Report of Earnings and Financial Statements for the
Six Months Ended September 30, 2019 (Consolidated)(Prepared pursuant to Japanese GAAP)
October 31, 2019
Listed company’s name:

Kawasaki Heavy Industries, Ltd.

Listed on:
Stock code:
URL:
Representative:
Contact:
Tel:

1st sections of the TSE, and NSE
7012
https://www.khi.co.jp/
Yoshinori Kanehana, President
Tatsuo Hoshino, Senior Manager, Accounting Department+81 3-3435-2130

Scheduled dates:
Submission of quarterly securities filing:
Commencement of dividend payments:
Supplementary materials to quarterly earnings:
Quarterly earnings presentation:

November 6, 2019
December 2, 2019
Available
Conducted (for institutional investors, analysts and thepress)(Amounts in millions of yen rounded down to the nearest million yen)

1. Consolidated Financial Results for the Six Months ended September 30, 2019
(April 1, 2019 – September 30, 2019)(1) Operating Results
Net sales(Percentage figures represent changes versus the year-ago period)
Net income attributable
Operating income
Recurring profit
to owners of parent
million yen%
million yen%
million yen%

million yen%
Six Months Ended
736,565
7.0
8,678
2.6
830
300.5
September 30, 2019
Six Months Ended
688,107(3.0)
8,454 (47.5)
207 (98.6)
September 30, 2018
Note: Comprehensive income: Six months ended September 30, 2019: ¥(7,763) million-%
Note: Comprehensive income: Six months ended September 30, 2018: ¥(3,628) million-%
Earnings per share
Earnings per share– diluted
yenyen
Six Months Ended(22.34)September 30, 2019
Six Months Ended(21.50)
September 30, 2018

(2) Financial Condition

Six Months Ended
September 30, 2019Year ended
March 31, 2019

Total assets

Net assets

million yen

million yen%

1,949,784

473,18123.4

1,838,855

492,26125.9

1Equity ratio(3,733)-(3,592)-

Note: Shareholders’ equity: Six months ended September 30, 2019: ¥457,535 million
Note: Shareholders’ equity: Year ended March 31, 2019: ¥ 476,387 million

2. Dividends

Record date or term

End of firstquarteryen

End of second
quarter
yen

-

35.00

-

35.00

Year ended
March 31, 2019Year ending
March 31, 2020
Year ending March
31, 2020 (forecast)

Dividend per share
End of third
End of fiscal
quarter
year
yen
yen

Full year
yen

-

35.00

70.00

-

35.00

70.00

Note: Revisions to the most recently announced dividend forecast: None

3. Forecast of Consolidated Earnings for the Year Ending March 31, 2020
(April 1, 2019 – March 31, 2020)
Net sales

Full year

million yen%

1,660,000

4.0(Percentage figures represent changes versus the year-ago period)
Net income
Earnings per
Operating income
Recurring profit
attributable to owners
shareof parent
million yen%
million yen%
million yen%
yen
56,000(12.5)

Note: Revisions to the most recently announced earnings forecast: None241,0008.2

25,000(8.9)

149.66

Notes1) Changes affecting the status of material subsidiaries (scope of consolidation): None2) Accounting procedures specific to preparation of quarterly consolidated financial statements: Yes*For further details, see “2.Consolidated Financial Statements (4)Notes on financial statements” onpage 15 in the Accompanying Materials.
3) Changes in accounting policies, changes in accounting estimates, and correction of errors(1) Changes in accounting policies in accord with revisions to accounting standards: Yes(2) Changes in accounting policies other than (1): None
(3) Changes in accounting estimates: None
(4) Correction of errors: None
4) Number of shares issued and outstanding (common stock)(1) Number of shares issued as of period-end (including treasury stock)
September 30, 2019:
167,080,532 shares
March 31, 2019:
167,080,532 shares(2) Number of shares held in treasury as of period-end
September 30, 2019:35,795 shares
March 31, 2019:35,196 shares(3) Average number of shares during respective periods
September 30, 2019:
167,044,988 shares
September 30, 2018:
167,046,946 shares

The quarterly report of earnings and financial statements is exempted from quarterly review
procedures based on the Financial Instruments and Exchange act.
Appropriate Use of Financial Forecasts and Other Important Matters
Forward-Looking Statements
These materials contain various forward-looking statements and other forecasts regarding performanceand other matters. Such statements are based on information available at the time of their preparation, anddo not mean that the Company promises to achieve these figures. Actual results may differ from thoseexpressed or implied by forward-looking statements due to a range of factors. For assumptions underlying
earnings forecasts and other information regarding the use of such forecasts, refer to “1. Qualitative
Information and Financial Statements (3) Consolidated earnings outlook ” on page 10 in the
Accompanying Materials.
How to Obtain Supplementary Briefing Material on Quarterly Financial Results and Details of theQuarterly Financial Results Briefing
The Company plans to conduct a briefing for institutional investors, analysts and the press by conference
call on Thursday October 31, 2019, and to post the briefing material on quarterly financial results to be
used for the briefing on TDnet and the Company’s website simultaneously with the announcement offinancial results.

3

Accompanying Materials – Contents
1. Qualitative Information and Financial Statements

5(1) Consolidated operating results

5(2) Consolidated financial position

10(3) Consolidated earnings outlook

10

2. Consolidated Financial Statements

11(1) Consolidated balance sheets

11(2) Consolidated statements of income and comprehensive income13(3) Consolidated cash flow statements

14(4) Notes on financial statements

15(Notes on the going-concern assumption)

15(Notes on significant changes in the amount of shareholders’ equity)

15(Accounting procedures specific to preparation of quarterly consolidated financial

15

statements)(Changes in accounting policies)

15(Related to consolidated balance sheets)

15(Related to consolidated statements of income)16(Segment information)

16

3. Supplementary information on consolidated earnings forecasts for the fiscal year ending March
31, 2020

4171. Qualitative Information about Financial Statements(1) Consolidated operating results
The global economy continues to grow at a moderate pace overall, but concerns are being apparent
about an economic downturn stemming from intensifying U.S.-China trade friction. And the remaining
possibility of a U.K. exit from the EU without an agreement, there is a continued need to closely
monitor the downward risks to the global economy.
The Japanese economy has been recovering modestly due to the modest increasing of capital
investment, the improvement in corporate earnings, and other factors, but deterioration in corporate
earnings is being apparent due to an intensification of U.S.-China trade frictions. Although overall
modest growth is expected to continue, it is necessary to continue to closely monitor foreign exchange
trends and watch out for deterioration in corporate earnings caused by the economic policies, etc. of
the United States and other countries.
Amid such an operating environment, the Group’s orders received in the first six months of the
fiscal year ending March 31, 2020, decreased versus the previous fiscal year, mainly in the Aerospace
Systems segment. Net sales increased overall, due to increases in the Aerospace Systems and the
Rolling Stock segment and other segments, despite a decline in the Energy System & Plant
Engineering segment. Operating income was almost on par with the previous year's result, as thedeterioration in the Precision Machinery & Robot segment and other factors, despite the improvementin the Energy System & Plant Engineering segment and the Rolling Stock segment. Recurring profit
increased due to decreases of payment for the in-service issues of commercial aircraft jet engines, andother factors, despite an increase in loss on foreign exchange. Net income attributable to owners ofparent remained essentially unchanged year on year due to an increase in tax expenses, which offset
the gain on sale of fixed assets recorded as extraordinary income.
As a result, the Group’s consolidated orders received decreased ¥73.1 billion versus the same periodof the previous fiscal year to ¥657.3 billion, consolidated net sales increased ¥48.4 billion year on yearto ¥736.5 billion, operating income increased ¥0.2 billion year on year to ¥8.6 billion, recurring profit
increased ¥0.6 billion year on year to ¥0.8 billion, and net loss attributable to owners of parent of ¥3.7
billion was almost on par with the previous year's result.

5Consolidated operating performance in the first half of fiscal year is summarized by segment
below.
Segment Information
Segment net sales, operating income, and orders received (billion yen)Six months ended September 30

2018(A)

2019 (B)

Orders received

Change (B – A)

Six months ended
September 30

Net

OperatingNet

OperatingNet

Operating

2018

2019

Changesales

incomesales

incomeSales

income(A)(B)(B – A)

Aerospace
Systems

210.2

9.4

250.8

9.7

40.6

0.2

201.1

158.7

(42.3)

103.9

2.2

95.6

5.0

(8.3)

2.8

146.7

124.0

(22.7)

102.1

9.6

98.2

3.2

(3.9)

(6.4)

115.4

104.6

(10.8)

Structure

39.7

1.2

37.1

(1.4)

(2.6)

(2.7)

16.5

26.5

10.0

Rolling Stock

45.4

(8.8)

59.3

(4.3)

13.8

4.5

60.5

39.1

(21.3)Engine

144.4

(4.6)

147.2

(3.3)

2.8

1.2

144.4

147.2

2.8

Other

42.1

1.0

48.1

0.8

5.9

(0.1)

45.6

57.0

11.4

-

(1.6)

-

(0.9)

-

0.6

-

-

-

688.1

8.4

736.5

8.6

48.4

0.2

730.4

657.3

(73.1)

Energy System& Plant
Engineering
Precision
Machinery &RobotShip & Offshore

Motorcycle &Adjustments
Total

Notes: 1. Net sales include only sales to external customers.
2. The method for calculating orders received in the Precision Machinery & Robot segment was changed in
the first quarter of FY2019 from the previous simple method to a method based on more detailed ordervalues. The value for orders received in the second quarter of the previous fiscal year has been recalculated
in accordance with the new calculation method.
3. The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.

6

Aerospace Systems
Regarding the business environment surrounding the Aerospace Systems segment, there is a certain
level of demand from the Ministry of Defense in Japan amid the tight defense budget. Demand forcommercial aircraft airframes and jet engines is increasing in conjunction with the rise in the numberof air passengers.
Amid such an operating environment, consolidated orders received decreased ¥42.3 billion year on
year to ¥158.7 billion due to decreases in component parts of airframes for Ministry of Defense andcommercial aircraft, although component parts of commercial aircraft jet engines remain high level.
Consolidated net sales increased ¥40.6 billion year on year to ¥250.8 billion due to increases incomponent parts of airframes for Ministry of Defense and commercial aircraft, and component partsof commercial aircraft jet engines.
Operating income of ¥9.7 billion was on par with the previous year's result, as increased sales offset
an increase in depreciation of development costs of a new program relating to component parts forcommercial aircraft engines.
Energy System & Plant Engineering
Regarding the business environment surrounding the Energy System & Plant Engineering segment,in addition to the recovery in resources development and oil and natural gas-related investment
overseas, there is still demand for energy infrastructure maintenance in Asia. Besides, demand for
distributed power sources is increasing due to stronger interest in investment in the environment andenergy conservation, among other factors. In Japan, there is ongoing demand for replacing aging
facilities for refuse incineration plants and industrial machinery. Meanwhile, in the energy andenvironmental field, although there is large potential demand for distributed power sources in Japan,
investment plans are slightly delayed in light of the liberalization of electricity.
Amid such an operating environment, consolidated orders received decreased ¥22.7 billion year on
year to ¥124.0 billion. Although new orders were relatively strong, including an order for major
refurbishments of domestic waste disposal facilities, the year-on-year result reflects the nonrecurrence of orders received for large projects in the previous fiscal year, including orders for a
Combined Cycle Power Plant and an LNG tank for the Japanese market.
Consolidated net sales decreased ¥8.3 billion year on year to ¥95.6 billion, due to a decline inconstruction work volume on Energy system segment and refuse incineration plants and other factors.
Operating income increased ¥2.8 billion year on year to ¥5.0 billion, due to the profitability
improvement in the Energy System segment and the other factors, despite a drop in sales.

7Precision Machinery & Robot
Regarding the business environment surrounding the Precision Machinery & Robot segment, thereis expected to be continued solid demand in the construction machinery market centered on emerging
markets, despite moves by some manufacturers to conduct inventory adjustments in response to asoftening of demand for hydraulic excavators in the Chinese market and other factors. In the robot
market, market conditions remained severe due to factors such as the postponement of capital
investment in the Chinese market in response to the U.S.-China trade friction. However, in light offactors such as new investments by major Taiwanese semiconductor manufacturers and data such as
forecasts of demand among the main U.S. equipment manufacturers, the semiconductor market
appears to have already bottomed out. Demand for robots is expected to expand steadily over the
medium to long term.
Amid such an operating environment, consolidated orders received decreased ¥10.8 billion year
on year to ¥104.6 billion, due to a decrease in various robots.
Consolidated net sales decreased ¥3.9 billion year on year to ¥98.2 billion, due to a decrease invarious robots.
Operating income decreased ¥6.4 billion year on year to ¥3.2 billion, as a result of factors including
the drop in robot sales, increases in costs of hydraulic components and research and development.
Ship & Offshore Structure
While demand for gas-fueled vessels is being driven higher by tighter environmental regulationsand LNG development projects are beginning to take shape, the Ship & Offshore Structure segment’s
operating environment remains adverse due to the prolonged slump in the marine transport market,
the continuation of the South Korean government’s support policies for its shipbuilding industry, andother issues.
Amid such an operating environment, consolidated orders received increased ¥10.0 billion year on
year to ¥26.5 billion, due to orders for LPG carriers and the other factors.
Consolidated net sales decreased ¥2.6 billion year on year to ¥37.1 billion, due to the decrease involume of construction of LNG carrier and LPG carrier, despite an increase in sales of vessel repair.
The segment posted an operating loss of ¥1.4 billion, a ¥2.7 billion deterioration from operating
income a year earlier. The main factors dragging down earnings were lower revenue from newly built
ships and the posting of losses from operations.

8

Rolling StockRegarding the business environment surrounding the Rolling Stock segment, there continues to bestable demand in Japan for the replacement of aging railcars. Overseas, demand for new andreplacement railcars is expected to increase in the U.S., including in the core New York area market.
Meanwhile, in Asia, we are planning the formation of projects for emerging markets in tandem with
the Japanese government’s efforts to promote infrastructure-related exports.
In this operating environment, we received new orders for passenger cars for the domestic market
but consolidated orders received totaled only ¥39.1 billion, ¥21.3 billion less than a year earlier when
we received a large order for passenger cars and refurbishments from the U.S. market.
Consolidated net sales increased ¥13.8 billion year on year to ¥59.3 billion, due to an increase insales of rolling stocks for Japan and U.S. despite a decrease in components for overseas.
Operating loss improved by ¥4.5 billion year on year to an operating loss of ¥4.3 billion. This was
mainly due to an increase in sales and a decrease in temporary expenses in a project in the U.S.
market (the order for which was received in the same period of the previous fiscal year), despite cost
fluctuations in some projects.
Motorcycle & Engine
Regarding the business environment surrounding the Motorcycle & Engine segment, while themodest growth in motorcycle markets mainly in Europe is continuing, some emerging markets are
weak. With respect to utility vehicles, the market continues to grow stably mainly in North America,
and the general-purpose engine market is also growing steadily.
In this operating environment, consolidated net sales increased ¥2.8 billion year on year to ¥147.2
billion, due to an increase in utility vehicles for U.S.
Operating loss improved by ¥1.2 billion year-on-year to an operating loss of ¥3.3 billion. This was
mainly a net result of increased sales, delayed recording of sales promotion expenses, and a reaction
to a temporary increase in selling, general, and administrative expenses in the same period of theprevious fiscal year.
Other Operations
Consolidated net sales increased ¥5.9 billion year on year to ¥48.1 billion.
Operating income of ¥0.8 billion was on par with the previous year's result.

9(2) Consolidated financial position(i) Assets
Current assets were ¥1,246.4 billion, ¥110.1 billion increase from March 31, 2019 due to anincrease in trade receivables.
Fixed assets were ¥703.3 billion, ¥0.8 billion increase from March 31, 2019 due to capital
expenditure and the other factors.
As a result, total assets were ¥1,949.7 billion, ¥110.9 billion increase from March 31, 2019.
(ii) Liabilities
Interest bearing liabilities were ¥695.6 billion, ¥256.2 billion increase from March 31, 2019.
Liabilities were ¥1,476.6 billion, ¥130.0 billion increase from March 31, 2019 due to an increase
in interest bearing liabilities and other factors.
(iii) Net assets
Consolidated net assets were ¥473.1 billion, ¥19.0 billion decrease from March 31, 2019 due topayment of dividends and a decrease in foreign currency translation adjustment.

(3) Consolidated earnings outlook
The Company has left its earnings forecasts for the fiscal year ending March 31, 2020, unchanged
from the figures previously announced on September 30, 2019.
Consolidated orders are forecast to decrease by ¥50.0 billion from the figures previous announced(on July 30), to ¥1,650.0 billion, due to expected decreases in the Precision Machinery & Robot
segment and other segments. ROIC and ROE are forecast to be 4.8% and 5.2%, respectively.
The Company’s earnings forecasts assume exchange rates of ¥107 to the U.S. dollar and ¥118 tothe euro.

Note regarding consolidated earnings outlook
The above earnings outlook is based on information available at the time of preparation, and includes
risks and uncertainties. We therefore discourage making investment decisions depending solely on thisoutlook. Please note that actual earnings may differ materially from this outlook, due to a variety ofimportant factors stemming from changes the external environment and/or the Company’s internal
environment. Important factors that impact actual operating performance include, but are not limited
to, the economic situation surrounding the Company’s scope of business, foreign exchange rates, inparticular the yen/dollar exchange rate, tax codes and other regulatory system-related issues.

102. Consolidated Financial Statements(1) Consolidated balance sheets
Million yen
As of
As of
March 31, 2019
September 30, 2019
AssetsCurrent assets
Cash on hand and in banks
Trade receivables
Merchandise and finished products
Work in process
Raw materials and supplies
Other
Allowance for doubtful receivables
Total current assets
Fixed assets
Net property, plant and equipment
Buildings and structures
Other
Total property, plant and equipment
Intangible assets
Investments and other assets
Other
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets
Liabilities
Current liabilities
Trade payables
Electronically recorded obligations - operating
Short-term debt
Income taxes payable
Provision for sales promotion expenses
Accrued bonuses
Provision for product warranties
Provision for losses on construction contracts
Advances from customers
Other
Total current liabilities
Long-term liabilities
Bonds payable
Long-term debt
Net defined benefit liability
Provision for the in-service issues of commercial aircraft
jet engines
Other
Total long-term liabilities
Total liabilities

11

74,311
427,665
68,176
405,087
119,558
45,333(3,792)
1,136,340

41,736520,325
76,561
424,937
125,245
61,130(3,488)1,246,447

194,939
290,729
485,669
16,797

197,321288,554
485,876
18,737201,471(1,422)200,048
702,514
1,838,855

200,126(1,404)
198,722703,337
1,949,784

247,191
123,083
100,023
10,390497
21,16813,096
27,609181,419
139,800
864,280

217,756
102,419
187,295
3,929
5,321
17,806
11,857
17,728
159,767
262,431986,313140,000
187,568
97,602140,000
195,959
100,347(*1)11,468(*1)9,990

45,674
482,313
1,346,593

43,993490,290
1,476,603

Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity

104,484
54,542
324,606(130)
483,502104,484
54,542
310,077(131)
468,973

Accumulated other comprehensive income
Net unrealized gains (losses) on securities, net of tax
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total net assets and liabilities

2,682
(227)
(4,556)(5,014)(7,115)
15,874492,261
1,838,855

2,488
(171)
(10,088)(3,666)(11,437)
15,645473,181
1,949,78412

(2) Consolidated statements of income and comprehensive income
Consolidated statements of income
Million yen
Six months ended
September 30, 2018
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Salaries and benefits
R&D expenses
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Equity in income of non-consolidated subsidiaries and affiliates
Foreign exchange gain
Other
Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
Payments for the in-service issues of commercial aircraft jet engines

Other
Total non-operating expenses
Recurring profit
Extraordinary income
Gain on sale of fixed assets
Total extraordinary income
Income before income taxes
Income taxes
Net loss
Net income attributable to non-controlling interests
Net loss attributable to owners of parent

Six months ended
September 30, 2019

688,107581,972
106,135

736,565
629,707
106,857

26,537
21,24049,903
97,6808,454

27,38423,73947,05598,179
8,678

239
180
802
3,102
1,398
5,724

314
180
924
1,473
2,893

1,546
(*1) 9,745
2,680
13,971
207

1,860
5,772
(*1) 1,157
1,951
10,741
830

207
2,940
(2,733)859(3,592)(*2) 1,277
1,277
2,107
5,122
(3,015)718(3,733)

Consolidated statements of comprehensive income
Million yen
Six months ended
September 30, 2018
Net loss
Other comprehensive income
Net unrealized gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurement of defined benefit plans
Share of other comprehensive income(loss) of associates
accounted for using equity method
Total other comprehensive income(loss)
Comprehensive Income(loss) attributable to:
Owners of parent
Non-controlling interests

13

Six months ended
September 30, 2019

(2,733)(3,015)572(2,148)
1,723
1,572

(212)
123
(4,014)
1,353(2,615)(1,997)(895)(3,628)(4,102)473(4,748)(7,763)(8,054)291

(3) Consolidated cash flow statements
Million yen
Six months ended
September 30, 2018
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in accrued bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for losses on construction contracts
Increase (decrease) in net defined benefit liability
Increase (decrease) in payments for the in-service issues ofcommercial aircraft jet engines
Interest and dividend income
Interest expense
Share of (profit) loss of entities accounted for using equity method(Gain) loss on sale of fixed assets(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables
Increase (decrease) in advance payments
Increase (decrease) in advances received from customers(Increase) decrease in other current assets
Increase (decrease) in other current liabilities
Other
Subtotal
Cash received for interest and dividends
Cash paid for interest
Cash paid for income taxes
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of property, plant, equipment and intangible assets
Proceeds from sales of property, plant, equipment and intangible
assetsAcquisition of investments in securities
Proceeds from sales of investments in securities
Acquisition of investments in subsidiaries and affiliate
Net decrease (increase) in short-term loans receivable
Payments of long-term loans receivable
Proceeds from collection of long-term loans receivable
Other
Net cash used for investing activities
Cash flows from financing activities
Net increase (decrease) in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds
Cash dividends paid
Cash dividends paid to non-controlling interests
Other
Net cash used for financing activities
Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

14

Six months ended
September 30, 2019207
29,342
1,465(2,968)(1,367)
2,409
4,868

2,107
30,133(206)(3,356)(1,168)(9,864)
4,833

9,745

(1,478)

(420)
1,546
(802)
(9,526)(78,347)(28,770)(1,939)(12,247)(7,059)(17,295)
3,434(107,727)
477(1,541)(4,630)(113,421)

(495)
1,860
(924)
(1,277)(93,246)(42,352)(49,292)(4,739)(20,308)(10,547)(39,131)561(238,893)
722(1,863)(9,456)(249,491)(43,587)(33,242)

334

1,509

(557)
136
(2,081)
(51)
(91)
82
(1,717)(47,533)(439)
458(2,931)
(551)
(34)
47
2,152
(33,030)

144,642
7,779(7,617)20,000(10,000)(5,032)(679)
218
149,311(2,250)(13,893)
64,36250,468250,750
19,000(23,112)20,000(10,000)(5,863)(503)(289)
249,9812,401(30,139)
68,311
38,172

(4) Notes on financial statements

Notes on the going-concern assumption
Not applicable
Notes on significant changes in the amount of shareholders’ equity
Not applicable
Accounting procedures specific to preparation of quarterly consolidated financial statements(Calculation of tax expense)
The Company calculates tax expense by rationally estimating its effective tax rate after applicationof tax effect accounting to pretax net income for the fiscal year which includes the second quarter
under review, and multiplying quarterly pretax net income by said estimated effective tax rate. If
unable to use the estimated effective tax rate, the Company calculates tax expense by multiplying thestatutory effective tax rate by quarterly pretax net income adjusted to reflect material differences otherthan temporary differences.
Income taxes are reported inclusive of income tax adjustments.
Changes in accounting policies
Consolidated subsidiaries applying U.S. accounting standards began applying Topic 606, "Revenue
from Contracts with Customers" from the first quarter of the year under review.
With the application of this standard, when contracted goods or services are transferred to thecustomer, revenue is recognized at an amount that reflects the consideration expected to be received
in exchange for the goods or services. In applying this standard, the Company adopted the method, as
is permitted as a transitional measure, of recognizing the cumulative effect of a retroactive adjustment
from the date at which the standard was applied and accordingly reducing retained earnings at the
beginning of the current consolidated fiscal year.
As a result, retained earnings at the beginning of the second quarter of the year under review
decreased by ¥4,948 million. In addition, income before income taxes for the second quarter of current
fiscal year increased by ¥2,912 million over the amount that would have been recorded if the previous
accounting standard had been applied.

Related to consolidated balance sheets(*1) Provision for the in-service issues of commercial aircraft jet engines
The Company participates as a risk and revenue sharing partner on the Rolls-Royce Trent 1000
engine program, which has been impacted by the challenge of managing significant in-service issues.
Rolls-Royce continues to work hard to remedy this situation and has made further substantial progresson the implementation of long-term solutions and mitigation of the near-term impact on customers. In
the FY2019 second quarterly financial results, the Company has made a provision of the abnormal
cost related to in-service issues which the Company would cover as a member of this program.

Related to consolidated statements of income15(*1) Payments for the in-service issues of commercial aircraft jet engines
The Company participates as a risk and revenue sharing partner on the Rolls-Royce Trent 1000
engine program, which has been impacted by the challenge of managing significant in-service issues.
Rolls-Royce continues to work hard to remedy this situation and has made further substantial progresson the implementation of long-term solutions and mitigation of the near-term impact on customers. In
the FY2019 second quarterly financial results, the Company has made a provision of the abnormal
cost related to in-service issues which the Company would cover as a member of this program. The
provision was included within the non-operating expenses.

(*2) Gain on sale of fixed assets
Proceeds from the sale of former dormitory/company housing sites.

Segment information
1. Six months ended September 30, 2018 (April 1, 2018 – September 30, 2018)(1) Sales and income (loss) by reportable segment
Million yen

Aerospace Systems
Energy System & Plant Engineering
Precision Machinery & Robot
Ship & Offshore structure
Rolling stock
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

210,222103,926
102,178
39,73945,426
144,425
42,188688,107
688,107

6,105
10,113
7,682
1,685
13
313
19,58845,502(45,502)-

216,327
114,039
109,861
41,42445,440144,739
61,777
733,610(45,502)688,107

9,471
2,203
9,635
1,289
(8,878)(4,656)
1,022
10,086(1,631)
8,454

Million yen
IncomeAmountIntersegment transactions(60)
Corporate expenses*(1,571)
Total(1,631)*Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Impairment loss on fixed assets and goodwill by reportable segment
Not applicable16

2. Six months ended September 30, 2019 (April 1, 2019 – September 30, 2019)(1) Sales and income (loss) by reportable segment
Million yen
External sales

Intersegment
sales

Total sales

Operatingincome (loss)

250,896
95,60998,21937,13059,306147,235
48,167736,565
736,565

4,194
17,421
7,246
4,803
9
324
18,37652,376(52,376)-

255,090
113,031
105,465
41,93359,316
147,560
66,543788,941(52,376)
736,565

9,704
5,052
3,211
(1,476)(4,367)(3,368)
871
9,627
(948)
8,678

Aerospace Systems
Energy System & Plant Engineering
Precision Machinery & Robot
Ship & Offshore structure
Rolling stock
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

Million yen
Amount99(1,047)

IncomeIntersegment transactions
Corporate expenses*

Total
(948)
* Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Impairment loss on fixed assets and goodwill by reportable segment
Not applicable

3. Supplementary information on consolidated earnings forecasts for the fiscal year ending
March 31, 2020
(1) Net sales and operating income (loss)
Billion yen

Reportable segment

Outlook for the year ending March 31, 2020 (fiscal 2019)
Revised forecast
Forecast issued
Change(A)
September 30, 2019 (B)(A – B)

520.0

Operatingincome(loss)
28.0

250.0

11.5

230.0

16.0

70.0
160.0
350.0
80.0

(2.5)
1.0
9.0
1.0
(8.0)
56.0

Net sales
Aerospace Systems
Energy System & Plant
Engineering
Precision Machinery &RobotShip & Offshore Structure
Rolling Stock
Motorcycle & Engine
Other
Adjustments
Total

1,660.0

Net sales

Operatingincome(loss)Net salesYear ended
March 31, 2019
(Fiscal 2018) (actual)

Operatingincome(loss)We didn’t disclose theeach segment data.

1,660.0

17

56.0

-

-

463.9

Operatingincome(loss)
32.6

253.0

11.6

222.0

21.3

78.9
124.6
356.8
95.1

1.0
(13.7)
14.3
2.5
(5.7)
64.0

Net sales

1,594.7

(2) Orders received

Reportable segment

Outlook for the year ending March 31, 2020 (fiscal 2019)
Revised forecast
Forecast issued
Change(A)
July 30, 2019 (B)(A – B)
415.0
420.0
(5.0)

Billion yen
Year ended
March 31, 2019
(Fiscal 2018) (actual)
431.6

Aerospace Systems
Energy System & Plant
330.0
335.0
(5.0)
Engineering
Precision Machinery &
240.0
280.0
(40.0)
Robot
Ship & Offshore Structure
100.0
100.0
Rolling Stock
130.0
130.0
Motorcycle & Engine
350.0
350.0
Other
85.0
85.0
Total
1,650.0
1,700.0(50.0)
Note: The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainly on
estimated demand.

263.5
225.2
81.1
136.0
356.8
94.2
1,588.7(3) Before-tax ROIC

Reportable segment
Aerospace Systems
Energy System & Plant
Engineering
Precision Machinery &RobotShip & Offshore Structure
Rolling Stock
Motorcycle & Engine
Total

(%)
Year ended
March 31, 2019
(Fiscal 2018) (actual)

Outlook for the year ending March 31, 2020 (fiscal 2019)
Revised forecast
Forecast issued
Change(A)
July 30, 2019 (B)(A – B)

6.0

8.0

(2.0)

5.0

7.1

7.6

(0.5)

9.3

12.2

20.4

(8.2)

19.8

(1.8)
1.6
5.7
4.8

(1.4)
1.6
8.4
6.7

(0.4)
(2.7)
(1.9)

3.2
(26.4)
8.4
4.5

Notes: 1. Forecast’s assumed foreign exchange rates: ¥107 = US$1, ¥118= 1 euro
2. Before-tax ROIC = (income before income taxes + interest expense) / invested capital.

18