Quarterly Report. (The Third Quarter of 149th Business Term) From October 1, 2017 to December 31, , Marunouchi 1-chome, Chiyoda-ku, Tokyo

Transcription

1 [Translation] Quarterly Report (The Third Quarter of 149th Business Term) From October 1, 2017 to 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo Hitachi, Ltd.

2 [Cover] [Document Filed] [Applicable Law] [Filed with] Quarterly Report ( Shihanki Hokokusho ) Article , Paragraph 1 of the Financial Instruments and Exchange Act of Japan Director, Kanto Local Finance Bureau [Filing Date] February 7, 2018 [Fiscal Year] The Third Quarter of 149th Business Term (from October 1, 2017 to ) [Company Name] [Company Name in English] [Title and Name of Representative] [Address of Head Office] Kabushiki Kaisha Hitachi Seisakusho Hitachi, Ltd. Toshiaki Higashihara, President & CEO 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo [Phone No.] [Contact Person] [Contact Address] Masachika Sawada, Manager, Legal Division 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo [Phone No.] [Contact Person] [Place Where Available for Public Inspection] Masachika Sawada, Manager, Legal Division Tokyo Stock Exchange, Inc. (2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo) Nagoya Stock Exchange, Inc. (8-20, Sakae 3-chome, Naka-ku, Nagoya) This is an English translation of the Quarterly Report filed with the Director of the Kanto Local Finance Bureau via Electronic Disclosure for Investors NETwork ( EDINET ) pursuant to the Financial Instruments and Exchange Act of Japan. The translation of the Confirmation Letter for the original Quarterly Report is included at the end of this document. Unless the context indicates otherwise, the term Company refers to Hitachi, Ltd. and the term Hitachi refers to the Company and its consolidated subsidiaries. Unless otherwise stated, in this document, where we present information in millions or hundreds of millions of yen, we have truncated amounts of less than one million or one hundred million, as the case may be. Accordingly, the total of figures presented in columns or otherwise may not equal the total of the individual items. We have rounded all percentages to the nearest percent, onetenth of one percent or one-hundredth of one percent, as the case may be. References in this document to the Financial Instruments and Exchange Act are to the Financial Instruments and Exchange Act of Japan and other laws and regulations amending and/or supplementing the Financial Instruments and Exchange Act of Japan.

3 Contents Part I Information on the Company 1 I. Overview of the Company 1 1. Key Financial Data 1 2. Description of Business 1 II. Business Overview 2 1. Risk Factors 2 2. Material Agreements, etc Analyses of Consolidated Financial Condition, Operating Results and Cash Flows 2 III. Information on the Company 8 1. Information on the Company s Stock, etc. 8 (1) Total number of shares, etc. 8 (2) Information on the stock acquisition rights, etc. 8 (3) Information on moving strike convertible bonds, etc. 8 (4) Information on shareholder right plans 8 (5) Changes in the total number of issued shares and the amount of common stock and other 8 (6) Major shareholders 8 (7) Information on voting rights 9 2. Changes in Senior Management 10 IV. Financial Information 10 Part II Information on Guarantors, etc. for the Company 10 [Condensed Quarterly Consolidated Financial Statements] F1 [Confirmation Letter] A1

4 Part I Information on the Company I. Overview of the Company 1. Key Financial Data Consolidated financial data, etc. Revenues Income from continuing operations, before income taxes Net income attributable to Hitachi, Ltd. stockholders Comprehensive income attributable to Hitachi, Ltd. stockholders Nine months ended December 31, 2016 (, unless otherwise stated) Nine months ended 6,519,311 6,674,028 [2,165,537] [2,297,561] Year ended March 31, ,162, , , , , ,582 [77,764] [97,969] 231, , , ,397 Total Hitachi, Ltd. stockholders equity 2,884,773 3,220,508 2,967,085 Total equity 4,066,913 4,449,438 4,096,995 Total assets 9,640,179 10,196,152 9,663,917 Earnings per share attributable to Hitachi, Ltd. stockholders, basic (yen) Earnings per share attributable to Hitachi, Ltd. stockholders, diluted (yen) [16.11] [20.29] Total Hitachi, Ltd. stockholders equity ratio (%) Net cash provided by operating activities 379, , ,582 Net cash used in investing activities (200,648) (314,238) (337,955) Net cash provided by (used in) financing activities (112,026) (142,413) (209,536) Cash and cash equivalents at end of period 763, , ,242 (Notes) 1. Hitachi's consolidated financial statements have been prepared in conformity with the International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board. 2. Revenues do not include the consumption tax, etc. 3. The figures of Revenues, Net income attributable to Hitachi, Ltd. stockholders and Earnings per share attributable to Hitachi, Ltd. stockholders, basic in square bracket are those for the three months ended December 31, 2016 and 2017, respectively. 2. Description of Business There were no material changes in principal businesses of Hitachi during the nine months ended. The Hitachi Group is comprised of the Company, 885 consolidated subsidiaries, and 398 equity-method associates and joint-ventures. Changes in principal affiliated companies during the nine months ended were as follows. Positioning of principal affiliated companies Main products and services Manufacturing Sales and services Information & Telecommunication Systems Social Infrastructure & Industrial Systems [Consolidated subsidiaries] (Change in company name) Hitachi Vantara Corporation [Consolidated subsidiaries] (New) Sullair US Purchaser, Inc. (Notes) 1. Hitachi Data Systems Corporation changed its name to Hitachi Vantara Corporation as of September 26, Sullair US Purchaser, Inc. has become a consolidated subsidiary of the Company on July 12, 2017 as Hitachi America, Ltd., a consolidated subsidiary of the Company, acquired Sullair US Purchaser, Inc., which is the holding company of companies that manufacture and sell air compressors with the Sullair brand. 1

5 II. Business Overview 1. Risk Factors There were no new risk factors recognized during the nine months ended. There were no material changes in the risk factors stated in the Annual Securities Report for the 148th business term pursuant to the Financial Instruments and Exchange Act of Japan. 2. Material Agreements, etc. No material agreements were entered into during the three months ended. The material agreement renewed after the end of three months ended until the filing date is as follows. Cross License Agreement Party Party Country Item under contract Contract description Contract period Hitachi, Ltd. (The Company) International Business Machines Corp. U.S.A. Information handling systems Cross license of patents From January 1, 2008 to the expiration of patents applied on or before January 1, Analyses of Consolidated Financial Condition, Operating Results and Cash Flows (1) Outline of Business Results Results of Operations During the nine months ended, the global economy expanded at a moderate pace. In the U.S., consumer spending and capital investment remained firm. In Europe, mainly in Germany, the economy continued to recover slowly. In China, increases in infrastructure spending and consumer spending underpinned economic growth. The Japanese economy has continued its moderate recovery trend, reflecting firm consumer spending due to improving employment and income and upward trend in capital investment. Under these conditions, results of operations in the nine months ended were as follows. Revenues increased 2% to 6,674.0 billion, as compared with the nine months ended December 31, 2016, due mainly to higher revenues in the Construction Machinery segment, in which overseas sales has increased mainly in China, and in the High Functional Materials & Components segment, in which sales of the electronics- and automotive-related products has increased. The increase was partially offset by the effect of the move to transform business portfolio such as conversion of Hitachi Capital Corporation and Hitachi Transport System, Ltd. to equity-method associates and deconsolidation of Hitachi Koki Co., Ltd. in the year ended March 31, Cost of sales increased 2% to 4,896.9 billion, as compared with the nine months ended December 31, 2016, and the ratio of cost of sales to revenues decreased 1% to 73%. Gross profit increased 4% to 1,777.0 billion, as compared with the nine months ended December 31, Selling, general and administrative expenses ( SG&A ) decreased 2% to 1,302.5 billion, as compared with the nine months ended December 31, 2016, and the ratio of SG&A to revenues was 20%, which was the same level as the nine months ended December 31, Other income decreased 37.4 billion to 4.6 billion, as compared with the nine months ended December 31, 2016, due mainly to the absence of net gain on business reorganization and others related to the sale of a part of shares of Hitachi Transport System, Ltd. recorded in the nine months ended December 31, Other expenses decreased 16.6 billion to 52.6 billion, as compared with the nine months ended December 31, 2016, due mainly to a decrease in restructuring charges (structural reform expenses). Financial income (excluding interest income) increased 1.3 billion to 7.1 billion and financial expenses (excluding interest charges) decreased 17.4 billion to 6.3 billion, as compared with the nine months ended December 31, 2016, respectively. Share of profits of investments accounted for using the equity method increased 11.3 billion to 45.4 billion, as compared with the nine months ended December 31, EBIT (earnings before interest and taxes, which is presented as income from continuing operations, before income taxes less interest income plus interest charges) increased billion to billion, as compared with the nine months ended December 31, Interest income increased 1.1 billion to 10.8 billion and interest charges increased 0.8 billion to 15.5 billion, as compared with the nine months ended December 31, Income from continuing operations, before income taxes increased billion to billion, as compared with the nine months ended December 31, Income taxes increased 29.6 billion to billion, as compared with the nine months ended December 31, Income from discontinued operations was 98 million, as compared with the loss of 0.8 billion for the nine months ended December 31, Net income increased 82.5 billion to billion, as compared with the nine months ended December 31, Net income attributable to non-controlling interests increased 15.2 billion to 93.2 billion, as compared with the nine months ended December 31, As a result of the foregoing, net income attributable to Hitachi, Ltd. stockholders increased 67.3 billion to billion, as compared with the nine months ended December 31,

6 Operations by Segment The following is an overview of results of operations by segment. Revenues for each segment include intersegment transactions. Segment profit is measured by EBIT. Since Hitachi Capital Corporation, which belonged to the Financial Services segment, was converted into an equity-method associate in October 2016, the Financial Services segment is not presented as a reportable segment from the year ending March 31, (Information & Telecommunication Systems) Revenues increased 1% to 1,413.0 billion, as compared with the nine months ended December 31, 2016, due mainly to higher revenues from system integration business for the Japanese market and the impact of foreign currency translation, despite lower sales of ATMs. Segment profit increased 52.8 billion to billion, as compared with the nine months ended December 31, 2016, due mainly to profitability improvement in system integration business in Japan, the effect of structural reform centered on the storage business and a decrease in restructuring charges. (Social Infrastructure & Industrial Systems) Revenues increased 2% to 1,622.9 billion, as compared with the nine months ended December 31, 2016, due mainly to revenue increase in railway systems business resulting from a rise in the sales of high-speed trains for the U.K. and that in industrial products business by acquiring air compressor business with Sullair brand (Sullair Business), despite the withdrawal from low-profitable business in the industry and distribution field. Segment profit increased 20.9 billion to 57.5 billion, as compared with the nine months ended December 31, 2016, due mainly to an improvement in profitability of business for the industry and distribution field, industrial products business and power & energy business. (Electronic Systems & Equipment) Revenues decreased 7% to billion, as compared with the nine months ended December 31, 2016, due mainly to the deconsolidation of Hitachi Koki Co., Ltd. in the year ended March 31, 2017, despite increased revenues at Hitachi Kokusai Electric Inc. and Hitachi High-Technologies Corporation owing to higher sales of semiconductor production equipment. Segment profit increased 7.7 billion to 56.6 billion, as compared with the nine months ended December 31, 2016, due mainly to higher earnings at Hitachi Kokusai Electric Inc. (Construction Machinery) Revenues increased 35% to billion, as compared with the nine months ended December 31, 2016, due mainly to increased sales of construction machinery in China and other overseas countries, and corporate acquisitions in Australia and the U.S. conducted by Hitachi Construction Machinery Co., Ltd. in the year ended March 31, Segment profit increased 61.3 billion to 70.5 billion, as compared with nine months ended December 31, 2016, due mainly to the increased revenues and higher share of profits of investments accounted for using the equity methods. (High Functional Materials & Components) Revenues increased 15% to 1,230.8 billion, as compared with the nine months ended December 31, 2016, due mainly to increased sales of the electronics- and automotive-related products at Hitachi Metals, Ltd. and Hitachi Chemical Company, Ltd., and corporate acquisition in Italy conducted by Hitachi Chemical Company, Ltd. in the year end of March 31, Segment profit decreased 6.4 billion to 85.2 billion, as compared with nine months ended December 31, 2016, due mainly to the absence of gains on business reorganization recorded at Hitachi Metals, Ltd. in the nine months ended December 31, 2016 and posting expenses related to competition law and others at Hitachi Chemical Company, Ltd. (Automotive Systems) Revenues increased 2% to billion, as compared with the nine months ended December 31, 2016, due mainly to increased sales of automotive parts mainly in China and the positive impact of foreign currency translation. Segment profit decreased 5.4 billion to 30.1 billion, as compared with the nine months ended December 31, 2016, due mainly to deteriorated profitability of car information system business and sales decrease in North America. (Smart Life & Ecofriendly Systems) Revenues decreased 5% to billion, as compared with the nine months ended December 31, Segment profit increased 5.3 billion to 24.6 billion, as compared with the nine months ended December 31, 2016, due mainly to an increase in share of profits of investments accounted for using the equity method and the effect of the cost reduction efforts. (Others) Revenues decreased 18% to billion, as compared with the nine months ended December 31, 2016, due mainly to the conversion of Hitachi Transport System, Ltd. to an equity-method associate in May Segment profit increased 2.9 billion to 17.5 billion, as compared with the nine months ended December 31,

7 Revenues by Market Revenues in Japan decreased 3% to 3,190.5 billion, as compared with the nine months ended December 31, 2016, due mainly to decreased revenues in the Social Infrastructure & Industrial Systems segment and the conversion of Hitachi Transport System, Ltd. and Hitachi Capital Corporation to equity-method associates, despite higher revenues in the High Functional Materials & Components segment. Overseas revenues increased 8% to 3,483.5 billion, as compared with the nine months ended December 31, 2016, due mainly to increased revenues in Asia mainly in the Construction Machinery, Electronic Systems & Equipment and High Functional Materials & Components segments, despite decreased revenues in Europe mainly in the Electronic Systems & Equipment segment, in which Hitachi Koki Co., Ltd. was deconsolidated. As a result, the ratio of overseas revenues to total revenues increased 3% to 52%, as compared with the nine months ended December 31, (2) Summary of Financial Condition, etc. Liquidity and Capital Resources During the nine months ended, there were no major changes in the Company s policies of maintaining liquidity and ensuring funds, efforts for improvement in fund management efficiency, and ideas regarding funding sources and fundraising. Cash Flows (Cash flows from operating activities) Net income in the nine months ended increased by 82.5 billion, as compared with the nine months ended December 31, Net cash inflow from a change in trade receivables increased by billion. Net cash inflow from a change in trade payables decreased by 40.1 billion as compared with nine months ended December 31, Net cash outflow from a change in inventories increased by billion and income taxes paid increased by 61.3 billion, respectively, as compared with nine months ended December 31, As a result of the foregoing, Net cash provided by operating activities was billion in the nine months ended, an increase of 94.0 billion compared with the nine months ended December 31, (Cash flows from investing activities) Net amount of investments related to property, plant and equipment* was billion in the nine months ended December 31, This net sum decreased by 66.4 billion compared with the nine months ended December 31, Purchase of investments in securities and other financial assets (including investments in subsidiaries and investments accounted for using the equity method) in the nine months ended increased by billion, as compared with the nine months ended December 31, 2016, by acquiring air compressor business with Sullair brand. Proceeds from sale of investments in securities and other financial assets (including investments in subsidiaries and investments accounted for using the equity method) in the nine months ended increased by 1.8 billion, as compared with the nine months ended December 31, As a result of the foregoing, net cash used in investing activities was billion in the nine months ended, an increase of billion compared with the nine months ended December 31, * The sum of the purchase of property, plant and equipment, the purchase of intangible assets and the purchase of leased assets, less the proceeds from sale of property, plant and equipment, and intangible assets, the proceeds from sale of leased assets and the collection of lease receivables (Cash flows from financing activities) Net cash inflow from a change in short-term debt in the nine months ended was 47.4 billion as compared with billion of net cash outflow in the nine months ended December 31, Payments related to long-term debt** in nine months ended was 88.7 billion, as compared with billion of proceeds related to longterm debt in nine months ended December 31, As a result of the foregoing, net cash flows used in financing activities was billion in the nine months ended, an increase of 30.3 billion compared with nine months ended December 31, ** The proceeds from long-term debt, less the payments on long-term debt As a result of the foregoing, cash and cash equivalents as of was billion, an increase of 46.0 billion from March 31, Free cash flows, the sum of cash flows from operating and investing activities, were an inflow of billion in the nine months ended, a decrease of 19.5 billion in the nine months ended December 31,

8 Assets, Liabilities and Equity The following is an overview of Hitachi s assets, liabilities and equity as of. Total assets were 10,196.1 billion, an increase of billion from March 31, This was due mainly to the acquisition of air compressor business with Sullair brand and an increase in inventories reflecting production progress. Total interest-bearing debt, the sum of short-term debt and long-term debt, was 1,246.9 billion, an increase of 70.3 billion from March 31, This was due mainly to an increase in short-term debt. Total Hitachi, Ltd. stockholders equity increased by billion from March 31, 2017, to 3,220.5 billion, due mainly to posting net income attributable to Hitachi, Ltd. stockholders. The ratio of total Hitachi, Ltd. stockholders equity to total assets increased 0.9% from March 31, 2017 to 31.6%. Non-controlling interests were 1,228.9 billion, an increase of 99.0 billion from March 31, Total equity was 4,449.4 billion, an increase of billion from March 31, The ratio of interest-bearing debt to total equity was 0.28, as compared with 0.29 as of March 31, (3) Management Policy There were no material changes in Hitachi s management policy during the nine months ended. (4) Challenges Facing Hitachi Group 1) Business and Financial Condition There were no material changes in Hitachi s business strategy during the nine months ended. 2) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company s Financial and Business Policies The Group invests a great deal of business resources in fundamental research and in the development of market-leading products and businesses that will bear fruit in the future, and realizing the benefits from these management policies requires that they be continued for a set period of time. For this purpose, the Company keeps its shareholders and investors well informed of not just the business results for each period but also of the Company s business policies for creating value in the future. The Company does not deny the significance of the vitalization of business activities and performance that can be brought about through a change in management control, but it recognizes the necessity of determining the impact on company value and the interests of all shareholders of the buying activities and buyout proposals of parties attempting to acquire a large share of stock of the Company or a Group company by duly examining the business description, future business plans, past investment activities, and other necessary aspects of such a party. There is no party that is currently attempting to acquire a large share of the Company s stocks nor is there a specific threat, neither does the Company intend to implement specified so-called anti-takeover measures in advance of the appearance of such a party, but the Company does understand that it is one of the natural duties bestowed upon it by the shareholders and investors to continuously monitor the state of trading of the Company s stock and then to immediately take what the Company deems to be the best action in the event of the appearance of a party attempting to purchase a large share of the Company s stock. In particular, together with outside experts, the Company will evaluate the buyout proposal of the party and hold negotiations with the buyer, and if the Company deems that said buyout will not maintain the Company s value and is not in the best interest of the shareholders, then the Company will quickly determine the necessity, content, etc., of specific countermeasures and prepare to implement them. The same response will also be taken in the event a party attempts to acquire a large percentage of the shares of a Group company. 5

9 (5) Research and Development There were no material changes in the research and development of the Hitachi Group (the Company and consolidated subsidiaries) stated in the Annual Securities Report for the 148th business term pursuant to the Financial Instruments and Exchange Act of Japan. The Hitachi Group s R&D expenditures in the nine months ended were billion, 3.6% of revenues. A breakdown of R&D expenditures by segment is shown below. (Billions of yen) Segment Nine months ended Information & Telecommunication Systems 36.0 Social Infrastructure & Industrial Systems 40.3 Electronic Systems & Equipment 36.9 Construction Machinery 16.4 High Functional Materials & Components 35.4 Automotive Systems 51.7 Smart Life & Ecofriendly Systems 5.3 Others 1.6 Corporate Items 16.5 Total

10 (6) Forward-Looking Statements Certain statements found in 3. Analyses of Consolidated Financial Condition, Operating Results and Cash Flows and other descriptions in this report may constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of Such forward-looking statements reflect management s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as anticipate, believe, expect, estimate, forecast, intend, plan, project and similar expressions which indicate future events and trends may identify forward-looking statements. Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements and from historical trends. Certain forward-looking statements are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on forward-looking statements, as such statements speak only as of the date of this report. Factors that could cause actual results to differ materially from those projected or implied in any forward-looking statement and from historical trends include, but are not limited to: economic conditions, including consumer spending and plant and equipment investment in Hitachi s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the major industrial sectors Hitachi serves; exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi s assets and liabilities are denominated; uncertainty as to Hitachi s ability to access, or access on favorable terms, liquidity or long-term financing; uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds; fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales; credit conditions of Hitachi s customers and suppliers; fluctuations in product demand and industry capacity; uncertainty as to Hitachi s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or shortages of materials, parts and components; uncertainty as to Hitachi s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance for such products; increased commoditization of and intensifying price competition for products; uncertainty as to Hitachi s ability to attract and retain skilled personnel; uncertainty as to Hitachi s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business; uncertainty as to the success of acquisitions of other companies, joint ventures and strategic alliances and the possibility of incurring related expenses; uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness; the potential for significant losses on Hitachi s investments in equity-method associates and joint ventures; general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations; uncertainty as to the success of cost structure overhaul; uncertainty as to Hitachi s access to, or ability to protect, certain intellectual property; uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity-method associates and joint ventures have become or may become parties; the possibility of incurring expenses resulting from any defects in products or services of Hitachi; the possibility of disruption of Hitachi s operations by natural disasters such as earthquakes and tsunamis, the spread of infectious diseases, and geopolitical and social instability such as terrorism and conflict; uncertainty as to Hitachi s ability to maintain the integrity of its information systems, as well as Hitachi s ability to protect its confidential information or that of its customers; and uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its employee benefit-related costs. The factors listed above are not all-inclusive and are in addition to other factors contained elsewhere in this report and in other materials published by Hitachi. 7

11 III. Information on the Company 1. Information on the Company s Stock, etc. (1) Total number of shares, etc. 1) Total number of shares Class Total number of shares authorized to be issued (shares) Common stock 10,000,000,000 Total 10,000,000,000 2) Issued shares Class Number of shares issued as of the end of third quarter (shares) () Number of shares issued as of the filing date (shares) (February 7, 2018) Stock exchange on which the Company is listed Description Common stock 4,833,463,387 4,833,463,387 Tokyo, Nagoya The number of shares per one unit of shares is 1,000 shares. Total 4,833,463,387 4,833,463, (Note) The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rights from February 1, 2018 to February 7, (2) Information on the stock acquisition rights, etc. Not applicable. (3) Information on moving strike convertible bonds, etc. Not applicable. (4) Information on shareholder right plans Not applicable. (5) Changes in the total number of issued shares and the amount of common stock and other Date From October 1, 2017 to Change in the total number of issued shares (shares) Balance of the total number of issued shares (shares) Change in common stock (Millions of yen) Balance of common stock (Millions of yen) Change in capital reserve (Millions of yen) Balance of capital reserve (Millions of yen) - 4,833,463, , ,757 (6) Major shareholders Not applicable. 8

12 (7) Information on voting rights Information on voting rights as of September 30, 2017 is stated in this item because the Company does not identify the number of voting rights as of due to the lack of information on the number of the Company s shares held by the entity which the Company holds one quarter or more of total number of voting rights of such entity as of. 1) Issued shares Classification Number of shares (shares) (As of September 30, 2017) Number of voting rights Description Shares without voting right Shares with restricted voting right (treasury stock, etc.) Shares with restricted voting right (others) Shares with full voting right (treasury stock, etc.) Common stock 5,741, Shares with full voting right (others) Common stock 4,806,516,000 4,806,516 - Shares less than one unit Common stock 21,206, Number of issued shares 4,833,463, Total number of voting rights - 4,806,516 - (Note) The Shares with full voting right (others) column includes 26,000 shares registered in the name of Japan Securities Depository Center, Incorporated (account for managing stocks whose shareholders have not transferred titles) and 26 voting rights for those shares. 2) Treasury stock, etc. (As of September 30, 2017) Name of shareholder Address Number of shares held under own name (shares) Number of shares held under the names of others (shares) Total shares held (shares) Ownership percentage to the total number of issued shares (%) Hitachi, Ltd. Aoyama Special Steel Co., Ltd. ISHII DENKOSHA Co., Ltd. SAITA KOUGYOU CO., LTD. Nitto Jidosha Kiki K.K. Mizuho Co., Inc. 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo 1-12, Minato 1-chome, Chuo-ku, Tokyo 1-11, Oroshishinmachi 3- chome, Higashi-ku, Niigata-shi, Niigata 5-3, Takinogawa 5-chome, Kitaku, Tokyo 3268, Nagaoka, Ibarakimachi, Higashiibaraki-gun, Ibaraki 4-1, Koishikawa 5-chome, Bunkyo-ku, Tokyo 5,575,000-5,575, ,000-10, ,000-1, ,000-88, ,000-52, ,000-15, Total - 5,741,000-5,741,

13 2. Changes in Senior Management Changes in senior managements from the filing date of the Annual Securities Report for the 148th business term to were as follows. 1) Changes in Responsibility [Effective October 1, 2017] Former Position and responsibility New Position and responsibility Position Responsibility Position Responsibility Representative Executive Officer Executive Vice President and Executive Officer Assistant to the President and management strategies Representative Executive Officer Executive Vice President and Executive Officer Assistant to the President, management strategies and information security management Name Toshikazu Nishino (Note) Matters delegated to the Executive Officer by the Board of Directors are described in Responsibility column. 2) The Number of Men and Women and Women's Percentage after Changes in Senior Management Men: 45 persons, Women: 2 persons (Women s percentage to total number of Directors and Executive Officers: 4%) The numbers and the percentage mentioned above are the same as those described in the Annual Securities Report for the 148th business term. IV. Financial Information Refer to the condensed quarterly consolidated financial statements incorporated in this Quarterly Report. Part II Information on Guarantors, etc. for the Company Not applicable. 10

14 Condensed Quarterly Consolidated Financial Statements Condensed Quarterly Consolidated Statement of Financial Position March 31, 2017 Assets Current assets Cash and cash equivalents 811, ,242 Trade receivables 2,214,369 2,433,149 Inventories 1,559,471 1,225,907 Investments in securities and other financial assets (note 2 and 6) 325, ,792 Other current assets (note 2) 249, ,516 Non-current assets Total current assets 5,160,190 5,002,606 Investments accounted for using the equity method 732, ,251 Investments in securities and other financial assets (note 2 and 6) 752, ,350 Property, plant and equipment 2,127,457 1,998,411 Intangible assets 1,121, ,201 Other non-current assets 301, ,098 Total non-current assets 5,035,962 4,661,311 Total assets 10,196,152 9,663,917 Liabilities Current liabilities Short-term debt 283, ,357 Current portion of long-term debt (note 6) 130, ,233 Other financial liabilities (note 6) 282, ,270 Trade payables 1,481,975 1,402,233 Accrued expenses 594, ,905 Advances received 546, ,132 Other current liabilities 533, ,729 Non-current liabilities Equity Total current liabilities 3,853,265 3,720,859 Long-term debt (note 6) 832, ,013 Retirement and severance benefits 619, ,684 Other non-current liabilities (note 2) 441, ,366 Total non-current liabilities 1,893,449 1,846,063 Total liabilities 5,746,714 5,566,922 Hitachi, Ltd. stockholders equity Common stock 458, ,790 Capital surplus 575, ,573 Retained earnings (note 7) 1,995,609 1,793,570 Accumulated other comprehensive income 194, ,068 Treasury stock, at cost (4,092) (3,916) Total Hitachi, Ltd. stockholders equity 3,220,508 2,967,085 Non-controlling interests 1,228,930 1,129,910 Total equity 4,449,438 4,096,995 Total liabilities and equity 10,196,152 9,663,917 See accompanying notes to condensed quarterly consolidated financial statements. F-1

15 Condensed Quarterly Consolidated Statement of Profit or Loss Nine months ended and Revenues 6,674,028 6,519,311 Cost of sales (4,896,973) (4,817,183) Gross profit 1,777,055 1,702,128 Selling, general and administrative expenses (1,302,504) (1,329,021) Other income (note 8) 4,613 42,025 Other expenses (note 8) (52,624) (69,269) Financial income (note 9) 7,142 5,796 Financial expenses (note 9) (6,302) (23,704) Share of profits of investments accounted for using the equity method 45,469 34,100 EBIT (Earnings before interest and taxes) 472, ,055 Interest income 10,821 9,623 Interest charges (15,518) (14,715) Income from continuing operations, before income taxes 468, ,963 Income taxes (116,464) (86,853) Income from continuing operations 351, ,110 Income (loss) from discontinued operations (note 10) 98 (869) Net income 351, ,241 Net income attributable to: Hitachi, Ltd. stockholders 258, ,264 Non-controlling interests 93,204 77,977 Earnings per share from continuing operations, attributable to Hitachi, Ltd. stockholders (note 11) Basic Diluted Earnings per share attributable to Hitachi, Ltd. stockholders (note 11) Basic Diluted Condensed Quarterly Consolidated Statement of Comprehensive Income Nine months ended and Net income 351, ,241 Other comprehensive income (OCI) Items not to be reclassified into net income Net changes in financial assets measured at fair value through OCI 13,632 36,164 Remeasurements of defined benefit plans (505) (719) Share of OCI of investments accounted for using the equity method 1,438 (31) Total items not to be reclassified into net income 14,565 35,414 Items that can be reclassified into net income Foreign currency translation adjustments 82,338 (26,592) Net changes in cash flow hedges 1,426 18,434 Share of OCI of investments accounted for using the equity method (12) (10,717) Total items that can be reclassified into net income 83,752 (18,875) Other comprehensive income (OCI) 98,317 16,539 Comprehensive income 450, ,780 Comprehensive income attributable to: Hitachi, Ltd. stockholders 324, ,520 Non-controlling interests 125,475 77,260 See accompanying notes to condensed quarterly consolidated financial statements. F-2

16 Condensed Quarterly Consolidated Statement of Profit or Loss Three months ended and Revenues 2,297,561 2,165,537 Cost of sales (1,691,374) (1,597,575) Gross profit 606, ,962 Selling, general and administrative expenses (434,879) (427,695) Other income 2, Other expenses (11,685) (25,959) Financial income 2,277 1,941 Financial expenses (12,124) (4,425) Share of profits of investments accounted for using the equity method 23,977 30,781 EBIT (Earnings before interest and taxes) 176, ,490 Interest income 4,097 4,047 Interest charges (5,364) (4,739) Income from continuing operations, before income taxes 175, ,798 Income taxes (43,609) (33,291) Income from continuing operations 131, ,507 Income (loss) from discontinued operations 1,372 (893) Net income 132, ,614 Net income attributable to: Hitachi, Ltd. stockholders 97,969 77,764 Non-controlling interests 34,884 30,850 Earnings per share from continuing operations, attributable to Hitachi, Ltd. stockholders (note 11) Basic Diluted Earnings per share attributable to Hitachi, Ltd. stockholders (note 11) Basic Diluted Condensed Quarterly Consolidated Statement of Comprehensive Income Three months ended and Net income 132, ,614 Other comprehensive income (OCI) Items not to be reclassified into net income Net changes in financial assets measured at fair value through OCI 7,210 52,601 Remeasurements of defined benefit plans (505) (255) Share of OCI of investments accounted for using the equity method Total items not to be reclassified into net income 7,293 53,136 Items that can be reclassified into net income Foreign currency translation adjustments 25, ,025 Net changes in cash flow hedges 2,098 (5,322) Share of OCI of investments accounted for using the equity method (9,496) 30,921 Total items that can be reclassified into net income 18, ,624 Other comprehensive income (OCI) 25, ,760 Comprehensive income 158, ,374 Comprehensive income attributable to: Hitachi, Ltd. stockholders 112, ,676 Non-controlling interests 46, ,698 See accompanying notes to condensed quarterly consolidated financial statements. F-3

17 Condensed Quarterly Consolidated Statement of Changes in Equity Nine months ended 2017 Common stock Capital surplus Retained earnings (note 7) Accumulated other comprehensive income Treasury stock, at cost Total Hitachi, Ltd. stockholders equity Noncontrolling interests Total equity Balance at beginning of period 458, ,573 1,793, ,068 (3,916) 2,967,085 1,129,910 4,096,995 Changes in equity Reclassified into retained earnings ,048 (11,048) Net income , ,582 93, ,786 Other comprehensive income ,046-66,046 32,271 98,317 Dividends to Hitachi, Ltd. stockholders - - (67,591) - - (67,591) - (67,591) Dividends to non-controlling interests (31,427) (31,427) Acquisition of treasury stock (232) (232) - (232) Sales of treasury stock - (24) Changes in non-controlling interests - (1,575) - (1,839) - (3,414) 4,972 1,558 Total changes in equity - (1,599) 202,039 53,159 (176) 253,423 99, ,443 Balance at end of period 458, ,974 1,995, ,227 (4,092) 3,220,508 1,228,930 4,449,438 Nine months ended December 31, Common stock Capital surplus Retained earnings (note 7) Accumulated other comprehensive income Treasury stock, at cost Total Hitachi, Ltd. stockholders equity Noncontrolling interests (note 5) Total equity Balance at beginning of period 458, ,790 1,609,761 83,543 (3,806) 2,735,078 1,390,492 4,125,570 Changes in equity Reclassified into retained earnings - - 7,857 (7,857) Net income , ,264 77, ,241 Other comprehensive income (loss) ,256-17,256 (717) 16,539 Dividends to Hitachi, Ltd. stockholders - - (57,939) - - (57,939) - (57,939) Dividends to non-controlling interests (37,476) (37,476) Acquisition of treasury stock (106) (106) - (106) Sales of treasury stock - (15) Changes in non-controlling interests - (639) - (166) - (805) (248,136) (248,941) Total changes in equity - (654) 141,182 9,233 (66) 149,695 (208,352) (58,657) Balance at end of period 458, ,136 1,750,943 92,776 (3,872) 2,884,773 1,182,140 4,066,913 See accompanying notes to condensed quarterly consolidated financial statements. F-4

18 Condensed Quarterly Consolidated Statement of Cash flows Nine months ended and Cash flows from operating activities: Net income 351, ,241 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 271, ,915 Impairment losses 2,297 28,407 Income taxes 116,473 86,919 Share of profits of investments accounted for using the equity method (45,469) (34,100) Financial income and expenses (2,200) (393) Net gain on business reorganization and others (2,746) (39,184) (Gain) loss on sale of property, plant and equipment 73 (704) Change in trade receivables 369, ,473 Change in inventories (321,693) (184,285) Change in other assets (28,153) (2,780) Change in trade payables 1,146 41,279 Change in retirement and severance benefits (20,484) (30,268) Change in other liabilities (36,370) (81,899) Other (9,984) 5,976 Subtotal 645, ,597 Interest received 10,815 8,420 Dividends received 16,695 12,710 Interest paid (16,746) (15,653) Income taxes paid (183,209) (121,897) Net cash provided by (used in) operating activities 473, ,177 Cash flows from investing activities: Purchase of property, plant and equipment (251,105) (231,553) Purchase of intangible assets (62,412) (70,069) Purchase of leased assets (2,653) (264,487) Proceeds from sale of property, plant and equipment, and intangible assets 11,054 26,696 Proceeds from sale of leased assets 7,118 10,415 Collection of lease receivables - 164,516 Purchase of investments in securities and other financial assets (including investments in subsidiaries and investments accounted for using the equity method) (165,074) (34,269) Proceeds from sale of investments in securities and other financial assets (including investments in subsidiaries and investments accounted for using the equity method) 159, ,702 Other (10,738) 40,401 Net cash provided by (used in) investing activities (314,238) (200,648) Cash flows from financing activities: Change in short-term debt, net 47,405 (156,740) Proceeds from long-term debt 137, ,144 Payments on long-term debt (226,223) (351,809) Proceeds from payments from non-controlling interests 3,953 7,009 Dividends paid to Hitachi, Ltd. stockholders (67,614) (57,977) Dividends paid to non-controlling interests (31,126) (36,300) Acquisition of common stock for treasury (232) (106) Proceeds from sales of treasury stock Purchase of shares of consolidated subsidiaries from non-controlling interests (6,234) (4,305) Proceeds from partial sales of shares of consolidated subsidiaries to non-controlling interests Other (63) (27) Net cash provided by (used in) financing activities (142,413) (112,026) Effect of exchange rate changes on cash and cash equivalents 29,523 (2,402) Change in cash and cash equivalents 46,082 64,101 Cash and cash equivalents at beginning of period 765, ,315 Cash and cash equivalents at end of period 811, ,416 See accompanying notes to condensed quarterly consolidated financial statements. F-5

19 Notes to Condensed Quarterly Consolidated Financial Statements (1) Nature of Operations Hitachi, Ltd. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The condensed quarterly consolidated financial statements of the Company as of and for the nine months ended comprise the Company, its subsidiaries, and the Company s interests in associates and joint ventures. The Company s and its subsidiaries businesses are global and diverse, and include manufacturing and services in eight segments consisting of information and telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, smart life and ecofriendly systems and others. (2) Basis of Presentation As the Company meets the requirements of a Specified Company applying Designated International Financial Reporting Standards pursuant to Article 1-2 of the Ordinance on the Terminology, Forms, and Preparation Methods of Quarterly Consolidated Financial Statements (Cabinet Office Ordinance No.64 of 2007), the condensed quarterly consolidated financial statements of the Company have been prepared in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting, as permitted by the provision of Article 93 of the Ordinance. They do not include all the information and disclosures required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS), and should be read in conjunction with the financial statements and notes included in the Company s annual consolidated financial statements for the year ended March 31, Management of the Company has made a number of judgments, estimates and assumptions relating to the application of accounting policies, reporting of revenues and expenses and assets and liabilities in the preparation of these condensed quarterly consolidated financial statements. Actual results could differ from those estimates. Estimates and assumptions are continually evaluated. The effects of a change in accounting estimates, if any, is recognized in the reporting period in which the change was made and in future periods. Judgments, estimates and assumptions that could have a material effect on these condensed quarterly consolidated financial statements are basically the same as those disclosed in the Company s annual consolidated financial statements for the year ended March 31, Regarding the condensed quarterly consolidated statement of financial position, changes in presentation have been made effective the fiscal year beginning April 1, 2017 due to materiality of some account balances as a result of business reorganization and others. Investments in securities and other financial assets, which were included in Other current assets as of March 31, 2017, have been reclassified and presented separately. Lease receivables, which were separately presented under current and noncurrent assets, have been included in Investments in securities and other financial assets under current and non-current assets, respectively. Other financial liabilities, which were separately presented under non-current liabilities, have been included in Other non-current liabilities. The consolidated statement of financial position as of March 31, 2017 has been reclassified in order to reflect these changes in presentation. As a result, regarding the consolidated statement of financial position as of March 31, 2017, Other current assets of 346,427 million have been reclassified as Investments in securities and other financial assets. In addition, Lease receivables of 42,365 million and 38,646 million, which were presented separately under current and non-current assets, have been reclassified as Investments in securities and other financial assets under current and non-current assets, respectively. Other financial liabilities of 53,422 million, which were presented separately under non-current liabilities, have been reclassified as Other noncurrent liabilities. (3) Significant Accounting Policies Significant accounting policies adopted in preparation of the condensed quarterly consolidated financial statements are consistent with those used in the preparation of the Company s annual consolidated financial statements for the year ended March 31, Income taxes for the nine months ended are computed using the estimated annual effective tax rate. F-6