HIGHLIGHTS OF THE YEARHitachi, Ltd. and SubsidiariesYears ended March 31, 2001 and 2000
CONTENTS
To Our Shareholders 1
Hitachi is changing how we . . . 5
Segment Information 12
Review of OperationsInformation Systems & Electronics 14Power & Industrial Systems 18Consumer Products 20Materials 22Services & Other 24
For a Better World 26
Board of Directors and Corporate Auditors 28
Financial Section 29
Five-Year Summary 61
Major Consolidated Subsidiaries 62
Corporate Data 63
Statements in this document contain forward-looking statements which reflect management’s currentviews with respect to certain future events and financial performance. Words such as “anticipate,”“believe,” “expect,” “estimate,” “intend,” “plan,” “project,” and similar expressions which indicate futureevents and trends identify forward-looking statements. Actual results may differ materially from thoseprojected or implied in the forward-looking statements and from historical trends. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate.
Factors that could cause actual results to differ materially from those projected or implied in anyforward-looking statements include, but are not limited to, rapid technological change, particularly inthe Information Systems & Electronics segment; uncertainty as to Hitachi’s ability to continue to developproducts and to market products that incorporate new technology on a timely and cost-effective basisand achieve market acceptance; fluctuations in product demand and industry capacity, particularly inthe Information Systems & Electronics segment and the Consumer Products segment; fluctuations inrates of exchange for the yen and other currencies in which Hitachi makes significant sales or in whichHitachi’s assets and liabilities are denominated, particularly between the yen and the U.S. dollar;uncertainty as to Hitachi’s access to liquidity or long-term financing, particularly in the context ofrestrictions or availability of credit prevailing in Japan; uncertainty as to Hitachi’s ability to implementmeasures to reduce the potential negative impact of fluctuations in product demand and/or exchangerates; general economic conditions and the regulatory and trade environment of Hitachi’s major markets,particularly, the United States, Japan and elsewhere in Asia, including, without limitation, continuedstagnation or deterioration of the Japanese or other East Asian economies, or direct or indirectrestriction by other nations of imports; uncertainty as to Hitachi’s access to, or protection for, certainintellectual property rights, particularly those related to electronics and data processing technologies;Hitachi’s dependence on alliances with other corporations in designing or developing certain products;and the market prices of equity securities in Japan, declines in which may result in write-downs ofequity securities Hitachi holds.
Millions ofMillions of yen U.S. dollars
2001 2000 2001
For the year:Net sales ¥ 8,416,982 ¥8,001,203 $67,879Operating income 342,312 174,364 2,761Net income 104,380 16,922 842Cash dividends declared 36,716 20,026 296
At year-end:Total assets 11,246,608 9,983,361 90,698Stockholders’ equity 2,861,502 2,987,687 23,077
Yen U.S. dollars
Per share data:Net income:
Basic ¥ 31.27 ¥ 5.07 $0.25Diluted 30.32 4.99 0.24
Net income per ADS (representing 10 shares):Basic 313 51 2.52Diluted 303 50 2.44
Notes: 1. The consolidated figures in this annual report are expressed in yen and, solely for the convenience of the reader, have been translated into United States dollars atthe rate of ¥124=U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of March 30, 2001. See note 2 of the accompanyingnotes to consolidated financial statements.
2. On April 1, 2000, Hitachi, Ltd. (the Company) adopted the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for certain Investmentsin Debt and Equity Securities” and restated the consolidated financial statements as of and for the year ended March 31, 2000.
HITACHI, LTD. ANNUAL REPORT 2001 1
TO OUR SHAREHOLDERS
Tsutomu KanaiChairman of the Boardand Director
Etsuhiko ShoyamaPresident and Director
Fiscal 2000, ended March 31, 2001, saw
“creating change” become ingrained in the
corporate culture of your company. In April
1999, Hitachi, Ltd., the parent company, was
divided into 10 business groups, each a virtually
independent company. At the same time, the
Board of Directors was reduced from 30 to 14
members. These moves were made to clarify
authority and responsibility, and to speed up
decision-making. Subsequently, in November
1999 we launched the “i.e. HITACHI
Plan,” a medium-term business plan that
set out goals to be achieved as part of
a major transformation aimed at
greatly increasing Hitachi’s corpo-
rate value.
Since then, Hitachi has changed
considerably. We placed confi-
dence in our employees and they
responded. Their dedicated efforts
have been a driving force behind the
change we have achieved to date.
Indeed, their efforts show how well they
have taken to heart our rallying cry of
two years ago, “Reliability and Speed.”
HITACHI VALUE, a set of common
values and standards of conduct ex-
pected of employees, has also become
an integral part of our corporate culture. As a
result, all employees now embrace change as
a normal state of affairs——and as a value driver.
Net sales for the year amounted to
¥8,416,982 million (US$67,879 million), an
increase of 5% year on year. Cash flows
from operating activities were ¥535,433
million (US$4,318 million), a year-on-year
increase of 19%. Operating income rose
96%, to ¥342,312 million (US$2,761 million).
Income before income taxes and minority in-
terests came to ¥323,655 million (US$2,610
million), an increase of 308%. Net income
was also sharply higher, soaring 517% to
¥104,380 million (US$842 million).
During the year, capital investment
amounted to ¥971,095 million (US$7,831
million), an increase of 16%. The increase in
capital investment reflects aggressive invest-
ment in the information systems and electron-
ics field, which forms the wellspring for future
corporate growth. R&D expenditure amounted
to ¥435,579 million (US$3,513 million),
unchanged from a year earlier, with more than
60% relating to R&D on information systems
and electronics.
As of March 31, 2001, Hitachi’s share
price stood at ¥1,073, a year-on-year decline
of 12%. Over the same period, the TOPIX
(Tokyo Stock Price Index) fell 25%. Hitachi
increased the annual cash dividend to ¥11.0
per share from ¥6.0 per share a year ago,
restoring it to the same level as in the fiscal
year ended March 31, 1998.
The transition to a flatter organization and
the delegation of authority are speeding up
the making and implementation of decisions.
As previously mentioned, our system of
virtually independent companies has truly
taken hold in Hitachi. Group CEOs now
make around 80% of the decisions that were
formerly made at the corporate level toward
achieving their goals. The number of layers in
the decision-making hierarchy has been halved.
Moreover, the number of headquarters staff
members has been reduced from 1,100 to 400.
HITACHI, LTD. ANNUAL REPORT 20012
>> Hitachi and International Business
Machines Corporation entered into a stra-
tegic relationship covering the cooperative
development and manufacturing of
selected servers, semiconductors and
components. The agreement is expected
to yield much lower costs and much
faster development of products.
>> Hitachi and LG Electronics Inc. estab-
lished Hitachi-LG Data Storage, Inc., with
the aim of making the new company the
world’s leading vendor of optical disk
drives, a key component in the digital
information era.
>> The Company reached agreement with
Matsushita Electric Industrial Co., Ltd. on a
strategic alliance in information services,
home appliances and other related busi-
ness areas. The two companies will work
together to develop the IC card solutions
business, to plan and develop home
network appliance systems and to jointly
develop key components in the area of
home appliances.
>> Hitachi Credit Corporation and Hitachi
Leasing, Ltd. were merged to form Hitachi
Capital Corporation, Japan’s largest
leasing enterprise. Management intends
to construct a new financial services
business model, and to achieve an ROE
of at least 10% while maintaining an
equity ratio of 10%.
The following are some of the specific actions
that we have taken recently under the banner
of “creating change” to enhance corporate value.
>> In the rapidly growing area of semicon-
ductor manufacturing equipment
operations, we decided to separate the
Instruments Group and Semiconductor
Manufacturing Equipment Group from
the parent company and merge them
with Nissei Sangyo Co., Ltd., a Hitachi
subsidiary. The resulting concentration of
management resources is intended to
create a high-profit structure.
>> Elpida Memory, Inc., a DRAM joint
venture formed with NEC Corporation,
successfully developed the world’s first
256-megabit DRAM based on 0.13-
micron process design rules. The decision
was also made to invest ¥160 billion to
construct a new 300mm wafer fabrica-
tion plant to further ensure Elpida
Memory’s leading position in the global
market.
>> In October 2000, Experio Solutions
Corporation, a Hitachi subsidiary, acquired
the e-Business Consulting Group of
Grant Thornton LLP, an accounting and
management-consulting firm. The acqui-
sition will expand Hitachi’s presence in
the global IT solutions market.
HITACHI, LTD. ANNUAL REPORT 2001 3
These and other measures implemented since
April 1999 to achieve structural reforms have
already contributed some ¥24 billion (US$194
million) annually to operating income. We esti-
mate that in fiscal 2002, the final year of the “i.e.
HITACHI Plan,” this contribution will have risen
to over ¥70 billion (US$565 million). Looking
ahead, we also intend to implement a number
of other strategies to increase earnings.
The Corporate Innovation Initiative (CII)
is a key company-wide focus as we seek to
accelerate the pace of “creating change” and
achieve the goals of the “i.e. HITACHI Plan.”
One element of CII is Project C. This
project sets out to shorten by 25% the 204
days it takes to turn over inventory plus
accounts receivable. This will be achieved
through root-and-branch reforms in the supply
chain, from production through sales. As a
result, we expect to generate cash flow total-
ling ¥1 trillion (US$8 billion) by fiscal 2002.
A second element is our Procurement
Renewal Project, which over a 2-year period
seeks to reduce materials purchasing costs
drastically. More centralized, net-based
purchasing, standardized procurement
specifications within the Hitachi Group and
distribution cost-cutting, will be instrumental
to achieving our goals.
Strengthening sales and marketing capa-
bilities in order to become our customers’
“best solutions partner” is also an important
part of CII. The latest customer relationship
management (CRM) and sales force automa-
tion (SFA) techniques are being utilized to
analyze customer requirements and formulate
best-fit solutions. The high regard that cus-
tomers have for Hitachi is not based solely on
our technological prowess. It is also due to
the fact that we act as their partner by provid-
ing them with optimal solutions.
Another component of CII is Project A.
With this project, Hitachi is focusing on surpass-
ing other companies by expanding its lineup
of products and services in areas where we
have a competitive edge. These include re-
dundant array of independent disks (RAID)
storage systems, a rapidly growing market in
which Hitachi boasts the world’s most ad-
vanced technology; electronic administrative
solutions that in a broadband network society
require the highest level of security and system
reliability; High Data Rate technology mobile
communication systems that provide an
efficient network infrastructure; and environ-
mental and energy-conservation systems that
are indispensable in the 21st century.
HITACHI, LTD. ANNUAL REPORT 20014
models and reorganizing their operations.
With the advent of the ubiquitous information
society and the increasing interdependency of
the world’s economies, companies everywhere
are being exposed to global megacompetition.
While this business climate has its risks, it
also brings great opportunities.
As symbolized by our corporate statement,
“Inspire the Next,” we want to drive change
in the world in which we live. Maximizing
shareholder value will be our polestar. In a
management climate characterized by dramatic
change, we are dedicated to reshaping our
businesses and increasing shareholder value.
Your continued support will underpin our efforts.
June 27, 2001
Tsutomu Kanai
Chairman of the Board and Director
Etsuhiko Shoyama
President and Director
The Hitachi Group consists of more than
1,000 companies engaged in an extremely
wide spectrum of business sectors in which
electronics is the core component. It is there-
fore a unique conglomerate unrivaled by any
other in the world. And, as such, we have a
responsibility to its shareholders to make the
most of the strengths this uniqueness engen-
ders in order to maximize corporate value.
The implementation of the “i.e. HITACHI
Plan” is improving the profitability of each of
our business sectors. We are channeling
business resources into information systems,
telecommunications and electronic devices——
key sectors for achieving our goals. The power
systems sector is beginning to generate
stable cash flows. In consumer products, we
are seeking partnerships with other leading
companies to improve profitability. In materials,
strong growth is expected in electronics parts
and materials. In services, stable profits can
be generated by concentrating on financial
services in particular.
We are intent on making further improve-
ments to our earnings structure by creating
synergies between business areas and by
staying ahead of changes in society. In Japan,
changes in the legal and tax systems, along
with an easing of regulations, are giving com-
panies more options for creating business
HITACHI, LTD. ANNUAL REPORT 2001 5
Hitachi is
embracing a slogan of “creating change.” This embodies theCompany’s drive to deliver value worldwide in a variety of ways.See how Hitachi is changing all facets of our lives.
Change
>> Changing how we
Changing how we en
Changing how we le
>> Changing how we thi
Changing how we
>> Changing how we liv
onnect
ance
rn
k
ather
HITACHI, LTD. ANNUAL REPORT 2001 5
HITACHI, LTD. ANNUAL REPORT 20016
Harnessing the Power of IT to Connect Our LivesHitachi is leveraging the versatility of mobile phones by introducinga number of innovations. Hitachi’s automatic interpretation systemconverts Japanese verbal input into any one of ten chosen languages.A map service enables pedestrians to connect more easily with theirdestinations. Hitachi’s innovative software technology converts key-board input into animated Japanese sign language. Through these andother initiatives, Hitachi is changing how we connect.
nectThis map is based on theDigital Map 2500 (SpatialData Framework) publishedby the GeographicalSurvey Institute with itsapproval under the article30 of the Surveying Law.(Approval numberSOU-SHI No. 555 2000)
HITACHI, LTD. ANNUAL REPORT 20018
Inspiration That Gives People Reason to ThinkHow we think about things doesn’t change unless we are givena source of inspiration. Hitachi is providing just that. Hitachi’swearable Internet appliance will change how and where weinterface in the cyber world. Hitachi is also giving people reasonto think about how they invest. Hitachi Investment Management,Ltd. offers Hitachi Group’s pension funds a smarter way to invest.
Creating New Value for the Society inWhich We LiveHitachi’s highly secure, high-speed storage servicemeets the needs of businesses that must operate24 hours a day, 365 days a year. In bioinformatics,a field in which we can leverage our cutting-edgebiotechnology and IT, Hitachi will give impetus toprogress in life sciences, ultimately leading tobreakthroughs that will change all our lives forever.
Notes: 1. Net sales by industry segment include intersegment transactions.2. This information is disclosed in accordance with a ministerial ordinance under the Securities and Exchange Law of Japan.
Information Systems & ElectronicsSystems IntegrationSoftwareRAID storage systemsServersPCsSwitchesFiber Optic ComponentsDVD DrivesSemiconductorsLCDsDisplay TubesSemiconductor ManufacturingEquipment
Test and Measurement EquipmentMedical Electronics Equipment
MaterialsSemiconductor Related MaterialsDisplay Related MaterialsPrinted Circuit BoardsSynthetic Resin MaterialsHousing EquipmentSpecialty SteelsRolls for Rolling MillsMalleable Cast-Iron ProductsMagnetic MaterialsPipe FittingsWiresCablesCopper ProductsRubber Products
Power & Industrial SystemsNuclear Power PlantsHydroelectric Power PlantsThermal Power PlantsControl EquipmentCompressorsRolling Mill EquipmentPlant Engineering andConstruction
ElevatorsEscalatorsAir-Conditioning EquipmentRolling StockAutomotive EquipmentConstruction MachineryEnvironmental Control Systems
Japan Sales ¥5,791,300 ¥5,657,571 ¥5,533,554 $46,704Percentage of Net Sales (%) 69 71 69
Outside Japan Asia 966,870 897,664 895,457 7,797Percentage of Net Sales (%) 11 11 11North America 903,800 767,241 838,848 7,289Percentage of Net Sales (%) 11 10 11Europe 550,968 484,744 539,741 4,443Percentage of Net Sales (%) 7 6 7Other Areas 204,044 193,983 169,774 1,646Percentage of Net Sales (%) 2 2 2Subtotal 2,625,682 2,343,632 2,443,820 21,175Percentage of Net Sales (%) 31 29 31
Total 8,416,982 8,001,203 7,977,374 67,879
HITACHI, LTD. ANNUAL REPORT 200114
>> INFORMATION & TELECOMMUNICATION
SYSTEMS In fiscal 2000, ended March 31,
2001, investment in IT was brisk in Japan,against a backdrop of restructuring in financialservices industries, intensifying competition inlogistics, and expansion of e-Government andNet businesses. Overseas markets saw asignificant increase in demand for storagesolutions that facilitate the centralized man-agement and sharing of storage systemsand data dispersed throughout companies.
In this climate, Hitachi’s systems integration(SI) and solutions businesses turned in strongsales growth, due in particular to demandfrom the financial services industry in Japan.Overseas, sales of redundant array of indepen-dent disks (RAID) storage systems increased,supported by the introduction of new models
REVIEW OF OPERATIONS
Information Systems & Electronics
and growing demand. Sales of PCs and PCservers were also above year-ago levels.Mainframe sales decreased as the Companydecided to shift its focus from mainframes toRAID storage systems in overseas markets.Hard disk drives turned in increased sales,although they were affected by falling prices.In telecommunications systems, demand wasbrisk for Integrated Service Digital Network(ISDN) systems in Japan, and optical com-ponents posted higher sales, primarily inNorth America.
Reflecting the changes in the product mix,overall earnings increased, but were affectedby the write-off of goodwill in Hitachi DataSystems Corporation, a U.S. subsidiary.
In June 2000, the Company launched theworld’s highest capacity and fastest RAIDstorage system, an achievement that gener-ated a strong market response. At the sametime, Hitachi broadened its lineup of StorageArea Network (SAN) solutions built aroundthis system and enhanced support andservices. The Company also reached agree-ment with VERITAS Software Corporation ona global partnership to deliver storagesolutions with high availability.
Another focus was on Net businesses,which are growing rapidly. Hitachi moved toenhance its organizational framework for con-ducting these businesses. One action wasthe establishment of Hitachi netBusiness, Ltd.to provide a full range of the type of servicesrequired for business platforms, includingoperation of internet data centers, storageservices, proxy operations, collection of feesand charges, customer management andcertification and encryption. In addition,Hitachi unveiled a common brand name toencompass all Net businesses of the HitachiGroup—Cubium.
GlobalCenter Japan Corporation is delivering storage services rooted in the highperformance and reliability of Hitachi’s RAID storage systems.
HITACHI, LTD. ANNUAL REPORT 2001 15
To shorten the time to market and to driveefficiencies in server development andproduction, Hitachi inked a broad-basedstrategic alliance with International BusinessMachines Corporation. The alliance will seethe two parties jointly develop and manufac-ture mainstay server products, semiconductorchips and other components.
To drive expansion in its solutions business,Hitachi has entered into a number of strategicalliances. In October 2000, for example,Experio Solutions Corporation, a Hitachi sub-sidiary, acquired the e-Business ConsultingGroup of Grant Thornton LLP, an accountingand management-consulting firm. Hitachi alsoforged a comprehensive alliance with MicrosoftCorporation to develop and deliver Microsoft®
Windows® 2000-based enterprise solutions.In December 2000, the two parties establisheda joint venture corporation called NEXTIDE Inc.,a Hitachi subsidiary.
In the telecommunications field, Hitachi andClarity Group, a U.S.-based equity partner-ship, established OpNext, Inc. in the U.S., inSeptember 2000. This new subsidiary suppliesfiber optic components for data and tele-communications applications, a market that isexpanding rapidly in North America and otherareas. Hitachi also signed an agreement withNEC Corporation for the joint development ofnext-generation optical transport systems,which are in increasing demand overseas.
A compact, energy-efficient 10Gbit/s optic transceiver.
Hitachi Software Engineering Co., Ltd. sawits net sales increase 14% year on year to¥182,475 million (US$1,472 million) basedon strong sales of value-added systems.These systems included Net-based bankingsystems, and large-scale systems for financialservices and communications companies.Operating income rose to ¥12,814 million(US$103 million), up 16% year on year. In newbusinesses, Hitachi Software Engineeringdeveloped DNA chips and related manufac-turing equipment in its growing life sciencebusiness.
Hitachi Information Systems, Ltd. posted a4% increase in net sales to ¥113,342 million(US$914 million). Spurring this increasewere the launch of e-commerce and otherApplication Service Provider services, in addi-tion to strong demand for the company’s SIservices from local governments, logisticscompanies, manufacturers and other types ofusers. Operating income rose 22% to ¥6,238million (US$50 million). In February 2001,Hitachi Information Systems announced that itwill merge with Hitachi Information Network,Ltd., a Hitachi subsidiary, to integrate andenhance its solutions business.
Hitachi’s new brand name for its Net business.
Microsoft and Windows are registeredtrademarks of Microsoft Corporation.
HITACHI, LTD. ANNUAL REPORT 200116
>> SEMICONDUCTORS During fiscal
2000, the semiconductor market grew due tobrisk demand for PCs and peripherals, mobilephones and digital consumer products.
Hitachi’s semiconductor operations reflectedthese favorable market conditions. Salesgrew, particularly of system LSIs and general-purpose semiconductors. Semiconductoroperations also saw earnings improve sharply,year on year.
During the year, Hitachi invested a record¥220,000 million (US$1,774 million) in semi-conductor operations. The investments wereearmarked to ramp up production capacity forstrategic products, namely radio frequency(RF) high power amplifier modules for GSM-standard mobile phones and system LSIssuch as RF analog ICs for mobile phones andmicrocontrollers for IC cards.
In system LSIs, robust sales were postedby H8 series microcontrollers for IC cardsand SuperH™ family microcomputers in abroad range of fields, including informationand digital consumer applications. RF analogICs for mobile phones also performed well. Ingeneral-purpose semiconductors, sales of RFhigh power amplifier modules were brisk.
In DRAMs, the development and design ofnext-generation products was started duringthe period at Elpida Memory, Inc., a Hitachi
equity-method affiliate that is jointly ownedwith NEC Corporation. Hitachi transferred itsDRAM sales functions to Elpida Memory inthe first quarter of 2001. DRAM productionhas been concentrated in Hitachi NipponSteel Semiconductor Singapore Pte. Ltd.,which manufactures DRAMs for ElpidaMemory. In September 2000, Elpida Memoryannounced the development of the world’sfirst 256-megabit DRAM based on 0.13-micron process design rules. Elpida Memoryalso began construction of a 300mm waferfabrication plant in February 2001.
In system memories, sales of large-capacityAND-type flash memories for data storageapplications were slow owing to sluggishdemand. SRAMs, on the other hand, performedwell due to demand from mobile phonemanufacturers. Trecenti Technologies, Inc., aHitachi subsidiary owned jointly with UnitedMicroelectronics Corporation, began volumeproduction using 300mm wafers in March2001. This was a world first. In April 2001,Hitachi teamed up with STMicroelectronics toestablish SuperH, Inc. to develop and licensemicroprocessor cores of the SuperH™ family.
Hitachi’s semiconductor business strategycalls for an ongoing focus on system LSIs,and the allocation of resources for the earlydevelopment and commercialization of next-generation strategic products in areas inwhich Hitachi is highly competitive.
>> DISPLAYS In display products, ship-ments of thin-film transistor (TFT) LCDs fornotebook PCs and PC monitors grew.However, sales fell as prices plummeted. Colordisplay tube sales decreased as the desktopPC market softened. On the other hand,projection tube sales increased, reflectingsteady growth of the projection TV market.Overall, sales of display products decreased
A multi-chip module incorporating a SuperHTM micro-processor and synchronous DRAMs in a single package.
HITACHI, LTD. ANNUAL REPORT 2001 17
and earnings dropped sharply due to fallingTFT LCD prices.
In October 2000, Hitachi establishedHitachi Display Device (Suzhou) Co., Ltd. inChina to assemble LCD modules for PCsand mobile phones. This new subsidiary willexpand Hitachi’s production capacity, enhanceHitachi’s price competitiveness and help meetan expected surge in demand in the Chinesemarket. Plans call for production to commencein October 2001.
During the year, Hitachi invested ¥55,000million (US$444 million) in LCD operations,mainly for a new production line for TFTLCDs, which is scheduled to begin operationin July 2001.
Regarding the Company’s TFT LCDstrategy, Hitachi is working to improve itsproduct mix by expanding the ratio of non-notebook PC applications such as mobilephones, PC monitors and televisions. Hitachiplans to stabilize its LCD operations byconcentrating on these strategic areas.
During the year under review, Fujitsu HitachiPlasma Display Limited, a Hitachi equity-method affiliate that is jointly owned withFujitsu Limited, completed construction of itssecond plasma display panel productionplant. The plant began shipping in April 2001.
>> OTHER In the digital media field, sales of
display monitors sagged as price competitionintensified. Sales of optical storage devicesincreased as demand for DVD-ROM drivesfor PCs grew.
Sales of test and measurement equipmentincreased year on year due to strong demandfor scanning electron microscopes for semi-conductor inspection, lithography systemsand biotechnology systems. Sales of envi-ronmental systems and medical systems,however, decreased.
Hitachi Medical Corporation’s net salesincreased 3% year on year to ¥112,280million (US$905 million), and operatingincome rose 9% to ¥4,594 million (US$37million) on increased sales of ultrasounddiagnostic equipment. In fiscal 2000, the com-pany launched an optical topography system,the world’s first medical imaging system thatemploys near-infrared rays to make brainactivity visible. Looking ahead, Hitachi Medicalaims to strengthen its service businesses andspeed up development of strategic productsin an effort to improve earnings.
To reorganize the Hitachi Group’s test andmeasurement equipment and semiconductormanufacturing equipment operations, theInstruments Group and SemiconductorManufacturing Equipment Group will beseparated from the parent company andmerged with Nissei Sangyo Co., Ltd. inOctober 2001. In a related move, HitachiMedical’s sales operations for clinical testingsystems will be transferred to Nissei Sangyo.
This UHF-ECR plasmaetching system is used formanufacturing semi-conductor devices basedon 0.13-micron or finerprocess design rules.
A 19-inch Super-IPS TFTLCD module with 170-degree wide viewing angle.
HITACHI, LTD. ANNUAL REPORT 200118
>> POWER SYSTEMS The domestic power
systems market was extremely challengingduring the period under review as electricpower companies curbed capital expenditures.This situation was brought about by deregula-tion in Japan’s electric power market and lack-luster demand for electricity. However, powersystems managed to post year-on-year gainsin sales and earnings, thanks to large-scalethermal power plant projects and expansion ofthe maintenance business as well as demandfor turbines for the U.S. market.
To take advantage of domestic deregulation,in June 2000 Hitachi completed its first powerplant, which is the centerpiece of its drive tobecome an independent power producer.Hitachi also moved to reinforce operationsworldwide. In December 2000, as part of anexpansion of its thermal power plant mainte-nance operations overseas, Hitachi set up ajoint venture in Singapore with a local com-pany to provide maintenance and relatedservices. Furthermore, in July 2001 Hitachi
Power & Industrial Systems
will establish a company with Fuji ElectricCo., Ltd. and Meidensha Corporation for thedesign, development and manufacture ofelectric power transmission and distributionequipment.
>> INDUSTRIAL SYSTEMS A downturn in
domestic demand for rolling stock offsetgrowth of signal-related equipment for railwaycompanies. On the other hand, sales ofchemical and pharmaceutical plants grewsteadily during the year, supported by a slightrecovery in private-sector capital expendituresin Japan. Hitachi moved forward with restruc-turing by separating design and manufacturingdivisions from the parent company. As a result,industrial systems posted increases in salesand earnings.
To lift the pace of development and bolstercost competitiveness in high-voltage motorsand small- to medium-capacity generators,Hitachi established Japan Motor & GeneratorCo., Ltd., a joint venture with Fuji Electric andMeidensha, in July 2000. In October 2000,Hitachi and Mitsubishi Heavy Industries, Ltd.established MHI-HITACHI Metals Machinery,Inc. to engage in sales of metal rolling millsand engineering services.
Moreover, in April 2001 an alliance wasformed with Kawasaki Heavy Industries, Ltd. tocreate a powerful platform for marketing andsales of railway systems for overseas markets.
Hitachi technology is showcased in these sleek 885-series limited express railcars thatrun on the Nagasaki Line of Kyushu Railway Company.
HITACHI, LTD. ANNUAL REPORT 2001 19
>> BUILDING SYSTEMS In elevators and
escalators, the Japanese market for mainte-nance and services expanded, but the domes-tic equipment market contracted year-on-yeardue to fierce price competition. In this climate,Hitachi focused on comprehensive buildingmanagement systems and other high-value-added service operations. At the same time, itrolled out highly competitive new equipment.These moves drove growth in both equipmentand services, resulting in higher year-on-yearsales and earnings. In another development,in October 2000, Hitachi merged its homeelevator operations with those of MitsubishiElectric Corporation to form MitsubishiHitachi Home Elevator Corporation.
>> OTHER In automotive products, Hitachiis focusing on aggressively developing opera-tions in the Intelligent Transport System (ITS)field. As part of this drive, in December 2000,Hitachi purchased Nissan Motor Co., Ltd.’sholdings in Xanavi Informatics Corporation,making it a wholly owned Hitachi subsidiary.Also, Hitachi teamed up with Clarion Co., Ltd.and Xanavi Informatics to establish HCXCorporation, to develop and manufactureleading-edge Car Information Systems.
Net sales of Hitachi Construction MachineryCo., Ltd. increased 3% to ¥328,854 million
The Chugoku Electric Power Co., Inc.’s Osaki PowerStation took delivery from Hitachi of 250MW pressurizedfluidized bed combustion generators, the world’s largest.
(US$2,652 million). Operating income in-creased 63% year on year, to ¥9,892 million(US$80 million). In Japan, declining orders forpublic works projects made the market difficult,but Hitachi Construction Machinery focusedon expanding sales by launching new hydraulicexcavator models and other products. Over-seas, solid results in Europe offset the effectsof a slowdown in the U.S. economy. Thecompany decided to dissolve a joint venture,Fiat-Hitachi Excavators S.p.A., and will pursuean independent strategy in Europe, Africa andthe Middle East. Looking to the future, HitachiConstruction Machinery will push ahead withdecisive restructuring measures including theestablishment of a wheel loader joint venturewith Deere & Company.
Hitachi Plant Engineering & ConstructionCo., Ltd. posted net sales of ¥241,842 million(US$1,950 million), a 23% increase year onyear. Completion of large-scale electric powerfacilities and steel mills overseas contributedto the results. Operating income rose to¥6,657 million (US$54 million), up 20% yearon year. Hitachi Plant Engineering intends toexpand its technologically superior clean roomoperations and concentrate on developingsolutions businesses such as in the area ofwater supply and sewage treatment facilities.
Hitachi delivered this escalator to the Fukui PrefecturalDinosaur Museum, which opened in July 2000.
HITACHI, LTD. ANNUAL REPORT 200120
In Japan, a particularly hot summer stimulatedgrowth of the room air conditioner market,while the Olympic Games in Sydney and thestart of BS digital broadcasting fueled growthof the TV market. The consumer productsmarket also received a boost from consumersrushing to purchase new appliances beforeApril 2001, when a new Japanese law cameinto effect that requires consumers to payrecycling fees for four types of appliances.Throughout the period, the slow pace of eco-nomic recovery caused Japanese consumersto become more price-sensitive than ever.
>> HOME APPLIANCES Competitive forcesheld down prices across the sector duringfiscal 2000. Sales of room air conditionerswere sluggish due to severe price competition.In Japan, sales and earnings of energy-efficientpulse amplitude modulation (PAM) refrigera-tors increased year on year. Sales of washingmachines increased, however earnings wereimpacted by price competition. Microwaveovens featuring PAM technology posted sig-nificant sales growth, well above the industry
Consumer Products
Hitachi’s refrigerators in six colors.
average. In contrast, sales of home vacuumcleaners declined, as Hitachi lost marketshare in the high-end category. As a whole,sales of home appliances in Japan showed aslight increase year on year.
During the year, Hitachi started to shift itsresources to fast-growing businesses, such asproducts for home nursing care and servicesfor home renovations. These moves weremade to respond to increasing demands formore comfortable living environments, reflect-ing the aging of Japan’s population.
In overseas operations, in October 2000,Hitachi entered into a strategic alliance withGermany’s BSH Bosch und SiemensHausgeräte GmbH. This alliance will serve asthe bedrock for expanding home applianceoperations outside Japan, particularly in Asianmarkets. As the first step, a joint venture calledBHST Washing Appliances Ltd. was estab-lished in April 2001 to manufacture drum-type washing machines in Thailand. The twocompanies are looking to broaden the scopeof their cooperation to include room airconditioners and other home appliances.
The world’s first 32-inch HDTV-ready full-resolution plasma TV.
HITACHI, LTD. ANNUAL REPORT 2001 21
With sales prices trending downward in thehousehold appliance industry, companies arehaving to bolster their price competitiveness.Hitachi is responding in two ways. First, it islowering the cost of sales by reducing materialcosts and promoting the standardization ofparts. The other way is through joint purchas-ing by members of the Hitachi Group.
>> DIGITAL MEDIA In TVs, the operating
environment turned severe as price competi-tion gripped the market. Hitachi moved tomeet this challenge by reorganizing its pro-duction system on a global scale. In thesummer of 2000, all cathode-ray tube colortelevision production was transferred overseas.Looking ahead, resources will be funneledinto plasma TVs, projection TVs and otherareas where the Company has a competitiveedge. In Japan, Hitachi also intends to developproducts for digital BS/CS broadcasting fromthe 110-degree orbital slot.
The mobile phone sector continued toperform well. Hitachi focused on providinghandsets to KDDI CORPORATION and wasthe first to bring to market a cdmaOnehandset featuring a color LCD. Plans call forHitachi to open up markets overseas too. Asa first step, Hitachi signed a contract withChina’s Hisense Co., Ltd., in September2000, to provide design and manufacturingtechnologies for mobile phones.
The world’s first DVD-RAM camcorder.
Super DLTtapeTM, a computer tape capableof 110GB data storage.
Sales of LCD projectors also rose on theback of rapid market expansion. Optical pick-ups and surface acoustic wave (SAW) filtersperformed well in growing PC and mobilephone markets.
>> HITACHI MAXELL, LTD. Net sales
declined 3% to ¥209,524 million (US$1,690million) and operating income fell 21% to¥9,970 million (US$80 million). Sales ofcomputer tapes, a field where Hitachi Maxellis a leader, increased as demand continued togrow. However, sales of lithium ion recharge-able batteries declined as mobile phonemanufacturers adjusted production volumes.Sales of CD-Rs also fell due to a precipitousfall in prices caused by oversupply.
Super DLTtape is a trademark of Quantum Corporation.
HITACHI, LTD. ANNUAL REPORT 200122
>> HITACHI CHEMICAL CO., LTD. HitachiChemical posted an 8% year-on-year increasein sales to ¥586,314 million (US$4,728million). Turning in strong performances wereelectronics-related products and chemical-related products. Operating income rose31% to ¥45,814 million (US$369 million).
Sales of electronics-related products werehigher. Sales of anisotropic conductive filmsfor fine circuit connections for LCDs werestrong, reflecting robust demand for mobilephones and PCs. Also higher were sales ofdie-bonding materials for semiconductors andepoxy molding compounds for semiconductorencapsulation. Copper-clad laminates for high-density multilayer printed circuit boards usedin servers and routers, and multiwire boardsfor semiconductor testers also increased.
Sales of chemical-related products werealso higher. This reflected strong demand foralumina ceramics for semiconductor manu-facturing equipment and adhesive films forelectronics-related applications. Sales ofcarbon cathode materials for lithium ionrechargeable batteries used in mobile phonesrose. Sales of pads for disk brakes wereboosted by their use in a wider range of cars.
In housing equipment and environmentalfacilities, sales slipped year on year, reflecting
Materials
Carbon cathodes for use in re-chargeable lithium ion batteries.
sluggish demand for prefabricated bathroomunits for houses. This negative factor out-weighed steady sales of system kitchensand compact domestic wastewater treat-ment systems.
During the year, Hitachi Chemical restruc-tured subsidiaries to improve managementefficiency. This included selling a publiclytraded subsidiary.
>> HITACHI METALS, LTD. Net sales in-creased 3% to ¥479,480 million (US$3,867million). Operating income rose 20% to¥25,371 million (US$205 million).
In high-grade specialty steels, demand wassteady for electronics-related materials suchas lead frames for mobile phones and sputter-ing target materials. Exports of automobileengine parts and materials to North Americawere strong. Sales of specialty steels, diesteels and cutting tools were solid. Thesefactors resulted in higher year-on-year salesin high-grade specialty steels.
In automotive materials, sales of high-grade casting components, especiallyHERCUNITE™, in Europe and North America,were good. On the other hand, demand forductile and malleable iron castings was lower.Overall, sales were slightly above the previousyear’s levels.
In construction components, plant andequipment, sales of stainless steel andplastic piping components were steady, aswere sales of environment-related productsto the public sector. These positive factorshelped push up sales of construction com-ponents, plant and equipment.
In electronic and information system com-ponents, overall sales decreased year on year.Ferrite cores for use in communication anddigital equipment, mobile phone components
Sputtering target materials for semiconductors,LCDs and hard disk drives.
HITACHI, LTD. ANNUAL REPORT 2001 23
and other information system componentsenjoyed strong demand. However, sales ofelectronic components dropped sharply, re-flecting the transfer of giant magneto-resistivehead operations to the parent company.
In April 2001, Hitachi Metals merged twotrading company subsidiaries and wound upanother subsidiary to improve managementefficiency. Management reforms were imple-mented by enhancing the autonomy ofbusiness groups and adopting a new manage-ment system.
>> HITACHI CABLE, LTD. Hitachi Cable’snet sales increased 14% year on year to¥410,394 million (US$3,310 million).Operating income rose 75% to ¥27,177million (US$219 million).
Overall sales of wires and cables increasedyear on year. Sales of power cables werelackluster, while sales of submarine fiber-opticcables continued to be buoyed by increasingdemand for higher communications capacity.
Electronic wires also turned in a strongperformance.
In information systems and electroniccomponents, overall sales increased year onyear. Sales of semiconductor packagingmaterials were down. Compound semicon-ductors posted good sales growth due tostrong demand for their use in mobile phonesand lasers for CDs and DVDs. Optical com-ponents, mobile phone base station construc-tion and antennas also posted strong results.
Sales of copper products increased,supported by strong demand for copperstrips for semiconductors and submarinefiber-optic cables. Sales of copper tubes,however, were flat.
In electric equipment, construction andother, sales were slightly below the previousyear’s level due to a decline in large-scaletransmission cable construction projects.Also, there was only a modest gain in sales ofautomotive hoses as falling prices largelynegated an increase in demand.
Fiscal 2000 saw more progress in therestructuring of Hitachi Cable’s operations.Hitachi Cable reached an agreement withSumitomo Electric Industries, Ltd. to form anew company that would combine theirrespective high-voltage electric power cableoperations, with the exception of domesticsales operations. Plans call for the new entityto start operations in October 2001.
Gallium-arsenide single crystals and wafers.
HITACHI, LTD. ANNUAL REPORT 200124
>> NISSEI SANGYO CO., LTD. Net sales in-creased 17% to ¥848,700 million (US$6,844million). Operating income rose 77% to¥14,688 million (US$118 million). During theperiod under review, the semiconductormanufacturing equipment industry was buoyedby aggressive capital investment by semicon-ductor manufacturers worldwide. NisseiSangyo was well positioned to benefit fromthis trend. Strong sales of semiconductormanufacturing equipment spurred sales andearnings growth in scientific instruments andproduction systems.
One noteworthy event was Nissei Sangyo’sreceipt of its first order for stepper lithographysystems manufactured by ASML. Another wasthe start of sales of organic electro lumines-cence (EL) production systems made byTOKKI CORPORATION.
In information systems and electroniccomponents, sales of microcontrollers andmodules for mobile phones as well as opticalpickups increased. These gains were offsetby Nissei Sangyo’s withdrawal from themonitor business in the U.S. and general-usecomputers for Europe.
In advanced industrial products, sales offiber-optic communications components rosesharply. These materials are a vital part of wave-length division multiplexing (WDM) systems.
Services & Other
Organic EL production equipment made byTOKKI CORPORATION.
In October 2001, plans call for the parentcompany’s Instruments Group and Semicon-ductor Manufacturing Equipment Group tobe merged with Nissei Sangyo. The ultimateaim is to become one of the world’s leadingcompanies in the areas of semiconductormanufacturing equipment and biotechnology-related products.
>> HITACHI CAPITAL CORPORATION
Hitachi Capital Corporation was formed inOctober 2000 following the merger ofHitachi’s consolidated subsidiary, HitachiCredit Corporation, and Hitachi’s equity-method affiliate, Hitachi Leasing, Ltd. Themerger gave birth to a comprehensive finan-cial services company with a broad customerbase that encompasses multinational corpo-rations as well as individuals. As the nucleusof the Hitachi Group’s financial services busi-ness, the new company has a solid base forgrowth. Hitachi Capital is targeting five keybusinesses: leasing, retail, cards, securitizationand outsourcing.
In fiscal 2000, Hitachi Capital’s revenuesincreased 5% year on year to ¥125,570 million(US$1,013 million). Operating income rose8% to ¥30,149 million (US$243 million).Leasing revenues increased 6% year on year,mainly due to the higher volume of industrial
Hitachi Capital credit cards.
HITACHI, LTD. ANNUAL REPORT 2001 25
machinery business. In the retail business,mainstay automobile and housing loan volumesincreased, resulting in a 3% rise in revenues.Revenues from cards, securitization andoutsourcing businesses increased 37%.Note: The above figures were restated to reflect
the merger in fiscal 2000.
>> HITACHI TRANSPORT SYSTEM, LTD.
Net sales increased 6% to ¥281,697 million(US$2,272 million), and operating incomerose 11% to ¥10,424 million (US$84 million).
In fiscal 2000, the volume of freight in Japanwas on a par with the preceding year’s level.Solid demand in freight of manufacturingequipment and consumer products was offsetby lackluster volumes of construction-relatedfreight.
Sales by the company’s domestic distribu-tion business increased 7% due mainly toexpansion in the logistics solutions businessfrom new fields such as retail, medical servicesand pharmaceutical products.
A Hitachi Transport System logistics center in San Diego, which opened in April 2000.
In the overseas distribution business, salesincreased 3%. This reflected continuing soliddemand in air cargo transportation to handlehigher exports of computer components. Alloverseas bases concentrated on capturingnew customers. The company opened twologistics centers in Los Angeles and SanDiego. In China, a local subsidiary was estab-lished in Shanghai, expanding the company’ssales base in that market.
In passenger operations, sales increased 2%year on year due to a strong performance intravel agency operations, which offset theimpact of a fall in passenger numbers at TokyoMonorail Co., Ltd.
>> OTHER Overseas-based general tradingcompanies in Europe and Asia felt the effectsof a drop in semiconductor demand from thestart of 2001. Overall, however, trading trans-actions for semiconductors made a majorcontribution to higher sales. In the U.S., highersales of turbines helped to push up net sales.
HITACHI, LTD. ANNUAL REPORT 200126
Hitachi believes that it is important to supportadvances in science and technology, educa-tion, environmental protection, internationalcooperation and other worthy causes. For abetter world, the Company strives to be aresponsible corporate citizen in communitiesworldwide and to conduct its activities inharmony with the environment. Guided by itscorporate statement, “Inspire the Next,”Hitachi aims to contribute to the realizationof a better society and more fulfilling lives inthe 21st century.
Teachers from Europe visited a Japanese elementary school in Hitachi City, IbarakiPrefecture in 2000 as part of HISTEP.
>> HITACHI NONPROFIT FOUNDATIONS
Around 30 years ago, Hitachi began establish-ing nonprofit foundations to proactively par-ticipate in a variety of social programs. In April2000, Hitachi merged The Youth Rehabilitationand Welfare Center with The CorrectionalServices Foundation to form The HitachiMirai Foundation. This foundation is activelysupporting rehabilitation and correctionalservices. In October 2000, the foundation wasawarded the Setoyama Prize by the JapanRehabilitation Aid Association for the longhistory of involvement in support of rehabilita-tion groups of the pre-merger foundations.Four other Hitachi-endowed foundations athome and one overseas are flagships for theCompany’s corporate citizenship activities.These foundations support research in scienceand technology, education, protection of theenvironment, international scholarships andother worthy causes.
>> ENVIRONMENT Through its businesses,
products and services, Hitachi is helping tocreate a recycling-oriented society that is inharmony with the environment.
In 1999, Hitachi established GREEN 21,a new system for evaluating the Company’senvironmental performance. In fiscal 2000,the scope of evaluation was widened toencompass 310 Hitachi companies. TheGREEN 21 system scores all environmentalactivities against a fixed set of standards andpromotes continuous improvement andenhancement of environmental activities.
Environmentally conscious operations arebeing promoted on a number of fronts. Forexample, the Company has made advances inenergy conservation, the reduction of industrial
FOR A BETTER WORLD
HITACHI, LTD. ANNUAL REPORT 2001 27
waste, and chemical substance management.Furthermore, as of March 2001, 198 of theCompany’s bases had acquired ISO14001series certification. Moreover, Hitachi is sup-plying environmentally friendly products thatoffer low energy consumption and a highlevel of ease of recycling. In addition, theCompany offers total environmental solutionsto customers.
Green purchasing——the procurement ofmaterials, parts and products with a minimalenvironmental impact——is another area theCompany is strengthening. In April 2001,Hitachi published Green Purchasing Guide-lines Version 2, which require vendors andbusiness partners to establish an environ-mental management system and carry outproduct assessments.
>> EDUCATION Well aware of the need to
identify and encourage the next generation ofAsian leaders, Hitachi started the HitachiYoung Leaders Initiative in 1996. This 5-dayprogram provides 24 students chosen fromAsian countries with an opportunity to ex-change ideas and create greater awarenessof issues in Asia, through forums, workshopsand local community service activities.
Hitachi has been sponsoring the HitachiInternational School Teachers ExchangeProgram (HISTEP) since 1987. The programinvolves reciprocal visits by teachers from theU.S., Europe and Japan to promote cross-cultural understanding and exchange ideason youth education. The activities includeschool visits, home stays and discussions. Todate, over 170 teachers have participated inthis program.
The 4th Hitachi Young Leaders Initiative was held inNovember 2000 in Bangkok, Thailand, under the theme“Asia Rising to the Challenge in the New Millennium.”
HITACHI, LTD. ANNUAL REPORT 200128
BOARD OF DIRECTORS AND CORPORATE AUDITORS(As of June 27, 2001)
Net cash provided by (used in) financing activities . . . . . . (159,507) 125,830 113,793 (1,286,347)
Effect of exchange rate changes on cash and cash equivalents . . 18,962 (21,784) (14,136) 152,920Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . 24,171 119,905 37,987 194,928Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . 1,357,432 1,237,527 1,199,540 10,947,032Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . ¥1,381,603 ¥1,357,432 ¥1,237,527 $11,141,960
See accompanying notes to consolidated financial statements.
HITACHI, LTD. ANNUAL REPORT 2001 35
1. Basis of Presentation and Summary of Significant Accounting Policies
(a) Basis of Presentation
Hitachi, Ltd. (the Company) and its domestic subsidiaries maintain their books of account in conformity with the financial accounting standards
of Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.
The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments which are necessary to
conform them with accounting principles generally accepted in the United States of America. Management of the Company has made a
number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements. Actual results could differ from those estimates.
The Company changed its balance sheet presentation from classified to unclassified balance sheets in the current year. The change was
implemented with the Company’s acquisition of Hitachi Leasing, Ltd., a financing company, as it believes that unclassified balance sheets
more appropriately reflect its financial position.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and those of its majority-owned subsidiaries, whether directly or
indirectly controlled. Intercompany accounts and significant intercompany transactions have been eliminated in consolidation. The investments
in affiliated companies are stated at their underlying equity value, and the appropriate portion of the earnings of such companies is included
in consolidated income.
(c) 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 maturities of generally three months or less when purchased to be cash equivalents.
(d) Foreign Currency Translation
Foreign currency financial statements have been translated in accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
“Foreign Currency Translation.” Under this standard, 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 date. Income and expense items are translated at the
average exchange rates prevailing during the year. Gains and losses resulting from foreign currency transactions are included in other income
(deductions), and those resulting from translation of financial statements are excluded from the consolidated statements of income and are
reported in other comprehensive income (loss).
(e) Investment in Securities
Effective April 1, 2000, the Company adopted SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Prior to
the adoption of SFAS No. 115, the Company disclosed the effect of the departure from SFAS No. 115 in a footnote to the consolidated
financial statements. The United States Securities and Exchange Commission (SEC) Division of Corporation Finance approved this presentation
in a letter dated August 16, 1993.
With the adoption of SFAS No. 115, the Company’s prior period financial statements have been restated to reflect the change in accounting
principle. As a result of the restatement, total assets increased ¥146,163 million, stockholders’ equity increased ¥111,475 million and
comprehensive income increased ¥13,747 million in the consolidated financial statements as of and for the year ended March 31, 2000, and
comprehensive loss increased ¥4,365 million in the consolidated financial statements for the year ended March 31, 1999. There was no
effect and a gain of ¥9,305 million on previously reported net income (loss) for the years ended March 31, 2000 and 1999, respectively.
Under SFAS No. 115, investments in equity securities that have readily determinable fair values and all investments in debt securities are to
be classified in three categories and accounted for as follows:
• Debt securities that the company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
• Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses included in earnings.
• Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities
and reported at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.
A decline in fair value of any available-for-sale or held-to-maturity security below the amortized cost basis that is deemed to be other than
temporary results in a write-down of the cost basis to fair value as a new cost basis and the amount of the write-down is included in earnings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSHitachi, Ltd. and Subsidiaries
HITACHI, LTD. ANNUAL REPORT 200136
The cost of a security sold or the amount reclassified out of accumulated other comprehensive income into earnings was determined by the
average method.
(f) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the specific identification method for job order inventories and
generally by the average method for raw materials and other inventories.
(g) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Property, plant and equipment are principally depreciated by the declining-balance method,
except for some assets which are depreciated by the straight-line method, over the following estimated useful lives:
The remaining contractual life is 4.3 years, and no exercisable stock options were outstanding as of March 31, 2001. The pro forma effect
of applying SFAS No. 123 on net income and earnings per share for the year ended March 31, 2001 was not material.
In addition, in April 2001, the board of directors of the Company decided to propose the adoption of stock option plans for non-employee
directors and certain employees to their shareholders’ meeting to be held in June 2001. In accordance with the proposals, options to
purchase the Company’s common stock less than 1,090,000 shares were granted at prices not less than market value at date of grant, are
exercisable from one year after the date of grant and expire 5 years after the date of grant.
HITACHI, LTD. ANNUAL REPORT 200160
INDEPENDENT AUDITORS’ REPORT
To the Shareholders and Board of Directors of
Hitachi, Ltd.:
We have audited the accompanying consolidated balance sheets of Hitachi, Ltd. and subsidiaries as of March 31, 2001 and 2000, and the
related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended March
31, 2001, all expressed in yen. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The segment information required to be disclosed in financial statements under accounting principles generally accepted in the United States
of America is not presented in the accompanying consolidated financial statements. Foreign issuers are presently exempted from such
disclosure requirement in Securities Exchange Act filings with the United States Securities and Exchange Commission.
In our report dated May 17, 2000, our opinion on the consolidated financial statements of Hitachi, Ltd. and subsidiaries as of and for the years
ended March 31, 2000 and 1999 was qualified because (1) the Company had stated investments in certain debt and equity securities at the
lower of cost or fair value and (2) the Company omitted the segment information. As described in Note 1(e) to the consolidated financial
statements, Hitachi, Ltd. and subsidiaries have changed their method of accounting for such investments in debt and equity securities and
restated the consolidated financial statements as of and for the years ended March 31, 2000 and 1999 to conform with accounting principles
generally accepted in the United States of America. Accordingly, our present opinion on the accompanying consolidated financial statements as
of and for the years ended March 31, 2000 and 1999, as presented herein, is different from that expressed in our previous report.
In our opinion, except for the omission of segment information, as discussed in the third paragraph, the consolidated financial statements
referred to in the first paragraph above present fairly, in all material respects, the financial position of Hitachi, Ltd. and subsidiaries as of March
31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31,
2001 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements as of and for the year ended March 31, 2001 have been translated into United States
dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated financial statements
expressed in yen have been translated into United States dollars on the basis set forth in Note 2 to the consolidated financial statements.
Note: On April 1, 2000, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt andEquity Securities.” Accordingly, figures for all prior periods have been restated.
’01
’00
’99
’98
’97 740
971
713
586
575
’01
’00
’99
’98
’97 90
104
12
(328)
17
’01
’00
’99
’98
’97 8,523
8,417
8,417
7,977
8,001
Net Sales(billions of yen)
Capital Investment(billions of yen)
Net Income (Loss)(billions of yen)
’01
’00
’99
’98
’97
857
1,054
1,013
901
895
’01
’00
’99
’98
’97
30.32
25.97
3.58
(98.15)
4.99
’01
’00
’99
’98
’97 10,341
10,292
9,848
9,983
11,247
Stockholders’ Equity per Share(yen)
Net Income (Loss) per Share–Diluted(yen)
Total Assets(billions of yen)
HITACHI, LTD. ANNUAL REPORT 200162
MAJOR CONSOLIDATED SUBSIDIARIES(As of March 31, 2001)
JAPAN
MANUFACTURINGBabcock-Hitachi K.K.
Hitachi Air Conditioning Systems Co., Ltd.
Hitachi Cable, Ltd.
Hitachi Chemical Co., Ltd.
Hitachi Construction Machinery Co., Ltd.
Hitachi Electronics Engineering Co., Ltd.
Hitachi Hokkai Semiconductor, Ltd.
Hitachi Hometec, Ltd.
Hitachi Kiden Kogyo, Ltd.
Hitachi Maxell, Ltd.
Hitachi Media Electronics Co., Ltd.
Hitachi Medical Corporation
Hitachi Metals, Ltd.
Hitachi Telecom Technologies, Ltd.
Hitachi Tohbu Semiconductor, Ltd.
Hitachi Tokyo Electronics Co., Ltd.
Hitachi Via Mechanics, Ltd.
Japan Servo Co., Ltd.
Trecenti Technologies, Inc.
ENGINEERING, SALES AND SERVICEChuo Shoji, Ltd.
Hitachi Building Systems Co., Ltd.
Hitachi Capital Corporation
Hitachi Electronics Services Co., Ltd.
Hitachi Engineering & Services Co., Ltd.
Hitachi Engineering Co., Ltd.
Hitachi Information Systems, Ltd.
Hitachi Life Corporation
Hitachi Mobile Co., Ltd.
Hitachi Plant Engineering & Construction Co., Ltd.
Hitachi Semiconductor and Devices Sales Co., Ltd.
Hitachi Service & Engineering (East), Ltd.
Hitachi Service & Engineering (West), Ltd.
Hitachi Software Engineering Co., Ltd.
Hitachi Systems & Services, Ltd.
Hitachi Techno Engineering Co., Ltd.
Hitachi Transport System, Ltd.
Nikkyo Create, Ltd.
Nissei Sangyo Co., Ltd. Notes: 1. Hitachi Credit Corporation and Hitachi Leasing, Ltd. were merged tocreate Hitachi Capital Corporation on October 1, 2000.
2. Nikkyo Create, Ltd. changed its name from Hitachi Keisho, Ltd. onOctober 1, 2000.
ABROAD
MANUFACTURINGHitachi Automotive Products (USA), Inc.
