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101
Hitachi, Ltd. Annual Report 2010
25. SUPPLEMENTARY CASH FLOW INFORMATION
Millions of yen
Thousands of
U.S. dollars
2010 2009 2008 2010
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥26,706 ¥ 34,443 ¥ 42,468 $287,161
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,155 177,624 174,735 657,581
Noncash investing and financial activities:
Capitalized lease assets . . . . . . . . . . . . . . . . . . . . ¥ 5,956 ¥ 10,299 ¥ 5,488 $ 64,043
Conversion of convertible debentures
issued by the Company . . . . . . . . . . . . . . . . . . . 2– – 22
The proceeds from the sale of securities classified as available-for-sale disclosed in note 4 are included in proceeds from sale
of investments in securities and shares of consolidated subsidiaries resulting in deconsolidation on the consolidated statements
of cash flows.
26. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Overall risk profile
The major manufacturing bases of the Company and its subsidiaries are located in Japan and Asia. The selling bases are
located globally, and the Company and its subsidiaries generate approximately 40% of their sales from overseas. These
overseas sales are mainly denominated in the U.S. dollar or Euro. As a result, the Company and its subsidiaries are exposed
to market risks from changes in foreign currency exchange rates.
The Company’s financing subsidiaries in the U.K., the U.S. and Singapore issue variable rate medium-term 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 losses in the event of non-performance by counterparties
to derivative financial instruments, but it is not expected that any counterparties will fail to meet their obligations because most
of the counterparties are internationally recognized financial institutions that are rated A or higher and contracts are diversified
into a number of major financial institutions.
The Company and its subsidiaries have an insignificant amount of derivative instruments containing credit-risk-related
contingent features, such as provisions that require the Company’s debt to maintain an investment grade credit rating from
each of the major credit rating agencies.
Risk management policy
The Company and its subsidiaries assess foreign currency exchange rate risk and interest rate risk by continually monitoring
changes in these exposures and by evaluating hedging opportunities. It is the Company’s principal policy that the Company
and its subsidiaries do not enter into derivative financial instruments for speculation purposes.
Foreign currency exchange rate risk management
The Company and its subsidiaries have assets and liabilities which are exposed to foreign currency exchange rate risk and,
as a result, they enter into forward exchange contracts and cross currency swap agreements for the purpose of hedging
these risk exposures.
In order to fix the future net cash flows principally from trade receivables and payables recognized, which are denominated
in foreign currencies, the Company and its subsidiaries on a monthly basis measure the volume and due date of future net
cash flows by currency. In accordance with the Company’s policy, a certain portion of measured net cash flows is covered
using forward exchange contracts, which principally mature within one year.