Hitachi Annual Report 2014

Annual Repor t 2014
Year ended March 31, 2014

Printed in Japan

SOCIAL INNOVATION
IT’S OUR FUTURE

Contents
1 SOCIAL INNOVATION – IT’S OUR FUTURE
2 Management Strategy
2 Hitachi‘s History of Transformation (Fiscal 2004 –Fiscal 2013)
4 2015 Mid-term Management Plan –Achieving Growth and Hitachi’s Transformation

30 Board of Directors

8 To Our Shareholders

31 Executive Officers

10 Special Feature: Hitachi Takes on Global Challenges –Targeting Global Growth
11 SECTION 1: Message from the CFO
12 SECTION 2: Message from the CMO
13 SECTION 3: Message from the CTO
14 SECTION 4: Message from the CTrO
15 SECTION 5: Message from the CIO
16 SECTION 6: Message from the Head of MONOZUKURI &Quality Assurance
17 SECTION 7: Message from the CPO
18 SECTION 8: Message from the CHRO
19 SECTION 9: Message from the General Counsel

32 Financial Section
32 Operating and Financial Review
38 Consolidated Balance Sheets
40 Consolidated Statements of Operations /Consolidated Statements of Comprehensive Income
41 Consolidated Statements of Equity
42 Consolidated Statements of Cash Flows
44 Consolidated Balance Sheetsby Manufacturing, Services & Others and Financial Services
45 Consolidated Statements of Operations
by Manufacturing, Services & Others and Financial Services /Consolidated Statements of Cash Flowsby Manufacturing, Services & Others and Financial Services

20 Financial Highlights
22 Segment Information

1

24 Foundation for Growth
24 CSR Management
26 Corporate Governance
28 Risk Management

46 Corporate Data

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views
with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,”“plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of
future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:• economic conditions, including consumer spending and plant andequipment investment in Hitachi’s major markets, particularly Japan, Asia,
the United States and Europe, as well as levels of demand in the majorindustrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;• exchange rate fluctuations of the yen against other currencies in which
Hitachi makes significant sales or in which Hitachi’s assets and liabilities
are denominated, particularly against the U.S. dollar and the euro;• uncertainty as to Hitachi’s ability to access, or access on favorable
terms, liquidity or long-term financing;• uncertainty as to general market price levels for equity securities,
declines in which may require Hitachi to write down equity securities
that it holds;• uncertainty as to Hitachi’s ability to continue to develop and market
products that incorporate new technologies on a timely and costeffective basis and to achieve market acceptance for such products;• rapid technological innovation;• the possibility of cost fluctuations during the lifetime of, or
cancellation of, long-term contracts for which Hitachi uses thepercentage-of-completion method to recognize revenue from sales;• fluctuations in the price of raw materials including, without limitation,
petroleum and other materials, such as copper, steel, aluminum,
synthetic resins, rare metals and rare-earth minerals, or shortages ofmaterials, parts and components;• fluctuations in product demand and industry capacity;• uncertainty as to Hitachi’s ability to implement measures to reduce
the potential negative impact of fluctuations in product demand,exchange rates and/or price of raw materials or shortages of materials,
parts and components;• increased commoditization of and intensifying price competition
for products;• uncertainty as to Hitachi’s ability to achieve the anticipated benefitsof its strategy to strengthen its Social Innovation Business;• uncertainty as to the success of restructuring efforts to improve
management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness;• uncertainty as to the success of cost reduction measures;• general socioeconomic and political conditions and the regulatory
and trade environment of countries where Hitachi conducts business,particularly Japan, Asia, the United States and Europe, including,
without limitation, direct or indirect restrictions by other nations onimports and differences in commercial and business customs including,
without limitation, contract terms and conditions and labor relations;• uncertainty as to the success of alliances upon which Hitachi
depends, some of which Hitachi may not control, with other corporations in the design and development of certain key products;• uncertainty as to Hitachi’s access to, or ability to protect, certain
intellectual property rights, particularly those related to electronics
and data processing technologies;• uncertainty as to the outcome of litigation, regulatory investigations
and other legal proceedings of which the Company, its subsidiaries
or its equity-method affiliates have become or may become parties;• the possibility of incurring expenses resulting from any defects in
products or services of Hitachi;• the potential for significant losses on Hitachi’s investments inequity-method affiliates;• the possibility of disruption of Hitachi’s operations by earthquakes,
tsunamis or other natural disasters;• uncertainty as to Hitachi’s ability to maintain the integrity of
its information systems, as well as Hitachi’s ability to protect its
confidential information or that of its customers;• uncertainty as to the accuracy of key assumptions Hitachi uses toevaluate its significant employee benefit-related costs; and• uncertainty as to Hitachi’s ability to attract and retain skilled personnel.
The factors listed above are not all-inclusive and are in addition toother factors contained in other materials published by Hitachi.

1Management Strategy

Hitachi’s History of Transformation(Fiscal 2004 – Fiscal 2013)
Recovery from management crisis and on to a new growth stage.
In fiscal 2013, Hitachi achieved new record highs in operating income and EBIT (earnings before interest and taxes).
However, for a company such as Hitachi that aims to be a leader in global markets, we are still just at the starting line.
Going forward, Hitachi will accurately track changes in society, accelerate the process of transformation to achieve new growth,and strive to increase corporate value.
Transformation of Business Portfolio

Fiscal 2004 – Fiscal 2005

Fiscal 2006 – Fiscal 2008

Strengthening Initiatives• Established joint venture with OMRON Corporationin the ATM business• Merged with automotive systems equity method company
TOKICO and subsidiary Hitachi Unisia Automotive throughabsorption-type mergers• Established joint venture with NEC Corporation in backbone router/switch business• Acquired plasma display business and related patents from
Fujitsu Limited

Strengthening Initiatives• Made Clarion a consolidated subsidiary• Established joint venture with GE, of the United States,in nuclear power generation systems business• Made Hitachi Kokusai Electric a consolidated subsidiary• Made Hitachi Koki a consolidated subsidiary
Rebuilding Initiatives• Sold precision small motor business to Nidec Corporation• Withdrew from consumer PC business• Transferred semiconductor manufacturing subsidiary in Singapore
to a semiconductor foundry

Rebuilding Initiatives• Established joint venture with Casio Computer Co., Ltd.
in mobile phone business• Transferred printer business to Ricoh Company, Ltd.

(Millions of yen)

600,000

23.7%

25.0%
22.9%
20.6%

500,000
Stockholders’ equity ratio

400,000
EBIT (earnings before interest and taxes)* (left scale)
300,000

Fiscal 2006
• Recorded additional costs due to turbine damage at
a nuclear power station in Japan and to thermal power
plant construction overseas• Falling sales prices for hard disk drives and digital media

11.2%

Fiscal 2008
• Financial crisis causedby Lehman Shock• One-off write-downof deferred tax assets

200,000

100,000

0
Net income (loss) attributable to Hitachi, Ltd. stockholders per share(right scale)Fiscal 2007
• Implemented one-off
write-down of deferred tax
assets due to worsening ofconditions in digital media field–100,000–200,000–300,000

2004

2005

* EBIT is presented as income before income taxes less interest income plus interest charges.

2

2006

2007

2008

Hitachi, Ltd. | Annual Report 2014

Fiscal 2009 – Fiscal 2012

Fiscal 2013

Strengthening Initiatives• Made five listed companies* wholly owned consolidated subsidiaries* Hitachi Information Systems; Hitachi Software Engineering; Hitachi Systems & Services;
Hitachi Plant Technologies; and Hitachi Maxell• Established joint venture in the hydroelectric power generation businesswith Mitsubishi Electric Corporation and Mitsubishi Heavy Industries, Ltd.
• Acquired BlueArc, a network storage solution business in the United States• Dissolved joint venture in the transmission and distribution business• Acquired a nuclear energy company in the United Kingdom

Rebuilding Initiatives• Integrated Renesas Technology, an equity method company
in the semiconductor business, with NEC Electronics• Transferred business in large LCD panels for TVs to Panasonic Corporation• Transferred plasma display panel plant to Solar Frontier K.K.
• Transferred hard disk drive business to Western Digital Corporation, of the United States• Integrated small and medium-sized LCD business with Japan Display Inc.
• Stopped in-house production of flat-panel TVs

Strengthening Initiatives• Hitachi Metals and Hitachi Cable were merged• Established joint venture with Mitsubishi Heavy
Industries, Ltd. in thermal power generation
systems business• Made Hitachi Medical a wholly owned subsidiary• Absorbed Hitachi Plant Technologies
Rebuilding Initiatives• Transferred printed circuit board production
equipment business to an investment fund
• Relisted Hitachi Maxell shares(Yen)

Fiscal 2010
• Celebrated 100th anniversary of founding• Introduced in-house company system

120

21.2%

24.1%

18.8%

100

15.7%
14.3%

80

60

Fiscal 2009
• Raised funds throughthe issuance of new shares

40

20

0

Fiscal 2011
• Achieved new record high in net income• Transferred hard disk drive business• Started cost structure reform project

2009

2010

2011

Fiscal 2012
• Introduced Group system• Increased number of
non-Japanese directors,
outside directors became
majority2012

Fiscal 2013
• Achieved new record
highs in operating income
and EBIT

〜
〜
–260

–280

2013
(FY)

–300

3

Management Strategy

2015 Mid-term Management Plan –Achieving Growth and Hitachi’s Transformation
Recovering from the Management Crisis

Management Focus

Results under 2012 Mid-termManagement Plan
(Fiscal 2010 – Fiscal 2012)INNOVATION
Strengthen service businesses that maximize
the utilization of IT and bring about innovation

Revenues• Grow the Social Innovation Business by working with

3-year average¥9,340.9

customers to identify their challenges and by providing

billioninnovative solutions• Strengthen and expand services businesses by providing
solutions for customers’ issues and product services

EBIT ratio (operating income ratio)
3-year average

4.9

GLOBAL% (4.6%)

Net income attributable to Hitachi, Ltd.
stockholders

Deliver innovation to customers
and society globally• Enhance engineering teams to strengthen solutions-provisionsystem and accelerate global business initiatives

3-year average¥253.7• Sales growth in North America and China in addition to Asia

billion• Globalization of management and use of global resources in R&D

Net income attributable to Hitachi, Ltd.
stockholders per share

TRANSFORMATION

3-year average¥55

Transform to deliver innovation by standardized
and speedy operation
Total Hitachi, Ltd. stockholders’ equity ratio(manufacturing, services & others)• Advancing the Hitachi Smart Transformation Project,a cost structure reform project (reevaluating operations tostrengthen competitiveness and generate cash)• Leverage global talent to lead businesses

Fiscal 2012

23.2
4

%

Hitachi, Ltd. | Annual Report 2014

Hitachi’s Vision
Hitachi delivers innovations
that answer society’s challenges.
With our talented team and proven experiencein global markets, we can inspire the world.

Society’s Challenges• Securing water resources, energy and food
• Replacement of aging infrastructure systems• Reduction of CO2 emissions• Improving transportation systems• Responding to lower birthrate and aging• Promoting material recycling

Macro trends• The shale gas revolution is making
the energy-supply portfolio change andoil and gas prices are fluctuating• Japanese market:
Finance sector: Increased IT investment
Public sector: National resilience
Power sector: Deregulation and separation ofgeneration from transmission and distribution• Conventional markets such as healthcare,
agriculture, etc., are growing by employing
innovation• Shift from “concentration, ownership, andconsumption” to “distribution, sharing, andrecycling”–a trend that is accelerating5

Cases of Service Business

Water business solutions
Addressing global demand for water through intelligent
water systems using recycled water and IT

U.K. rail
Resolving issues by increasing rolling stock operating
ratio and implementing measures for aging rail cars

Elevator and escalator business
Product services supporting the entire product life
cycle, such as operation and maintenance.

Global Strategy

Hitachi has reconfirmed the position of China andNorth America as priority regions and is now
aiming for further growth.
Europe• Railways • Nuclear power • Healthcare

China• Buildings • Governments• Construction • Finance • Healthcare
FY2013

FY2015¥1,073.6 billion¥1,220.0

billion[13.6%]FY2013

FY2015¥812.1 billion¥860.0billionAsia• Energy • Water • Buildings • Railways• Manufacturing • Automobiles[5.9%]

North America• Automobiles • Finance • Oil and gas• Power • Healthcare
FY2013

FY2015¥910.2 billion¥1,000.0[9.9%]FY2013

FY2015¥989.9 billion¥1,290.0

billion[30.3%][growth rate]

Cost Structure Reform

Hitachi Smart Transformation Project: Shift to an enterprise that generates cash to achieve growth〜FY2012FY2013

FY2014FY2015

Reforms focused on cost areas and functions
Accelerate centralized purchasing of
direct and indirect materials

Full-scale development of
global SCM reforms and modular design

Production
costs

Concept formulation

Global SCM reforms

Concept formulation

Expand applications of modular design

Directmaterials
costs

Accelerate centralized purchasing(in Japan)
Indirect costs

Concept formulation(Globally)

Expand introduction of shared services in Japan and overseas

Headquarters reforms

6

Promote process reforms

Global logistics reforms

Centralize common operating expenses

Concept formulation

Accelerate global usage of shared services
and indirect operation reform

Expand specific reforms into area reforms

Strengthen engineered sourcing (increase procurement engineers)
Concept formulation

FY2016〜

Process-focused reforms

Group structure reforms• Advance, standardize, and centralize businesses andwork processes– Supply chain– Project management– Indirect operations in Japan, etc.
• Operational reforms• Shift to a global business process

billionHitachi, Ltd. | Annual Report 2014

Target Performance

RevenuesoService revenue ratio

Fiscal 2015 Target¥10

FY2015Overtrillion

Fiscal 2013 Result

40%¥9,616.2

billion

EBIT ratio (operating income ratio)
FY2013Fiscal 2015 Target

32%

Over 7%(Over 7%)

Fiscal 2013 Result

6.0% (5.5%)

Overseas revenue ratio
attio
atio
o

Net income attributable to Hitachi, Ltd.
stockholders
FY2015

Fiscal 2015 Target

Over

Over ¥350.0

50%billionFiscal 2013 Result¥264.9FY201345%

billion

Net income attributable to Hitachi, Ltd.
stockholders per share
Fiscal 2015 Target

Cost reduction benefi
efi
fitss
Single year (Billions of yen)

Cumulative (Billions of yen)
400.0
90.0

Over ¥70
Fiscal 2013 Result¥54.86

310.0

Hitachi, Ltd. stockholders’ equity ratio(manufacturing, services & others)

90.0
220.0

Fiscal 2015 Target

110.0

Over 30%

110.0
75.0

35.0

FY2011Result

FY2012
Result

FY2013Result

FY2014
Forecast

FY2015
TargetFiscal 2013 Result

27.4 %
7

To Our Shareholders

Toshiaki Higashihara
President & COO

Hiroaki Nakanishi
Chairman & CEO

In markets around the world, economic conditions are ever-changing. The economies are slowing in certain
emerging countries, while encouraging changes are being seen in others as governments focus on growth andgreater prosperity. In India, for example, hopes for economic growth are rising since the new administration came
to power, and in China, steps are being taken to stimulate internal demand as the country strives to sustain its
economic expansion. In response to these types of changes, which affect societies, regions, and people, we will
work together with our customers to identify their challenges and provide innovative solutions through Hitachi’s
Social Innovation Business. At the same time, we will continue to implement proactive management strategies thatfacilitate our transformation into a truly global company, while helping to drive the national growth strategy of
the Japanese government.
In recent years, Hitachi has changed its basic management strategy from recovery to growth. Through our 2012
Mid-term Management Plan, launched in fiscal 2010, Hitachi successfully recovered from an operational crisis.
In May 2013, in our path toward new growth, we launched our 2015 Mid-term Management Plan. In fiscal 2013,
the first year of the current plan, Hitachi achieved record-high levels of operating income and EBIT, as well as
year-on-year increases in revenues, net income attributable to Hitachi, Ltd. stockholders, and total Hitachi, Ltd.
stockholders’ equity ratio (manufacturing, services & others). We also achieved year-on-year increases in our service
revenue ratio, which rose to 32%, and in our overseas revenue ratio, which reached 45%. As these figures illustrate,
we have been making steady progress. Nevertheless, amid ever-accelerating globalization, we have also begun to
identify a new series of challenges.
Fiscal 2014, the second year of the 2015 Mid-term Management Plan, will be critical in our continued efforts topromote further growth. Accordingly, we will promote measures to resolve the challenges we face and devise andimplement specific growth strategies for each business division.
Specifically, to accelerate global initiatives in our Social Innovation Business, we will strengthen our engineering
teams while allowing them to work more closely with sales teams in each country to formulate and propose
solutions to our customer’s business challenges. At the same time, we will strengthen our ability to fully support
the business operations of our customers by offering consultations for the supply of products, systems, and services.

8

Hitachi, Ltd. | Annual Report 2014

With regard to our products, we will strive to further enhance their competitiveness in global markets, in addition
to offering “product services” that provide operation and maintenance support throughout the entire productlifecycle. Through these and other measures, we will work to provide solutions that fully resolve the challenges
our customers face.
Regarding global business development, we have reaffirmed the importance of China and the United States as
high-priority regions. China, along with Europe, India and Asia, had been designated a high-priority region,
but the recent clarification of economic policies in the country has reaffirmed this status. The growing signs of
economic growth potential in the United States also led us to reaffirm that country’s status as a high-priority region.
Accordingly, we have been stepping up our initiatives in these two countries. In June 2014, Hitachi Group senior
executives convened in Beijing where they formulated a new growth strategy that we are now implementing. In
April 2014, we assigned a vice president and executive officer to the United States to act as head of our global IT
service business. We also established the position of global chief executive officer for our rail systems business in
the United Kingdom. These executives have commenced autonomous decentralized operations. In these ways,
we are aggressively promoting the globalization of our management.
To ensure the steady development of global business, it is essential that we increase our ability to generate cash.
Towards that end, we will take steps to improve profitability and continue implementation of the Hitachi Smart
Transformation Project, our cost structure reform project. Taking an end-to-end perspective, we will reevaluatebusiness processes, from order receipt to design, manufacturing, sales, and service. In this way, we will enhancethe efficiency of our entire operation, thereby achieving further cost reductions and generating cash in the process.
To effectively advance these measures, it is essential that we optimize and nurture our global talent. We are
currently establishing a global, Group-wide human resources management platform that will help us place the rightpeople in the right jobs and maximize the performance of our employees, wherever they may be.
We have also taken steps to strengthen our management system so that we can promote our growth strategies,
which is a top priority. In October 2013, we appointed nine “C-suite” officers, including a CFO and a CMO, andwe clarified the missions of our executive officers. Furthermore, in April 2014, we were appointed as Hitachi’s
Chairman & CEO and President & COO, respectively. In our new roles, we will continue to enhance Hitachi’s
management agility while steering the Group on a clear course towards solid and sustained growth. Furthermore,
we will stimulate growth in profits by allocating this newly created cash to strategic investments, thereby ensuring
a steady continuation of the current growth phase. Through these and other measures, we are confident that we
can meet the expectations of our shareholders.
Working together under this new management system, each and every member of the Hitachi Group will strive
to reach the targets of the 2015 Mid-term Management Plan and achieve further growth. Accordingly, as an important
shareholder of Hitachi, Ltd., we would like to ask you for your continued understanding and support.

July 2014

Hiroaki Nakanishi

Toshiaki Higashihara

Chairman & CEO

President & COO

9

Special Feature

HitachiTakes on Global
Challenges
Targeting Global Growth
11 SECTION 1: Message from the CFO (Chief Financial Officer)
Implementing Financial Strategies to Succeed in Global Markets

12 SECTION 2: Message from the CMO (Chief Marketing Officer)
Working with Customers to Identify Their Challenges andProvide Innovative Solutions

13 SECTION 3: Message from the CTO (Chief Technology Officer)
Fostering Innovation That Shapes the Future of Society
through Customer-oriented R&D

14 SECTION 4: Message from the CTrO (Chief Transformation Officer)
Establishing a Globally Competitive Cost Structure throughthe Hitachi Smart Transformation Project

15 SECTION 5: Message from the CIO (Chief Information Officer)
Taking Aggressive Steps to Increase Management Efficiency andAchieve Business Growth through the Effective Use of IT

16 SECTION 6: Message from the Head of MONOZUKURI &Quality Assurance
Reinforcing the Foundation for Quality and Cost Competitiveness through
MONOZUKURI Capabilities

17 SECTION 7: Message from the CPO (Chief Procurement Officer)
Strengthening Competitiveness across the Value Chain throughReforms Targeting Global Integrated Procurement Operations

18 SECTION 8: Message from the CHRO (Chief Human Resources Officer)
Achieving Worldwide Business Growthwith Global Human Resources Management

19 SECTION 9: Message from the General Counsel
Supporting the Globalization of Hitachi withWorld-class Governance and Compliance10Hitachi, Ltd. | Annual Report 2014

SECTION 1

Message from the CFO

Implementing Financial Strategies to Succeed
in Global Markets
Focusing on strategic investment to strengthen Hitachi’s ability to generate cash
and expand the Social Innovation Business.

Bolstering Cash Flow Management
In fiscal 2013, Hitachi achieved new record highs in operating income—¥532.8 billion—
and in EBIT—¥580.1 billion. Nonetheless, we are aiming to reach the level of our overseas
competitors in global markets, and accordingly we are not satisfied with this performance.
Hitachi currently faces a shortage of the funds needed to be highly competitive andrecord growth in global markets. The recent trend in large M&A transactions is toward cash
deals instead of share exchanges, and Hitachi will need to secure sufficient cash to respondrapidly to these types of changes in the competitive environment. Accordingly, generatinga high level of profits, building a stronger balance sheet, and strengthening cash generation
capacity are urgent issues for Hitachi, and the Group has formulated measures to drive
improvements in those areas.
Specifically, we are taking steps to improve the Cash Conversion Cycle, such as reducing
the days working capital ratio. We are also striving to cut costs by shortening the lead timefrom order to delivery in order to reduce work in process and inventories. Moving forward,
we will take further steps to increase cash. For example, by raising the precision of demand
forecasting and responding in a timely manner to customer demand, we will shorten theaccounts receivable collection period and reduce excess inventories. To steadily execute
these types of measures, we are reforming the cost structure through the Hitachi Smart
Transformation Project and boosting our cash generation capacity through the E2E (End-toEnd) Supply Chain Project. These projects are being implemented on a Group-wide basis.
Strategic Investment to Expand the Social Innovation Business
Under the 2015 Mid-term Management Plan, we are conducting aggressive strategic
investment to expand the Social Innovation Business. We are carefully considering investment
effectiveness, including not only capital and R&D expenditures but also M&A transactions
implemented to rapidly secure management resources, such as customer service platforms
and solution development capabilities. At the same time, we are maintaining a focus on
the balance between implementing these investments, strengthening our financial
position,
ncial pos tion,and providing a return to shareholders.
In the Social Innovation Business, there are projects for which the periods arelong
re lon
lo
ng
g and
and
considerable amounts of time are required to recover the upfront investments.. Goi
Going
G
oin
ng
forward, we will strive to bolster our risk management, enhance the precision ofprojectof proj
pr
ojec
ectt
earnings forecasting, and establish a favorable cycle of strategic investment andcash
nd ccaashhgeneration. In these ways, Hitachi will achieve further growth.

Toyoaki Nakamura
Executive Vice President and Executive Officer,
CFO

11

Special Feature

SECTION 2

Message from the CMO

Working with Customers to Identify
Their Challenges and Provide Innovative Solutions
Strengthening our sales and engineering teams to accelerate global growthin the Social Innovation Business.

Driving Top-Line Growth
Hitachi’s 2015 Mid-term Management Plan includes the target of ¥10 trillion in revenues
for the Hitachi Group, and sales teams and front-end engineers are responsible for driving
progress toward the achievement of that target as well as further growth in the years ahead.
To realize global growth, we will strengthen our sales forces and expand our engineering
teams, which will cooperate closely with sales teams in each country and work to solve thechallenges of our customers. In this way, Hitachi will enhance and strengthen its system forthe proposal of solutions.
Marketing and Sales Strategies Targeting Business Growth
Looking at specific regions, Hitachi has reaffirmed the position of China and North America
as priority regions and will implement focused initiatives in these markets. China is an
important region that accounts for about 10% of the revenues of the Hitachi Group. With
ongoing urbanization and the development of the service industry, we expect the market in
China to continue to record stable growth. Although some matters of concern exist in China,
such as rising labor costs, we will take steps to strengthen our risk management system as we
strive to contribute to the resolution of social challenges, including environmental problems
and social infrastructure improvement.
Like China, North America accounts for about 10% of our total revenues. In the UnitedStates, there is a full-scale trend toward bringing manufacturing back to the domestic
market. Sales of automotive products are expected to increase, and new businesses arebeing created in the IT and other sectors. In this advanced market, the members of the
Hitachi Group will work together to expand solutions-related businesses, principally in IT
and infrastructure.
In Japan, strategic IT investment is rising, centered on the financial sector. We also
anticipate increased investment in social infrastructure as a part of national resilience projects,
as well as higher demand for transmission and distribution systems due to electric powersystemreform.
sy
stem
m re
form Moving forward, we will propose solutions for these domestic infrastructure
rebuilding
initiatives
and actively respond to demand related to the overseas advances of
reb
re
bui
uild
din
ng
g in
nitt
our
customers.
our ccu
o
sto
om
me
erss
Moreover,Hitachi will take steps to accelerate the growth of its global customer base as
M
Mor
Mo
reo
eove
ver,
r, H
true
a tru
tr
ue business
bu
busi
sine
ness partner that can contribute to solving the challenges of customers. To that

Ryuichi Kitayama
Senior Vice President and Executive Officer,
CMO, and General Manager of Corporate
Sales & Marketing Group

end
eend,
nd, wewe will
w ll aaggressively implement initiatives to attain top sales for clients with strong
growthpotentialin the energy, natural resources, and infrastructure fields.
gro
g
ow
wth
th p
po
ote
ten
n
Hitachi’s
sales
H
Hit
itaachhi’’s ssal
al and marketing divisions will propose solutions to achieve top-line growth
take
aand
nd w
willl tawiakeke tthe lead in markets around the world as the Hitachi Group works to expand
theInnovation
Business.
the Social
SSoociaal In
nno
o

12

Hitachi, Ltd. | Annual Report 2014

SECTION 3

Message from the CTO

Fostering Innovation That Shapes the Future of Society
through Customer-oriented R&D
We will push forward R&D to expand services and establish a global research network. In this way,
we will use innovative technologies to address the challenges facing society.

Customer-Oriented R&D
The Hitachi Group has approximately 5,000 people working in R&D and invests about 4% ofconsolidated revenues in R&D activities on an ongoing basis. With these resources, we areembarking on the R&D of technologies that will foster innovation. Through such innovation,
we will shape the future of society.
To resolve the challenges facing customers through the use of innovative technologies,
the most important task is to first identify and understand those challenges. To that end,
we emphasize a customer-oriented approach and conduct R&D in locations close tomarkets and customers.
The 2015 Mid-term Management Plan includes objectives of more than 40% for the service
revenue ratio and more than 50% for the overseas revenue ratio. For these objectives, weare focusing on two initiatives in particular. The first is the implementation of R&D activities
targeting the expansion of services. It will be extremely challenging to raise the service
revenue ratio from 32% in fiscal 2013 to more than 40% in fiscal 2015. To achieve that
objective, we are bolstering technical development related to product services, which entail
the provision of support throughout the entire product lifecycle, such as operation andmaintenance. These initiatives include the use of big data analysis for the infrastructure
facility failure predictive diagnosis system. In addition, to strengthen solutions for customers’issues as a service, we are focusing on technology development through such means as
an ethnography survey by which we closely observe customers’ operations and identify
substantial issues.
The second initiative is the establishment of a global research network targeting the
expansion of overseas business. We are aiming to expand our global customer base and toincrease the overseas revenue ratio to more than 50%. To meet those objectives, we will
promote R&D that is in line with local needs. Accordingly, we are expanding our overseas
bases, such as the Big Data Research Laboratory in the United States, the European Nuclear
Research Centre in the United Kingdom, and the European Rail Research Centre, also in the
United Kingdom. In addition, we will support the development of solutions throughglobalrough gloobasharing of the most advanced technology from each region.
Hitachi’s Mission and R&D
The Mission of the Hitachi Group is to “contribute to society through the development
elop
el
opm
me
ent
nt of
o
superior, original technology and products.” Conducting R&D into innovative tec
technologies
te
chn
hno
olo
ogi
giess
and services—and providing the results to customers in the form of products andservices—nd servndserviccees——
is the foundation of the value provided to society by Hitachi. It is also the source
ourrcce
e of ouourgrowth potential.

Keiji Kojima
Vice President and Executive Officer,
CTO, and General Manager of Research &Development GroupTo foster innovation around the world, we will not limit ourselves to conventional
technical
onall te
on
tech
chn
niccaldevelopment. Rather, we will accelerate customer-oriented activities targeting the resolutionof the challenges facing society.

13Special Feature

SECTION 4

Message from the CTrO

Establishing a Globally Competitive Cost Structure
through the Hitachi Smart Transformation Project
Improving our earning power and cash generation capacity by reducing costs as well as drasticallyoverhauling our business practices and organizational structure.

Transforming Hitachi through Cost Structure Reforms
To further enhance its position in global markets and keep pace with its competitors,
Hitachi has been implementing the Hitachi Smart Transformation Project since 2011.
This cost structure reform project is being implemented on a Group-wide basis. By drasticallyoverhauling our previous business practices and organizational structure, we have been
making steady progress toward our cost-reduction objective. In comparison with fiscal
2010, we aim to reduce costs by approximately ¥400.0 billion over the five years fromfiscal 2011 to 2015.
This project extends beyond conventional cost reductions, which center on loweringcosts in each division. It is also focused on improving earning power and cash generation
capacity to advance Hitachi to the next stage of growth. To that end, we are overhaulingbusiness practices from the perspective of overall global optimization and implementing
rigorous measures to increase the efficiency of operations and organizational structures.
Specifically, from the top down we are implementing shared initiatives that leverage theeconomies of scale of the Hitachi Group. These initiatives include IT platform consolidation,
supply chain reforms, and global, centralized purchasing initiatives. From the bottom up,
we are implementing advanced initiatives from the front lines, such as the use of modular
design to reduce the numbers of parts and shorten production processes. These initiatives
will be shared Group-wide.
In carrying out this project, the most important factor is transforming the mind-set of every
Hitachi employee around the world. It is natural to have some hesitation about changing
previous business practices, but for Hitachi to succeed in global competition, we must
sweep away preconceived ideas and aggressively advance the Group’s transformation.
Advancing to the Next Stage of Growth through Full-Scale Process Reforms
In the first stage of the project, we promoted measures to make reductions in the areas ofproduction costs, direct materials costs, and indirect costs. Through fiscal 2013, we achieved
cumulativea cumulativve ttotal reduction of about ¥220.0 billion. Moving forward, in the second stage,
m
we
will
furtherw
ew
willl ffururthhee deepen and enhance measures in each cost area and implement full-fledged
processreforms
pro
p
oce
cess
ss rrefeforormm through the reevaluation of business processes from end to end. To optimizethethe entire
eentntirree valuevaalu
u chain, from demand forecasting to development, marketing, design,
procurement,propoccureremmeentnt,, production, sales, installation, and service, we will standardize and consolidate

Tatsuro Ishizuka
Executive Vice President and Executive Officer,
CTrO, and Deputy General Manager ofSmart Transformation Project Initiatives Divisionbusinesspracticesand frameworks for each process and will rigorously eliminate any redunbus
b
usin
nes
esss ppra
act
ct
dancies.
will also enhance our organizational structure to ensure that the Hitachi Groupdandancciees.. W
Wee w
make
full
ccan
nm
mak
ke
e fu
ulll use of its capabilities.
measures, we will strongly drive increases in our ability to generate
TThrough
Th
hro
rou
ugh
gh these
tth
h
the
th
e ccashca
ashh thattha
th
att is necessary for investment in growth, and we will accelerate initiatives sothat Hitachi can realize sustained growth as a truly global company.

14

Hitachi, Ltd. | Annual Report 2014

SECTION 5

Message from the CIO

Taking Aggressive Steps to Increase Management
Efficiency and Achieve Business Growth throughthe Effective Use of IT
Hitachi will work to further enhance its management by effectively using IT, not only to implement
back-office functions but also to improve management decision making and operations.
IT’s Role in Management
In corporate management, IT is a platform for increasing management efficiency andachieving business growth. As CIO, it is my duty to achieve both of these objectives
through strategic IT investment.
To increase management efficiency, we are accelerating the process of reviewing
and improving operations by using IT to visualize activities throughout the operational
value chain, including order receipt, parts procurement, and management accounting.
The Hitachi Group’s business operations are expanding globally, and to respond rapidly tochanges in the management environment we have developed an IT platform that utilizes
cloud computing. In addition, we have established a Global Human Capital Database forthe purpose of nurturing and utilizing Hitachi Group employees worldwide, who havea diverse range of skills.
We are also actively using IT to advance business growth. In the past, the data handled
by IT systems was principally generated by corporate activities, such as business transactions
and management actions. The central role of IT in business was the efficient processing of
this type of information. Hitachi uses IT at a more advanced level. Through the analysis andevaluation of big data gathered and stored from sensors that monitor the operations ofequipment and systems, Hitachi is advancing initiatives to resolve its own management andoperational issues. In this way, the IT division, which was previously treated as a single
administrative division, is being repositioned as a frontline unit that provides support to
Hitachi’s management.
The fact that IT is one of Hitachi’s businesses is itself a strength in the use of IT within
the Group. Moving forward, we will strive to leverage the full capabilities of IT to further
enhance Hitachi’s management.
Boosting Cash Generation through the E2E Supply Chain Project
In fiscal 2013, we established the E2E (End-to-End) Supply Chain Project Division to
boost cash generation. Through the E2E Supply Chain Project, the division will w
work
ork ttooraise Hitachi’s overall operational efficiency by reevaluating operational processes,
ses, suc
ses
ssuch
uch
h aas
demand forecasting and service provision, with an end-to-end perspective. In add
aaddition,
ddit
itio
on,
n,
the division will take steps to improve the Cash Conversion Cycle through the vis
vvisualization
sua
ualiz
iza
atio
ion
n
of management information, such as cash receipts and disbursements. The cash
generatedsh gen
ge
ner
erat
ated
ed
by those improvements will then be used for growth investment.
We will aggressively implement initiatives to improve the Cash Conversion Cyc
Cycle
Cyclee tothe level of leading overseas companies by fiscal 2015. At the same time, we will
coordinate
w l coo
co
ord
din
nat
ate
e
these activities with the Hitachi Smart Transformation Project, a cost structure reform
initiative.
fo
orm
rm
m in
niti
tiattivve.

Shinjiro Iwata
Executive Vice President and Executive Officer,
CIO, and General Manager of End-to-End
Supply Chain Project Division15

Special Feature

SECTION 6

Message from the Head of MONOZUKURI & Quality Assurance

Reinforcing the Foundation for Quality and Cost
Competitiveness through MONOZUKURI Capabilities
Achieving highly efficient operations by accelerating the overseas shift of the value chain.

High-Quality Products at Low Cost
My mission is the prompt delivery of high-quality products that meet customer needs at
low cost. From the viewpoint of MONOZUKURI (design, manufacture, or repair of products),
Hitachi is advancing the shift of the value chain overseas bases—from demand forecasting,design, and procurement to manufacturing and service. We are taking steps to build the
optimal design and production system and conduct manufacturing in the best location.
In this way, we are enhancing the efficiency of our global operations.
In addition, the MONOZUKURI viewpoint is being used to bolster supply chain management
through the E2E (End-to-End) Supply Chain Project. Hitachi is implementing this project on
a Group-wide basis to strengthen cash generation. For example, we have introduced acloud system that facilitates the optimization of product inventories based on demand forecasting data, and we have increased efficiency in logistics through the consolidation of
warehouses. Through these efforts, we are improving cash flow by shortening lead times
and reducing inventories.
Strengthening MONOZUKURI Capabilities Globally with Modular Design
and Production in the Best Location
To increase design efficiency and enhance cost competitiveness, we are promoting
standardization in design and manufacturing through the introduction of modular design.
The modular design method reduces the number of different parts and shortens productlead times by modularizing and standardizing parts. First, we develop a thorough understanding of the specifications of the product needed by the customer. We then conduct
basic design in Japan, where we have a high level of technical skills, and detailed design at
local bases in line with regional needs. We have already completed the application of modular
design to eight products, and we have started to apply it to an additional 14 products.
Design determines about 80% of manufacturing costs, and accordingly the introduction ofmodular design will enable Hitachi to efficiently provide products that meet customer needs.
addition,Inn add tion, in order to globalize manufacturing in the best location, we are makingtheadv
aadvancesdvan
ancceses inin thh nurturing of overseas engineers, and enhancing operational efficiency bydelegating
to local design departments and rapidly implementing design that
del
d
eleg
ega
atin
ing
g au
aauthorityu
meets
detailedmeeetmetss deta
detaililed
ed needs in the local market. In Japan, Hitachi will strengthen its manufacturing
bases
and
utilizebasb
asees aan
nd
d ut
util
l them as “mother factories” to establish the technologies that theCompany
Co
C
om
mpa
pan
nyy willw l use to mass-produce new products.

Hiroshi Nakayama
Vice President and Executive Officer,
Head of MONOZUKURI & Quality Assurance

these
Som
SSome
ome
me off thethese
se initiatives will not generate results for a long period of time, perhaps five to10years.
by continually and steadily implementing initiatives Hitachi will build
1
0 ye
yea
arss. Nonetheless,
No
N
on
n
designmanufacturing system that can rapidly respond to changes in markets and
a des
d
esig
gn
n and
and m
customer needs. We are committed to MONOZUKURI backed by leading-edge technologies.
Moving forward, we will make continued progress with MONOZUKURI that offers superior
quality and cost competitiveness.

16

Hitachi, Ltd. | Annual Report 2014

SECTION 7

Message from the CPO

Strengthening Competitiveness acrossthe Value Chain through Reforms Targeting Global
Integrated Procurement Operations
Bolster its global competitiveness through Group-wide initiatives to accelerate reductions
in direct materials costs.
To provide products that meet the needs of markets and customers in terms of quality,
delivery and cost, Hitachi needs to strengthen competitiveness across the global value chain
by optimizing processes ranging from demand forecasting to design, manufacturing andservice delivery.
The Corporate Procurement Division is working to respond rapidly to changes in the needsof markets and customers. To that end, the division is advancing reforms to implement
Global Integrated Procurement Operations, which leverage optimal combinations of threeaxes—regions, businesses and products. In addition, the division is accelerating collaboration
with business partners. In these ways, the Corporate Procurement Division will strive tocontribute to gains in profitability and cash flow by reducing costs, centered on direct materials
costs, and to support the generation of new value in the development of products and services.
Specifically, we set targets for production costs from the product design, development,
and pre-order stages. On that basis, we work to implement “cost planning,” under which
we develop specifications to achieve those targets and select products and business partners.
We also take steps to expand and bolster “global procurement” and to augment “centralized purchasing.” To advance these initiatives, we must build close relationships withcompetitive business partners around the world, as well as with design, manufacturing
and other divisions throughout the Hitachi Group. To that end, the Corporate Procurement
Division is providing a range of proposals and consultations from the perspective of
procurement and taking steps to strengthen its capabilities in “Procurement Engineering,”
which will enhance the competitiveness of the Group’s value chain.
These initiatives have been positioned as one part of the Hitachi Smart Transformation Project,a cost structure reform project that the Company is implementing on a Group-wide basis.
Accordingly, the Corporate Procurement Division is working on joint initiatives in close
cooperation with other internal divisions, such as design, R&D, MONOZUKURI and quality
assurance, and with Group companies that have specialized functions related to pro
procurement
curem
men
activities. I believe that this aggressive advancement of procurement reform on a Gro
Group-wide
G
rou
upp-w
wid
de
e
basis is a major strength of the Hitachi Group in comparison with its competitors.
o s.
ors
In fiscal 2014, to reinforce Hitachi’s progress toward the achievement of the 2015
0 5
015
Mid-term Management Plan, the Corporate Procurement Division will focus on im
implementing
imp
mple
lem
meent
ntin
ng
g
the planned initiatives and work to increase its overall competitiveness. As we str
sstrive
trivve too bebea world-class procurement division, we will do our utmost to contribute to theoverall
e ov
ove
era
all
growth of Hitachi’s businesses.

Shinichiro Omori
Vice President and Executive Officer,
CPO, and General Manager of Corporate
Procurement Division17

Special Feature

SECTION 8

Message from the CHRO

Achieving Worldwide Business Growth with
Global Human Resources Management
Building a strong organization to lead the growth of the Hitachi Group by maximizing
the performance of diversified employees.

Globalization of the Management System and Human Resource Management
Human resource are the engine of Hitachi’s growth, and under the 2015 Mid-termManagement Plan, human resources play a central role in Hitachi’s initiatives to advancethe global development of the Social Innovation Business. Our most important challenge isthe nurturing and utilization of human resources that are well versed in the frontline situation in each country and can provide solutions in local markets. To enable our highly skilled,
diverse global talent around the world to work to their full potential, without regard tonationality, language or gender, we have commenced global human resource management.
We are accelerating initiatives for leaders on a Group-wide, global basis, such as implementing
standardized educational programs and rotations for candidates for Group management
positions and aggressively advancing the appointment of non-Japanese executives.
Strengthening the Foundation for Leveraging Human Resources
These initiatives are supported by the Group-wide human resource management platform,
and accordingly Hitachi has taken steps to strengthen this platform. First, in fiscal 2012,
we completed a Global Human Capital Database, which contains information for about
250,000 Hitachi Group employees. In fiscal 2013, we completed Hitachi Global Grading,which ranks management positions on a common scale that applies to approximately
50,000 managers. As a result, we have established a platform that enables us to searchamong Group employees worldwide to find the people who are the best fit for a specificproject and assign them to the optimal position. This framework enables Hitachi to respondrapidly to changes in the markets.
Also, in fiscal 2014 we are establishing Global Performance Management, which isa framework for goal management, evaluation, and coaching. We will strive to maximize
the performance of employee and organizations by clearly linking the objectives of the
Hitachi Group with those of individual employees and taking steps to reform work methods.
Going forward, we will endeavor to support Hitachi’s business growth by using thisplatform to nurture and leverage human resources with diverse backgrounds and toestablish strong organizations that can succeed in global competition.

Hidenobu Nakahata
Vice President and Executive Officer,
CHRO, and General Manager of
Human Capital Group18

Hitachi, Ltd. | Annual Report 2014

SECTION 9

Message from the General Counsel

Supporting the Globalization of Hitachi withWorld-class Governance and Compliance
We strive to achieve highly transparent and trustworthy management through initiatives targetinga rigorous approach to corporate governance and compliance. These initiatives reflect an emphasis on
diversity in governance and a global commitment to compliance.

Strengthening Corporate Governance to Address the Globalization of Management
In strengthening corporate governance, Hitachi is focusing on diversity. Hitachi has adopted
the Committee System, which provides a clear separation of the management oversight andbusiness execution functions. The Board of Directors, which is responsible for management
oversight, includes the Nominating Committee, Audit Committee, and Compensation
Committee, with outside directors accounting for the majority of members of eachcommittee. With this governance structure, Hitachi increases management transparency
and builds a decision-making framework that reflects a variety of viewpoints from insideand outside Hitachi. Since fiscal 2012, outside directors, including non-Japanese, haveaccounted for the majority of the members of the Board of Directors and brought global
perspectives to the Board of Directors through active discussions based on diverse experienceand expertise. We, Hitachi, held meetings of the Board of Directors in India in 2012 and in
the United States in 2013 and discussed the business strategies for each region. Moving
forward, the Board not only considers reports from the business execution side but also
steps up its function as a venue for brainstorming about specific strategies. In these ways,
the Board sets the course of Hitachi for increasing the corporate value of the Hitachi Group.
In advancing global business initiatives, the incorporation of diverse values has
special meaning from a risk management perspective. Hitachi will continue working toreflect a wide variety of opinions in its management and striving to further enhance its
corporate governance.

Thorough Compliance on a Group-wide BasisAs the Hitachi Group is advancing global initiatives for its Social Innovation Business,in these endeavors, it is extremely important for the Group to secure the trust of its stakeholders in each country. In addition, taking a rigorous approach to compliance overseas is
more important than ever before.
In fiscal 2009, the Hitachi Group formulated the Hitachi Global Compliance Pro
Programgram(HGCP) and has implemented auditing and employee education based on this pr
program.
p
rog
gra
ram
m.
The HGCP is designed to prevent corruption, which is the focus of strengthened
regulations
ed regegu
ulaatiotion
ns
worldwide. Under the HGCP, employees in each country follow unified rules toprevent
o pre
p
eve
vent
nt ttheheoccurrence of corruption, a major compliance risk. In addition, in 2010, the HitachiGroup
ittacchihi GroGrouuppestablished the Hitachi Group Codes of Conduct, which internalize ISO26000 andotherand ototheherrinternational rules. In this way, the entire Hitachi Group shares a more stringent
level
nt llev
evel
el of
o
ethical values than the laws of each country. The Hitachi Group will continue to str
sstrengthen
tren
eng
gth
heen
its compliance system, centered on the HGCP, and will rigorously implement the
Hitachi
he H
he
Hita
tach
chi

Toshiaki Kuzuoka
Senior Vice President and Executive Officer,
General Counsel & Head of Corporate Communication, andHead of Risk Management

Group Codes of Conduct.

19

Financial Highlights
Hitachi, Ltd. and subsidiaries

FY2013

FY2012FY2011FY2010FY2009FY2008For the year:
Revenues¥9,616,202¥9,041,071¥9,665,883¥9,315,807¥8,968,546¥10,000,369

Operating income

532,811422,028

412,280

444,508

202,159

127,146

EBIT (earnings before interest and taxes)

580,153

358,015573,218

443,81277,815(275,239)

Net income (loss) attributable to Hitachi, Ltd. stockholders

264,975

175,326

347,179

238,869(106,961)(787,337)

Cash flows from operating activities

439,406

583,508

447,155

841,554798,299558,947

Cash flows from investing activities(491,363)(553,457)(195,584)(260,346)(530,595)(550,008)

Free cash flows(51,957)

30,051

251,571581,208

267,704

8,939

Cash flows from financing activities

32,968(180,445)(167,838)(584,176)(502,344)

284,388

Cash dividends declared

50,71147,69036,72736,133—

9,971

Capital investment (Property, plant and equipment)

849,877

742,537

649,234

556,873

546,326

788,466

Depreciation (Property, plant and equipment)

329,833

300,664

360,358

382,732

441,697478,759

R&D expenditures

351,426

341,310412,514395,180

372,470

416,517

Total assets

11,016,899

9,809,230

9,418,526

9,185,629

8,964,464

9,403,709

Property, plant and equipment

2,342,091

2,279,964

2,025,538

2,111,270

2,219,804

2,393,946

Total Hitachi, Ltd. stockholders’ equity

2,651,241

2,082,560

1,771,782

1,439,865

1,284,658

1,049,951

Interest-bearing debt

2,823,049

2,370,079

2,396,454

2,521,551

2,367,143

2,820,109

Number of employees

320,725

326,240

323,540

361,745359,746

361,796

Basic¥54.86¥37.28¥76.81¥52.89¥(29.20)¥(236.86)

Diluted

54.85

36.29

71.86

49.38

(29.20)(236.87)

10.5

10.0

8.0

8.0

—

3.0

549.02431.13382.26318.73287.13315.86

At year-end:

Per share data:
Net income (loss) attributable to Hitachi, Ltd. stockholders:Cash dividends declared
Total Hitachi, Ltd. stockholders’ equity

Financial ratios:
Operating income ratio

5.5

4.7

4.3

4.8

2.3

1.3

EBIT ratio

6.0

4.0

5.9

4.8

0.9

–2.8

Return on revenues

2.8

1.9

3.6

2.6

–1.2

–7.9

Return on equity (ROE)

11.2

9.1

21.6

17.5

–9.2

–48.9

Return on assets (ROA)

2.4

1.8

3.7

2.6

–1.2

–8.4

D/E ratio (including noncontrolling interests) (times)

0.73

0.75

0.86

1.03

1.04

1.29

Total Hitachi, Ltd. stockholders’ equity ratio

24.1

21.2

18.8

15.7

14.3

11.2

Notes:
1. In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income is presented as total revenues less cost of sales andselling, general administrative expenses. The Company believes that this is useful to investors in comparing the Company’s financial results with those of other Japanese companies.
Under accounting principles generally accepted in the United States of America, restructuring charges, net gain or loss on sales and disposal of rental assets and other property
and impairment losses for long-lived assets are included as part of operating income.
2. The restructuring charges mainly represent special termination benefits incurred with the reorganization of our business structures, and as the result of the Company andits subsidiaries reviewing and reshaping the business portfolio.
3. EBIT is presented as income before income taxes less interest income plus interest charges.
4. The Company has changed the number of employees to exclude temporary employees starting from the year ended March 31, 2010.
The figure for the prior year has been restated to reflect the current year’s presentation.

20

Hitachi, Ltd. | Annual Report 2014

Millions of yen

FY2007

FY2006

FY2005

FY2004

Revenues / Operating income ratio / EBIT ratio
Revenues (left scale)Operating income ratio (right scale)

EBIT ratio (right scale)(Millions of yen)

¥11,226,735¥10,247,903¥9,464,801¥9,027,043

345,516

182,512

256,012

279,055

335,729

214,218

289,959

280,150(58,125)(32,799)

37,32051,496

791,837

615,042

690,875

565,356(637,618)(786,170)(501,362)(526,988)

154,219(171,128)

189,51338,368(185,556)

121,259(261,638)(99,429)

19,947

19,97436,641

36,462

969,087

1,048,572

954,706

959,593541,470

472,175

451,170425,080

428,171412,534

405,079

388,634

10,530,847

10,644,259

10,021,195

9,736,247

2,653,918

2,688,977

2,460,186

2,357,931

2,170,612

2,442,797

2,507,773

2,307,831

2,531,506

2,687,450

2,419,044

2,502,506

347,810

349,996327,324

323,072(%)

12,000,000

99,000,000

6

6,000,000

33,000,000

0

0

04

05

06

07

08

09

10

11

12

13
(FY)

12

13
(FY)

–3

Return on equity (ROE) / Return on assets (ROA)
Return on equity (ROE)

Return on assets (ROA)

(%)

Yen

¥(17.48)¥(9.84)¥11.20¥15.53(17.77)(9.87)

10.84

15.15

6.0

6.0

11.0

11.0

652.95734.66752.91

692.73
%

50

25

0

–25

–50

04

05

06

07

08

09

10

11

Cash flows
Cash flows from operating activities (left scale)Free cash flows (right scale)

Cash flows from investing activities (left scale)(Millions of yen)

3.1

1.8

2.7

3.1

3.0

2.1

3.1

3.1

–0.5

–0.3

0.4

0.6

–2.5

–1.3

1.5

2.3

–0.6

–0.3

0.4

0.5

0.76

0.76

0.68

0.78

20.6

22.9

25.0

23.7

(Millions of yen)

1,000,000

800,000

500,000

400,00000–500,000–1,000,000–400,000

04

05

06

07

08

09

10

11

12

13
(FY)

–800,000

21

Segment Information
Information & Telecommunication Systems

Main Products and Services
Systems Integration
Outsourcing
Services

Revenues (left scale)
EBIT ratio (right scale)

FY2013
(%)

3,000

7

2,000

5.6%

5.8%

1,000

5

5.0%

〜
〜
0

11

12

Main Products and Services
Thermal Power Generation Systems
Nuclear Power Generation Systems
Renewable Energy Power
Generation Systems
Transmission & Distribution Systems

0

13
(FY)

Hitachi Virtual Storage Platform G1000

Power Systems

Overseas Revenue Ratio

1,786.5

Telecommunications Equipment
ATMs

Operating income ratio (right scale)
(%)

1,200

19.7%

20

904.6
777.3

800

3.3%

Overseas Revenue Ratio

3.3%

2.2%

0

‒4.1%
‒5.4%

Social Infrastructure & Industrial Systems

0Main Products and Services
Industrial Machinery and Plants
Elevators
Escalators

11

12

–10

13
(FY)

Operating income ratio (right scale)(%)
1,446.6

1,313.8

6

1,204.9

Railway Systems

4.8%

1,000

4.6%

4.1%

Overseas Revenue Ratio

4.1%
3.9%

4
〜
〜

0

Electronic Systems & Equipment

Main Products and Services
Semiconductor and LCDs
Manufacturing Equipment
Test and Measurement Equipment

12

13
(FY)

Revenues (left scale)
EBIT ratio (right scale)

(%)

1,500

5.3%
4.5%
1,101.7

Overseas Revenue Ratio

2.9%
2

0

11

12

13
(FY)

Hitachi Medical’s MRI System

Hydraulic Excavators
Wheel Loaders
Mining Machinery

0

Operating income ratio (right scale)(Billions of yen)
1,200

9.6%

798.7

55%
FY2013(%)

800

FY2013

Share of Revenues

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)

10%

4

3.2%

500

Main Products and Services

6

4.7%
1,116.7

1,014.3
4.1%

36%
FY2013(Billions of yen)

1,000

FY2013

Share of Revenues

Operating income ratio (right scale)Power Tools

Construction Machinery

0

Revenues and Profit

Advanced Industrial Products
Medical Electronics Equipment

11

14%

5

4.5%

500

Monorail System
Daegu Urban Railway Line 3 (Korea)

40%
FY2013(Billions of yen)
1,500

FY2013

Share of Revenues

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)

7%

10

400

Wind Power Generation System
Wind Power Kamisu DAIICHI Offshore Wind Farm,Wind Power Ibaraki, Co., Ltd.

30%
FY2013(Billions of yen)

832.4

FY2013

Share of Revenues

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)18%

6

1,764.2
5.5%

1,954.9

5.9%

5.8%

Servers
Mainframes

Operating income ratio (right scale)(Billions of yen)

Software
Disk Array Subsystems

Share of Revenues

Revenues and Profit

10

767.3

756.0

7%

9

Overseas Revenue Ratio
7.9%
400

8.3%

7.7%

7.9%

〜
〜

7.2%

Hitachi Construction Machinery’s Double-arm
Working Machine

22

0

11

12

8

13
(FY)

0

FY201373%

Hitachi, Ltd. | Annual Report 2014

High Functional Materials & Components

Main Products and Services
Semiconductor and Display
Related Materials
Circuit Boards and Materials

Share of Revenues

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)Operating income ratio (right scale)

FY2013(Billions of yen)

(%)

1,500

1,336.4

1,437.1

1,363.2

Energy Storage Devices

9

7.5%

Automotive Parts (Molded Plastics, etc.)
7.1%
1,000

5.4%

Overseas Revenue Ratio

Specialty Steels
Magnetic Materials and Components

Automotive Systems

3.8%

3.6%

500

High Grade Casting Components
and Materials
Hitachi Chemical’s Industrial Li-ion Batteries

0

3

11

12

13
(FY)

Wires and Cables

Main Products and Services
Engine Management Systems
Electric Powertrain Systems
Drive Control Systems

13%

6

4.4%

0

Operating income ratio (right scale)

FY2013(Billions of yen)

(%)

1,200

5.3%
4.7%

Car Information Systems

4.5%

4.6%
800

6

892.1
4.4%

8%

4

806.8

811.5

43%
Share of Revenues

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)

FY2013

Overseas Revenue Ratio
400

2
0.6%

0

Hitachi Automotive Systems’ Semi-Active
Suspension
n SSystem

Digital Media & Consumer Products*

Main Products and Services
Air-Conditioning Equipment
Room Air Conditioners
Refrigerators

12

13
(FY)

0

Revenues (left scale)
EBIT ratio (right scale)Operating income ratio (right scale)

FY2013(Billions of yen)

(%)
4

1,200
858.8

890.8

818.5

800

Overseas Revenue Ratio

‒0.1%
400

‒0.3%

‒1.3%

0

‒0.7%

‒1.4%
0

Hitachi Appliances’ Multi-split Air Conditioner“FLEXMULTI” (High-efficiency Model)

Main Products and Services
Logistics
Property Management

11

12

13
(FY)

–2

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)

FY2013(%)
5

1,719.7
1,233.6
1,111.0

1,200

600

3.9%

Overseas Revenue Ratio
3

3.0%
2.7%

〜
〜

Main Products and Services
Leasing
Loan Guarantees

11

12

13
(FY)

0

Revenues and Profit
Revenues (left scale)
EBIT ratio (right scale)

FY2013
(%)
10.2%

8.6%

8.7%

8.5%

8.6%
353.2

12

9.8%
338.5

Overseas Revenue Ratio
4

12

Hitachi Capital’s Hitachi Corporate Card
* Effective on April 1, 2014, the former “Digital Media & Consumer Products” was renamed “Smart Life & Ecofriendly Systems.”

3%

8

340.2

200

11

25%
Share of Revenues

600

0

FY2013Operating income ratio (right scale)(Billions of yen)

400

12%

4

3.7%

3.6%

0

46%
Share of Revenues

4.2%

Hitachi Transport System’s Truck and Metropolitan
East Distribution Center

FY2013Operating income ratio (right scale)(Billions of yen)
1,800

Financial Services

8%

2
0.5%

Flat-Panel TVs

Others (Logistics and Other services)

49%
Share of Revenues

Revenues and Profit

Washing Machines
Optical Disk Drives

11

FY201313(FY)

0FY201327%
23

Foundation for Growth

CSR Management

As a global company, we share society’s values and pursue sustainable growth by integrating management strategies and CSR. We align our CSR
activities with our Mid-term Management Plan to realize the Hitachi Group Vision, creating both social and economic value.

Management Strategies and CSR

Material Issues for Hitachi

Hitachi’s Vision

We use a materiality process based on dialogues with stakeholders to

In conjunction with the start of the 2015 Mid-term Management
Plan, which was announced in May 2013, the Hitachi Group Vision
was created as a guide to what the Hitachi Group intends to become.
The Vision embodies our firm commitment to help resolve the various

identify material issues. To integrate our management strategies and
CSR, we reflect, in our activities, material issues related to the key
management policies in our Mid-term Management Plan and we seek
to materialize CSR in line with our management strategy.

challenges facing society as well as to contribute to the realization of

Hitachi delivers innovations that answer society’s challenges.
With our talented team and proven experience in global
markets, we can inspire the world.

For Hitachi, CSR is about realizing the world we envision in our

Importance for stakeholdersa sustainable society.

1. Products that Create a Sustainable
Society (Sustainable Business)
2. Caring for the Environment
3. Public Policy Initiatives
4. Respect for Human Rights
5. Supply Chain Management
6. Diversity Management

Group Vision.

Inﬂuence on business

Hitachi’s CSR Activities
To realize the Hitachi Group Vision, we have shared the CSR Policyof the Hitachi Group with all Group members. This policy, which was

Environmental Activities

formulated in fiscal 2005, is the basis for our CSR activities. Looking

Accompanying economic and social development around the world,

toward the next Mid-term Management Plan which will start froma range of environmental problems, such as climate change, resource

fiscal 2016, to further integrate management strategies and CSR,

depletion, and ecosystem destruction, are becoming increasingly severe.

we are revising our CSR Policy to a new framework using ISO26000.

As a company engaged in the Social Innovation Business,

From fiscal 2014, we will further improve communications with our

we aim to achieve the environmental management described in our

stakeholders to recognize and fulfill our social responsibilities. We will

Environmental Vision or achieving a sustainable society by employing

also reinforce the PDCA cycle to ensure execution of our activities andour company’s resources to reduce the burden of human activities

to improve the quality of our management.

on the environment.
We are committed to global warming prevention, resource
conservation, and ecosystems preservation as the three pillars of our

New CSR Management Framework

vision. Our goal is to achieve a more sustainable society by promoting
global production that reduces the environmental burden of a product

Recognize

throughout its lifecycle.

Properly recognize oursocial responsibility

Environmentally Conscious Products and Services

Review and
Improve
Review and improve
CSR activities
through proactive
communicationand stakeholder
engagement

1. Recognition of Social
Responsibility
2. Organizational Governance
3. Human Rights
4. Labor Practices
5. The Environment
6. Fair Operating Practices
7. Customers (Consumer Issues)
8. Community Involvement andDevelopment
9. Review and Improvement of
CSR Activities

We develop environmentally conscious products called Eco-Products
as part of our efforts to make the burden on the environment of our
products and services as small as possible. Eco-Products must meet
specific environmentally conscious criteria for the design and developIdentify, Prioritize
and Act
Identify relevant
issues, establish
priorities foraddressing issues,
and act

ment of products and services. These criteria are set in our
Assessment for DfE (Design for Environment), which is used forthe evaluation process. To advance the development of Eco-Products,
we have set targets for raising the Eco-Product sales ratio, which is
the ratio of Eco-Product sales to total product sales. In fiscal 2013, theEco-Product sales ratio has reached 89%, surpassing our target of 84%.

24

Hitachi, Ltd. | Annual Report 2014

The Hitachi Environmental Vision

Reduction in Energy Use per Unitd per unit
From base year

14%
reduction

Energyused
1,746 ML
Activity
amount*=Energyused
1,712 ML100%

Activity
amountFY 2005

Eco-Products that meet even more demanding requirements areucts qualifying under the Eco-Products Select program increased to 210.

86%

FY 2013(base year)

designated as Eco-Products Select. In fiscal 2013, the number of prod-=* A value closely related to the emission factor numerators (environmental
burden) of energy use from business activities, etc. (for example, production
quantity, output, building floor space, and number of employees, etc.)
We reduce the energy use per unit as one way to use energy more efficiently.
In fiscal 2013, we reduced this by 14 percent, surpassing the 11 percent target(from the base year fiscal 2005). For more reductions, we installed high-efficiency
equipment, from LED lighting to inverter air conditioners, and are cuttingenergy by improving manufacturing processes.

Environmentally Conscious Production
We have set targets for efficient energy use, waste amounts, chemical
substance emissions, and water use to reduce the environmental
burden of our business activities.

Reduction in Waste and Valuables Generation per UnitpCreating Eco-Factories & Offices Select
The Eco-Factory & Office Select program certifies factories and officesthat show a high level of environmental consciousness as well as out-

From base year

standing results. In this way, the program promotes environmentally24%

conscious production and encourages environmental action. Factories

reductionand offices certified under the Eco-Factory & Office Select program arereevaluated every fiscal year to confirm that their performance continues
to meet the certification criteria. In fiscal 2013, 19 facilities obtained
new certification and 36 facilities had their certifications renewed.

Amountgenerated

782 kt =Activity100%

FY 2005(base year)

Amountgenerated

677 kt =Activity76%

FY 2013

All factories and offices are recycling waste materials onsite and, with customers,
are reducing transportation waste. Under the Zero Emission*1 initiative, which
minimizes landfill disposal, 121 facilities achieved zero emission goal as of fiscal 2013.
*1 Zero emission: A final disposal rate (landfill disposal/waste) of less than 0.5
percent in any given year.

25

Foundation for Growth

Corporate Governance

Hitachi, Ltd. and its seven listed subsidiaries have adopted the(2) Audit Committee

Committee System under the Companies Act of Japan (the “Companies

The Audit Committee has the authority to audit the execution ofAct”). By demarcating responsibilities for management oversight andduties of Directors and Executive Officers and to determine proposals

those for the execution of business operations, Hitachi is working tosubmitted to the general meeting of shareholders for the election andcreate a framework for quick business operation, while making manage-

dismissal of accounting auditors. The Audit Committee consists of fivement highly transparent with outside Directors on the Board of Directors.

Directors, including three outside Directors and two standing Audit

Some of Hitachi’s Directors and Executive Officers serve concurrently
as Directors and committee members at Group companies. In addition,

Committee members.
The Audit Committee meetings were held 15 days during the fiscal

Hitachi is strengthening its integrated management of the Group,

year ended March 31, 2014.

improving management oversight of Group companies, and executing(3) Compensation Committee

business strategies formulated to enable the Hitachi Group to demon-

The Compensation Committee has the authority to determine

strate its collective strengths. The goal is higher corporate value.

remuneration policies for Directors and Executive Officers and remuneration for individuals based on these policies. The Compensation

Board of Directors
The Board of Directors approves basic management policy for the
Hitachi Group and supervises the execution of the duties of Executive
Officers and Directors to sustainably enhance corporate value andCommittee consists of four Directors, three of whom are outside Directors.
The Compensation Committee meetings were held four days
during the fiscal year ended March 31, 2014.

shareholders’ common interests. The basic management policy

Executive Officers

includes the medium-term management plan and annual budget

Executive Officers decide on matters delegated to them by the Board

compilation. The Board of Directors focuses on strategic issues relatedof Directors and execute Hitachi’s business affairs within the scope ofto the basic management policy as well as other items to be resolved

assignments determined by the Board of Directors. As of June 20,

that are provided in laws, regulations, the Articles of Incorporation,

2014, Hitachi had 31 Executive Officers.

and Board of Directors Regulations. As of June 20, 2014, the Board of
Directors was made up of 12 Directors, and two of them concurrently

Senior Executive Committee

serve as Executive Officers. Hitachi aims to reinforce the supervisory

The Senior Executive Committee is a council to ensure that the President

function of the Board of Directors, of which seven outside Directors,

deliberately decides on important managerial matters, which may

including non-Japanese, account for the majority, reflecting theiraffect the business of Hitachi or the Hitachi Group, through discussing

global and diverse viewpoints. Furthermore, Hitachi formulated andthese matters from diverse viewpoints. This committee consists ofpublished Corporate Governance Guidelines outlining the framework

10 members as of June 20, 2014: the Chairman & CEO, the Presidentof corporate governance, such as the function and composition of theand COO, five Executive Vice Presidents and Executive Officers, andBoard of Directors, qualifications for outside Directors, and criteria forthree Senior Vice Presidents and Executive Officers.

assessing the independence of outside Directors.
Corporate Governance Guidelines of Hitachi, Ltd.
http://www.hitachi.com/IR-e/corporate/governance/guidelines.html
Within the Board of Directors, there are three statutory committees—
the Nominating Committee, the Audit Committee, and the Compensation
Committee—with outside Directors accounting for the majority ofmembers of each committee. The Board of Directors meetings were held
10 days during the fiscal year ended March 31, 2014, and the attendance rate of Directors at these meetings was 99%. To assist with theduties of the Board of Directors and each committee, staffs who are
not subject to orders and instructions of Executive Officers are assigned.
(1) Nominating Committee
The Nominating Committee has the authority to determine particular
proposals submitted to the general meeting of shareholders for theelection and dismissal of Directors. The Nominating Committee
consists of four Directors, three of whom are outside Directors.
The Nominating Committee meetings were held five days during
the fiscal year ended March 31, 2014.

26

Director and Executive Officer Compensation
Compensation for Directors and Executive Officers is commensuratewith the ability required of them as well as their responsibilities, while
compensation packages at other companies are also taken into
consideration.
The compensation for Directors consists of a monthly salary anda year-end allowance. The monthly salary is decided by making adjustments to the basic salary that reflects full-time or part-time status,
committee membership and position, and travel from place of residence,
among other factors. The year-end allowance is a pre-determinedamount equivalent to about 20% of the Director’s annual income
based on the monthly salary, although this amount may be reduced
depending on Hitachi’s performance. Directors concurrently serving as
Executive Officers are not paid compensation as Directors.
The compensation for Executive Officers consists of a monthly
salary and a performance-linked component. The monthly salary is
decided by adjusting a basic amount set in accordance with the relevant
position to reflect the results of an assessment. The performance-linked
component is set within a range equivalent to about 30% of theHitachi, Ltd. | Annual Report 2014

Executive Officer’s annual income and adjusted based on Hitachi andMarch 31, 2009, and the retirement allowance was abolished.
Compensation for Directors and Executive Officers for the fiscal

individual performance.

year ended March 31, 2014, is as follows:

The compensation structure for Directors and Executive Officers
was re-examined starting with compensation for the fiscal year ended

Compensation for Directors and Executive Officers
Total amount of each type (Millions of yen)
Total amount of compensation, etc.
(Millions of yen)

Category

Year-end allowance andperformance-linked component

Monthly salary

Number of persons

Directors (excluding outside Directors)

161

142

18

5

Outside Directors

215

201

13

9

Executive Officers

1,989

1,275

714

31

Total

2,366

1,619

746

45

Notes:
1. The number of Directors excludes one Director who concurrently serves as an Executive Officer.
2. The amount of compensation to outside Directors includes the monthly salary for one outside Director who retired due to the expiration of his term of office at the close of
the 144th Ordinary General Meeting of Shareholders held on June 21, 2013.

In addition, Directors or Executive Officers for whom compensation from Hitachi and its subsidiaries is not less than ¥100 million and the amountof their compensation are as follows:
Total amount of each type (Millions of yen)
Total amount of compensation, etc.
(Millions of yen)

Name

Company

Category

Hiroaki Nakanishi

Hitachi, Ltd.

Executive Officer*

Performance-linked
component

Monthly salary

173

122

51

* Although concurrently serving as Director, Mr. Hiroaki Nakanishi does not receive compensation as Director.

Internal Control over Financial Reporting
To ensure the reliability of the financial reporting for the Group as areporting, Hitachi is advancing the establishment of systems for objective

whole, the Hitachi Group has documented control procedures, fromassessment at each in-house company and major Group company.

company-level controls to process-level controls, in accordance withThe J-SOX Committee’s Office summarizes the assessment results ofpolicies determined by the J-SOX Committee.

each company to confirm the effectiveness of internal control on
a Group-wide, consolidated basis.

In regard to assessment of the internal control over the financial
Hitachi Group Internal Control Assessment Framework(As of March 31, 2014)

Hitachi, Ltd. President
and CFO

Financial Services
AgencyInternal
ControlReportReportReportReportAudit Committee

J-SOX Committee
J-SOX Committee’s Office
ReportIn-house andmajor Group companies

Collaboration

Internal Auditing
OfficeIndependent
Auditors
External
Audit

ReportSubsidiary companies

27

Foundation for Growth

Risk Management

Hitachi conducts business activities in a wide range of fields in markets around the world. To prevent a variety of risk factors from having
adverse effects on business continuity, the Hitachi Group is taking steps to strengthen risk management, such as utilizing a system with overall
responsibility for compliance for the Hitachi Group.

Reinforcing the Risk Management System

Compliance Reporting System

The entire Hitachi Group is reinforcing management systems to

We instituted a Group-wide whistle-blowing system to prevent illegal

address increasingly global and complex risks. In fiscal 2009, weand unethical behavior, to promptly address infractions, and toformulated the Hitachi Global Compliance Program (HGCP), our basis

enhance our ability to self-regulate. People can report directly to thefor audits and educating employees. In fiscal 2013, we appointed

Compliance Department at Hitachi or to an outside attorney. Thisa Hitachi Group Chief Compliance Officer (CCO), with overall respon-system can be used not only by Hitachi employees but also by former

sibility for the Hitachi Group’s compliance system, and CCOs in each

employees, temporary staff, and business partners. Another system—

business unit.

the Channel to the Board of Directors—has been introduced to allow

Moreover, in October 2013 we established the Risk Management
Group, which consolidates a range of functions under the Head of
Risk Management, such as internal audits, compliance, and crisis

employees to report problems anonymously and directly to Hitachi’s
Board of Directors.
For all reports, an investigation is conducted and the facts aremanagement (BCP),*1 that had previously been managed by separate

confirmed. If the report is an onymous, then the results of the investi-

departments. Moving forward, in addition to compliance, we will

gation are communicated to the person who made the report. In

establish standards and systems for evaluating all risks related to our

addition, an appropriate response is implemented, such as corrective

business activities, including business risks, and a comprehensive risk

measures as needed.

management system for final consideration of countermeasures at
the management level.

Corruption Prevention Initiatives*1 BCP: Business Continuity Plan: A plan for the rapid restoration and continued
implementation of core operations in the event of an emergency.

To address the global risk of bribery, with reference to the U.S. Foreign
Corrupt Practices Act (USFCPA)*2 Resource Guide and other laws andregulations, in fiscal 2013, we formulated possible bribery risk scenarios

Risk Management Systemand conducted surveys related to bribery risk at Group companies
outside Japan. Based on the responses to those surveys, we identified
companies that had a specified risk corresponding to the risk scenarios.

Risk Management GroupMoving forward, we will take steps to reduce compliance risk on a

• Complianceglobal basis through such means as auditing and education, centered• Export Control

on the companies that were identified.

• Crisis Management (BCP / disaster response)• Internal Audits, etc.

*2 U.S. Foreign Corrupt Practices Act (USFCPA) has two main provisions. One prohibits
the bribery of foreign government officials, and the other requires accounting transparency in accordance with the Securities Exchange Act. The anti-bribery provisionprohibits bribery of foreign government officials and is under the jurisdiction of the U.S.
Department of Justice. The accounting provision requires that accounting records
accurately and fairly reflect transactions and that an appropriate system of internal
accounting controls is maintained. This provision is under the jurisdiction of the U.S.
Securities and Exchange Commission.

Standards and systems for evaluating business and other risks

Preventing Violations of the Antimonopoly Law
The Hitachi Group operates on the principles of “conformance withthe law and business ethics” and “fair and disciplined competition.”Comprehensive risk management system

However, Hitachi, Ltd. was penalized for impairing the fairness ofat the management levela public bid in fiscal 2002, and we received administrative orders in
September 2006, October 2008, and March 2009 for violating Japan’s
Antimonopoly Law.

28

Hitachi, Ltd. | Annual Report 2014

In November 2012, a subsidiary dealing in automotive components

When the Great East Japan Earthquake hit Japan in March 2011,

received administrative orders from the Japan Fair Trade Commission

our BCP helped us to make immediate response and decision . On thefor violating the Antimonopoly Law. In September 2013, the sameother hand, a number of problems became clear, such as tracking

company was prosecuted by the U.S. Department of Justice for violating

secondary suppliers and beyond, using the cloud and redundant

U.S. antitrust laws, resulting in a plea bargain. The company concluded

systems for production information, and securing alternative meansa plea agreement and paid a fine of 195 million U.S. dollars (¥19.0

of transportation and stock of fuel. Based on the lessons that webillion) in November 2013.

learned from the disaster, in October 2011, we issued new Hitachi

As part of measures to prevent recurrence, we are publicizing

Group BCP guidelines for departmental implementation to further

messages from top executives, developing internal regulations,enhance our business continuity planning. By the end of fiscal 2011,

conducting regular audits, and providing education and training to

49 business divisions of Hitachi, Ltd. and 96 Hitachi Group companies

employees based on a compliance manual.

in Japan completed developing and revising BCPs for earthquakes andnew strains of influenza. Overseas, 303 companies took steps on to

Export Control

formulate BCPs, with the objective of completing the BCPs by the end

Hitachi’s basic policy for export control is a provision of the Hitachi

of fiscal 2013. In this way, Hitachi Group is strengthening its ability toStandards of Corporate Conduct,*3 which states that we “shall help

respond to business risks, such as large-scale disasters, new strains ofmaintain international peace and security through compliance with

influenza, political disturbances, rioting, and terrorism.

trade laws and regulations.” We adopted rules for controlling security
intended for export, we screen for destination countries and regions,

Strengthening Safety Measures for Employees
Working in Dangerous Regions

end users, and end uses, and we conduct strict export control in

Following the hostage incident in Algeria*4 in January 2013, theaccordance with laws and regulations. We provide guidance to promote

President instituted a policy in February 2013 for ensuring the safety

the implementation of export controls by Hitachi Group companies inof employees dispatched to regions with high risks of war, conflicts

Japan and overseas in accordance with this policy. We also implement

and terrorism. Under this policy, security assessment is conducted bytraining support and other measures. In fiscal 2013, we held workshops

in-house and outside experts before employees are dispatched to ain the United States and implemented working-level training forhigh-risk region. In addition, after deployment, additional surveys are

Hitachi Group companies in the United States. In addition, we

conducted every half year to confirm effectiveness of safety measures.

continue to implement e-learning related to export controls for all

In fiscal 2013, we made such an assessment in several countries in theemployees. In fiscal 2013, this e-learning was provided for about

Middle East and Africa and secured the safety of employees who

20,000 people at 111 Group companies in Japan and overseas.

work all around the world.

*3 Hitachi Standards of Corporate Conduct: Created by Hitachi, Ltd. to ensure fullawareness of Hitachi’s mission and role and to enable Hitachi to continue to grow asa truly global enterprise.

*4 Algerian hostage crisis: Incident in January 2013 in which an armed terrorist groupattacked a natural gas refining plant in Algeria. There were more than 30 victims,
including 10 Japanese.

exports based on this policy in 1987. For all goods and technologies

BCP Formulation
Being deeply committed to the social infrastructure, we are enhancing
our BCPs to guard against risks that could cause disruption to business
operations that severely impact society. In December 2006, we createdthe Hitachi Group Guidelines for Developing Business Continuity
Plans, and in fiscal 2010 we translated them into English and Chinesefor distribution to all Hitachi Group companies worldwide to prepare
for large-scale disasters and other risks.

29

Board of Directors
As of June 30, 2014














 Sadayuki Sakakibara  Philip Yeo  Hiroaki Nakanishi  Toshiaki Higashihara George Buckley  Nobuo Katsumata  Takashi Miyoshi
Harufumi Mochizuki
Cynthia Carroll
Hiroaki Yoshihara
Takashi Hatchoji
Nobuo Mochida

Outside Directors

Directors

Nobuo Katsumata

Senior Corporate Advisor, Marubeni Corporation

Hiroaki Nakanishi*

Chairman & CEO

Cynthia Carroll

Non-Executive Director, BP plc. (UK)

Takashi Hatchoji

Chairman of the Board, Hitachi America, Ltd.

Sadayuki Sakakibara

Chairman of the Board, Toray Industries, Inc.

Toshiaki Higashihara* President & COO

George Buckley

Chairman, Arle Capital Partners Limited (UK)

Takashi Miyoshi

Harufumi Mochizuki

President and Representative Director, Tokyo Small andMedium Business Investment & Consultation Co., Ltd.

Nobuo Mochida

Philip Yeo

Chairman, SPRING Singapore

Hiroaki Yoshihara

Outside Director, Murata Manufacturing Co., Ltd.

(Notes)Directors are listed by position and in Japanese alphabetical order within each grouping.
* Denotes directors who serve concurrently as executive officers.
Each committee is composed of the following members (Chair underlined):
Nominating Committee:
Nobuo Katsumata, Sadayuki Sakakibara, Harufumi Mochizuki,
Hiroaki Nakanishi
Audit Committee:
Takashi Miyoshi, Nobuo Katsumata, Harufumi Mochizuki,
Hiroaki Yoshihara, Nobuo Mochida
Compensation Committee: Harufumi Mochizuki, Nobuo Katsumata, Sadayuki Sakakibara,
Toshiaki Higashihara

30

Hitachi, Ltd. | Annual Report 2014

Executive Officers
As of June 30, 2014













 Koji Tanaka  Toyoaki Nakamura  Hiroaki Nakanishi  Toshiaki Higashihara  Tatsuro Ishizuka
 Toshiaki Kuzuoka  Shinjiro Iwata
Toshikazu Nishino
Ryuichi Kitayama
Yutaka Saito
Junzo Nakajima
Masahiro Kitano

Chairman & CEO
Hiroaki Nakanishi*

Vice Presidents and Executive Officers
Toshio Ikemura

Infrastructure systems business(urban planning and development systems business)

President & COO

Hiroto Uozumi

Power systems business (nuclear power systems business)

Toshiaki Higashihara* Overall operations

Shinichiro Omori

Supply chain management (procurement)

Executive Vice Presidents and Executive Officers

Kaoru Kawano

Infrastructure systems business (sales operations)

Yoshifumi Kanda

Marketing and sales, and power systems business (sales operations)

Yoshihito Kitamatsu

Finance and corporate pension system

General management

Tatsuro Ishizuka*

Cost structure reform, power systems business andinfrastructure systems businessShinjiro Iwata*

Information technology strategies

Kazuhiro Kurihara

Marketing and sales

Yutaka Saito*

Information & telecommunication systems business

Kenichi Kokubo

Regional strategies (China)

Koji Tanaka*

Strengthening of products

Keiji Kojima

Research & development

Junzo Nakajima

Regional strategies (Asia Pacific)

Kunizo Sakai

Infrastructure systems businessToyoaki Nakamura*

Finance and corporate pension system

Kaichiro Sakuma

Information & telecommunication systems business

Senior Vice Presidents and Executive Officers

Keiichi Shiotsuka

Masahiro Kitano

Information & telecommunication systems business(system solutions and services business)

Healthcare business

Ryuichi Kitayama*

Akira Shimizu

Marketing and sales

Marketing and sales

Toshiaki Kuzuoka*

Yasuo Tanabe

Government & external relations

Corporate communications and CSR, legal matters,
government & external relations, risk management
and corporate auditing

Yoshitaka Tsuda

Information & telecommunication systems business(sales operations)

Toshikazu Nishino

Management strategies

Hidenobu Nakahata

Human capital

Hiroshi Nakayama

Supply chain management (MONOZUKURI and quality assurance)

Katsumi Nagasawa

Power systems business

Masaya Watanabe

Information & telecommunication systems business(global service business promotion)(Notes)Executives are listed by position and in Japanese alphabetical order within each grouping.
* Denotes executive officers who are representative executive officers.

31

Financial Section

Operating and Financial Review

Operating Results
Effective from April 1, 2013, the Company adopted earnings before
interest and taxes (“EBIT”), which is presented as income before
income taxes less interest income plus interest charges, as themeasurement for the consolidated operating results.

Summary
Millions of yen
Years ended March 31:

Total revenues

2014

2013

Percentchange¥9,616,202¥9,041,071

6%

EBIT

580,153

358,015

62%

Income before income taxes

568,182

344,53765%

Net income

364,030

237,72153%

Net income attributable to
Hitachi, Ltd. stockholders

264,975

175,326

51%

Analysis of Statement of Operations
Total revenues increased 6% to ¥9,616.2 billion compared with theyear ended March 31, 2013. This was due primarily to higher revenues
in the Information & Telecommunication Systems segment mainly
resulting from increased revenues from services business, and in theSocial Infrastructure & Industrial Systems segment mainly resulting
from strong performance of elevators and escalators in China. The
increase in total revenues was also attributable to increased revenues
in the Electronic Systems & Equipment, Automotive Systems, DigitalMedia & Consumer Products and Others (Logistics and Other services)segments. However, this increase was partially offset by decreased
revenues in the Power Systems segment owing to the effects of theintegration of the thermal power generation systems business into
MITSUBISHI HITACHI POWER SYSTEMS, LTD., an equity-method affiliate.
Our overseas revenues increased 17% to ¥4,312.7 billion comparedwith the year ended March 31, 2013, due primarily to higher revenues
in Asia, North America and Europe.
Cost of sales increased 5% to ¥7,083.3 billion compared withthe year ended March 31, 2013. The ratio of cost of sales to total
revenues was 74%, a decrease of 1% compared with the year ended
March 31, 2013.
Selling, general and administrative expenses increased 7% to¥2,000.0 billion compared with the year ended March 31, 2013. The
ratio of selling, general and administrative expenses to total revenues
was 21%, which was approximately the same as in the year ended
March 31, 2013.

32

Expenses related to competition law and others were posted in
the amount of ¥76.8 billion in the year ended March 31, 2014.
A breakdown of these expenses is as follows. We posted expenses of¥19.0 billion in the Automotive Systems segment owing to the factthat Hitachi Automotive Systems, Ltd. has agreed with the UnitedStates Department of Justice to conclude a plea agreement regarding
alleged violations of U.S. antitrust laws. In other cases, we posted
expenses in relation to investigation in respect of alleged antitrust
violations in Europe, certain civil disputes, occurring in connection withinvestigations and alleged antitrust violations in the U.S., and settlements of certain consequential losses involving dispute with customers.
Impairment losses for long-lived assets increased ¥10.5 billion to¥33.7 billion, as compared with the year ended March 31, 2013. The
Automotive Systems segment recognized impairment losses of ¥8.9
billion, due primarily to the battery businesses for automobiles projected
lower-than-expected future income because of changes in market
conditions. The Electronic Systems & Equipment segment recognizedimpairment losses of ¥6.4 billion, primarily due to the medical equipment business projected lower-than-expected future income because
of severe market competition. The High Functional Materials &Components segment recognized impairment losses of ¥5.1 billion,
due primarily to the deterioration of the profitability of the high-grade
metal products and materials business because of decreased demand.
The above impairment losses were determined on the basis of fairvalue estimates based primarily on discounted future cash flows.
Restructuring charges decreased ¥2.2 billion to ¥28.2 billion, as
compared with the year ended March 31, 2013. In the year ended
March 31, 2014, special termination benefits were ¥28.1 billion. This
mainly consisted of special termination benefits expensed for rationalizing the workforce in the Information & Telecommunication Systems
segment, for withdrawal from TV parts and other business in the
Digital Media & Consumer Products segment, and for restructuring
wires, cables and other relevant products business, which was undertaken to address the deterioration of the business environment, in theHigh Functional Materials & Components segment.
Interest income increased ¥0.9 billion to ¥14.1 billion, as comparedwith the year ended March 31, 2013.
Dividend income increased ¥1.7 billion to ¥8.1 billion, as comparedwith the year ended March 31, 2013.
Other income increased ¥156.8 billion to ¥183.1 billion, as
compared with the year ended March 31, 2013. This increase wasdue primarily to an increase in the net gain on securities, which
increased ¥155.8 billion to ¥173.1 billion, as compared with the year
ended March 31, 2013. The net gain on securities mainly consisted ofa gain associated with the transfer of the thermal power generation
systems business.

Hitachi, Ltd. | Annual Report 2014

Interest charges decreased ¥0.6 billion to ¥26.1 billion, as comparedwith the year ended March 31, 2013.
Loss on sale of stock of an affiliated company was posted in theamount of ¥5.9 billion in the year ended March 31, 2014.
Other deductions increased ¥5.2 billion to ¥7.7 billion, as comparedwith the year ended March 31, 2013.
Equity in net earning of affiliated companies in the year ended
March 31, 2014 was ¥8.6 billion, as compared with net loss of ¥40.4
billion in the year ended March 31, 2013. This was due primarily tothe fact that Renesas Electronics Corporation, which had reported
losses in the year ended March 31, 2013, ceased to be our equitymethod affiliate.
Income before income taxes increased ¥223.6 billion to ¥568.1 billion,
and EBIT increased ¥222.1 billion to ¥580.1 billion, as compared withthe year ended March 31, 2013.
Income taxes increased ¥97.3 billion to ¥204.1 billion due primarily
to the increase in income before income taxes, as compared with theyear ended March 31, 2013.
Net income increased ¥126.3 billion to ¥364.0 billion, as comparedwith the year ended March 31, 2013.
Net income attributable to noncontrolling interests increased ¥36.6
billion to ¥99.0 billion, as compared with the year ended March 31, 2013.
As a result of the foregoing, net income attributable to Hitachi, Ltd.
stockholders increased ¥89.6 billion to ¥264.9 billion, as comparedwith the year ended March 31, 2013.

Operations by Segment
The following is an overview of results of operations by segment.
Revenues for each segment include intersegment transactions.
Effective April 1, 2013, the Company changed its measurement ofsegment profitability from operating income, which is presented as
total revenues less total cost of sales and selling, general and administrative expenses in order to be consistent with financial reporting
principles and practices generally accepted in Japan, to EBIT. Accordingly,
the amounts previously reported for the year ended March 31, 2013
have been restated in conformity with the new measure of segment
profit or loss.
Effective April 1, 2013, the Company changed the name of“Others” to “Others (Logistics and Other services).”(Information & Telecommunication Systems)
Revenues were ¥1,954.9 billion, an increase of 9% compared withthe year ended March 31, 2013. This increase was due primarily toincreased sales in the services business and of ATMs for the overseas
market, as well as increased revenues from the storage solution business due to the effects of foreign exchange rate fluctuations.
Segment profit decreased 5% to ¥98.5 billion, as compared withthe year ended March 31, 2013. This decrease was due primarily toincreased restructuring charges, partially offset by the increase in profits
from the services business due mainly to higher revenues.

(Power Systems)
Revenues were ¥777.3 billion, a decrease of 14% compared withthe year ended March 31, 2013. This decrease was due primarily tothe effect of the transfer of the thermal power generation systems
business and a significant decline in revenues from preventive maintenance services for nuclear power generation systems.
Segment profit increased 409% to ¥152.9 billion, as comparedwith the year ended March 31, 2013. This increase was due primarily
to posting a gain associated with the transfer of the thermal power
generation systems business, partially offset by the decrease inoperating income owing to lower revenues.
(Social Infrastructure & Industrial Systems)
Revenues were ¥1,446.6 billion, an increase of 10% compared with theyear ended March 31, 2013. The increase was due primarily to higher
sales of elevators and escalators in China and other markets, andhigher revenues from the railway systems business for overseas markets.
Segment profit decreased 7% to ¥59.1 billion, as compared withthe year ended March 31, 2013. This decrease was due primarily tothe decrease in operating income owing to lower earnings from overseas projects in social infrastructure systems business, partially offset
by the higher profits from elevators and escalators and in the railway
systems business resulting from increased revenues.
(Electronic Systems & Equipment)
Revenues were ¥1,116.7 billion, an increase of 10% compared withthe year ended March 31, 2013. This increase was due primarily toincreased sales of semiconductor manufacturing equipments andmedical analysis systems at Hitachi High-Technologies Corporationand increased sales of semiconductor manufacturing equipments at
Hitachi Kokusai Electric Inc., as well as increased revenues at Hitachi
Koki Co., Ltd. and Hitachi Medical Corporation.
Segment profit increased 62% to ¥52.6 billion, as compared withthe year ended March 31, 2013. This increase was due primarily tothe increase in operating income resulting from higher revenues andthe effect of business restructuring.
(Construction Machinery)
Revenues were ¥767.3 billion, an increase of 1% compared with theyear ended March 31, 2013. This increase was due primarily to higher
sales of hydraulic excavators in Japan and China, partially offset bylower sales of mining machinery in North America, Asia and Oceania.
Segment profit increased 9% to ¥63.3 billion, as compared withthe year ended March 31, 2013. This increase was due primarily tothe increase in operating income resulting from the effect of foreignexchange rate fluctuations and progress with cost-cutting programs,
partially offset by the absence of large gains on the sale of subsidiaryshares due to business restructuring that were recorded in the year
ended March 31, 2013.

33

Financial Section(High Functional Materials & Components)
Revenues were ¥1,363.2 billion, an increase of 2% compared withthe year ended March 31, 2013. This increase was due primarily tothe higher sales of automotive- and electronics-related products,
partially offset by lower demand for HDD-related products and theeffect of the withdrawal from unprofitable businesses.
Segment profit increased 90% to ¥96.5 billion, as compared withthe year ended March 31, 2013. This increase was due primarily tothe increase in operating income resulting from higher revenues, theeffect of cost-cutting programs and business restructuring for thewires and cables business, and the absence of write-offs of inventories
associated with a decrease in raw material prices that were recorded
at Hitachi Metals, Ltd. in the year ended March 31, 2013. This
increased segment profit was also attributable to the decrease in
restructuring charges for the wires and cables business, etc.
(Automotive Systems)
Revenues were ¥892.1 billion, an increase of 11% compared with theyear ended March 31, 2013. This increase was due primarily to higher
demand for automobile in overseas markets and the last-minutedemand ahead of the scheduled consumption tax rate increase in Japan.
Segment profit decreased 86% to ¥4.9 billion compared with theyear ended March 31, 2013. This decrease was due primarily to posting
expenses related to competition law and others owing to the fact that
Hitachi Automotive Systems, Ltd. has agreed with the United States
Department of Justice to conclude a plea agreement regarding
alleged violations of U.S. antitrust laws, and posting impairment
losses for the battery businesses for automobiles, partially offset by
the increase in operating income resulting from higher revenues andassociated improvement in capacity utilization.
(Digital Media & Consumer Products)
Revenues were ¥890.8 billion, an increase of 9% compared with theyear ended March 31, 2013. This increase was due primarily to thelast-minute demand ahead of the scheduled consumption tax rateincrease in Japan and higher sales of air-conditioning equipments
both in Japan and overseas.
Segment loss worsened ¥2.0 billion to ¥2.9 billion, as comparedwith the year ended March 31, 2013. This was due primarily to theincrease in restructuring charges, partially offset by increased operating
income resulting from higher revenues.

34(Others (Logistics and Other services))
Revenues were ¥1,233.6 billion, an increase of 11% compared withthe year ended March 31, 2013. This increase was due primarily toincreased revenues at Hitachi Transport System, Ltd. resulting frombusiness expansion through the consolidation of Japanese and overseas
companies, and increased revenues at Hitachi Maxell, Ltd. owing to
the succession of the LCD projectors business.
Segment profit increased 44% to ¥48.1 billion, as compared withthe year ended March 31, 2013. This increase was due primarily tothe increase in operating income resulting from higher revenues andthe effects of promoting cost-cutting programs, as well as decreased
restructuring charges.
(Financial Services)
Revenues were ¥338.5 billion, a decrease of 1% compared with theyear ended March 31, 2013. This decrease was due primarily to theabsence of recording revenues related to a large cancellation in theyear ended March 31, 2013, partially offset by higher revenues fromthe overseas business.
Segment profit increased 18% to ¥34.6 billion, as compared withthe year ended March 31, 2013. This increase was due primarily tothe increase in operating income resulting from higher earnings fromthe overseas business and higher earnings as a result of the decreasein credit costs in Japan, as well as decreased restructuring charges.

Revenues by Geographic Area
Millions of yen
Percentchange

2014

2013

Japan

¥5,303,474¥5,355,119–1%

Outside Japan

4,312,728

3,685,952

17%Years ended March 31:

Asia

2,063,567

1,711,141

21%

North America

910,274804,057

13%

Europe812,120

636,840

28%

Other Areas

526,767

533,914

–1%

Total

¥9,616,202¥9,041,071

6%(Japan)
Revenues in Japan were ¥5,303.4 billion, a decrease of 1% comparedwith the year ended March 31, 2013. This decrease was due primarily
to the significant decrease in revenues in the Power Systems segmentowing to the effects of the transfer of the thermal power generation
systems business, and the decrease in revenues in the High Functional
Materials & Components segment owing to the withdrawal from
unprofitable businesses, partially offset by the increases in revenues in
the Information & Telecommunications Systems, Electronic Systems &Equipment, Construction Machinery and Digital Media & Consumer
Products segments, etc.

Hitachi, Ltd. | Annual Report 2014

(Asia)
Revenues in Asia were ¥2,063.5 billion, an increase of 21% comparedwith the year ended March 31, 2013. This increase was due to theincreases in revenues in all segments, including the Information &Telecommunication Systems segment, which reported higher sales ofATMs in China, the Social Infrastructure & Industrial Systems segment,
which reported higher sales of elevators and escalators mainly resulting
from the effects of foreign exchange rates fluctuations, and the DigitalMedia & Consumer Products segment, which reported higher revenues
resulting from higher sales of air-conditioning equipments and theeffects of the foreign exchange rates fluctuations.
(North America)
Revenues in North America were ¥910.2 billion, an increase of 13%
compared with the year ended March 31, 2013. This increase wasdue primarily to the increase in revenues in the Information &Telecommunication Systems segment, resulting from the effects of theforeign exchange rates fluctuations, the Electronic Systems &Equipment, High Functional Materials & Components, Automotive
Systems and Others (Logistics and Other services) segments, partially
offset by the decrease in revenues in the Construction Machinery
segment owing to the lower sales of mining machinery.
(Europe)
Revenues in Europe were ¥812.1 billion, an increase of 28% comparedwith the year ended March 31, 2013. This increase was due to theincreases in revenues in all segments, including the Information &Telecommunication Systems segment, which reported increased
revenues resulting from the effects of the foreign exchange rates fluctuations, the Social Infrastructure & Industrial Systems segment, which
reported increased revenues from the railway systems business andthe Construction Machinery segment, which reported increased revenues in the U.K.
(Other Areas)
Revenues in other areas were ¥526.7 billion, a decrease of 1% compared with the year ended March 31, 2013. This decrease was due
primarily to the decrease in revenues in the Power Systems segmentowing to the effects of the transfer of the thermal power generation
systems business, and in the Construction Machinery segment owing
to decreased sales of mining machinery in Australia, etc. However, thisdecrease was partially offset by the increased revenues in the Others(Logistics and Other services) segment due to the consolidation of a
Turkish company by Hitachi Transport System, Ltd.

Liquidity and Capital Resources
Our management considers maintaining an appropriate level ofliquidity and securing adequate funds for current and future business
operations to be important financial objectives. Through efficientmanagement of working capital and selective investment in new plants
and equipment, we are working to optimize the efficiency of capitalutilization throughout our business operations. We endeavor to improve
our group cash management by centralizing such management among
us and our overseas financial subsidiaries. Our internal sources offunds include cash flows generated by operating activities and cash on
hand. Our management also considers short-term investments to be
an immediately available source of funds. In addition, we raise funds
both in the capital markets and from Japanese and internationalcommercial banks in response to our capital requirements. Our management’s policy is to finance capital expenditures primarily by internallygenerated funds and to a lesser extent by funds raised through theissuance of debt and equity securities in domestic and foreign capital
markets. In order to flexibly access funding, we maintain our shelfregistration with the maximum outstanding balance of ¥300.0 billion
and issued the straight bonds of ¥60.0 billion on December 13, 2013
for the purpose of repaying short-term debts (commercial paper) andmeeting demand for funds for growth of the Social Innovation Business.
We maintain commitment line agreements with a number ofdomestic banks under which we may borrow in order to ensure efficient
access to necessary funds. These commitment line agreements generally
provide for a one-year term, renewable upon mutual agreement
between us and each of the lending banks, as well as another commitment line agreement with a contract term of three years and twomonths ending in July 2016. These committed credit arrangements
are, in general, subject to financial and other covenants and conditions
both prior to and after drawdown, the most restrictive of which require
maintenance of minimum issuer rating or long-term debt ratings from
Rating and Investment Information, Inc. (R&I) of BBB-. As of March
31, 2014, our unused commitment lines totaled ¥515.1 billion,
including these of ¥400.0 billion which the Company maintained.
We receive debt ratings from Moody’s Japan K.K. (Moody’s),Standard & Poor’s Rating Japan (S&P), as well as R&I. Our debt ratings
as of March 31, 2014 were as follows.

Rating Company

Long-term

Short-term

Moody’s

A3

P-2

S&P

A–

A-2

R&I

A+

a-1

With our current ratings, we believe that our access to the global
capital markets will remain sufficient for our financing needs. We seek
to improve our credit ratings in order to ensure financial flexibility for
liquidity and capital management, and to continue to maintain accessto sufficient funding resources through the capital markets.

35

Financial Section

Cash Flows
Millions of yen
2014

2013

Net cash provided by operating activities¥439,406¥583,508

Net cash used in investing activities(491,363)(553,457)

Net cash provided by (used in)financing activities

32,968(180,445)

Effect of exchange rate changes on cash
and cash equivalents

49,57458,449Net increase (decrease) in cash andcash equivalents

30,585(91,945)

Years ended March 31:

Cash and cash equivalents at beginning of year

527,632

619,577

Cash and cash equivalents at end of year

¥558,217¥527,632(Cash Flows from Operating Activities)
Net income amounted to ¥364.0 billion in the year ended March 31,
2014, an increase of ¥126.3 billion compared to the year ended
March 31, 2013, due primarily to increases in operating income andnet gain on securities. In the year ended March 31, 2014, tradereceivables increased by ¥308.4 billion due primarily to the increase inrevenues, whereas in the year ended March 31, 2013, a decrease intrade receivables of ¥71.7 billion was recorded. Inventories increasedby ¥70.7 billion in the year ended March 31, 2014, whereas adecrease in inventories of ¥7.8 billion was recorded in the year ended
March 31, 2013. Compared with the decrease in payables of ¥187.6
billion in the year ended March 31, 2013, payables increased by¥54.3 billion in the year ended March 31, 2014. As a result of theforegoing, the net cash provided by operating activities was ¥439.4
billion in the year ended March 31, 2014, a decrease of ¥144.1 billion
compared with the year ended March 31, 2013.
(Cash Flows from Investing Activities)
A net sum of ¥561.0 billion in the year ended March 31, 2014 wasrecorded as investments related to property, plant and equipment,
where the collection of investments in leases, the proceeds from disposal of property, plant and equipment and the proceeds from disposal of tangible assets and software to be leased were subtracted
from the amount of the capital expenditures, the purchase of intangible
assets and the purchase of tangible assets and software to be leased,
an increase of ¥72.7 billion from the year ended March 31, 2013. In
addition, purchase of investments in securities and shares of newly
consolidated subsidiaries decreased by ¥84.1 billion and amounted to36¥87.5 billion, due mainly to the absence of stock acquisitions related
to the acquisition of Horizon Nuclear Power Limited in the year ended
March 31, 2013. Proceeds from sale of investments in securities andshares of consolidated subsidiaries resulting in deconsolidation
increased by ¥42.1 billion and amounted to ¥122.8 billion in the year
ended March 31, 2014, due mainly to selling a part of shares ofWestern Digital Corporation. As a result of the foregoing, the net
cash used in investing activities was ¥491.3 billion in the year ended
March 31, 2014, a decrease of ¥62.0 billion compared with the year
ended March 31, 2013.
(Cash Flows from Financing Activities)
Net decrease in short-term debt in the year ended March 31, 2014was ¥203.8 billion, whereas net increase of ¥74.6 billion was recordedin the year ended March 31, 2013. A net sum of ¥338.8 billion wasrecorded as proceeds related to long-term debt, where the payments
on long-term debts were subtracted from the proceeds from long-term
debt, an increase of ¥495.4 billion from the year ended March 31,
2013. As a result of the foregoing, the net cash provided by financing
activities was ¥32.9 billion in the year ended March 31, 2014, whereas
the net cash of ¥180.4 billion was used in financing activities in theyear ended March 31, 2013.
As a result of the above items, as of March 31, 2014, cash andcash equivalents amounted to ¥558.2 billion, net increase of ¥30.5
billion from March 31, 2013. Free cash flows, the sum of cash flows
from operating and investing activities, represented an outflow of¥51.9 billion in the year ended March 31, 2014, whereas an inflow of¥30.0 billion was recorded in the year ended March 31, 2013.

Assets, Liabilities and Equity
As of March 31, 2014, total assets amounted to ¥11,016.8 billion,
an increase of ¥1,207.6 billion from March 31, 2013. This increase wasdue primarily to an increase in accounts receivables mainly resulting
from increased revenues, an increase in the value of foreign currencydenominated assets resulting from the translation due to the depreciation of yen, an increase in the value of marketable securities in linewith higher stock market prices, and the effects of the consolidationof NBL Co., Ltd. at Hitachi Capital Corporation for strengthening thefinancial services business. Total cash and cash equivalents and shortterm investments as of March 31, 2014 amounted to ¥567.3 billion, an
increase of ¥29.3 billion from the amount as of March 31, 2013.
As of March 31, 2014, total interest-bearing debt, which represents
the sum of short-term debt, long-term debt and non-recourse

Hitachi, Ltd. | Annual Report 2014

borrowings of consolidated securitization entities, amounted to¥2,823.0 billion, an increase of ¥452.9 billion from March 31, 2013.
This increase was due primarily to the issuance of straight bonds, theprocurement of new long-term debt by the Company, and the effectsof the consolidation of NBL Co., Ltd. at Hitachi Capital Corporation.
As of March 31, 2014, short-term debt, consisting mainly of borrowings
from banks and commercial paper, amounted to ¥647.2 billion,a decrease of ¥26.5 billion from March 31, 2013, due primarily to therepayment of commercial paper by the Company. As of March 31,
2014, long-term debt (excluding current portion), consisting mainly ofdebentures, debentures with stock acquisition rights, medium-term
notes and loans principally from banks and insurance companies,
amounted to ¥1,512.7 billion, an increase of ¥205.9 billion fromMarch 31, 2013, due primarily to the issuance of straight bonds andthe procurement of new long-term debt by the Company.
As of March 31, 2014, total Hitachi, Ltd. stockholders’ equity
amounted to ¥2,651.2 billion, an increase of ¥568.6 billion fromMarch 31, 2013, due primarily to posting of net income attributable
to Hitachi, Ltd. stockholders and a decrease in the accumulated othercomprehensive loss resulting from the depreciation of yen and higher
stock market prices. As a result, the ratio of total Hitachi, Ltd. stockholders’ equity to total assets as of March 31, 2014 was 24.1%,
compared with 21.2% as of March 31, 2013.
Noncontrolling interests as of March 31, 2014 was ¥1,201.2 billion,
an increase of ¥104.4 billion from March 31, 2013.
The ratio of interest-bearing debt to total equity (the sum of total
Hitachi, Ltd. stockholders’ equity and noncontrolling interests)
decreased to 0.73, compared with 0.75 as of March 31, 2013.

37

Financial Section

Consolidated Balance Sheets
Hitachi, Ltd. and Subsidiaries
March 31, 2014 and 2013

Millions of yen

Assets2014

2013

558,217¥ 527,632

9,172

10,444Current assets:
Cash and cash equivalents
Short-term investments¥

Trade receivables:
Notes

143,675

110,316

2,654,260

2,311,460

2,797,935

2,421,776

Investments in leases

262,953

270,899

Current portion of financial assets transferred to consolidated securitization entities

52,212

23,365

1,407,055

1,437,399

Accounts
Net trade receivables

Inventories
Prepaid expenses and other current assets

616,326

498,623

5,703,870

5,190,138

1,220,800

781,984

492,383

518,313

Buildings

1,900,779

1,942,634

Machinery and equipment

4,901,505

5,207,010

Total current assets
Investments and advances, including affiliated companies
Property, plant and equipment:
Land

Construction in progress

94,972

115,340

7,389,639

7,783,297

5,047,548

5,503,333

2,342,091

2,279,964

Goodwill

339,148

290,387

Other intangible assets

422,333

415,009761,481705,396

185,818

131,379

Less accumulated depreciation
Net property, plant and equipment
Intangible assets:

Total intangible assets
Financial assets transferred to consolidated securitization entities
Other assets
Total assets

38

802,839

720,369¥11,016,899¥9,809,230

Hitachi, Ltd. | Annual Report 2014

Millions of yen

2014

2013

647,269¥ 673,850

Current portion of long-term debt

464,234

260,185

Current portion of non-recourse borrowings of consolidated securitization entities

49,89526,39918,926

15,462

1,331,288

1,219,402

937,401

924,591

Liabilities and Equity
Current liabilities:
Short-term debt¥

Trade payables:
Notes
Accounts
Accrued expenses
Income taxes

72,83956,278Advances received

298,483

359,795

Other current liabilities
Total current liabilities
Long-term debt

470,430

428,179

4,290,765

3,964,141

1,512,720

1,306,747

Non-recourse borrowings of consolidated securitization entities

148,931102,898

Retirement and severance benefits

749,913913,211

Other liabilities

462,106

342,946

7,164,435

6,629,943

458,790458,790

Total liabilities
Commitments and contingencies
Equity:Common stock
4,833,463,387 shares issued as of March 31, 2014 and 2013
Capital surplus

617,468

622,946

Retained earnings

1,587,394

1,370,723(9,265)(368,334)

Accumulated other comprehensive loss
Treasury stock, at cost

(3,146)(1,565)

Total Hitachi, Ltd. stockholders’ equity

2,651,241

2,082,560

Noncontrolling interests

1,201,223

1,096,727

Total equity

3,852,464

3,179,287¥11,016,899¥9,809,230

Total liabilities and equity

39

Financial Section

Consolidated Statements of Operations
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2014, 2013 and 2012

Millions of yen

2014

2013

2012

¥8,330,966
1,285,236
9,616,202¥7,829,413
1,211,658
9,041,071¥8,528,292
1,137,591
9,665,883(6,154,904)(928,459)(7,083,363)(2,000,028)(5,859,912)(884,079)(6,743,991)(1,875,052)(6,447,009)(831,962)(7,278,971)(1,974,632)

Expenses related to competition law and others
Impairment losses for long-lived assets
Restructuring charges
Interest income
Dividend income
Other income
Interest charges
Loss on sale of stock of an affiliated company
Other deductions
Equity in net earning (loss) of affiliated companies
Income before income taxes(76,858)(33,796)(28,284)
14,136
8,154
183,110(26,107)(5,915)(7,755)
8,686
568,182–(23,209)(30,498)
13,2296,415
26,220(26,707)–(2,494)(40,447)
344,537–(31,841)(23,097)
12,653
5,551
228,906(28,141)–(3,010)(15,571)557,730

Income taxes
Net income(204,152)
364,030(106,816)
237,721(144,922)
412,808

99,055¥ 264,975

62,395¥ 175,326

65,629¥ 347,179

Revenues:
Product sales
Financial and other services
Total revenues
Cost of sales:
Product sales
Financial and other services
Total cost of sales
Selling, general and administrative expenses

Less net income attributable to noncontrolling interests
Net income attributable to Hitachi, Ltd. stockholders

Yen

Net income attributable to Hitachi, Ltd. stockholders per share:
Basic
Diluted¥54.8654.85¥37.2836.29¥76.81
71.86

Consolidated Statements of Comprehensive Income
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2014, 2013 and 2012

Millions of yen

Net income
Other comprehensive income (loss) arising during the year
Foreign currency translation adjustments
Pension liability adjustments
Net unrealized holding gain on available-for-sale securities
Cash flow hedges
Total other comprehensive income (loss) arising during the year
Comprehensive income
Less comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Hitachi, Ltd. stockholders
40

2014

2013

2012

¥364,030¥237,721¥412,808

159,638
129,499
127,312(11,301)
405,148
769,178
143,791¥625,387

181,814(12,040)
41,386(28,201)
182,959
420,680
117,490¥303,190

23,462(44,149)
2,962(2,502)(20,227)
392,581
49,446¥343,135

Hitachi, Ltd. | Annual Report 2014

Consolidated Statements of Equity
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2014, 2013 and 2012

Millions of yen

2014

Balance at beginning of year
Change in equity
Conversion of convertible bonds
Equity transactions and other
Net income
Other comprehensive income,net of reclassification adjustments
Dividends to Hitachi, Ltd. stockholders
Dividends to noncontrolling interests
Acquisition of treasury stock
Sales of treasury stock
Total change in equity
Balance at end of year

Commonstock

CapitalsurplusRetainedearnings

Accumulated
othercomprehensive
loss

Treasurystock,
at cost

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity¥458,790¥622,946¥1,370,723¥(368,334)¥(1,565)¥2,082,560¥1,096,727¥3,179,287

–
–
–

–
(5,907)–––
264,975–(1,343)–––––(7,250)264,975–(13,081)
99,055–(20,331)364,030

–
–
–
–
–
–
¥458,790

–
–
–
–
429
(5,478)¥617,468–(48,304)–––
216,671¥1,587,394

360,412––––359,069¥ (9,265)–––(4,431)2,850(1,581)¥(3,146)

360,412(48,304)–(4,431)
3,279
568,681¥2,651,241

44,736–(26,214)––
104,496¥1,201,223

405,148(48,304)(26,214)(4,431)
3,279
673,177¥3,852,464

Millions of yen

2013

Balance at beginning of year
Change in equity
Conversion of convertible bonds
Equity transactions and other
Net income
Other comprehensive income,net of reclassification adjustments
Dividends to Hitachi, Ltd. stockholders
Dividends to noncontrolling interests
Acquisition of treasury stock
Sales of treasury stock
Total change in equity
Balance at end of year

Commonstock

CapitalsurplusRetainedearnings

Accumulated
othercomprehensive
loss

Treasurystock,
at cost

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity¥427,775¥600,243¥1,242,110¥(496,896)¥(1,450)¥1,771,782¥1,002,213¥2,773,995

31,015––31,015(8,307)–––
175,326

–
698
–

–
–
–

62,030(7,609)175,326–
1,186
62,39562,030(6,423)
237,721–––––31,015¥458,790

–
–
–
–
(5)
22,703¥622,946–(46,713)–––
128,613¥1,370,723

127,864––––
128,562¥(368,334)

–
–
–
(162)
47
(115)
¥(1,565)

127,864(46,713)–(162)
42
310,778¥2,082,560

55,095–(24,162)––
94,514¥1,096,727

182,959(46,713)(24,162)(162)
42
405,292¥3,179,287

Millions of yen

2012

Balance at beginning of year
Change in equity
Conversion of convertible bonds
Equity transactions and other
Net income
Other comprehensive loss,
net of reclassification adjustments
Dividends to Hitachi, Ltd. stockholders
Dividends to noncontrolling interests
Acquisition of treasury stock
Sales of treasury stock
Total change in equity
Balance at end of year

Commonstock

CapitalsurplusRetainedearnings

Accumulated
othercomprehensive
loss¥409,129¥603,133¥ 922,036¥(493,062)¥(1,371)¥1,439,865¥1,001,524¥2,441,389

18,646––

18,646(21,527)–––
347,179

–
210
–

–
–
–

37,292(21,317)347,179–(26,464)
65,62937,292(47,781)
412,808–––––
18,646¥427,775

–
–
–
–
(9)
(2,890)¥600,243–(27,105)–––
320,074¥1,242,110(4,044)––––(3,834)¥(496,896)

–
–
–
(126)
47
(79)
¥(1,450)(4,044)(27,105)–(126)38
331,917¥1,771,782(16,183)–(22,293)––689¥1,002,213(20,227)(27,105)(22,293)(126)
38332,606¥2,773,995

Treasurystock,
at cost

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity

41

Financial Section

Consolidated Statements of Cash Flows
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2014, 2013 and 2012

Millions of yen

2014

2013

2012

¥ 364,030¥ 237,721¥ 412,808

Depreciation

329,833

300,664

360,358

Amortization

125,552

117,355

119,308

Impairment losses for long-lived assets

33,79623,20931,841

Deferred income taxes

59,8682,394

21,509Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:

Equity in net (earning) loss of affiliated companies(8,686)40,447

15,571Gain on sale of investments in securities and other(45,412)(24,047)(228,115)

74

4,762

15,096(131,738)––

Impairment of investments in securities
Gain associated with the thermal power generation systems business(Gain) loss on disposal of rental assets and other property

223

3,119

(18,627)(Increase) decrease in receivables(308,492)

71,777(259,211)(Increase) decrease in inventories(70,700)

7,860(162,594)(Increase) decrease in prepaid expenses and other current assets(90,692)(3,442)

987

Increase (decrease) in payables

54,327(187,651)

119,177

Increase (decrease) in accrued expenses and retirement andseverance benefits

51,946

8,177(18,430)

Increase (decrease) in accrued income taxes

33,460(25,697)

7,103

Increase (decrease) in other liabilities

46,125(22,215)(13,812)Net change in lease receivables related to the Company’s
and its subsidiaries’ products

1,021

12,05127,012

Other(5,129)17,024

17,174439,406

583,508

447,155

Capital expenditures(385,000)(381,731)(337,502)

Purchase of intangible assets(118,870)(105,842)(106,042)

Purchase of tangible assets and software to be leased(436,499)(335,640)(269,350)

33,10928,556

47,697

Net cash provided by operating activities
Cash flows from investing activities:

Proceeds from disposal of property, plant and equipment
Proceeds from disposal of tangible assets and software to be leased

31,306

20,944

17,447

Collection of investments in leases

314,921285,407244,446

Purchase of investments in securities and shares of newly
consolidated subsidiaries(87,542)(171,721)(151,413)

Proceeds from sale of investments in securities and shares of
consolidated subsidiaries resulting in deconsolidation

122,801

80,602331,007

Other
Net cash used in investing activities

42

34,411

25,96828,126¥(491,363)¥(553,457)¥(195,584)

Hitachi, Ltd. | Annual Report 2014

Millions of yen

2014

2013

2012

¥(203,885)¥ 74,630¥ 70,105

Cash flows from financing activities:
Increase (decrease) in short-term debt, net
Proceeds from long-term debt

704,457

352,840

388,991

Payments on long-term debt

(365,566)(509,356)(544,841)

5,886

2,523

736

Dividends paid to Hitachi, Ltd. stockholders(48,194)(46,564)(27,018)

Dividends paid to noncontrolling interests(25,535)(25,827)(22,206)

Acquisition of common stock for treasury(4,431)

(162)

(126)

16

25

38

(28,901)(28,191)(39,230)

–

102

6,188

Proceeds from sale of common stock by subsidiaries

Proceeds from sales of treasury stock
Purchase of shares of consolidated subsidiaries from noncontrollinginterest holders
Proceeds from sale of shares of consolidated subsidiaries
to noncontrolling interest holders
Other

(879)

(465)

(475)

Net cash provided by (used in) financing activities

32,968(180,445)(167,838)

Effect of exchange rate changes on cash and cash equivalents

49,57458,449(18,966)

Net increase (decrease) in cash and cash equivalents

30,585(91,945)

64,767

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

527,632

619,577554,810¥ 558,217¥ 527,632¥ 619,577

43

Financial Section

Consolidated Balance Sheetsby Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2014 and 2013
Billions of yen

As of March 31, 2014

As of March 31, 2013

Total*

Manufacturing,Services &OthersFinancial
Services

Total*

558.2¥ 500.7¥ 141.7¥ 527.6

2,797.9

2,007.2642.3

2,421.7

262.9

84.4

203.0

270.8

52.2

52.2

5.1

18.1

23.3

1,405.9

0.0

1,407.0

1,437.4

0.0

1,437.3

597.5

76.0

625.4

499.7

50.7

509.0
5,190.1

Manufacturing,Services &OthersFinancial
Services

Cash and cash equivalents¥ 519.0¥ 156.7

Trade receivables

2,152.4

878.2

70.8

207.5

–

AssetsCurrent assets:

Investments in leases
Current portion of financial assets transferred
to consolidated securitization entities
Inventories
Others¥Total current assets

4,745.9

1,370.8

5,703.8

4,534.7

1,056.0

Investments and advances

1,175.8102.2

1,220.8

720.6

112.3

781.9

Property, plant and equipment

2,100.9242.3

2,342.0

2,074.7

206.3

2,279.9

Financial assets transferred to consolidated
securitization entities

–

185.8

185.8

–

131.3

131.3

1,045.1544.7

1,564.3

994.2

454.8

1,425.7¥9,067.9¥2,446.1¥11,016.8¥8,324.4¥1,960.9¥9,809.2¥ 686.7¥ 598.8¥ 1,111.5¥ 690.9¥ 407.9¥ 934.0

–

49.8

49.8

5.1

21.2

26.3

Trade payables

1,278.3

276.3

1,350.2

1,181.6

256.2

1,234.8

Others1,658.6

154.9

1,779.1

1,659.8

142.1

1,768.8

3,623.7

1,080.0

4,290.7

3,537.6

827.5

3,964.1

731.5

849.4

1,512.7

672.7

692.8

1,306.7

–

148.9

148.9

–

102.8

102.8

Other assets
Total assets

Liabilities and Equity
Current liabilities:
Short-term debt and current portion of
long-term debt
Current portion of non-recourse borrowings ofconsolidated securitization entities

Total current liabilities
Long-term debt
Non-recourse borrowings of consolidated
securitization entities
Other noncurrent liabilities

1,156.7

59.6

1,212.0

1,204.3

56.9

1,256.1

Total liabilities

5,512.0

2,138.1

7,164.4

5,414.7

1,680.2

6,629.9

Total Hitachi, Ltd. stockholders’ equity

2,483.8

178.4

2,651.2

1,932.3

161.1

2,082.5

Noncontrolling interests

1,072.0129.5

1,201.2

977.3

119.6

1,096.7

Total equity

3,555.8307.9

3,852.4

2,909.7280.7

3,179.2

Total liabilities and equity¥9,067.9¥2,446.1¥11,016.8¥8,324.4¥1,960.9¥9,809.2

Interest-bearing debt

¥1,418.2¥1,647.1¥ 2,823.0¥1,368.8¥1,224.9¥2,370.0

D/E ratio (including noncontrolling interests) (times)

0.40

5.35

0.73

0.47

4.36

0.75

Total Hitachi, Ltd. stockholders’ equity ratio (%)

27.4

7.3

24.1

23.2

8.2

21.2

* Total figures exclude inter-segment transactions.

44

Hitachi, Ltd. | Annual Report 2014

Consolidated Statements of Operations
by Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2014 and 2013
Billions of yen

As of March 31, 2014

As of March 31, 2013

Total*

Manufacturing,Services &OthersFinancial
Service

Total*¥338.5¥9,616.2¥8,839.6¥340.2¥9,041.0

500.7

33.1

532.8

393.9

29.2

422.0

549.5

34.6

580.1

332.1

29.4

358.0

Income before income taxes

537.8

33.2

568.1

317.9

28.7

344.5

Net income attributable to Hitachi, Ltd. stockholders

253.5

14.3

264.9

164.9

12.7

175.3

Manufacturing,Services &OthersFinancial
Service¥9,416.4

Operating income
EBIT (earnings before interest and taxes)

Revenues* Total figures exclude inter-segment transactions.

Consolidated Statements of Cash Flowsby Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2014 and 2013
Billions of yen

As of March 31, 2014
Manufacturing,Services &OthersFinancial
Services

Cash flows from operating activities¥ 498.6

Cash flows from investing activities(393.6)

Free cash flows
Cash flows from financing activities

As of March 31, 2013

Total*1

Manufacturing,Services &OthersFinancial
Services

Total*1¥ (25.9)¥ 439.4¥ 503.4¥105.2¥ 583.5(124.1)(491.3)(478.4)(63.0)(553.4)104.9(150.0)(51.9)

25.0

42.1

30.0

(134.6)

163.7

32.9

(170.1)(44.4)(180.4)

Effect of exchange rate changes on cash andcash equivalents

48.0

1.3

49.5

56.7

1.8

58.4

Net increase (decrease) in cash and cash equivalents

18.3

15.1

30.5

(88.3)(0.3)(91.9)¥ 500.7¥141.7¥ 527.6¥ 589.0¥142.0¥ 619.5

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

519.0

156.7

558.2

500.7

141.7

527.6

Core free cash flows*2

22.4(202.5)(186.0)

19.4

46.9

45.7

*1 Total figures exclude inter-segment transactions.
*2 Operating cash flows plus collection of investments in leases less cash outflows for the purchase of property, plant and equipment, intangible assets, software, and the assets to be leased.

Note: Consolidated Financial Statements by Manufacturing, Services & Others and Financial Services represent unaudited financial information
prepared by the Company for the purpose of this supplementary information.

Role of the Financial Services Segment
Hitachi’s Manufacturing, Services & Others segments and its Financial Services segment are each clearly positioned and managed as distinct businesses with different characteristics. The Manufacturing, Services & Others segments work in coordination with the Financial Services segment toexpand the Social Innovation Business.
Increasing the financing receivables owned by Hitachi Capital Corporation, which constitutes the Financial Services segment, is the basis for
growth in the financing business and regarded as investment to generate higher returns on equity. Credit rating agencies typically permit a higher
level of interest-bearing debt and D/E ratio for financial services companies than for manufacturing and services companies. The credit ratings ofHitachi, Ltd. are assigned by credit rating agencies on the basis of key financial indicators that exclude Hitachi’s financial services business.

45

Corporate Data
As of March 31, 2014

Corporate Name
Hitachi, Ltd. (Kabushiki Kaisha Hitachi Seisakusho)
URL
http://www.hitachi.com/
Principal Office
6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo, 100-8280, JapanFounded1910 (Incorporated in 1920)
Number of Employees
320,725
Number of Shares Issued
Common Stock: 4,833,463,387 shares
Number of Shareholders
372,894
Administrator of Shareholders’ Register
Tokyo Securities Transfer Agent Co., Ltd.
Nippon Building 4th Floor, 6-2, Otemachi 2-chome,
Chiyoda-ku, Tokyo, 100-0004, Japan
Stock Exchange Listings
Tokyo, Nagoya
Accounting Auditor
Ernst & Young ShinNihon LLC
Investor Relations Contacts
JAPAN
Hitachi, Ltd.
6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo, 100-8280
TEL: +81-3-3258-1111
E-mail: IR@hdq.hitachi.co.jp
U.S.A.
Hitachi America, Ltd.
50 Prospect Avenue,
Tarrytown, NY 10591
TEL: +1-914-333-2987
E-mail: investor.info@hal.hitachi.com
U.K.
Hitachi Europe Ltd.
Whitebrook Park, Lower Cookham Road,
Maidenhead Berkshire SL6 8YA
TEL: +44-1628-585714

46

Hitachi Annual Report 2014

Annual Repor t 2014
Year ended March 31, 2014

Printed in Japan