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Leading a Strong Resurgence
Annual Report 2010
Year ended March 31, 2010

Table of contents

  • Page 1
    Annual Report 2010 Year ended March 31, 2010 Leading a Strong Resurgence

  • Page 2
    ... differences in commercial and business customs including, •฀ uncertainty฀as฀to฀general฀market฀price฀levels฀for฀equity฀securities฀in฀Japan,฀declines฀in฀which฀may฀require฀ without limitation, contract terms and conditions and labor relations; Hitachi฀to฀write...

  • Page 3
    ... inf rastructure technologie s - fo u n dat io n technologies of the Hitachi G roup . F o c u sin g o u r de v e lo pme n t o n t hree key themes-glob al, f usion and the environment - w e w ill grow Hitachi as a world lead er in t h e Social Innovation Business. Hitachi, Ltd. Annual Report 2010 1

  • Page 4
    ... Business, which supplies advanced social infrastructure linked by information technology (IT), a unique strength of ours, around the world to become a global leading Social Innovation Company. In this way, we will meet the expectations of our stakeholders. 2 Hitachi, Ltd. Annual Report 2010

  • Page 5
    ...and cut fixed expenses and procurement costs. We also conducted public tender offers for five publicly listed companies-Hitachi Information Systems, Ltd., Hitachi Software Engineering Co., Ltd., Hitachi Systems & Services, Ltd., Hitachi Plant Technologies, Ltd., and Hitachi Maxell, Ltd.-turning them...

  • Page 6
    ... centers •฀Storage Information and telecommunication systems •฀Smart grids •฀Healthcare Power systems •฀ Energy (Thermal, nuclear, renewable) •฀Water treatment •฀ Elevators and escalators •฀ Green mobility Materials and key devices 4 Hitachi, Ltd. Annual Report 2010

  • Page 7
    ... ratio Europe 9% North America 8% 41% Europe 9% North America 9% Strategy by Region Emerging markets Industrialized countries Japan 48% Over 50% Tap into robust social innovation demand, cooperate with partners Make environmental and integrated technology proposals to address demand to upgrade...

  • Page 8
    ...services businesses. In nuclear power, we will continue to make steady progress with projects currently under construction and win more orders. In the smart grid business, which fuses information and power systems, we aim to achieve high growth based on Hitachi's strengths. While the Japanese market...

  • Page 9
    ... Innovation Business. This includes storage systems in North America and smart grids in China. In the environment field, in addition to electronics research in areas such as new power devices, inverters and lithium-ion batteries, we will invest to strengthen analysis technologies that form the basis...

  • Page 10
    ... to explain their business strategies to investors and discharge their accountability responsibilities. Corporate, which supports the in-house companies, will upgrade the management platform that spans the group and the world, including the IT platform, manufacturing and procurement. In doing so...

  • Page 11
    ... global company whose values parallel those of society. United in our commitment to meeting the expectations of all stakeholders, as the senior management we ask for your unwavering support going forward. Takashi Kawamura Chairman Hiroaki Nakanishi President Hitachi, Ltd. Annual Report 2010 9

  • Page 12
    ... ¥929 ¥419 ¥763 10% Construction Machinery 6% 12% High Functional Materials & Components Automotive Systems 6% 7% 9% 4% 8% Components & Devices Digital Media & Consumer Products Financial Services Others 2010 10 Eliminations & Corporate items (¥1,207) Hitachi, Ltd. Annual Report 2010

  • Page 13
    ... the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2010. See note 3 of the accompanying notes to consolidated financial statements. 3. In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income...

  • Page 14
    ...HITACHI l฀Old Segments Information & Telecommunication Systems Electronic฀Devices l฀New Segments Information & Telecommunication Systems P.14 Power Systems Power & Industrial Systems P.16 Digital฀Media฀&฀Consumer฀ Products High Functional Materials & Components Logistics, Services...

  • Page 15
    ...-in Hybrid Electric Vehicles •฀Flat-Panel฀TVs •฀Mobile฀Phones •฀Refrigerators •฀Air-Conditioning฀Equipment Room Air-Conditioner Multifunctional IC Card •฀General฀Trading •฀Logistics •฀Property฀Management Distribution Center Hitachi, Ltd. Annual Report 2010...

  • Page 16
    ... networks saw sales decline year over year as companies kept a tight rein on IT investment. ATM sales declined with a decrease in units shipped in Japan. Earnings in hardware operations dropped from the previous fiscal year mainly because of lower sales of storage products, servers and...

  • Page 17
    ... the status of other facilities around the clock in a single, central location. The center also supports the stable operation of data centers, which play an important role as a platform for the provision of the Hitachi Cloud Solution service, Harmonious Cloud. Hitachi, Ltd. Annual Report 2010 15

  • Page 18
    ...(Engineering, Procurement and Construction) projects, and boiler orders from South Africa. Earnings improved substantially from the previous fiscal year because of the higher sales, as well as better project management, which involved using enhanced process management tools and increasing the number...

  • Page 19
    ... largest generating capacity*2 for downwind turbines. Hitachi is actively developing wind power generation systems that combine control systems and storage battery technologies, thereby contributing to the creation of a low-carbon society. *2 As of June 22, 2010 Hitachi, Ltd. Annual Report 2010 17

  • Page 20
    ... fewer unprofitable projects owing to better project management, a tight focus on profitability with orders, and progress with cost cutting. l฀Urban Planning and Development Systems Revenues declined year over year despite some growth in sales in the elevator and escalator business in China. The...

  • Page 21
    ... construct railways by selling aluminum railcars in Japan and overseas based on its proprietary "A-train" concept that has a lower environmental impact. "Super Amorphous X" is a super energy-saving transformer made by Hitachi Industrial Equipment Systems Co., Ltd. This transformer uses an amorphous...

  • Page 22
    ... at Hitachi High-Technologies Corporation, Hitachi Medical Corporation and Hitachi Koki. Share of Revenues 10 % l Hitachi High-Technologies Corporation Revenues declined year on year due to a number of factors. One was constrained capital expenditures in LCD-related manufacturing equipment...

  • Page 23
    ...and lithium-ion battery combine to yield forceful tightening strength and extended operating time. This high-performance power tool also has outstanding maneuverability. Available in different color variations, this easy-to-use and sleekly designed tool has won high acclaim from users. Hitachi, Ltd...

  • Page 24
    ... promoted a recovery in demand for hydraulic excavators in emerging nations such as China. Although the company worked to reduce procurement costs and fixed expenses, earnings fell sharply year over year due to lower sales and the impact of foreign currency fluctuations. In March 2010 Hitachi...

  • Page 25
    ...-made Insulated Gate Bipolar Transistor (IGBT) inverter system that is based on the inverter technology used in Shinkansen (bullet) trains. This enables reduced maintenance costs and realizes smooth and speedy gear changes as well as powerful electric braking. Hitachi, Ltd. Annual Report 2010 23

  • Page 26
    ... cost reductions. l฀Hitachi Metals, Ltd. Sales declined year over year. High-grade metal products and materials posted a year-over-year decline, mainly in materials for molds and metal tools and other automotive-related products, although sales have begun to recover. In electronics and IT devices...

  • Page 27
    ...are used in air-conditioner compressor motors, hybrid vehicle drive motors, HDD head drive motors and other motors, contributing to smaller sizes and higher efficiency. * Developed by Sumitomo Special Metals Co., Ltd., which merged with Hitachi Metals in April 2007. Hitachi, Ltd. Annual Report 2010...

  • Page 28
    ... market and economic stimulus programs by governments around the world supported an upturn in sales of some vehicle types, notably eco-vehicles and small and mid-sized cars, which led a recovery in sales of braking and other drive control system-related components and engine management systems...

  • Page 29
    ...types of fuel combustion concepts, utilizing its proprietary simulation technologies to model turbulent flow and air-fuel mixtures. Drive฀Control฀Systems Hitachi has commercialized an adaptive cruise control (ACC) system to assist drivers in recognition, judgment and operation of their vehicles...

  • Page 30
    ...outweighed progress with cost cutting. l Battery Systems (Hitachi Maxell, Ltd. and Hitachi Vehicle Energy, Ltd.) Sales declined year on year due to lower sales volumes of mainly computer tapes, optical discs and prismatic lithium-ion rechargeable batteries at Hitachi Maxell. Millions of yen FY2009...

  • Page 31
    ...Hitachi Vehicle Energy announced the development of lithium-ion batteries for plug-in hybrid electric vehicles. Besides battery cells themselves, Hitachi Vehicle Energy provides optimum solutions in the form of battery systems that also incorporate electric control. Hitachi, Ltd. Annual Report 2010...

  • Page 32
    ...the eco-points program in Japan sparked strong sales growth for refrigerators, mainly large models; demand was also strong for washing machines and all-electric housing-related products. Overall sales declined overseas as sales of room air-conditioners and commercial air conditioners fell because of...

  • Page 33
    ...Storage Co., Ltd. leverages Hitachi's sophisticated development capabilities and LG Electronics Inc.'s outstanding mass production technologies to supply world-class optical disc drives that are sold around the globe. Hitachi฀Appliances'฀Room฀Air฀Conditioners Hitachi's room air conditioners...

  • Page 34
    .... Share of Revenues 4 % l Hitachi Capital Corporation Volume declined year on year. Volume rose in the agricultural equipment & medical sector due to active efforts to participate in a support fund in the agricultural equipment field. Hitachi฀Capital's฀Multifunctional฀IC฀Card Hitachi...

  • Page 35
    ... FY2008 Millions of U.S. dollars FY2009 Revenues ...Segment profit ...Capital investment (Property, plant and equipment) ...Depreciation (Property, plant and equipment) ...R&D expenditures ...Assets ...Number of employees ...Hitachi, Ltd. Annual Report 2010 ¥ 763,665 19,423 25,202 32,840 4,692...

  • Page 36
    ... platform technologies to support IT-PIS (power & industrial systems) fusion/environmental businesses, (3) conducting new electronics research for the Social Innovation Business, and (4) strengthening green mobility R&D for expanding environmental businesses. 34 Hitachi, Ltd. Annual Report 2010

  • Page 37
    ... for the handling of IP, sharing information and conducting educational activities relating to standardization on a Group-wide basis. Hitachi, Ltd. Annual Report 2010 *2 Publicized patents in Japan, the U.S., Europe, China, India and Brazil Share of Hitachi Group Publicized Patents*2 by Segment in...

  • Page 38
    ... and human value. This requires a clear commitment from top management and ongoing efforts to strengthen corporate governance, based on a culture of compliance and high ethical values. Our vision and mission is to harness the Hitachi Group's collective knowledge and technologies to address...

  • Page 39
    ... Hitachi Group has set out environmental activity items and final year fiscal 2010 targets as an Environmental Action Plan. We measure our achievement against targets every fiscal year and use this as the basis for making ongoing improvements. We internally certify as Super-Eco Factories & Offices...

  • Page 40
    ... 31, 2010. Executive officers execute Hitachi's business affairs and decide on matters pertaining to the same in accordance with the division of duties stipulated by resolutions of the Board of Directors. Board of Directors and Executive Officers The Board of Directors determines basic management...

  • Page 41
    ... of day-to-day operations and legal compliance, so that improvements can be made. Moreover, to ensure strict legal compliance, Hitachi has various committees and a whistle-blower system. Internal Control Over Financial Reporting Hitachi's shares are listed on the New York Stock Exchange (the...

  • Page 42
    ... and Motobayashi Chairman of the Board, Hitachi Software Engineering Co., Ltd. Representative Executive Officer and Chairman Chairman of the Board, Hitachi Plant Technologies, Ltd. Representative Executive Officer and President Representative Executive Officer, Executive Vice President and Executive...

  • Page 43
    ... Officer, Hitachi Group Chief Innovation Officer, Hitachi Group Chief Information Security Officer and General Manager of Smart City Business Management Division Urban Planning and Development Systems Business, Defense Systems Business, Corporate Planning, Environmental Strategies, Human Capital...

  • Page 44
    We will grow as a world leader in the Social Innovation Business. 42 Hitachi, Ltd. Annual Report 2010

  • Page 45
    ... Consolidated Statements of Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Five-Year Summary Hitachi, Ltd. Annual Report 2010 43

  • Page 46
    Consolidated Balance Sheets Hitachi, Ltd. and Subsidiaries March 31, 2010 and 2009 Millions of yen Thousands of U.S. dollars (note 3) 2010 Assets Current assets: Cash and cash equivalents ...Short-term investments (note 4) ...Trade receivables, net of allowance for doubtful receivables of ¥43,...

  • Page 47
    ... liabilities ...Long-term debt (notes 6 and 10) ...Retirement and severance benefits (note 11) ...Other liabilities (note 9) ...Total liabilities ...Equity: Common stock 4,518,132,365 and 3,368,126,056 shares issued as of March 31, 2010 and 2009, respectively (notes 10 and 12) ...Capital surplus...

  • Page 48
    Consolidated Statements of Operations Hitachi, Ltd. and Subsidiaries Years ended March 31, 2010, 2009 and 2008 Millions of yen 2010 2009 2008 Thousands of U.S. dollars (note 3) 2010 Revenues: Product sales ...Financial and other services ...Total revenues ...Cost of sales: Product sales ......

  • Page 49
    ... and other ...Sales of treasury stock ...Total change in capital surplus ...Balance at end of year ...Legal reserve and retained earnings (note 14): Balance at beginning of year ...Change in legal reserve and retained earnings: Equity transactions and other ...Net loss ...Dividends to Hitachi, Ltd...

  • Page 50
    ...dollars (note 3) 2010 Total Hitachi, Ltd. stockholders' equity: Balance at beginning of year ...Change in total Hitachi, Ltd. stockholders' equity: Issuance of common stock ...Conversion of ...907,430) 2,139,086 - (264,710) (1,237) 698 951,537 $24,385,430 48 Hitachi, Ltd. Annual Report 2010

  • Page 51
    ... the year: Foreign currency translation adjustments ...Pension liability adjustments ...Net unrealized holding gain (loss) on available-for-sale securities ...Cash flow hedges ...Total other...861) $ (907,430) 74,269 1,763,688 308,344 (7,215) 2,139,086 $ 1,231,656 Hitachi, Ltd. Annual Report 2010 49

  • Page 52
    ...treasury stock ...Purchase of shares of consolidated subsidiaries from noncontrolling interest holders ...Proceeds from sale of shares of consolidated subsidiaries to noncontrolling interest holders ...Other ...Net cash provided by (used in) financing activities ...Effect of exchange rate changes on...

  • Page 53
    .... (d) Cash Equivalents For the purpose of the statement of cash flows, the Company considers all highly liquid investments with insignificant risk of changes in value which have initial maturities of three months or less when purchased to be cash equivalents. Hitachi, Ltd. Annual Report 2010 51

  • Page 54
    ...-for-sale security, held-to-maturity security or cost-method investment is less than the cost basis or the amortized cost basis, the Company assesses whether the impairment is temporary or other-than-temporary. Fair value is determined based on quoted market prices, projected discounted cash...

  • Page 55
    ... programs, certain financial assets such as lease receivables, trade receivables and others are sold to Special Purpose Entities (SPEs) which are mainly funded through the issuance of asset-backed securities to investors. When a transfer of financial assets is eligible to be accounted for as a sale...

  • Page 56
    ... gross revenues or the straight-line method over the remaining estimated economic life of each software product. (m) Impairment of Long-lived Assets The Company reviews the carrying value of long-lived assets or a related group of assets to be held and used, including intangible assets with finite...

  • Page 57
    ...value, as evidenced by vendor specific objective evidence (VSOE), or in the absence of VSOE of the delivered elements, the residual method. VSOE is the price charged by the Company to an external customer for the same element when such an element is sold separately. Hitachi, Ltd. Annual Report 2010...

  • Page 58
    ... 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 measurement equipment, railway vehicles...

  • Page 59
    ... development of software products for sale or lease to others are accounted for in accordance with ASC 985, "Software." Development costs incurred in the research and development of new software products and enhancements to existing products are expensed as incurred until technological feasibility...

  • Page 60
    ...value, the Company considers the principal or most advantageous market where the Company would transact and considers assumptions that market participants would use in pricing the asset or liability. (ab) Accounting Changes... statements. The Company adopted the provisions of ASC 470, "Debt," related ...

  • Page 61
    ... of ASC 810, purchases and proceeds from sales of shares of subsidiaries that do not result in a change in the scope of consolidation, which were previously included in cash flows from investing activities, are included in cash flows from financing activities. Hitachi, Ltd. Annual Report 2010 59

  • Page 62
    ... 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 ¥93=U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 31, 2010. This translation...

  • Page 63
    ... fair value of available-for-sale securities by the consolidated balance sheets classification as of March 31, 2010 and 2009. Millions of yen Amortized cost basis Gross gains Gross losses Aggregate fair value 2010 Amortized cost basis Gross gains Gross losses Aggregate fair value 2009 Short-term...

  • Page 64
    ... consist primarily of stocks issued by Japanese listed companies. Governmental debt securities consist primarily of Japan treasury bonds. Corporate debt securities consist primarily of structured bonds. Other securities consist primarily of investments funds. 62 Hitachi, Ltd. Annual Report 2010

  • Page 65
    ... Company did not identify any events or changes in circumstances that might have had a significant adverse effect on their fair value. The aggregate fair values of investments in affiliated companies, for which a quoted market price was available, as of March 31, 2010 and 2009, were ¥17,388 million...

  • Page 66
    ...information relating to Renesas Technology Corp. (Renesas), Casio Hitachi Mobile Communications Co., Ltd. (CHMC) and other affiliated companies accounted for by the equity method is as follows: Millions of yen Renesas CHMC Others Total 2010... 2,470,677 $ 3,236,086 64 Hitachi, Ltd. Annual Report 2010

  • Page 67
    ... yen Renesas CHMC Others Total 2010 Revenues ...Cost of sales ...Selling, general and administrative expenses ...Impairment losses for long-lived assets ...Restructuring charges ......870,307 (1,673,574) (298,819) (51,729) (167,463) ¥ 3,802 ¥ (58,186) Hitachi, Ltd. Annual Report 2010 65

  • Page 68
    ... dollars Renesas CHMC Others Total 2010 Revenues ...Cost of sales ...Selling, general and administrative expenses ...Impairment losses for long-lived assets ...Restructuring charges ......,987 (2,239,644) (332,358) (164,437) (395,428) ¥ (35,852) ¥ (162,205) 66 Hitachi, Ltd. Annual Report 2010

  • Page 69
    ... 30.6% interest in Renesas Electronics Corporation and accounts for the investment under the equity method of accounting. On April 1, 2004, CHMC, which focused on mobile phone design, production and sales, was incorporated. The Company has owned 49.0% of the voting stock of CHMC since its foundation...

  • Page 70
    ...accumulated depreciation as of March 31, 2010 amounted to ¥1,948,175 million ($20,948,118 thousand) and ¥1,682,439 million ($18,090,742 thousand), respectively. The leased assets are depreciated using the straight-line method over their estimated useful lives. 68 Hitachi, Ltd. Annual Report 2010

  • Page 71
    ... leases Years ending March 31 Operating leases 2010 Financing leases Thousands of U.S. dollars Operating leases 2010 2011 ...2012 ...2013 ...2014 ...2015 ...Thereafter ...Total minimum payments to be received ...Unguaranteed residual values ...Amount representing executory costs ...Unearned income...

  • Page 72
    ... as lease, trade and mortgage loans receivable, and arrange other forms of asset-backed financing for the purpose of providing diversified and stable fund raising as part of their ongoing securitization activities. Historically, they have used both Hitachi-supported and third-party Special Purpose...

  • Page 73
    ... receivables recorded on the consolidated balance sheets. Hitachi Capital Corporation and certain other financing subsidiaries sold lease receivables to SPEs that are not QSPEs. For the years ended March 31, 2010, 2009 and 2008, net gains recognized on the sale of these lease receivables amounted...

  • Page 74
    ...473 (3,002,634) $ 7,525,839 $58,215 $30,204 Net credit loss 2009 Total assets managed or transferred: Trade receivables excluding mortgage loans receivable ...Assets transferred ...Assets held in portfolio ...¥1,003,491 (269,685) ¥ 733,806 ¥11,079 ¥5,202 72 Hitachi, Ltd. Annual Report 2010

  • Page 75
    ... of U.S. dollars 2010 Proceeds from transfer of trade receivables ...Net loss recognized on those transfers ...Outstanding balance of transferred receivables ... ¥362,147 (616) 75,654 ¥490,647 (993) 98,214 $3,894,054 (6,624) 813,484 Hitachi Capital Corporation sold mortgage loans receivable to...

  • Page 76
    ... of capitalized 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, 2010, 2009 and 2008 were ¥40,128 million ($431,484 thousand), ¥85,841 million and ¥49,180 million, respectively. 74 Hitachi, Ltd. Annual...

  • Page 77
    ...U.S. dollars 2010 Gross carrying amount Accumulated amortization Net carrying amount Amortized intangible assets: Software ...Software for internal use ...Patents ......2014 ...2015 ... ¥86,805 66,763 47,323 28,332 16,521 $933,387 717,882 508,849 304,645 177,645 Hitachi, Ltd. Annual Report 2010 75

  • Page 78
    ...2009. The fair value of that reporting unit was estimated using the present value of expected future cash flows and quoted market prices. Impairment losses are included in selling, general and administrative expenses in the consolidated statements of operations. 76 Hitachi, Ltd. Annual Report 2010

  • Page 79
    ... 27,103 (3,053) ¥24,050 ¥ 63,580 87,531 60,440 ¥147,971 Thousands of U.S. dollars 2010 Domestic Foreign Total Income (loss) before income taxes ...Income taxes: Current tax expense ...Deferred tax expense (benefit)...,181 ¥324,782 187,576 84,587 ¥272,163 Hitachi, Ltd. Annual Report 2010 77

  • Page 80
    ... tax rates of foreign subsidiaries ...Other, net ...Effective income tax rate ... 40.6% 37.1 9.7 (0.9) (0.0) 35.6 4.6 125.5 (20.8) 1.3 232.7% (40.6)% 22.7 1.6 (18.3) 0.5 5.4 3.4 204.1 (4.0) (0.5) 174.3% 40.6% (2.8) 0.3 1.7 (7.9) 4.0 0.9 45.9 2.2 (1.1) 83.8% 78 Hitachi, Ltd. Annual Report 2010

  • Page 81
    ... consolidated balance sheets under the following captions: Millions of yen 2010 2009 Thousands of U.S. dollars 2010 Prepaid expenses and other current assets ...Other assets ... ¥23,090 49,622 ¥72,712 ¥19,164 52,044 ¥71,208 $248,279 533,570 $781,849 Hitachi, Ltd. Annual Report 2010 79

  • Page 82
    ... dollars 2010 Borrowings, mainly from banks ...Commercial paper ...Borrowings from affiliates ... ¥388,809 46,377 16,265 ¥451,451 ¥659,250 325,852 13,720 ¥998,822 $4,180,742 498,677 174,893 $4,854,312 The weighted average interest rate on short-term debt outstanding as of March 31, 2010 and...

  • Page 83
    ... on property, plant and equipment, maturing 2010-2024, interest 1.89-5.4% ...Unsecured, maturing 2010-2026, interest 0.65-6.97% ...Capital lease obligations ...Less current portion ...68,841 1,030,323 33,919 1,915,692 303,730 ¥1,611,962 The aggregate annual maturities of long-term debt after...

  • Page 84
    ... 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 in a period...

  • Page 85
    ...a notional account which represents pension benefits. The balance in the notional account is based on principal credits, which are accumulated as employees render services, and interest credits, which are determined based on the market interest rates. Under unfunded lump-sum payment plans, employees...

  • Page 86
    ... return on plan assets ...Employers' contributions ...Employees' 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...

  • Page 87
    ...used to determine the net periodic pension cost for the years ended March 31, 2010, 2009 and 2008 are as follows: 2010 2009 2008 Discount rate ...Expected long-term return on plan assets ...Rate of compensation increase ... 2.6% 3.0% 2.7% 2.5% 3.4% 2.7% 2.5% 3.1% 2.7% The expected long-term rate...

  • Page 88
    ... consist of foreign government bonds. Government and municipal debt securities are primarily valued at prices provided by the securities industry, the industrial associations in each country, or prices which are calculated on the basis of market interest rates. 86 Hitachi, Ltd. Annual Report 2010

  • Page 89
    ... bonds of the related countries, swap interest rates and credit risks. (d) Hedge funds are invested primarily in relative value strategy funds, event driven funds, equity long/short funds, and macroeconomic and Commodity Trading Advisor (CTA) funds. Hedge funds are valued using the Net Asset...

  • Page 90
    ... stock for the year ended March 31, 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. 88 Hitachi, Ltd. Annual Report 2010

  • Page 91
    ...849,021) 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...

  • Page 92
    ... of incorporation. The changes in treasury stock for the years ended March 31, 2010, 2009 and 2008 are summarized as follows: Millions of yen Shares Amount Thousands of U.S. dollars Amount Balance as of March 31, 2007 ...Acquisition for treasury ...Sales of treasury stock ...Balance as of March 31...

  • Page 93
    ... (7,335) ¥(182,783) ¥ (69,222) (110,899) 384 ¥(179,737) ¥ (20,906) (48,605) 289 ¥ (69,222) $(1,932,656) 46,118 (78,871) $(1,965,409) Hitachi, Ltd. Annual Report 2010 91

  • Page 94
    ... the year: Foreign currency translation adjustments ...Pension liability adjustments ...Net unrealized holding gain on available-for-sale securities ...Cash flow hedges ...Reclassification adjustments...12,613) (96,258) $ 91,258 1,292,075 306,850 (15,925) 1,674,258 92 Hitachi, Ltd. Annual Report 2010

  • Page 95
    ...of reclassification adjustments: Foreign currency translation adjustments ...Pension liability adjustments ...Net unrealized holding gain on available-for-sale securities ...Cash flow hedges ...(144,570)...585) 118,189 ¥ (68,113) (113,126) (59,874) (137) (241,250) Hitachi, Ltd. Annual Report 2010 93

  • Page 96
    ... in the event the customer cannot make scheduled payments. The subsidiaries provide certain revolving lines of credit to its credit card holders in accordance with the terms of the credit card business customer service contracts. Furthermore, the subsidiaries provide credit facilities to parties in...

  • Page 97
    ... 31, 2010, outstanding commitments for the purchase of property, plant and equipment were approximately ¥35,906 million ($386,086 thousand). It is a common practice in Japan for companies, in the ordinary course of business, to receive promissory notes in the settlement of trade accounts receivable...

  • Page 98
    ...Antitrust Division of the U.S. Department of Justice as of March 31, 2009, and paid that fine in June 2009. In June 2007, the Company received requests for information from the European Commission in respect of alleged antitrust violations relating to dynamic random access memories. In May 2010, the...

  • Page 99
    ... due to a specific type of electronic parts that were projected to have lower production because of smaller demand in the market and a decline in the expected selling price of certain assets held for sale caused by a deterioration of the real estate market. The fair value estimates used to determine...

  • Page 100
    ... accrued special and one-time termination benefits for the years ended March 31, 2010, 2009 and 2008 is as follows: Millions of yen 2010 2009 2008 Thousands of U.S. dollars 2010 Balance at beginning of the year ...New charges ...Cash payments ...Foreign currency exchange rate changes ...Balance at...

  • Page 101
    ... ¥21,040 million on a contribution of availablefor-sale securities to a pension fund trust. 22. SALES OF STOCK BY SUBSIDIARIES OR AFFILIATED COMPANIES In April 2007, Hitachi Metals, Ltd., a subsidiary which manufactures and sells high-grade metal products, and NEOMAX Co., Ltd., a subsidiary which...

  • Page 102
    ...Advertising expense ...Maintenance and repairs ...Rent ...Research and development expense ... ¥124,019 28,877 72,065 142,077 372,470 ¥148,145 38,598 78,242 148,401 416,517 ¥162,526 45,823 84,122 143,369 428,171 $1,333,538 310,505 774,892 1,527,710 4,005,054 100 Hitachi, Ltd. Annual Report...

  • Page 103
    ...notes mainly through the Euro markets to finance its 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...

  • Page 104
    ... rate payments on long-term debt associated with medium-term notes and make fixed interest rate payments, thereby creating fixed interest rate long-term debt. Certain financing subsidiaries mainly finance a portion of their operations using long-term debt with a fixed interest rate and lend funds...

  • Page 105
    ...6,849 2010 Derivatives Location Millions of yen Thousands of U.S. dollars Forward exchange contracts Cross currency swap agreements Interest rate swaps Other income ...Other income ...Interest charges ... ¥ (175) 3,206 580 ¥3,611 $ (1,882) 34,473 6,237 $38,828 Hitachi, Ltd. Annual Report 2010...

  • Page 106
    ... dollars Forward exchange contracts Cross currency swap agreements Interest rate swaps Option contracts Other income ...Other income ...Interest charges ...Other income ... ¥(1,007) (7,536) 1,756 (634) ¥(7,421) $(10,828) (81,032) 18,881 (6,817) $(79,796) 104 Hitachi, Ltd. Annual Report 2010

  • Page 107
    ... hedging instruments Ineffective portion and amount excluded from effectiveness test 2010 Derivatives Location Millions of yen Thousands of U.S. dollars Forward exchange contracts Cross currency swap agreements Interest rate swaps Other income ...Other income ...Interest charges ... ¥ 245 589...

  • Page 108
    ...Long-term debt The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using 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...

  • Page 109
    ... Thousands of U.S. dollars 2010 Carrying amounts Estimated fair values Long-term debt ...Derivatives (Effective Portion in Other Current Liabilities): Forward exchange contracts ...Cross currency swap agreements ...Interest rate swaps ...Option contracts ...Derivatives (Ineffective Portion in...

  • Page 110
    ... relevant information including market interest rate curves, referenced credit spreads or default rates, are used to determine fair value. These investments are included in Level 2. Level 2 securities include short-term investments and available-for-sale securities such as listed stocks traded over...

  • Page 111
    ... 31, 2010 and 2009. The carrying value on the consolidated balance sheet is equal to the fair value. Millions of yen 2010 Fair value hierarchy classification Total Balance Level 1 Level 2 Level 3 Assets: Investments in securities Equity securities ...Governmental debt securities ...Corporate debt...

  • Page 112
    ... debt securities Subordinated interests resulting from securitization Corporate debt securities Subordinated interests resulting from securitization Thousands of U.S. dollars 2010 Total Total Balance at beginning of year ...Purchases, sales, issuances and settlements ...Total gains or losses...

  • Page 113
    ... The fair value based on observable inputs such as quoted market prices of similar investments is included in Level 2. The fair value primarily based on discounted cash flows using unobservable inputs based on business forecasts, market trends, and assumptions of projected business plans is included...

  • Page 114
    ... March 30, 2010 (the acquisition date). Telcon manufactures and sells major construction machinery including hydraulic excavators, backhoe loaders and wheel loaders. Hitachi Construction Machinery decided to purchase an additional 20% interest to obtain a strong lead in the India market, which is...

  • Page 115
    ... 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 116
    ... media and Batteries Digital Media & Consumer Products: Optical disk drives, Flat-panel TVs, LCD projectors, Mobile phones, Room air conditioners, Refrigerators, Washing machines and Air-conditioning equipment Financial Services: Leasing and Loan guarantees Others: Logistics, Property management...

  • Page 117
    ... 2010 Information & Telecommunication Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products...

  • Page 118
    ... 2010 Information & Telecommunication Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products...

  • Page 119
    ... 2010 Information & Telecommunication Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials & Components ...Automotive Systems ...Components & Devices ...Digital Media & Consumer Products...

  • Page 120
    ...$270,925 Capital Investment for Long-Lived Assets Millions of yen 2010 2009 Thousands of U.S. dollars 2010 Information & Telecommunication Systems ...Power Systems ...Social Infrastructure & Industrial Systems ...Electronic Systems & Equipment ...Construction Machinery ...High Functional Materials...

  • Page 121
    ... business in any individual country and region in which its long-lived assets in that country exceed 10% of the consolidated balance of long-lived assets. There are no revenues to a single major outside customer for the years ended March 31, 2010 and 2009. Hitachi, Ltd. Annual Report 2010 119

  • Page 122
    ...2010 Japan Outside customers ...Intersegment transactions ...Total ...Asia Outside customers ...Intersegment transactions ...Total ...North America Outside customers ...Intersegment transactions ...Total ...Europe Outside customers...588,978 10,873,280 75,462,258 120 Hitachi, Ltd. Annual Report 2010

  • Page 123
    ... (640,441) $2,173,752 Millions of yen 2010 2009 Thousands of U.S. dollars 2010 Japan ...Asia ...North America ...Europe ...Other Areas ...Subtotal ...Eliminations and Corporate assets ...Total ... ¥ 7,297,719 1,318,...043 111,272,989 (15,017,484) $ 96,255,505 Hitachi, Ltd. Annual Report 2010 121

  • Page 124
    ... 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, 2010. In making this assessment, our management used the criteria set forth...

  • Page 125
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hitachi, Ltd. and subsidiaries' internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of...

  • Page 126
    ... inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Hitachi, Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on the...

  • Page 127
    Hitachi, Ltd. Annual Report 2010 125

  • Page 128
    ... 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 sale and disposal of rental assets and other property and impairment...

  • Page 129
    ... Shareholder Services P.O. Box 43077 Providence, Rhode Island 02940-3077 USA TEL: U.S.A. 1-877-CITI-ADR (248-4237) (toll-free) International +1-781-575-4555 E-mail: [email protected] URL: www.citi.com/adr Overseas Stock Exchange Listing New York Japanese Stock Exchange Listings Tokyo...

  • Page 130
    Printed in Japan