, Viviti Technologies Ltd. to WD in a cash and stock transaction valued...

  • Page 126
    ... 77% over the average share price of Hitachi Kokusai Electric's common stock traded on the First Section of the Tokyo Stock Exchange for the three month period ended January 13, 2009. As a result, the Company purchased 13,406,000 shares, the upper limit for the number of shares in the tender offer...

  • Page 127
    ..., Power Systems, Social Infrastructure & Industrial Systems, Electronic Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems, Components & Devices, Digital Media & Consumer Products, Financial Services, and Others. Hitachi, Ltd. Annual Report 2011...

  • Page 128
    ...Devices: Hard disk drives, LCDs, Information storage media and Batteries Digital Media & Consumer Products: Optical disk drives, Flat-panel TVs, LCD projectors, Room air conditioners, Refrigerators, Washing machines and Airconditioning equipment Financial Services: Leasing and Loan guarantees Others...

  • Page 129
    ... Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products ...Financial Services ...Others...

  • Page 130
    ... Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products ...Financial Services ...Others...

  • Page 131
    ... Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products ...Financial Services ...Others...

  • Page 132
    ... are attributed to geographic areas based on the location of the customers for the years ended March 31, 2011, 2010 and 2009. Millions of yen 2011 2010 2009 Thousands of U.S. dollars 2011 Japan ...Outside Japan Asia ...North America...Europe ...Other Areas ...Subtotal ...Total ... ¥5,269,259 2,073...

  • Page 133
    ... because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2011. In making this assessment, our management used the criteria set...

  • Page 134
    Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Hitachi, Ltd.: We have audited the accompanying consolidated balance sheets of Hitachi, Ltd. and subsidiaries (the "Company") as of March 31, 2011 and 2010, and the related consolidated statements ...

  • Page 135
    ...audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Hitachi, Ltd. and subsidiaries as of March 31, 2011 and 2010, and the related consolidated statements of operations, equity, and cash ï¬,ows for...

  • Page 136
    ....citi.com/dr Overseas Stock Exchange Listing New York Japanese Stock Exchange Listings Tokyo, Osaka, Nagoya, Fukuoka and Sapporo Independent Registered Public Accounting Firm Ernst & Young ShinNihon LLC Investor Relations Contacts JAPAN Hitachi, Ltd. 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100...

  • Page 137
    Printed in Japan