hitachi koki co., ltd

Annual Repor t 2001Year ended March 31, 2001

Hitachi Koki Co., Ltd.

H2 Hitachi Koki Co., Ltd. Annual Report 2001

P ro f i l e

C o n t e n t s

Hitachi Koki Co., Ltd. manufactures and sells world-class pro d-

ucts in three distinct markets: power tools, printing systems and

scientific instruments. As a result of continuous R&D and human

re s o u rce development, we have developed core technology leader-

ship in ultra-high-speed motors, ultra-high-precision machining

and electronic control technology. Above all, Hitachi Koki seeks to

i n c rease the competitiveness of its present business fields and

p robe into new, but related fields to ensure sales leadership that

is so necessary for survival in the fast-changing environment of

global competition.

Financial Highlights ................................................ 1

To Our Shareholders and Customers ........................ 2

Power Tools ............................................................. 4

Printing Systems...................................................... 6

Scientific Instruments .............................................. 8

Research and Development ...................................... 9

Quality Assurance/Environmental Conscious ............10

Financial Section......................................................11

Board of Directors and Auditors/Corporate Data ......27

Consolidated Subsidiaries ........................................28

F inanc ia l Hi gh l ightsHitachi Koki Co., Ltd. and Consolidated Subsidiaries Years ended March 31

Thousands ofMillions of yen U.S. dollars (Note)

2001 2000 1999 2001

For the yearNet sales............................................................................................................ ¥130,682 ¥128,234 ¥144,206 $1,208,045Operating income (loss) .................................................................................... 2,214 (656) 1,562 17,878Net income (loss) .............................................................................................. 3,018 (11,964) (1,824) 24,358

At year-endTotal assets........................................................................................................ 150,061 157,878 166,656 1,211,146Shareholders’ equity .......................................................................................... 91,419 97,674 105,651 737,853

Yen U.S. dollars (Note)

2001 2000 1999 2001

Per share dataNet income (loss) .............................................................................................. ¥ 24.53 ¥ (97.22) ¥ (14.82) $ 0.20Cash dividends ................................................................................................. 8.0 6.0 10.0 0.06Shareholders’ equity .......................................................................................... 742.84 793.64 858.46 6.00

Note: U.S. dollar amounts have been converted from yen, for convenience only, at the rate of ¥123.90=U.S.$1, the Tokyo foreign exchange market rate at March 31,

2001.

1

2 Hitachi Koki Co., Ltd. Annual Report 2001

To Our Shar eho lders and Customers

In the world economy during fiscal 2001,

ended March 31, 2001, the Japanese

economy began losing steam after show-

ing signs of recovery in the first half of the

year, and the overall state of the domestic

economy remained sluggish. Overseas,

the U.S. and other principal economies

achieved generally favorable growth dur-

ing the first half of the fiscal year.

However, the U.S. economy decelerated

rapidly in the latter half, and the adverse

effects of this downturn spilled over to

European and Asian countries.

To sustain growth amid mounting

global competition, Hitachi Koki focused

on enhancing its consolidated operations

and attaining a quick improvement in

business results by taking decisive mea-

sures to reform its business structure and

operations, raise efficiency, and reduce

costs. Specific steps taken included intro-

ducing a business group system under

which each business division operates vir-

tually as an independent company as well

as adopting an executive officer system.

These measures were implemented to bet-

ter clarify responsibilities in each business

group. Also, Hitachi Koki reduced the

number of its directors, reorganized the

Directors’ Committee, and reviewed its

decision-making standards as part of

efforts to establish a structure that facili-

tates rapid decision making. To bolster

our competitiveness in power tools, we

spun off our power tools manufacturing

operations as a separate company special-

izing in power tool production and trans-

ferred various other functions to

subsidiaries, which included establishing

a power tools subsidiary in the Tokyo-

Yokohama area. Moreover, we transferred

the Information Systems Department to

another subsidiary as we placed greater

emphasis on the specialization of func-

tions to raise efficiency, reduce costs over

the long term, and expand sales routes for

third parties outside of the Hitachi Koki

Group.

Against this background, the Hitachi

Koki Group recorded consolidated net

sales of ¥130.7 billion in fiscal 2001.

With regard to profits, successful mea-

sures to reform its business and manage-

ment structures enabled the Company to

record operating income of ¥2.2 billion

and net income of ¥3.0 billion. By posting

a profit in fiscal 2001, Hitachi Koki was

able to break its string of two consecutive

years of net losses. Despite its return to

profitability in the fiscal year under

review, Hitachi Koki has yet to attain a

full-scale recovery. Thus, to further

enhance our performance, we will strenu-

ously implement policies aimed at speed-

ing new product development,

strengthening our marketing capabilities,

and consolidating our production bases.

Power Tools Group

In the Power Tools Group, we worked to

expand sales by strengthening our mar-

keting capabilities and introducing new

products. Despite these measures, sales

remained virtually level with those of the

previous fiscal year, reflecting such factors

as the adverse effects of the rapidly decel-

erating U.S. economy during the second

half of the fiscal year. Nevertheless, the

Yasutsugu Takeda, PhDPresident and Director

3

Power Tools Group recorded a profit

thanks to the implementation of measures

to rationalize its operations, reduce prod-

uct costs, and lower expenses. Total sales

of the Power Tools Group amounted to

¥76.5 billion.

Printing Systems Group

Sales in the Printing Systems Group rose

in the first half of the fiscal year but

dipped slightly in the second half, mainly

reflecting cooling demand in the market

for high-speed printers. However, the

rapid market introduction of the already

developed DDP series of printers compen-

sated for the overall decline in sales.

During the fiscal year, we implemented a

plan to rebuild the operations at Hitachi

Koki Imaging Solutions, Inc. (HIKIS), a

subsidiary that has suffered poor results.

These rebuilding measures included

introducing a new management team,

making large staff reductions, consolidat-

ing and eliminating marketing bases, and

expanding sales of Hitachi Koki’s prod-

ucts. Total sales in the Printing Systems

Group amounted to ¥50.6 billion.

Scientific Instruments Group

In the Scientific Instruments Group, high-

er sales of ultracentrifuges and micro

ultracentrifuges as well as high-speed

refrigerated centrifuges were buoyed by

vigorous activities in the bio-processing

field in Japan and efforts to strengthen

our product lineup through the introduc-

tion of new products. Overseas, we also

achieved higher sales of various ultracen-

trifuges and large-scale continuous flow

ultracentrifuges by strengthening our

alliance with Kendro Laboratory

Products, of the United States. By geo-

graphic region, this group posted firm

sales in Asia, the United States, and

Europe. Total sales in the Scientific

Instruments Group amounted to ¥3.6 bil-

l i o n .

Medium-Term Management Strategy

The Hitachi Koki Group formulated its

Medium-Term Management Plan and has

been focusing on attaining the objectives

of this plan, which is guiding the Group’s

operations from fiscal 2001 through fiscal

2003. However, faster-than-anticipated

changes in the economic and business

environments have prompted Hitachi

Koki to reevaluate this management plan

to more effectively respond to this evolv-

ing environment. As such, we recently

revised our Medium-Term Management

Plan, which includes making downward

revisions in our target for net sales to

¥150.0 billion and for recurring income

to ¥7.2 billion, for fiscal 2003.

Amid the increasingly severe business

environment, we are taking steps to attain

newly established targets under this plan

and are pressing ahead with the imple-

mentation of aggressive management

strategies, which are outlined as follows.

First, we are placing top priority on

strengthening our consolidated operations

globally. As a specific measure, in our

Power Tools Group, we are considering

consolidating or eliminating overseas

bases and undertaking sweeping reforms

at unprofitable bases. In the Printing

Systems Group, we have begun rebuild-

ing the operations of HIKIS, a subsidiary

operating in the red, while working

toward the rapid development of new

products with superior competitiveness in

global markets.

Next, we are striving to attain highly

efficient operations. Through the

Companywide introduction of total sup-

ply chain management (TSCM) and Six

Sigma activities, we are achieving highly

efficient and streamlined management.

Concurrently, we will improve consoli-

dated cash flow by trimming our invento-

ries and promoting the conversion of

accounts receivables into cash.

Other objectives of our management

plan include reducing costs, reviewing

unprofitable products, and mutually

augmenting product lines by vigorously

promoting alliances, and strengthening

our cost-competitiveness. At the same

time, we will vigorously use analysis lead

design (ALD) to reduce product develop-

ment times, and focus on the develop-

ment of strategic products via close

tie-ups with the research sectors of

Hitachi, Ltd., as we work to strengthen

our new product development capabili-

ties.

Targets Serving

as Management Indicators

Through the implementation of the

various measures of the Medium-Term

Management Plan, we are aiming to

expand sales and reduce costs, which will

enable us to improve the profitability of

our consolidated operations. For the year

ending March 31, 2003, we are working

to achieve a recurring income to net sales

ratio of 5%. As other targets, we are striv-

ing to attain an ROE of 5% in the imme-

diate future and intend to raise this to

above 8% over the long term. Also, we are

aiming for an ROA of 4% in the near term

and an ROA of above 6% in the long

term.

We are determined to develop Hitachi

Koki into an excellent enterprise that will

greatly contribute to the interests of our

shareholders and customers throughout

the world.

July 2001

Yasutsugu Takeda, PhD

President and Director


Hitachi Koki has established sales and

service bases for its power tools in regions

throughout the world. In addition, the

Company operates three production plants

in Japan and six overseas. These facilities

produce over 1,000 types of high-quality

power tools, including numerous power

tools for specialized tasks, that are indis-

pensable for allowing professionals to

perform their jobs at the highest levels.

By offering such an abundant selection of

power tools, Hitachi Koki is able to respond

closely to the diverse needs of professional

and DIY users in markets worldwide. To

continue creating power tools for special-

ized tasks, the Design and Development

divisions are using analysis lead design

(ALD), while drawing on an abundance

of accumulated knowledge and unsur-

passed technological capabilities as they

pursue the development of even higher-

value-added power tools that integrate

new leading-edge technologies and

feature outstanding design.

A Review of Fiscal 2001

In fiscal 2001, the Power Tools Group

recorded sales of ¥76.5 billion, approxi-

mately the same level as in the previous

fiscal year. Nevertheless, the Power Tools

Group posted operating income of ¥2.5

billion, thanks to the implementation of

measures-including reforms of its business

structure and extensive measures to

enhance efficiency-for reducing overall

costs throughout its global operations.

Looking at principal factors underlying

sales performance, we recorded robust

overseas sales in the United States and

other overseas markets during the first

half of the fiscal year under review. In the

second half, despite the slowdown of the

U.S. economy, the effects of this down-

turn on overseas sales were relatively mild.

In addition, we posted brisk growth in

sales in Japan. At the management level,

we reduced costs in our global operations

by speeding up our operations and achieving

top-down policy decision making through

the introduction of a business group system.

Specific measures for reducing costs

included establishing an independent

profit system at Hitachi Koki Sawa Co.,

Ltd., one of our principal power tool

production facilities, and improving the

efficiency of that company’s operations.

Also, to improve the profitability of sales

in the Tokyo and Yokohama metropolitan

areas, we established Hitachi Koki Sales

Co., Ltd., as we shifted away from

commissioned product sales by other

companies to a direct sales structure. I n

a d d i t i o n , we established the Home Center

Sales Promotion Department to integrate

all home center sales functions.

Future Issues

Having recently returned to profitability,

the Power Tools Group is now making its

utmost efforts to attain its G13 target of

securing a 13% share of the global market.

Our efforts to attain this objective will be

focused largely on our overseas operations.

Over the next two years, we aim to double

production at our two manufacturing

facilities in China while using these plants

as a base for manufacturing cost-compet-

itive power tools and cordless tools for

professional and DIY users in markets

worldwide, and thereby expanding our

sales. We intend to shift the manufacture

of mature product lines overseas, carry

out production in optimal locations,

reduce inventories by progressing with

TSCM, and cut costs from the development

p h a s e , as we focus on strengthening our

price competitiveness. Backed by the

strength of our abundant product lineup,

we also plan to commence efforts to bol-

ster sales to home centers. Along with

POWER TOOLSOur Bus inesses

Slide Compound Saw C8FSH

these efforts, the previously mentioned

Home Center Sales Promotion

Department is introducing new products.

These efforts are already steadily yielding

important results.

Under our G13 target, we aim to raise

our share of overseas markets to 10% and

attain a 13% share of the global market

when including our share of the domestic

market. We are working to increase mar-

ket share by expanding our line of basic

products, which includes introducing

such new product as pneumatic nailers

and cordless tools in the United States

and hammers and hammer drills in the

European market.

Noteworthy Product Introductions

12V Cordless Impact Driver “Super

Impact Driver WH12DM”

We rapidly completed the development

of this impact driver by using computer

analysis that utilizes ALD, including 3-D

CAD, CAM, and CAE. This model offers

the industry’s highest-speed turning and

maximum torque. In developing this

product, we also emphasized design,

which has earned favorable acclaim by

customers. Following its debut in March

2001, this impact driver has become a hit

product, as determined by indicators

used within the industry. This product

is also being sold as part of a set that

includes a specialized A/C charger.

Slide Compound Saw C8FSH

The first product of its type, this slide

compound saw significantly enhanced

ease of handling by using a laser beam

that gives exact cutting lines. This com-

pound saw enables accurate and easy

operation when cutting by incorporating

a light to provide a clear work area and,

as mentioned, a laser beam to align cutting

lines. This slide compound saw has also

become one of our hit products.

Super Impact Driver WH12DM

5


Printing Systems

Hitachi Koki boasts the world’s highest

levels of technologies as a printing solutions

company and commands the top shares

of the domestic market for high-speed

laser printers and dot line printers. The

Company has over 20 years’ experience

in the field of laser printers, which are

the most commonly used type of printer

in the world today. Our laser printers

have earned extensive acclaim within the

industry and have garnered a growing list

of accolades that include some awards from

a former Science & Technology Agency

(currently, the Ministry of Education,

Culture, Sports, Science & Technology),

The Japan Electrical Manufacturers’

Engineers, and etc. Hitachi Koki’s dot

line printers also play an important role

in areas close to people’s daily lives. For

example, Hitachi Koki’s dot line printers

are widely used for printing on noncarbon-

type receipts used in the dispatch and

receipt of home delivery services.

Fiscal 2001 in Review

Domestic sales of high-speed and medium-

speed continuous-form laser printers

declined from the previous fiscal year,

owing to such factors as a decrease in new

orders resulting from the consolidation of

domestic financial institutions. Exports of

these printers were also lower, reflecting

the effects of the slowdown of the U.S.

economy in the second half of the fiscal

year. Intense competition in the market

for midrange printers mirrored a shift

in customer needs toward printers c o m-

patible with any operating system—which

e n h a n c e s ease of operation by all u s e r s —

along with the advance of networks. T h i s

d e v e l o p m e n t has paved the way for entry

into this sector by numerous competing

companies from other industries.

Amid this market environment, we

introduced our DDP70 high-speed cut-

sheet laser printers, the first line of print-

ers in our DDP series. Sales of the newly

launched the DDP70 series compensated

for an overall decline in sales of other

printer models.

However, the Printing Systems Group

was unable to attain an operating profit

during the fiscal year. Slower-than-

anticipated progress in reducing operating

l o s s e s at HIKIS, an overseas affiliated com-

pany, was a principal reason why the Printing

Systems Group was unable to achieve an

o p e r a t i n g profit. In January 2001, we

introduced a new management staff at

HIKIS and are implementing a plan to

rebuild that company’s operations by

making large reductions in staff, eliminating

and consolidating marketing bases and

expanding product sales. We expect that

these measures will enable the Printing

Systems Group to record an operating

profit in the current fiscal year.

As a result of the previous factors, sales

in the Printing Systems Group amounted

to ¥50.6 billion.

Principal Issues in the Printing

Systems Group

The Printing Systems Group is focusing

mainly on three tasks—developing vari-

ous types of new products, improving the

efficiency of its operations and restruc-

turing the operations of HIKIS.

Regarding new product development,

we are proceeding with the development

of next-generation, continuous-form laser-

beam printers. Specifically, this group is

developing even higher-speed, higher-image

quality printers that integrate the world’s

fastest printing speed technologies. These

printers have output quality that reaches

600dpi at speeds as high as 324 pages

per minute. Following the launch of the

DDP70 series of high-speed cut-sheet

laser printers in fiscal 2001, this group

7

plans to strengthen sales of its print-on-

demand products by launching the DDP92

series, which achieves even higher speeds.

As a new business, the Printing Systems

Group has designated the development

of high-speed, high-end color printers as

one of its strategic projects and is working

ambitiously to develop such products.

This group is forging stronger ties with

Hitachi for the development of such prod-

u c t s as controllers and systems and will

proceed with the independent marketing

of print-on-demand products.

To raise the efficiency of its operations,

Hitachi Koki first intends to progress with

extensive cost reduction measures at the

parent company by cutting expenses,

lowering its cost ratio, and shrinking

inventories through the introduction of

TSCM.

Hitachi Koki has been rebuilding the

management of HIKIS. However, along

with a delay in the initial restructuring

plan, we reworked this plan amid an

extremely volatile business environment.

We are now vigorously implementing

this plan, which contains such measures

as making large reductions in staff, con-

solidating or eliminating marketing bases,

and expanding product sales.

Successfully rebuilding the operations of

HIKIS will be the key to achieving an oper-

a t i n g profit in the Printing Systems Group.


DDP70 Series Cut-Sheet Laser Printers

This new-generation printer enables easy

print-on-demand. By using this printer,

data from PCs can be rapidly printed out

and stapled or bound together as a book.

This printer can easily meet the most

arduous demands, for example, of making

300 copies of a 200-page manual for use

the following day. The DDP70 series has

already been earning high acclaim in

Europe and North America.

DDP70 Series Cut-Sheet Laser Printers

Hitachi Koki’s centrifugal separation sys-

tems are used primarily in biotechnology-

related markets by universities in the

fields of medicine, biology, agricultural

science, and pharmacology. These systems

are also being used by research laboratories

and pharmaceutical companies for the

separation, condensing, and refining of

biological testing materials. More recently,

the capabilities of these centrifugal sepa-

ration systems are being utilized especially

in such areas as research and analysis of

genome functions and protein structures

as well for the research and production of

vaccines.

The Scientific Instruments Group develops

a diverse array of centrifuges ranging from

ultracentrifuges, which have ultrahigh-

speed rotation capabilities, to various types

of centrifuges with low rotation speeds.


In fiscal 2001, the Scientific Instruments

Group recorded sales of ¥3.6 billion. Net

income amounted to ¥150 million, marking

the first time in six years this group has

recorded a profit.

Looking at performance by type of

product, we posted higher growth in

sales of our mainstay ultracentrifuges and

high-speed refrigerated centrifuges in the

United States, Europe, and China, thanks

to the well-acclaimed performance capa-

bilities and high quality of these cen-

Scientific Instruments

trifuges. Robust sales of ultracentrifuges

for vaccine production were under-

pinned by investments to upgrade facili-

ties at pharmaceutical companies. Also

contributing to sales in this group was

the favorable performance of our MG768

automated centrifuge system for prepara-

tion processing in genome analysis for

new drugs. By geographic region, brisk

OEM sales of ultracentrifuges in the

United States and Europe also helped lift

overall sales of this group.

Principal Issues in the Scientific

Instruments Group

Hitachi Koki believes that accelerating

the speed of its product development

capabilities is essential for responding

promptly to today’s rapidly changing

market needs. As one particularly notable

trend, centrifugal separation systems are

being used in rapidly evolving biotech-

nology markets. In response, Hitachi

Koki is placing high priority on making

continual efforts to promptly ascertain

customer needs and to accelerate the

development of products that match user

needs amid an increasingly competitive

environment. In ultracentrifuges, our sole

competitor at present is a company in

North America. However, this North

American company commands close to

an 80% share of the world market. We

intend to solidify our sales partnership in

North America with Kendro and aim to

expand our share of the market to 50%

by 2004.


Microplate Robot AP Series

This Microplate AP series is the successor

to our MG768. More compact than the

MG768, which was used only for prepa-

ration processing in g e n o m e analysis, the

Microplate AP series integrates a cooler

that provides it with incubator functions

not available with the MG768, thereby

extending its range of applied fields to

the creation of genome drugs. Also,

through close cooperation with the

Research and Development Laboratory,

we are significantly enhancing the ease

of use. Our sales activities are targeted

at research centers engaged in genome-

related research and companies involved

in the research on drug discovery.

Microplate Robot, AP Series


9

R e s e a rch and Deve lopment

Hitachi Koki carries out its R&D activi-

ties based on the motto “Striving for the

timely development of products that sat-

isfy and meet the needs of customers.”

While respecting the creativity of individ-

ual researchers, we work toward the

development of leading-edge technolo-

gies not only to expand market share for

products but also to ensure that the tech-

nologies that support these products

remain firmly positioned at the forefront

of each respective industry.

The Research and Development

Laboratory is divided into the Research

Dept. I, which covers electric power tools

and scientific instruments; the Research

Dept. II, which carries out research in

laser-beam printers; the Research Dept.

III, which handles ink-jet printers; and

the Design Center, which is responsible

for product design. Each of these three

departments and the Design Center

maintain close ties with the research

sectors of Hitachi, Ltd.


Based on the results of consultations in

1999 with a U.S. technology consulting

company, Hitachi Koki introduced

analysis lead design (ALD), which yield-

ed a 30% reduction in lead time and sig-

nificantly reduced development costs.

The lowering of production costs has

helped raise profitability in each business

group and enabled the entire Hitachi

Koki Group to operate in the black.

Principal Issues in R&D

Hitachi Koki is dealing with three princi-

pal issues in R&D. The first is to develop

new types of products and devise a devel-

o p m e n t strategy in electric power tools—

which over the past several years has

been described as a mature business—

and printers, a field expected to grow in

the future. In the previous fiscal year, we

launched several new strategic products

in the Power Tools Group, including

Super Impact 12, while in the Printing

Systems Group, we introduced the DDP70

series. From the current fiscal year, we

intend to produce an even larger number

of products using ALD.

The second principal issue is to further

raise the levels of our technologies as well

as strengthen and enhance our basic

technologies to enable high-speed rotation.

These technologies have such leading-

edge applications as biotechnology fields

related to the production of vaccines as

well as genome analysis using centrifuges

that integrate high-speed rotation tech-

nologies.

The third issue is obtaining and mak-

ing strategic use of intellectual property

rights. We are currently accelerating

efforts to secure new patents, mainly in

our power tools and printers businesses.

Hitachi Koki believes that achieving a

profit in the balance of revenues and

expenditures for the usage of technolo-

gies based on intellectual rights will con-

tribute to a reduction in its costs.

Design

Besides its superior technologies, Hitachi

Koki boasts outstanding strengths in

design. As eloquent testimony to our

strong capabilities, in fiscal 2000, five of

our products earned the Good Design

Award by the Japan Industrial Design

Promotion Organization ( JIDPO).

More-detailed information is provided

by accessing the following web sites.

Good Design Award: http://www.g-mark.org

JIDPO: http://www.jidpo.or.jp/

Hitachi Koki’s policy of long-term commitment to R&D has been the driving force underpinning the Company’s continued growth. In R&D,Hitachi Koki works continually to advance its core technologies as itstrives to maintain world leadership in each of its business gro u p s ,including power tools, printers, and scientific instruments.


Qua l ity Assurance/Env ir onmenta l Consc ious

Placing Top Priority on Quality

As part of our ongoing efforts to ensure

the highest levels of quality, we have secured

certification under the ISO 9000 series—

the international quality assurance standard—

in each of our business groups. Hitachi

Koki has also obtained this certification

at several domestic plants and s u b s i d i a r i e s

as well as at overseas subsidiaries in Asia,

North America and Europe.

Power Tool Test Center

Completed within our Katsuta Plant in 1998,

our state-of-the-art Power Tool Test Center

integrates all testing facilities previously

situated at various locations within the

plant. With 4,080 square meters of floor

space, this three-story facility includes a

presentation center for demonstrating our

quality-assurance activities to customers,

soundproof and vibration-resistance

evaluation testing rooms as well as envi-

ronment-friendly air-conditioning and

other systems that conserve energy.

Effective Use of 3-D CAD/CAM/CAE

Hitachi Koki is steadily expanding its use

of 3-D CAD/CAM/CAE as part of concur-

rent engineering based on 3-D systems.

The introduction of 3-D CAD/CAM/CAE

has been instrumental in allowing signifi-

cant reductions in development lead

times and in raising product quality. The

use of 3-D images makes it easier to point

out problem areas to the design group

even before the production of the first

prototype.

Quality re p resents the foundation of Hitachi Koki’s business. HitachiKoki makes ongoing efforts to raise levels of quality to ensure that itsp roducts and brand name maintain a reputation for trust and re l i a b i l i t yamong customers. We implement various Companywide drives to re d u c ep roduct defects, which has led to increased customer satisfaction.

Committed to Environmental Protection

Hitachi Koki places top priority on protecting

the earth’s environment. Our determination

to promote environmental protection

includes working to prevent global warming

by reducing electricity usage, protecting the

ozone layer by eliminating the use of ozone-

depleting substances for cleaning, reducing

waste volume through recycling and devel-

oping products that minimize the load on

the environment. As part of its commitment

to protecting the environment, Hitachi Koki

is also obtaining ISO 14000 certification for

its domestic and overseas plants.

History of Certification under ISO 14001 C o m p a n y Date obtained

Domestic Plant, SubsidiariesKatsuta Plant September 1996Hitachi Koki Sawa Co., Ltd. September 1996Kasama Plant September 1996Hitachi Koki Yamagata Co., Ltd. January 1998Hitachi Koki Haramachi Co., Ltd. January 2000Overseas HKA (Hong Kong) November 1997HKE & HIKIS Dublin (Ireland) January 1998HKS (Singapore) December 1998

History of Certification under ISO 9001/9002

C o m p a n y Certification Date obtained

Domestic Plant, SubsidiariesKatsuta Plant

Printing Systems Group ISO 9001 January 1994Power Tools Group ISO 9001 August 2000Scientific Instruments Group ISO 9001 October 1995

Hitachi Koki Haramachi Co., Ltd. ISO 9002 August 1996Hitachi Koki Yamagata Co., Ltd. ISO 9002 January 1995Overseas SubsidiariesHKS (Singapore) ISO 9002 September 1995HKM (Malaysia) ISO 9002 December 1997HKF (Fujian, China) ISO 9001 March 1997HKG (Guangdong, China) ISO 9002 January 1999HKA (Hong Kong) ISO 9002 February 1996HKE (Ireland) ISO 9002 April 1995HIKIS (USA) ISO 9001 January 2000

Quality Assurance

Environment Consciousness

Contents

Five-Year Summary..................................................... 11

Consolidated Balance Sheets ..................................... 12

Consolidated Statements of Operations ...................... 14

Consolidated Statements of Shareholders’ Equity........ 15

Consolidated Statement of Cash Flows ....................... 16

Notes to Consolidated Financial Statements .............. 17

Report of Independent Public Accountants.................. 26

F inanc ial Section

11

Thousands ofMillions of yen U.S. dollars (Note 1)

ASSETS 2001 2000 2001

Current assets:

Cash and time deposits (Note 2) ................................................................................................. ¥ 16,727 ¥ 11,214 $ 135,004

Marketable securities (Notes 2 and 3) ......................................................................................... 12,221 20,200 98,636

Trade receivables (Notes 7 and 15):

—Notes .................................................................................................................................. 5,105 4,616 41,203

—Accounts............................................................................................................................. 29,162 26,731 235,367

—Allowance for doubtful accounts......................................................................................... (1,470) (1,062) (11,864)

Net trade receivables ................................................................................................................... 32,797 30,285 264,706

Deferred income taxes (Note 8) .................................................................................................. 3,808 2,514 30,734

Inventories (Notes 4 and 7) ........................................................................................................ 29,160 28,278 235,351

Other current assets ................................................................................................................... 1,843 1,782 14,785

Total current assets ............................................................................................................. 96,556 94,273 779,306

Property, plant and equipment:

Land ........................................................................................................................................... 4,197 4,901 33,874

Buildings and structures (Note 7) ............................................................................................... 30,921 31,444 249,564

Machinery and equipment .......................................................................................................... 83,826 85,990 676,562

Construction in progress............................................................................................................. 553 754 4,463

....................................................................................................................................................... 119,497 123,089 964,463

Less accumulated depreciation.................................................................................................... (83,255) (84,000) (671,953)

Net property, plant and equipment..................................................................................... 36,242 39,089 292,510

Investments and other assets:

Investment securities (Note 3) .................................................................................................... 4,576 3,467 36,933

Long-term loans.......................................................................................................................... 2,775 2,775 22,397

Allowance for doubtful accounts................................................................................................. (9) (11) (73)

Deferred income taxes (Note 8) .................................................................................................. 6,997 6,185 56,473

Other assets ................................................................................................................................ 2,924 2,922 23,600

Total investments and other assets ...................................................................................... 17,263 15,338 139,330

Foreign currency translation adjustments ................................................................................... — 9,178 —

....................................................................................................................................................... ¥150,061 ¥157,878 $1,211,146

See accompanying notes.

Consol i dated Ba lance SheetsMarch 31, 2001 and 2000



LIABILITIES AND SHAREHOLDERS’ EQUITY 2001 2000 2001

Current liabilities:

Bank loans (Note 7) .................................................................................................................... ¥ 17,299 ¥ 14,431 $ 139,621

Current portion of long-term debt (Note 7) ................................................................................ 1,668 3,286 13,462

Trade payables (Note 15):

—Notes .................................................................................................................................. 690 612 5,569

—Accounts............................................................................................................................. 13,011 12,781 105,012

Accrued expenses ....................................................................................................................... 7,486 8,895 60,420

Income taxes payable (Note 8) ................................................................................................... 796 557 6,425

Other current liabilities .............................................................................................................. 4,506 4,940 36,368

Total current liabilities ........................................................................................................ 45,456 45,502 366,877

Long-term debt (Note 7)................................................................................................................ 713 2,351 5,755

Retirement and severance benefits (Note 10) .............................................................................. 11,751 11,565 94,843

Employees’ severance and retirement benefits (Note 10)............................................................ 42

Other long-term liabilities ............................................................................................................ 255 280 2,057

Total liabilities .................................................................................................................... 58,175 59,698 469,532

Minority interests ......................................................................................................................... 466 506 3,761

Contingent liabilities (Note 9)

Shareholders’ equity (Note 11):

Common stock, par value ¥50 per share;

Authorized—270,000,000 shares

Issued —123,072,776 shares ........................................................................................... 17,814 17,814 143,777

Additional paid-in capital ........................................................................................................... 21,389 21,389 172,631

Retained earnings........................................................................................................................ 60,867 58,472 491,259

Net unrealized holding gains on securities .................................................................................. 312 — 2,518

Foreign currency translation adjustment..................................................................................... (8,960) — (72,316)

Treasury stock, at cost ................................................................................................................ (2) (1) (16)

Total shareholders’ equity ................................................................................................... 91,420 97,674 737,853

....................................................................................................................................................... ¥150,061 ¥157,878 $1,211,146

13


2001 2000 1999 2001

Net sales (Note 15) .............................................................................................. ¥130,682 ¥128,234 ¥144,206 $1,054,738

Cost of sales ........................................................................................................ 91,580 92,233 102,138 739,144

Gross profit ........................................................................................................... 39,102 36,001 42,068 315,594

Selling, general and administrative expenses .................................................... 36,887 36,657 40,506 297,716

Operating income (loss) .................................................................................... 2,215 (656) 1,562 17,878

Other income (expenses):

Interest and dividend income............................................................................ 302 385 613 2,437

Interest expenses ............................................................................................... (1,463) (959) (2,416) (11,808)

Equity in earnings of affiliate ............................................................................. 16 33 34 129

Gains of sale of fixed assets ............................................................................... 2,224 — — 17,950

Expenses for restructuring (Note 12) ................................................................ (711) (12,685) (116) (5,738)

Foreign currency exchange gains (loss), net ...................................................... 318 (487) (548) 2,567

Loss from devaluation of securities.................................................................... (10) (231) (200) (81)

Amortization of net transition obligation........................................................... (1,197) — — (9,661)

Others, net ........................................................................................................ (191) (181) (365) (1,542)

Income (loss) before income taxes and minority interests .............................. 1,503 (14,781) (1,436) 12,131

Income taxes (Note 8):

—Current ......................................................................................................... 763 1,200 450 6,158

—Deferred ........................................................................................................ (2,337) (3,973) — (18,861)

Income (loss) before minority interests ............................................................ 3,077 (12,008) (1,886) 24,834

Minority interests................................................................................................ (59) 44 62 (476)

Net income (loss) ................................................................................................ ¥ 3,018 ¥ (11,964) ¥ (1,824) $ 24,358

Yen U.S. dollars (Note 1)

Net income (loss) per share:

—Primary ......................................................................................................... ¥24.53 ¥(97.22) ¥(14.82) $0.20

—Diluted .......................................................................................................... 24.42 — 0.20


Consol ida ted Statements of Operat ionsYears ended March 31, 2001, 2000 and 1999


Millions of yen

Number of Net Foreign shares of Additional u n r e a l i z e d c u r r e n c y

common stock Common paid-in Retained holding gains translation Treasury(Thousands) stock capital earnings on securities adjustments stock

Balance at March 31, 1998............ 123,073 ¥17,814 ¥21,389 ¥70,283 ¥ — ¥ — ¥(2)

Net loss..................................... — — — (1,824) — — —

Treasury stock .......................... — — — — — — 1

Cash dividends paid.................. — — — (1,723) — — —

Bonuses to directors .................. — — — (80) — — —

Bonuses to employees

and fund for welfare.............. — — — (3) — — —

Minimum pension cost ............ — — — (204) — — —

Balance at March 31, 1999............ 123,073 17,814 21,389 66,449 — — (1)

Net loss..................................... — — — (11,964) — — —

Treasury stock .......................... — — — — — — —

Cumulative effects of

adopting tax effect

accounting ............................ — — — 4,664 — — —

Cash dividends paid.................. — — — (984) — — —

Minimum pension benefit ........ — — — 307 — — —

Balance at March 31, 2000............ 123,073 17,814 21,389 58,472 — — (1)

Net income ............................... — — — 3,018 — — —

Adjustments from

translation of foreign

currency financial statements.... — — — — — (8,960) —

Adoption of new accounting

standard for financial

instruments........................... — — — — 312 — —

Treasury stock .......................... — — — — — — (1)

Cash dividends paid.................. — — — (738) — — —

Minimum pension benefit ........ — — — 115 — — —

Balance at March 31, 2001............ 123,073 ¥17,814 ¥21,389 ¥60,867 ¥312 ¥(8,960) ¥(2)

Thousands of U.S. dollars (Note 1)

Net Foreign Additional u n r e a l i z e d c u r r e n c y

Common paid-in Retained holding gains translation Treasurystock capital earnings on securities adjustments stock

Balance at March 31, 2000 ........................................... $143,777 $172,631 $471,929 $ — $ — $(8)

Net income............................................................... — — 24,358 — — —

Adjustments from translation of foreign currency

financial statements.............................................. — — — — (72,316) —

Adoption of new accounting standard

for financial instruments....................................... — — — 2,518 — —

Treasury stock .......................................................... — — — — — (8)

Cash dividends paid................................................. — — (5,956) — — —

Minimum pension benefit ........................................ — — 928 — — —

Balance at March 31, 2001 ........................................... $143,777 $172,631 $491,259 $2,518 $(72,316) $(16)


Consol i dated Sta tements of Sharehol ders ’ Equ i tyYears ended March 31, 2001, 2000 and 1999

15


2001 2000 2001

Cash flows from operating activities:

Income (Loss) before income taxes and minority interests............................................................ ¥ 1,503 ¥(14,781) $ 12,131

Depreciation................................................................................................................................. 6,337 6,709 51,146

Decrease in employees’ severance and retirement benefits ............................................................ (28) (934) (226)

Interest and dividend income....................................................................................................... (302) (385) (2,437)

Interest expense ........................................................................................................................... 1,463 959 11,808

Gain on sales of securities ............................................................................................................ (211) — (1,703)

Gain on sale of fixed assets ........................................................................................................... (2,224) — (17,950)

Expenses for restructuring............................................................................................................ — 11,152 —

Increase in receivables.................................................................................................................. (1,470) (1,040) (11,864)

Decrease (Increase) in inventories ................................................................................................ (665) 160 (5,394)

Increase (Decrease) in trade payables ........................................................................................... (1,040) 1,985 (8,394)

Others, net ................................................................................................................................... 1,025 405 8,272

4,385 4,230 35,392

Interest and dividends received ................................................................................................... 302 384 2,437

Interest paid ................................................................................................................................ (1,266) (948) (10,218)

Retirement benefits paid............................................................................................................... (1,800) (4,410) (14,528)

Income taxes paid ........................................................................................................................ (471) (1,220) (3,801)

Net cash provided by (used in) operating activities .............................................................. 1,150 (1,964) 9,282

Cash flows from investing activities:

Decrease in time deposits with maturities over three months ..................................................... 707 2,274 5,706

Proceeds from sale of marketable securities ................................................................................. 482 3,459 3,890

Purchase of tangible assets ........................................................................................................... (4,161) (3,721) (33,584)

Proceeds from sale of tangible assets ............................................................................................ 3,637 — 29,354

Purchase of intangible assets ........................................................................................................ (390) (386) (3,148)

Others, net ................................................................................................................................... 292 (147) 2,358

Net cash provided by investing activities.............................................................................. 567 1,479 4,576

Cash flows from financing activities:

Increase (Decrease) in bank loans................................................................................................. (1,808) 4,452 (14,592)

Payments on long-term debt ....................................................................................................... (496) (2,463) (4,003)

Cash dividends paid .................................................................................................................... (738) (984) (5,956)

Others, net ................................................................................................................................... 437 370 3,526

Net cash provided by (used in) financing activities............................................................... (2,605) 1,375 (21,025)

Effect of changes in exchange rate on cash and cash equivalents................................................ 278 (369) 2,243

Net increase (decrease) in cash and cash equivalents.................................................................. (610) 521 (4,924)

Cash and cash equivalents at beginning of year ........................................................................... 29,480 28,959 237,934

Cash and cash equivalents at end of year (Note 2) ....................................................................... ¥28,870 ¥ 29,480 $233,010


Consol idated Statement o f Cash F lowsYear ended March 31, 2001 and 2000


1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of PresentationHitachi Koki Co., Ltd. (the “Company”) and its domestic subsidiariesmaintain their books of account in conformity with financial accountingstandards of Japan, which are different from the accounting and disclosurerequirements of International Accounting Standards. The accounts offoreign subsidiaries are based on their accounting records maintained inconformity with generally accepted accounting principles and practicesprevailing in the respective countries of their domicile. The accompany-ing consolidated financial statements have been compiled from the con-solidated financial statements filed with the appropriate Local FinanceBureau of the Ministry of Finance as required by the Securities andExchange Law of Japan. The statement of cash flows was not requiredto be filed with the regulatory authorities until 2000, and, accordingly,such statement has not been prepared for 1999.

Certain modifications, including presentation of the consolidatedstatements of shareholders’ equity, have been made in the accompanyingfinancial statements to facilitate understanding by readers outside Japan.

The financial statements are stated in Japanese yen. The translation ofthe Japanese yen amounts into U.S. dollars is included solely for theconvenience of readers, using the prevailing exchange rate at March 31,2001, which was ¥123.90 to U.S.$1. Such translations should not beconstrued as representations that the Japanese yen amounts have been,could have been, or could in the future be, converted into U.S. dollarsat this or any other rate of exchange.

Certain reclassifications have been made in the 2000 and 1999 finan-cial statements to conform to the 2001 presentation.

(b) Principles of ConsolidationThe consolidated financial statements include the accounts of theCompany and those of its subsidiaries. All significant intercompanyaccounts and transactions are eliminated in consolidation.

Effective for the year ended March 31, 2000, all companies arerequired to consolidate all significant investees which are controlledthrough substantial ownership of majority voting rights or existence ofcertain conditions. Previously, only majority-owned companies wereconsolidated. There was no effect of applying this rule to theCompany’s consolidated financial statements.

Investments in affiliated companies (all 20% to 50% owned and certainothers 15% to 20% owned) are stated at the underlying equity value,and the appropriate portion of the earnings of such companies isincluded in consolidated income.

Effective for the year ended March 31, 2000, investments in compa-nies of which the Company has at least 15% and less than 20% of thevoting rights are also accounted for using the equity method in the caseswhere the Company has the ability to exercise significant influence overoperating and financial policies of the investees. There was no effect ofapplying this new accounting standard.

(c) Foreign Currency TranslationReceivables and payables denominated in foreign currencies are trans-lated into Japanese yen at the exchange rates at the balance sheet date,except that prior to April 1, 2000 long-term receivables and payablesdenominated in foreign currencies were translated at historicalexchange rates. Resulting exchange gains or losses are credited orcharged to income as incurred.

Effective April 1, 2000, the Company and its consolidated sub-sidia ries adopted the revised accounting s tandard, “Opinion

Concerning Revision of Accounting Standard for Foreign CurrencyTranslation”, issued by the Business Accounting Deliberation Councilon October 22, 1999 (the “Revised Accounting Standard”).

Under the Revised Accounting Standard, long-term receivables andpayables denominated in foreign currencies are translated into Japaneseyen at the exchange rates at the balance sheet date. There was no effectof adopting this Revised Accounting Standard.

The assets and liabilities of foreign currency financial statements aretranslated into Japanese yen at current rates of exchange at the balancesheet date. Common stock, additional paid-in capital and retained earn-ings are translated at the historical exchange rates. Income, expensesand net income are translated at average rates of exchange. Translationadjustments are debited or credited to foreign currency translationadjustments accounts in the accompanying consolidated balance sheets.

Due to the adoption of the Revised Accounting Standard, theCompany reports foreign currency translation adjustments in the share-holders’ equity and minority interests. The prior year’s amount, whichis included in assets, has not been reclassified.

(d) Cash and Cash EquivalentsFor the purpose of the consolidated statements of cash flows, theCompany and the subsidiaries classify cash on hand, readily availablebank deposits and short-term highly liquid investments with low risk ofvalue fluctuation with maturities not exceeding three months at thetime of purchase as cash and cash equivalents.

(e) Marketable Securities and Investment SecuritiesPrior to April 1, 2000, current and non-current securities listed on thestock exchanges were stated at the lower of cost or market value, costbeing determined by the moving-average method. Other securities werestated at the moving-average cost. Appropriate write-downs are record-ed for unlisted securities that declined in value substantially when suchlosses are considered to be permanent.

Effective April 1, 2000, the Company and its domestic subsidiariesadopted the new Japanese accounting standard on accounting for finan-cial instruments (“Opinion Concerning Establishment of AccountingStandard for Financial Instruments” issued by the Business AccountingDeliberation Council on January 22, 1999).

Upon applying the new accounting standard, companies are requiredto examine the intent of holding each security and classify those securi-ties as (a) securities held for trading purposes (hereafter, “trading secu-rities”), (b) debt securities intended to be held to maturity (hereafter,“held-to-maturity debt securities”), (c) equity securities issued by non-consolidated subsidiaries and affiliated companies, and (d) for all othersecurities that are not classified in any of the above categories (here-after, “available-for-sale securities”).

Equity securities issued by subsidiaries and affiliated companieswhich are not consolidated or accounted for by the equity method arestated at moving-average cost. Available-for-sale securities with fairmarket value are stated at fair market value. Unrealized gains and unre-alized losses on these securities are reported, net of applicable incometaxes, as a separate component of the shareholders’ equity. The realizedgain on sale of such securities is computed using the moving-averagecost. Securities with no fair market values are stated principally at themoving-average cost.

The Company and its domestic subsidiaries had no trading securitiesor held-to-maturity debt securities.

Notes to Conso l idated F inanc ial Statemen tsMarch 31, 2001, 2000 and 1999

17

If the market value of equity securities issued by subsidiaries andaffiliated companies, and available-for-sale securities, declines signifi-cantly, such securities are stated at fair market value and the differencebetween fair market value and the carrying amount is recognized as aloss in the period of the decline.

As a result of adopting the new accounting standard for financialinstruments, income before income taxes increased by ¥499 million.Also, based on the examination of the intent of holding each securityupon application of the new accounting standard at April 1, 2000,available-for-sale securities maturing within one year from the balancesheet date are included in current assets, and other securities areincluded in investments and other assets. As a result, at April 1, 2000,securities in current assets decreased by ¥1,171 million and investmentsecurities increased by the same amount compared with what wouldhave been reported under the previous accounting policy.

(f) Derivatives Transactions and Hedge AccountingThe Company and subsidiaries utilize forward foreign exchange con-tracts and currency swap contracts as derivatives transactions, in order tohedge foreign currency risks arising from normal business transactions.

Prior to April 1, 2000, short-term receivables denominated in foreigncurrencies of the Company hedged by forward foreign exchange con-tracts were translated into Japanese yen using the forward rates. Thedifference between the amount of hedged foreign currency receivableusing the forward rate and the book value of the receivable was includ-ed in net income.

Effective April 1, 2000, the Company adopted the revised accountingstandard, “Opinion Concerning Revision of Accounting Standard forForeign Currency Translation”, issued by the Business AccountingDeliberation Council on October 22, 1999 (the “Revised AccountingStandard”).

Under the Revised Accounting Standard, forward foreign exchangecontracts are stated at fair value and change in the fair value is account-ed for as gains or losses in the statement of operations. The effect on theconsolidated statement of operations of adopting this RevisedAccounting Standard was immaterial.

Some subsidiaries record the discounts or premiums on forward con-tracts and currency swap contracts in net income over the life of thecontracts.

(g) Inventories Finished goods, semi-finished goods and raw materials are stated at thelower of cost or market value, cost being determined primarily by themoving-average method. Work in process is stated at cost primarilybased on the identified cost method.

(h) Retirement BenefitsThe Company and its domestic subsidiaries provide two post-employ-ment benefit plans, an unfunded lump-sum payment plan and a fundedpension plan, under which all eligible employees are entitled to benefitsbased on the level of wages and salaries at the time of retirement or ter-mination, length of service and certain other factors.

At March 31, 2000, the liability for retirement benefits for employeesis stated at the amount that would be required to be paid (less theamount of pension plan assets), if all eligible employees terminatedtheir employment as of the balance sheet date.

Effective April 1, 2000, the Companies adopted the new accountingstandard, “Opinion on Setting Accounting Standard for Employees’Severance and Pension Benefits”, issued by the Business Accounting

Deliberation Council on June 16, 1998 (the “New Accounting Standard”).

Under the New Accounting Standard, allowance and expenses forseverance and retirement benefits are determined based on the amountsactuarially calculated using certain assumptions.

The Company and its domestic subsidiaries provided allowance foremployees’ severance and retirement benefits at March 31, 2001 basedon the estimated amounts of projected benefit obligation and the fairvalue of the plan assets at that date.

The excess of the projected benefit obligation over the fair value ofpension assets as of April 1, 2000 and the liabilities for severance andretirement benefits recorded as of April 1, 2000 (the “net transitionobligation”) amounted to ¥5,985 million. The net transition obligationwill be recognized as expense in equal amounts over five years com-mencing with the year ended March 31, 2001. Actuarial gains/losses arerecognized as income/expense in equal amounts principally over 15years commencing from the succeeding period.

As a result of the adoption of the new accounting standard, in theyear ended March 31, 2001, severance and retirement benefit expenseincreased by ¥1,459 million, operating income decreased by ¥232 mil-lion and income before income taxes decreased by ¥1,429 million com-pared with what would have been recorded under the previousaccounting standard.

Retirement benefits to directors and corporate auditors of theCompany are included in other long-term liabilities in the amount cal-culated based on the established guidelines. Payment of such benefits issubject to the approval at the shareholders’ meeting.

(i) Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Depreciation is com-puted primarily using the declining-balance method at rates based onthe estimated useful lives, except that buildings are depreciated primarilybased on the straight-line method.

(j) Income TaxesIncome taxes are provided for amounts currently payable for each peri-od based on taxable income for the year ended March 31, 1999.

Effective April 1, 1999, the Company adopted the new standard,which recognizes tax effect of temporary differences between the finan-cial statement basis and the tax basis of assets and liabilities. Under thenew accounting standard, the provision for income taxes is computedbased on the pretax income included in the consolidated statement ofincome. The asset and liability approach is used to recognize deferredtax assets and liabilities for the expected future tax consequences oftemporary differences between the carrying amounts of assets and lia-bilities for financial reporting purposes and the amounts used forincome tax purposes.

The amounts of deferred income taxes attributable to the tax effectsof the temporary differences at April 1, 1999 is reflected as an adjust-ment of ¥4,664 million to the retained earnings brought forward fromthe previous year. Prior years’ financial statements have not been restat-ed. The effect for the year ended March 31, 2000 was to decrease netloss by ¥3,973 million and to increase retained earnings at that date by¥8,637 million.

(k) Appropriation of Retained EarningsPayments of dividends and directors’ bonuses are accounted for as anappropriation of retained earnings in the year in which such appropria-tions are approved at the general shareholders’ meeting, or in the caseof interim dividends at the meeting of the board of directors.


(L) Net Income per ShareNet income per share of common stock is computed based upon theweighted-average number of shares outstanding during each year. Fordiluted net income per share, both net income and shares outstandingwere adjusted to assume the conversion of convertible bonds.

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents at March 31, 2001 and 2000 for the consoli-dated statements of cash flows consisted of the following:

Thousands of Millions of yen U.S. dollars

2001 2000 2001

Cash and time deposits..............................¥16,727 ¥11,214 $135,004Marketable securities ................................. 12,221 20,200 98,636

Time deposits with maturities over three months ................................... (78) (762) (630)

Equities and investment funds................... — (1,172) —

Cash and cash equivalents .........................¥28,870 ¥29,480 $233,010

3. MARKET VALUE INFORMATION FOR SECURITIES

At March 31, 2001, acquisition cost, book value and fair value of secu-rities with available fair value were as follows:

Available-for-sale securitiesMillions of yen

Acquisition cost Book value Difference

Securities with book value (fair value)exceeding acquisition cost:

Equity securities ¥1,049 ¥2,088 ¥1,039Investment funds 2,514 2,525 11Corporate bonds 13 22 9

Total ¥3,576 ¥4,635 ¥1,059

Other securities:Equity securities ¥1,502 ¥ 991 ¥ (511)Investment funds 522 500 (22)

Total ¥2,024 ¥1,491 ¥ (533)

Thousands of U.S. dollars

Acquisition cost Book value Difference

Securities with book value (fair value) exceeding acquisition cost:

Equity securities $ 8,466 $16,852 $ 8,386Investment funds 20,290 20,379 89Corporate bonds 105 178 73

Total $28,861 $37,409 $ 8,548

Other securities:Equity securities $12,122 $ 7,998 $(4,124)Investment funds 4,213 4,036 (177)

Total $16,335 $12,034 $(4,301)

At March 31, 2001, acquisition cost, book value and fair value ofsecurities not stated at fair value were as follows:


Available-for-sale securities:Money management fund ¥10,204 $82,357Others 130 1,049

Shares of affiliated companies 337 2,720

Maturities of available-for-sale securities with maturities are as follows:Millions of yen

Over one year Over five years Within but less than but less than Over tenone year five years ten years years Total

B o n d s :Corporate bonds ¥ — ¥21 ¥ — ¥ — ¥ 2 1

Others: 28 — — — 28

Total ¥28 ¥21 ¥— ¥— ¥49


Over one year Over five years Within but less than but less than Over tenone year five years ten years years Total

B o n d s :Corporate bonds $ — $169 $ — $ — $ 1 6 9

Others: 226 — — — 226

Total $226 $169 $— $— ¥395

Total sales amounts of available-for-sale securities sold in the yearended March 31, 2001 amounted to ¥307 million and the gains andlosses amounted to ¥210 million and ¥1 million, respectively.

At March 31, 2000, book value, market value and net unrealizedgains of securities with available market values were as follows:

Millionsof yen

Current:Book value ¥2,662Market value 2,831

169

Non-current:Book value 3,021Market value 4,285

1,264

Net unrealized gains ¥1,433

4. INVENTORIES

Inventories at March 31, 2001 and 2000 consisted of the following:Thousands of

Millions of yen U.S. dollars

2001 2000 2001

Finished goods ........................................ ¥20,275 ¥18,226 $163,640Semi-finished goods ................................ 1,474 1,618 11,897Work in process ...................................... 3,411 3,439 27,530Raw materials .......................................... 5,705 5,633 46,045Goods in transit ....................................... 2,520 2,543 20,339Inventory reserve..................................... (4,225) (3,181) (34,100)

........................................................... ¥29,160 ¥28,278 $235,351

5. DERIVATIVE TRANSACTIONS

(a) Status of Derivative Transactions The Company and subsidiaries utilize forward foreign exchange contractsand currency swap contracts as derivative transactions, in order tohedge foreign currency risks arising from normal business transactions.

The derivative transactions are made solely with highly rated finan-cial institutions. The basic policy for forward foreign exchange con-tracts and currency swap contracts is determined by the director incharge. These contracts are executed and managed by the AccountingDepartment in accordance with the internal rules on authorization,maximum transaction amounts allowed, etc. Details of the transactionsare reported to the director on a monthly basis.

19

The following summarizes hedging derivative financial instrumentsused by the Company and subsidiaries and items hedged:Hedging instruments: Hedged items:

Forward foreign exchange contracts Foreign currency trade receivables

Currency swap contracts Foreign currency loans

(b) Market Value of Derivative Transactions The aggregate amounts contracted to be paid or received and the fairvalue of derivative transactions at March 31, 2001 and 2000 were asfollows:

Currency-related derivatives:Millions of yen

2001

Contract amount

Total Due after Market Unrealized one year value gain (losses)

Forward contracts:To sell:

U.S. dollars .............................. ¥3,670 ¥— ¥3,988 ¥(318)Euro ........................................ 1,609 — 1,619 (10)H.K. dollars ............................. 275 — 289 (14)STG. £ ..................................... 236 — 243 (7)A.U. dollars.............................. 155 — 154 1S.G. dollars .............................. 98 — 101 (3)

Total .................................... ¥6,043 ¥— ¥6,394 ¥(351)

Millions of yen

2000

Contract amount



STG. £ ..................................... ¥ 12 ¥— ¥ 12 ¥ 0To buy:

U.S. dollars .............................. 469 — 455 (14)

Total .................................... ¥481 ¥— ¥467 ¥(14)


2001

Contract amount



U.S. dollars ..............................$29,621 $— $32,187 $(2,566)Euro ........................................ 12,986 — 13,067 (81)H.K. dollars ............................. 2,220 — 2,333 (113)STG. £ ..................................... 1,904 — 1,961 (57)A.U. dollars.............................. 1,251 — 1,243 8S.G. dollars .............................. 791 — 815 (24)

Total ....................................$48,773 $— $51,606 $(2,835)

In accordance with the new disclosure requirement effective April 1,1999, derivative transactions at March 31, 2001 are disclosed on a consol-idated basis.

6. LEASE INFORMATION

Finance leases whose ownership is not transferred to lessees are not capitalized and accounted for in the same manner as operating leases.Certain information for such non-capitalized finance leases was as follows:

(1) A summary of assumed amounts of acquisition cost, accumulated depre-ciation and net book value at March 31, 2001 and 2000 was as follows:

Millions of yen

2001

Acquisition Accumulated Net bookcost depreciation value

Machinery and equipment ...................... ¥621 ¥328 ¥293Software.................................................. 14 14 0

............................................................... ¥635 ¥342 ¥293

Millions of yen

2000


Machinery and equipment ...................... ¥867 ¥569 ¥298Software.................................................. 46 44 2

............................................................... ¥913 ¥613 ¥300


2001


Machinery and equipment ...................... $5,012 $2,647 $2,365Software.................................................. 113 113 0

............................................................... $5,125 $2,760 $2,365

(2) Future minimum lease payments, at March 31, 2001 and 2000 wereas follows:


2001 2000 2001

Due within one year .......................................... ¥114 ¥142 $ 920Due after one year.............................................. 191 166 1,542

.......................................................................... ¥305 ¥308 $2,462

(3) Lease payments, assumed depreciation charges and assumed interestcharges for the year ended March 31, 2001, 2000 and 1999 were as follows:


2001 2000 1999 2001

Lease payments.................................... ¥136 ¥217 ¥260 $1,098Assumed depreciation charges............. 128 202 241 1,033Assumed interest charges..................... 7 9 14 56

(4) Assumed depreciation charges are computed using the straight-linemethod over the lease terms assuming no residual value.

(5) Assumed interest charges are computed using the effective-interestmethod.

7. SHORT-TERM BANK LOANS AND LONG-TERM DEBT

(1) The weighted-average rate of interest for short-term bank loans isapproximately 6.7 % at March 31, 2001 and 6.2% at March 31, 2000.

(2) Long-term debt at March 31, 2001 and 2000 consisted of the following:

Thousands ofMillions of yen U.S. dollars

2001 2000 2001

Unsecured loans principally from banks and insurance companies, weighted-average rate of interest approximately 5.1% for 2000 .................. ¥ 875 ¥4,131 $ 7,062

2.1% domestic unsecured convertible bonds due in 2002 .................................. 1,506 1,506 12,155

.................................................................. 2,381 5,637 19,217Less amount due within one year .............. 1,668 3,286 13,462

.................................................................. ¥ 713 ¥2,351 $ 5,755


21

The indentures covering the 2.1% domestic unsecured convertiblebonds provide, among other conditions, for conversion into shares ofcommon stock at the conversion price per share of ¥804.80. At the currentconversion price, 1,871 thousand shares of common stock wereissuable at March 31, 2001 upon full conversion of the outstandingconvertible bonds.

(3) The following assets are pledged as collateral for short-term bankloans at March 31, 2001 and 2000:


2001 2000 2001

Trade receivables–accounts ..................... ¥103 ¥109 $ 831Inventories .............................................. 201 206 1,622Buildings and structures .......................... 363 — 2,930

........................................................... ¥667 ¥315 $5,383

8. INCOME TAXES

Taxes on income consist of corporation tax, inhabitant taxes and enter-prise tax. The aggregate normal effective tax rate on income beforeincome taxes was approximately 41.8% for 2001 and 2000 and 47.4%for 1999. The actual effective tax rates in the consolidated statements ofoperations differ from the normal effective tax rates principally becauseof the effect of recoverability of deferred tax assets and net losses ofsubsidiaries.

The significant differences between the statutory tax rate and theCompany’s effective tax rate for financial statement purposes for theyear ended March 31, 2001 are as follows:

Statutory tax rate ............................................................... 41.8%Non-deductible expenses .............................................. 4.1Non-taxable income ...................................................... (11.4)Change in valuation allowance ...................................... (297.4)Per capital inhabitant tax .............................................. 2.7Deference in statutory tax rate of foreign subsidiaries .... 17.1Net loss of subsidiaries .................................................. 108.4Elimination of unrealized profits ................................... 18.5Elimination of dividend income ................................... 18.3Others ........................................................................... (6.8)

Effective tax rate ................................................................ (104.7%)

Significant components of deferred tax assets and liabilities as of March31, 2001 and 2000 are as follows:


2001 2000 2001

Deferred tax assets:Retirement benefits .............................. ¥ 3,333 ¥ 3,118 $26,901Prepaid expenses (long-term) .............. 1,026 1,231 8,281Write-downs of inventories ................. 590 618 4,762Tax loss carryforward .......................... 4,372 5,890 35,286Others ................................................. 1,960 1,988 15,819

Total deferred tax assets........................... 11,281 12,845 91,049Valuation allowance................................. (196) (4,146) (1,582)

Net deferred tax assets ............................. 11,085 8,699 89,467

Deferred tax liabilities:Net unrealized gains on securities ........ (224) — (1,808)Reserve for special depreciation ........... (60) (42) (484)Others ................................................. (17) (20) (137)

Total deferred tax liabilities ..................... (301) (62) (2,429)

Net deferred tax assets ............................. ¥10,784 ¥ 8,637 $87,038

9. CONTINGENT LIABILITIES

Contingent liabilities at March 31, 2001 and 2000, for trade notes dis-counted in the ordinary course of business amounted to ¥492 million($3,971 thousand) and ¥540 million, respectively.

10. RETIREMENT BENEFITS AND RETIREMENT COSTS

As explained in Note 1(h) (the significant accounting policies), effectiveApril 1, 2000, the Company and its domestic subsidiaries adopted thenew accounting standard for employees’ severance and retirement ben-efits, under which the liabilities and expenses for severance and retire-ment benefits are determined based on the amounts obtained byactuarial calculations.

Employees’ severance and retirement benefits included in the liabilitysection of the consolidated balance sheet as of March 31, 2001 consistsof the following:


Projected benefit obligation ................................. ¥ 73,668 $ 594,576Unrecognized prior service costs.......................... 2 16Unrecognized actuarial differences....................... (8,114) (65,488)Less fair value of pension assets ........................... (49,229) (397,328)Less unrecognized net transition obligation ........ (4,788) (38,644)Prepaid pension costs ......................................... 212 1,711

Liabilities for severance and pension benefits..... ¥ 11,751 $ 94,843

Included in the consolidated statement of operations for the yearended March 31, 2001 is severance and retirement benefit expensecomprising of the following:


Service costs-benefits earned during the year ....... ¥2,216 $17,885 Interest cost on projected benefit obligation ........ 2,580 20,823Expected return on plan assets............................. (1,536) (12,397)Amortization of net transition obligation ............. 1,197 9,661

Severance and retirement benefit expense........ ¥4,457 $35,972

The discount rate on plan assets used principally by the Company is3.5% and the rate of expected return on plan assets used principally bythe Company is 2.5%. The estimated amount of all retirement benefitsto be paid at the future retirement date is allocated equally to each ser-vice year using the estimated number of total service years. Actuarialgains and losses are recognized as income or expense in equal amountsprincipally over 15 years commencing from the succeeding period. Thenet transition obligation will be recognized as expense in equal amountsover 5 years commencing with the year ended March 31, 2001.

11. SHAREHOLDERS’ EQUITY

Under the Japanese Commercial Code (the “Code”), certain issuance ofcommon stock, including conversions of convertible bonds and exer-cise of warrants, are required to be credited to the common stockaccount to the extent of the greater of par value or 50% of the proceedsand the remaining amount to the additional paid-in capital account asdetermined by the Board of Directors.

The maximum amount that the Company can distribute as dividendsis calculated based on the unconsolidated financial statements of theCompany in accordance with the Code.

Cash dividends charged to retained earnings during the years ended


March 31, 2001, 2000 and 1999 represent dividends paid out duringthese periods.

As explained in Note 1(c) (the significant accounting policies), effec-tive April 1, 2000, the Company adopted the revised accounting stan-dard for foreign currency translation, under which the foreign currencytranslation adjustment is reported in the shareholders’ equity andminority interests.

12. EXPENSES FOR RESTRUCTURING

The Company and some of its subsidiaries restructured their operationsin the year ended March 31, 2000. Expenses of the restructuring consistmainly of additional retirement benefits amounting to ¥5,616 million,write-offs of assets amounting to ¥3,788 million and impairment ofgoodwill amounting to ¥1,769 million.

13. SUBSEQUENT EVENT

The following appropriation of retained earnings was approved at thegeneral shareholders’ meeting of the Company held on June 27, 2001.

Millions Thousands of of yen U.S. dollars

Year-end cash dividends ¥4 ($0.03) per share..... ¥492 $3,971Bonuses to directors ............................................ 48 387

14. SEGMENT INFORMATION

(1) Information by Industrial SegmentThe Company and its consolidated subsidiaries’ primary business activ-ities are divided into three industrial segments: Power tools, Printingsystems, and Scientific instruments.

23

Business segment information for the years ended March 31, 2001, 2000 and 1999 is as follows:Millions of yen

2001

Scientific Elimination and/Power tools Printing systems instruments or corporate Consolidated

Net sales:Outside customers.................................................................................................. ¥76,517 ¥50,612 ¥3,553 ¥— ¥130,682Intersegment........................................................................................................... — — — (—) —

Total sales....................................................................................................... ¥76,517 50,612 3,553 (—) 130,682

Operating expenses .................................................................................................... 74,045 51,020 3,402 (—) 128,467

Operating income (loss).......................................................................................... ¥ 2,472 ¥ (408) ¥ 151 ¥(—) ¥ 2,215

Identifiable assets........................................................................................................ ¥92,543 ¥53,026 ¥4,492 ¥— ¥150,061Depreciation expense.................................................................................................. 3,105 1,921 147 — 5,173Capital expenditures................................................................................................... 2,463 2,115 126 — 4,704

Millions of yen

2000


Net sales:Outside customers.................................................................................................. ¥77,484 ¥47,590 ¥3,160 ¥ — ¥128,234Intersegment........................................................................................................... — — — (—) —

Total sales....................................................................................................... 77,484 47,590 3,160 (—) 128,234


Operating income (loss).......................................................................................... ¥ (365) ¥ (238) ¥ (53) ¥(—) ¥ (656)

Identifiable assets........................................................................................................ ¥95,111 ¥58,865 ¥3,902 ¥ — ¥157,878Depreciation expense.................................................................................................. 3,949 1,943 138 — 6,030Capital expenditures................................................................................................... 2,076 1,690 242 — 4,008

Millions of yen

1999


Net sales:Outside customers.................................................................................................. ¥80,363 ¥60,790 ¥3,053 ¥ — ¥144,206Intersegment........................................................................................................... – – – (—) —

Total sales....................................................................................................... 80,363 60,790 3,053 (—) 144,206


Operating income (loss).......................................................................................... ¥ (2,723) ¥ 4,360 ¥ (75) ¥(—) ¥1,562

Identifiable assets........................................................................................................ ¥95,707 ¥66,913 ¥4,036 ¥ — ¥166,656Depreciation expense.................................................................................................. 3,643 2,110 131 — 5,884Capital expenditures................................................................................................... 5,896 2,769 203 — 8,868


2001


Net sales:Outside customers.................................................................................................. $617,571 $408,491 $28,676 $(— $1,054,738Intersegment........................................................................................................... — — — (—) —

Total sales....................................................................................................... 617,571 408,491 28,676 (—) 1,054,738

Operating expenses .................................................................................................... 597,619 411,784 27,457 (—) 1,036,860

Operating income (loss) ......................................................................................... $ 19,952 $ (3,293) $ 1,219 $(—) $ 17,878

Identifiable assets........................................................................................................ $746,917 $427,974 $36,255 $(— $1,211,146Depreciation expense.................................................................................................. 25,061 15,504 1,186 — 41,751Capital expenditures................................................................................................... 19,879 17,070 1,017 — 37,966

(Notes) 1. The Company changed the name of Printers segment to Printing systems segment for the year ended March 31, 2000.2. As explained in Note 1(h), the Company and its domestic subsidiaries adopted the new Japanese accounting standard for employees’ severance and retirement benefits

in the year ended March 31, 2001. As a result of the adoption of the new accounting standard, in the year ended March 31, 2001, operating expenses of Power toolssegment increased by ¥202 million, operating expenses of Printing systems segment increased by ¥18 million, operating expenses of Scientific instruments segmentincreased by ¥11 million, and operating income of Power tools segment and Scientific instruments segment decreased and operating loss of Printing systems segmentincreased by the same amount compared with what would have been recorded under the previous accounting standard.


(2) Information by Geographic AreaA summary of the sales and operating income by geographic area for the years ended March 31, 2001, 2000 and 1999 is as follows:

Millions of yen

2001

Elimination and/Domestic Asia Europe North America Others or corporate Consolidated

Net sales:Outside customers ............................................................... ¥ 75,994 ¥ 8,072 ¥17,995 ¥ 26,319 ¥2,302 ¥ — ¥130,682Intersegment ........................................................................ 2 0 , 7 4 0 6 , 2 6 7 3 2 8 8 4 0 — ( 2 8 , 1 7 5 ) —

Total sales .................................................................... 9 6 , 7 3 4 1 4 , 3 3 9 1 8 , 3 2 3 2 7 , 1 5 9 2 , 3 0 2 ( 2 8 , 1 7 5 ) 1 3 0 , 6 8 2

Operating expenses.................................................................. 9 0 , 9 2 4 1 4 , 2 9 0 1 9 , 0 5 7 2 9 , 1 8 3 2 , 4 4 3 ( 2 7 , 4 3 0 ) 1 2 8 , 4 6 7

Operating income (loss) ....................................................... ¥ 5,810 ¥ 49 ¥ (734) ¥ (2,024) ¥ (141) ¥ 745 ¥ 2,215

Identifiable assets ..................................................................... ¥117,660 ¥11,351 ¥13,479 ¥ 15,245 ¥1,366 ¥ (9,040) ¥150,061

Millions of yen

2000


Net sales:Outside customers ............................................................... ¥ 77,179 ¥ 9,334 ¥17,151 ¥22,177 ¥2,393 ¥ — ¥128,234Intersegment ........................................................................ 18,768 4,036 733 1,116 1 (24,654) —

Total sales .................................................................... 95,947 13,370 17,884 23,293 2,394 (24,654) 128,234

Operating expenses.................................................................. 95,417 13,365 17,665 25,312 2,548 (25,417) 128,890

Operating income (loss) ....................................................... ¥ 530 ¥ 5 ¥ 219 ¥ (2,019) ¥ (154) ¥ 763 ¥ (656)

Identifiable assets ..................................................................... ¥118,397 ¥13,576 ¥13,784 ¥17,344 ¥1,673 ¥ (6,896) ¥157,878

Millions of yen

1 9 9 9


Net sales:Outside customers ............................................................... ¥ 84,297 ¥ 7,311 ¥19,997 ¥29,650 ¥2,951 ¥ — ¥144,206Intersegment ........................................................................ 19,389 4,627 716 2,077 1 (26,810) —

Total sales .................................................................... 103,686 11,938 20,713 31,727 2,952 (26,810) 144,206

Operating expenses.................................................................. 100,954 11,941 20,322 33,101 3,106 (26,780) 142,644

Operating income (loss) ....................................................... ¥ 2,732 ¥ (3) ¥ 391 ¥ (1,374) ¥ (154) ¥ (30) ¥ 1,562

Identifiable assets ..................................................................... ¥119,582 ¥15,055 ¥15,384 ¥25,548 ¥1,849 ¥(10,762) ¥166,656


2 0 0 1


Net sales:Outside customers.............................................................. $ 6 1 3 , 3 5 0 $ 6 5 , 1 4 9 $ 1 4 5 , 2 3 8 $ 2 1 2 , 4 2 1 $ 1 8 , 5 8 0 $ — $ 1 , 0 5 4 , 7 3 8Intersegment ...................................................................... 1 6 7 , 3 9 3 5 0 , 5 8 1 2 , 6 4 7 6 , 7 8 0 — ( 2 2 7 , 4 0 1 ) —

Total sales....................................................................... 7 8 0 , 7 4 3 1 1 5 , 7 3 0 1 4 7 , 8 8 5 2 1 9 , 2 0 1 1 8 , 5 8 0 ( 2 2 7 , 4 0 1 ) 1 , 0 5 4 , 7 3 8

Operating expenses ................................................................ 7 3 3 , 8 5 0 1 1 5 , 3 3 5 1 5 3 , 8 0 9 2 3 5 , 5 3 6 1 9 , 7 1 8 ( 2 2 1 , 3 8 8 ) 1 , 0 3 6 , 8 6 0

Operating income (loss) ....................................................... $ 4 6 , 9 8 3 $ 3 9 5 $ ( 5 , 9 2 4 ) $ ( 1 6 , 3 3 5 ) $ ( 1 , 1 3 8 ) $ ( 6 , 0 1 3 ) $ 1 7 , 8 7 8

Identifiable assets ................................................................... $ 9 4 9 , 6 3 7 $ 9 1 , 6 1 4 $ 1 0 8 , 7 8 9 $ 1 2 3 , 0 4 3 $ 1 1 , 0 2 5 $ ( 7 2 , 9 6 2 ) $ 1 , 2 1 1 , 1 4 6

Notes As explained in Note 1(h), the Company and its domestic subsidiaries adopted the new Japanese accounting standard for employees’ severance and retirement benefits inthe year ended March 31, 2001. As a result of the adoption of the new accounting standard, in the year ended March 31, 2001, operating expenses of the Domestic areaincreased by ¥232 million and operating income decreased by the same amount compared with what would have been recorded under the previous accounting standard.

(3) Overseas Net Sales A summary of overseas net sales for the years ended March 31, 2001, 2000 and 1999 is as follows:

Millions of yen

2001

Asia Europe North America Others Total

Overseas net sales ............................................................................................................. ¥8,902 ¥23,945 ¥34,835 ¥3,417 ¥ 71,099Consolidated net sales....................................................................................................... 130,682Percentage of overseas net sales over consolidated net sales .............................................. 6.8% 18.3% 26.7% 2.6% 54.4%

Millions of yen

2000

Asia Europe North America Others Total

Overseas net sales ............................................................................................................. ¥10,401 ¥23,711 ¥31,315 ¥3,524 ¥ 68,951Consolidated net sales....................................................................................................... 128,234Percentage of overseas net sales over consolidated net sales .............................................. 8.1% 18.5% 24.4% 2.8% 53.8%

Millions of yen

1 9 9 9

A s i a E u r o p e North America O t h e r s T o t a l

Overseas net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 8 , 3 8 7 ¥ 2 7 , 7 6 6 ¥ 4 1 , 7 8 0 ¥ 4 , 5 1 3 ¥ 8 2 , 4 4 6Consolidated net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 4 , 2 0 6Percentage of overseas net sales over consolidated net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . 8 % 1 9 . 3 % 2 9 . 0 % 3 . 1 % 5 7 . 2 %


2 0 0 1

A s i a E u r o p e North America O t h e r s T o t a l

Overseas net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 1 , 8 4 8 $ 1 9 3 , 2 6 1 $ 2 8 1 , 1 5 4 $ 2 7 , 5 7 9 $ 5 7 3 , 8 4 2Consolidated net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 , 0 5 4 , 7 3 8Percentage of overseas net sales over consolidated net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . 8% 1 8 . 3 % 2 6 . 7 % 2 . 6 % 5 4 . 4 %

25

15. TRANSACTIONS WITH RELATED COMPANIES

The outstanding common stock of the Company is owned 23.3% byHitachi, Ltd. (the other related company).

Balances with the other related company and subsidiaries of the oth-er related company as of March 31, 2001 and 2000, and related trans-actions for the years ended March 31, 2001, 2000 and 1999 aresummarized as follows:

Thousands ofMillions of yen U.S. dollars

2001 2000 2001

Balances:Other related company:

Trade receivables—accounts ............. ¥4,576 ¥4,444 $36,933

Subsidiaries of other related company:Trade receivables—accounts ............. 1,116 1,032 9,007Trade receivables—notes................... 1,565 1,385 12,631Trade payables—accounts ................. 2,154 2,615 17,385


2001 2000 1999 2001

Principal transactions:Other related company:

Consignment sales ............ ¥23,424 ¥25,271 ¥30,483 $189,056

Subsidiaries of other related company:Sales ..................................... 5,197 5,412 5,970 41,945Factoring .............................. 9,880 10,460 12,754 79,742

In accordance with the new disclosure requirement effective from theyear ended March 31, 2000, the information of the year ended March31, 1999 is restated to conform to the 2000 presentation.

To the Shareholders and the Board of Directors of

HITACHI KOKI CO., LTD.

We have audited the accompanying consolidated balance sheets of Hitachi Koki Co., Ltd. (a Japanese corporation) and subsidiaries as of March 31,2001 and 2000, the related consolidated statements of operations and shareholders’ equity for each of the three years in the period ended March 31,2001, and the consolidated statements of cash flows for the years ended March 31, 2001 and 2000, expressed in Japanese yen. Our audits weremade in accordance with generally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and suchother auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Hitachi Koki Co., Ltd. andsubsidiaries as of March 31, 2001 and 2000, the consolidated results of their operations for each of the three years in the period ended March 31,2001, and their cash flows for the years ended March 31, 2001 and 2000 in conformity with accounting principles generally accepted in Japan con-sistently applied during the periods, except as noted in the following paragraph.

As explained in Notes 1(b) and 1(j), in the year ended March 31, 2000, Hitachi Koki Co., Ltd. and subsidiaries prospectively adopted new Japaneseaccounting standards for consolidation and equity method accounting and income taxes. Also as explained in Notes 1(c), 1(e), 1(f) and 1(h), in theyear ended March 31, 2001, Hitachi Koki Co., Ltd. and subsidiaries prospectively adopted new Japanese accounting standards for foreign currencytranslation, financial instruments, derivative transactions and retirement benefits.

Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated from Japanese yen onthe basis set forth in Note 1.

Tokyo, JapanJune 27, 2001

Statement on Accounting Principles and Auditing StandardsThis statement is to remind users that accounting principles and auditing standards and their application in practice may vary among nations andtherefore could affect, possibly materially, the reported consolidated financial position and results of operations. The accompanying consolidatedfinancial statements are prepared based on accounting principles generally accepted in Japan, and the auditing standards and their application inpractice are those generally accepted in Japan. Accordingly, the accompanying consolidated financial statements and the auditors’ report presentedabove are for users familiar with Japanese accounting principles, auditing standards and their application in practice.

R e p o r t o f I ndependent Pub l ic Accountants


President & Director Yasutsugu Takeda

Senior Vice-President & Director Kozo Kagimoto

Vice-President & Director Tetsuo Tanaka

Board Directors Akio NagataSueo KawaiTakao SatoYasuyuki TsujiKiyohiko Shiiki

Corporate Auditors Motohisa NishiharaToshiaki HashimotoKazuo MoritaKunihiro Tanaka

Executive Managing Officer Yasuyuki Hirano

Executive Officers Sumihisa KotaniKensei HosoyaRyuichi NidairaToshio HikiKouji TakahashiYasuo KikuchiYouichi Nakatani

Stock Information

Founded December 1948

Capital ¥17,813,584,316

Number of Shares Authorized 270,000,000

Outstanding 123,072,776

Number of Shareholders 18,409

Percentage of Major Shareholders Total Shares Issued

1. Hitachi, Ltd. 22.98%

2. Chuo Shoji, Ltd. 8.99

3. The Mitsubishi Trust & Banking Corporation, Trust Account 3.41

4. The Sanwa Bank, Ltd. 2.94

5. Hitachi Koki Employees’ Shareholding Association 2.73

6. The Joyo Bank, Ltd. 1.85

7. The Industrial Bank of Japan, Ltd. 1.63

8. Nippon Trusty Service Trust & Banking Co., Ltd. 1.47

9. Boston Safe Deposit and Trust Company 1.44

10. Chuo Mitsui Trust & Banking Co., Ltd. 1.27

Corpo rate DataAs of March 31, 2001

B o a r d o f Di recto rs and Aud i to rsAs of June 27, 2001

27


Consol idated Subs id ia r ies

Company Name and Address Ownership

NORTH AMERICA

Hitachi Koki U.S.A., Ltd. 1 0 0 %3950 Steve Reynolds Blvd., Norcross, Georgia 30093, U.S.A.Tel: 1-770-925-1774 Fax: 1-770-279-4293

9409 Owensmouth Ave., Chatsworth, California 91311, U.S.A.Tel: 1-818-772-7972 Fax: 1-818-772-7969

Hitachi Koki Imaging Solutions, Inc. 1 0 0 %1757 Tapo Canyon Road, Simi Valley, California 93063-3392, U.S.A.Tel: 1-805-578-4000 Fax: 1-805-578-4001

EUROPE

Hitachi Koki Europe Ltd. 1 0 0 %Clonshaugh Industrial Estate, Dublin 17, IrelandTel: 353-1-803-6500 Fax: 353-1-803-6674

Hitachi Power Tools Belgium N.V./S.A. 1 0 0 %Koningin Astridlaan 51, B-1780 Wemmel, BelgiumTel: 32-2-460-1720 Fax: 32-2-460-2542

Hitachi Power Tools Europe GmbH 1 0 0 %Siemensring 34, 47877 Willich 1, F.R. GermanyTel: 49-02154-49930 Fax: 49-02154-499350

Hitachi Power Tools France S.A. 1 0 0 %Parc de l’ Eglantier 22, rue des Cersiers Lisses, C.E. 1541, 91015 EVRY CEDEX, FranceTel: 33-1-69474949 Fax: 33-1-60861416

Hitachi Power Tools Iberica, S.A. 1 0 0 %C/Migjorn, s/n, Poligono Norte, 08226 Terrassa (Barcelona), SpainTel: 34-93-735-6722 Fax: 34-93-735-7442

Hitachi Power Tools Netherlands B.V. 1 0 0 %Brabanthaven 11, 3433 PJ Nieuwegein, The NetherlandsTel: 31-3060-67486 Fax: 31-3060-67400

Hitachi Power Tools Österreich GmbH 1 0 0 %Str.7, Object 58/A6, Industriezentrum Nö-Süd, 2355 Wiener Neudorf, AustriaTel: 43-2236-64673/5 Fax: 43-2236-63373

Hitachi Power Tools (U.K.) Ltd. 1 0 0 %Precedent Drive, Rooksley, Milton Keynes, MK 13, 8PJ, U.K.Tel: 44-1908-660663 Fax: 44-1908-606642

A S I A / O C E A N I A

Hitachi Koki (Singapore) Pte. Ltd. 9 3 %12 Tuas Road, Jurong Industrial Estate, Singapore 638486Tel: 65-861-0211 Fax: 65-861-4066

Hitachi Koki (Malaysia) Sdn. Bhd. 7 6 %PLO53, Kawasan Perindustrian Senai (II), 81400 Senai, Johor, MalaysiaTel: 60-7-5992345 Fax: 60-7-5992355

Hitachi Koki India Ltd. 9 2 %No. 42, 3rd. Main Rd., Yeshwantpur, Industrial Suburb, Bangalore 560022, IndiaTel: 91-80-3471581 Fax: 91-80-3471543

Company Name and Address Ownership

Hitachi Koki Asia Co., Ltd. 1 0 0 %Unit A-D, 11th Floor, CDW Building, 388 Castle Peak Road,Tsuen Wan, N.T., Hong Kong, ChinaTel: 852-2437-9291 Fax: 852-2417-9432

Guang Dong Hitachi Koki Co., Ltd. 8 2 %Industry County Wealthy Zone, Industry Road, Hua Long Town Pan Yu, Guangdong, ChinaTel: 86-20-84-8754622 Fax: 86-20-84754623

Fujian Hitachi Koki Co., Ltd. 8 0 %Hutang, Fuxing Investment Zone, Fuzhou, Fujian, ChinaTel: 86-591-3620201 Fax: 86-591-3620518

Hitachi Power Tools Australia Pty. Ltd. 1 0 0 %Unit 37, Slough Business Park, Locked Bag 119, Silverwater, NSW 2128, AustraliaTel: 61-29-647-2022 Fax: 61-29-647-2921

Hitachi Koki Printer Asia Pte. Ltd. 1 0 0 %6, New Industrial Rd., #05-03/04 Hoe Huat Industrial Bldg., Singapore 536199Tel: 65-289-8484 Fax: 65-286-4286

D O M E S T I C

Hitachi Koki Sawa Co., Ltd. 1 0 0 %1450, Tarazaki, Hitachinaka, Ibaraki 312-0003Tel: 81-29-285-1112 Fax: 81-29-285-9740(Formerly Hitachi Koki Sawa Plant)

Hitachi Koki Haramachi Co., Ltd. 1 0 0 %70 Minami-Harada, Kita-Nagano, Haramachi, Fukushima 975-0072Tel: 81-244-26-1821 Fax: 81-244-24-5818

Hitachi Koki Yamagata Co., Ltd. 1 0 0 %1784 Urushiyama, Ohaza, Yamagata-City, Yamagata 990-2161Tel: 81-23-686-5211 Fax: 81-23-686-5457

Hitachi Koki Parts Center Co., Ltd. 1 0 0 %5-2-5, Higashi-Ueno, Taito-ku, Tokyo 110-0015 Tel: 81-3-5828-4911 Fax: 81-3-5828-4915

Nikko Sangyo Co., Ltd. 1 0 0 %1060 Takeda, Hitachinaka, Ibaraki 312-8502Tel: 81-29-276-7444 Fax: 81-29-276-7495

Hitachi Koki Information Technology, Ltd. 1 0 0 %1060 Takeda, Hitachinaka, Ibaraki 312-0025Tel: 81-29-276-7446 Fax: 81-29-276-7446(Formerly Hitachi Koki Engineering, Ltd.)

Hitachi Koki Sales Co., Ltd. 1 0 0 %5-3-2, Heiwajima, Ota-ku, Tokyo 143-0006Tel: 81-3-5753-7700 Fax: 81-3-5753-7669

As of March 31, 2001

Note: Hitachi Koki Parts Center Co., Ltd. changed its name from Hitachi KokiService Co., Ltd. on April 1, 2001.

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Katsuta Headquarters1060 Takeda, Hitachinaka

Ibaraki 312-8502, Japan

Head OfficeShinagawa Intercity Tower A, 20th Floor

15-1, Konan 2-chome, Minato-kuTokyo 108-6020, Japan

For further information, please write to:

Hitachi Koki Co., Ltd.Administration Department

Fax: 81-3-5783-0709E-mail: [email protected]

URL: http://www.hitachi-koki.com


Printed in Japan

hitachi koki co., ltd

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