Report of Earnings and Financial Statements
for the Fiscal Year Ended March 31, 2017 (Consolidated)(Prepared pursuant to Japanese GAAP)
April 27, 2017
Listed company’s name:

Kawasaki Heavy Industries, Ltd.

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

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

Scheduled dates:
Ordinary general meeting of shareholders
Commencement date of dividend payments
Submission of financial statements

June 28, 2017
June 29, 2017
June 28, 2017

Supplementary materials to financial results
Earnings presentation

Available
Conducted (for institutional investors and analysts)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2017
(April 1, 2016 – March 31, 2017)(Amounts in million yen rounded down to the nearest million yen)

(1) Operating Results
Years ended March 31(Million yen ) (Percentage figures indicate change compared with the previous fiscal year )Net income attributable
Net sales
Operating income
Recurring profit
to owners of parent
%
%
%
%
2017
1,518,830(1.4)
45,960 (52.1)
36,671 (60.6)
26,204(43.0)
2016
1,541,096
3.6
95,996
10.0
93,22910.6
46,043(10.8)
Note: Comprehensive income Fiscal year ended March 31, 2017: ¥ 25,335 million 25.2%
Fiscal year ended March 31, 2016: ¥ 20,230 million (76.9%)
Years ended March 31
Earnings per share
Return on equity Return on assets– diluted
Yen
Yen
%
%
2017
15.68
6.0
2.2
2016
27.56
10.6
5.6
For reference: Equity in income of non consolidated subsidiaries and affiliates
Fiscal year ended March 31, 2017: ¥ 5,537 million
Fiscal year ended March 31, 2016: ¥ 2,876 million
Earnings per share

Operating income
to net sales
%
3.0
6.2

(2) Financial Condition
March 31

(Million yen)
Total assets

Net assets

Equity ratio

Net assets per share

%

Yen

2017

1,687,363

451,32725.9

261.73

2016

1,620,458

445,62526.6

258.21

For reference: Shareholders’ equity

March 31, 2017:
March 31, 2016:1¥ 437,247 million¥ 431,368 million

(3) Cash Flow Position
Years ended March 31
Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities(Million yen)
Cash and cash equivalents
at end of year2017

93,514(64,879)(15,850)

50,722

2016

86,059(74,185)(23,400)

37,832

2. Dividends
Years ended/ending March 31

1Q

2Q

3Q

Year-end

Yen

Yen

Yen

Yen

Total
dividends
paid
Full year(annual)Yen
million yen

2016

-

5.00

-

7.00

12.00

20,047

43.5

4.6

2017

-

4.00

-

2.00

6.00

10,023

38.2

2.3

2018
(forecast)

-

-

-

-

6.00

Recorddate orterm

Dividend per share

Payout ratio(consolidated)

Dividends /Net assets(consolidated)

%

%

27.8

Notes: The interim dividend and year-end dividend for the fiscal year ending March 31, 2018, have notbeen determined.

3. Forecast of Consolidated Earnings for the Fiscal Year Ending March 31, 2018
(April 1, 2017 – March 31, 2018)

Full year(Million yen)(Percentage figures indicate change compared with the previous fiscal year)
Net income
Earnings
Net sales
Operating income
Recurring profit
attributable to owners per shareof parent
%
%
%
%
Yen
1,555,000
2.3
58,00026.1
51,50040.4
36,00037.3
21.54

Notes: The company has decided not to disclose an earnings outlook for the fiscal second quarter,
beginning with the fiscal year ending March 31, 2018. This decision is based on the fact that theGroup manages operating performance mainly on a fiscal year basis.

*Notes(1) Changes affecting the status of material subsidiaries (scope of consolidation): None
(2) Changes in accounting policies, changes in accounting estimates, and correction of errors(ⅰ) Changes in accounting policies in accord with revisions to accounting standards: None(ⅱ) Changes in accounting policies other than (ⅰ): None(ⅲ) Changes in accounting estimates: None(ⅳ) Correction of errors: None

(3) Number of shares issued and outstanding (common stock)(ⅰ) Number of shares issued as of period-end (including treasury stock)
March 31, 2017:
1,670,805,320 shares
March 31, 2016:
1,670,805,320 shares(ⅱ) Number of shares held in treasury as of period-end
March 31, 2017:259,108 shares
March 31, 2016:
228,992 shares(ⅲ) Average number of shares during respective periods
March 31, 2017:
1,670,561,157 shares

2March 31, 2016:

1,670,591,977 shares*Report of Earnings and Financial Statements are not subject to audit.
*Appropriate Use of Financial Forecasts and Other Important Matters
Forward-Looking Statements
These materials contain earnings forecast and other forward-looking statements based on information
available to the company at the time of disclosure and the company makes no assurances as to the actual
results and/or other outcomes, which may differ from those expressed or implied herein due to various
factors. For assumptions underlying earnings forecasts and other information regarding the use of suchforecasts, refer to “(4) Consolidated earnings outlook” on page 5 in section “1. Overview of operating
results” in the Accompanying Materials.
How to Obtain Supplementary Briefing Material on Financial Results and Details of the Financial
Results Briefing
The Company plans to conduct a briefing for institutional investors and analysts on Thursday April 27,
2017, and to post the briefing material on financial results to be used for the briefing on TDnet and theCompany’s website simultaneously with the announcement of financial results.

3

Accompanying Materials – Contents
1. Overview of operating results

5(1) Consolidated operating results

5(2) Consolidated financial condition

8(3) Cash flows

8(4) Consolidated earnings outlook

9

2. Basic rationale for selecting accounting standards

10

3. Consolidated Financial Statements

11(1) Consolidated balance sheets

11(2) Consolidated statements of income and comprehensive income13(3) Consolidated statement of changes in net assets

15(4) Consolidated statements of cash flows

17(5) Notes on financial statements

18

Notes on the going-concern assumption

18

Related to consolidated statements of income

18

Segment information and others

20

Per share data

24

Material subsequent events24

4. Others

25(1) Consolidated orders and sales(2) Supplementary information on earnings forecasts for the fiscal year ending March 31, 2018

4

25
26

1. Overview of operating results(1) Consolidated operating results(i) Overview of consolidated operating results
In fiscal 2016 (the twelve months ended March 31, 2017), the global economy continued to growmodestly, with growth centered on the U.S., where the real economy remains strong. On the other
hand, the global economy is relatively lacking in vigor due to languishing crude oil prices, theeconomic slowdown in emerging countries and resource-rich countries, and other factors. In addition,
future prospects for the real economy have become increasingly uncertain as a result of factors
including turmoil in international financial markets due to Brexit, concerns about an expansion ofprotectionist policies, and other factors. Going forward, these risks with the potential to drag down
the global economy must continue to be watched.
The Japanese economy remains at a standstill due to the deterioration in the external demandenvironment, lackluster personal consumption, and other factors. Going forward, the economy isexpected to grow modestly overall due to steady improvement in the income and employment
environments, but there is a possibility that economic policies enacted by countries around the world,
especially the U.S., geopolitical risks in the Middle East, the Korean Peninsula, and other factors,
could result in both rapid and significant fluctuations in foreign exchange rates. As a result, foreignexchange rates must continue to be watched carefully.
Amid such an operating environment, the Group’s orders received in fiscal 2016 declined versus
the previous fiscal year, mainly in the Aerospace, Ship & Offshore Structure and Plant &Infrastructure segments. Net sales during fiscal 2016 were on par with the same period of theprevious fiscal year overall, as the increase in sales in the Plant & Infrastructure and Precision
Machinery segments was offset by the impact of the yen’s appreciation, the assignment of theconstruction machinery business during the previous fiscal year, and other factors. There was a
decline in operating income, recurring profit, and net income attributable to owners of parent due toa deterioration in the Ship & Offshore Structure segment and a decline in profits in the Aerospacesegment and other segments.
As a result, the Group’s consolidated orders received declined ¥344.9 billion versus the same
period of the previous fiscal year to ¥1,348.7 billion, consolidated net sales declined ¥22.2 billion
year on year to ¥1,518.8 billion, consolidated operating income declined ¥50.0 billion year on yearto ¥45.9 billion, consolidated recurring profit dropped ¥56.5 billion year on year to ¥36.6 billion,
while net income attributable to owners of parent declined ¥19.8 billion year on year to ¥26.2 billion.
ROIC* was 5.0%, while ROE was 6.0%.
* Before-tax ROIC = EBIT(income before income taxes + interest expense) / invested capital(interest-bearing debt + shareholders’ equity).

5Consolidated operating performance in the fiscal year ended March 31, 2017, is summarized bysegment below.
(ii) Segment information
Segment net sales, operating income, and orders received(billion yen)

Fiscal year ended March 31

2016(A)

2017(B)

Orders received

Change (B – A)

Fiscal year ended March 31

Net

OperatingNet

OperatingNet

Operating

2016

2017

Changesales

incomesales

incomesales

income(A)(B)(B – A)

Ship & Offshore
Structure

94.8

(7.9)

103.2

(21.4)

8.3(13.4)

98.3

36.9(61.4)

Rolling Stock

146.6

9.2

137.1

3.4

(9.4)

(5.8)

132.1

158.5

26.4

Aerospace

351.8

45.6

329.9

25.0

(21.9)(20.6)

464.2

237.0

(227.2)

236.4

16.9

241.9

15.2

5.5

(1.6)

288.9

260.3

(28.5)

135.6

8.5

160.8

2.6

25.2

(5.9)

138.7

95.0

(43.7)

333.5

15.7

313.0

11.7

(20.5)

(4.0)

333.5

313.0

(20.5)

Machinery

133.1

8.5

155.2

13.1

22.1

4.5

133.1

166.8

33.6

Other

108.8

2.8

77.4

3.1

(31.4)

0.2

104.4

80.9

(23.4)

-

(3.7)

-

(7.0)

-

(3.3)

-

-

-

1,541.0

95.9

1,518.8

45.9(22.2)(50.0)

1,693.6

1,348.7(344.9)Gas Turbine &Machinery
Plant &
Infrastructure
Motorcycle &EnginePrecision

Adjustments
Total

Note: 1. Net sales include only sales to external customers.
2. The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.

Ship & Offshore Structure
Consolidated orders received fell ¥61.4 billion year on year to ¥36.9 billion, due to the downturnin demand for newly-built ships.
Consolidated net sales increased ¥8.3 billion to ¥103.2 billion, due to increase in the amount of
shipbuilding and repairing of vessels for the Ministry of Defense, and other factors.
Consolidated operating income declined ¥13.4 billion year on year to an operating loss of ¥21.4
billion, attributable to an increase in amount of allowance for doubtful accounts on trade receivablesfrom the joint venture in Brazil, an increase in provision for losses on construction contracts
resulting from the appreciation of the yen, an increase in costs, and other factors.
Rolling Stock
Consolidated orders received increased ¥26.4 billion year on year to ¥158.5 billion, as despite thedecline for overseas markets, orders for linear-motor subway cars were received from the Tokyo
6

Metropolitan Bureau of Transportation, along with other factors.
Consolidated net sales declined ¥9.4 billion year on year to ¥137.1 billion, due to a decline insales to Asia including Taiwan and Singapore, and other factors.
Consolidated operating income declined ¥5.8 billion year on year to ¥3.4 billion, due to the dropin sales, the decline in highly-profitable projects, an increase in costs, and other factors.
Aerospace
Consolidated orders received declined ¥227.2 billion to ¥237.0 billion. The year-on-year decline
was due to the fact that a bulk order for patrol aircraft was received from the Ministry of Defense in
the previous fiscal year.
Consolidated net sales declined ¥21.9 billion year on year to ¥329.9 billion, due to the effect of
the appreciation of the yen and other factors, despite the increase in sales to the Ministry of Defense.
Consolidated operating income fell ¥20.6 billion year on year to ¥25.0 billion, due to theappreciation of the yen and a decline in profitability of component parts for commercial aircraft,along with other factors.
Gas Turbine & Machinery
Consolidated orders received declined ¥28.5 billion year on year to ¥260.3 billion. This decline
was attributable to a drop in orders for items such as hydraulic machinery and compressors, as wellas due to the fact that a bulk order was received in the previous fiscal year for a new project for
aircraft engine components.
Consolidated net sales increased ¥5.5 billion year on year to ¥241.9 billion, due to the increase insales of commercial aircraft jet engine component parts, an increase in work on gas engine power
generation systems, and other factors, despite the impact of the yen’s appreciation.
Consolidated operating income declined ¥1.6 billion year on year to ¥15.2 billion, due to theeffect of the appreciation of the yen, an increase in depreciation of development costs of newcommercial aircraft jet engine projects, and other factors.
Plant & Infrastructure
Consolidated orders received fell ¥43.7 billion year on year to ¥95.0 billion, due to the decline inmunicipal refuse incineration plants for the domestic market, along with other factors.
Consolidated net sales increased ¥25.2 billion year on year to ¥160.8 billion, due to an increase inconstruction work volume on a chemical plant for an overseas market.
Consolidated operating income declined ¥5.9 billion year on year to ¥2.6 billion, due to theprovision for losses on construction contracts in LNG tanks for overseas markets and other factors,
despite an increase in sales.
Motorcycle & Engine
Consolidated net sales declined ¥20.5 billion year on year to ¥313.0 billion, due to the impact of
the yen’s appreciation, the decline in general-purpose gasoline engines and motorcycles to emerging
countries, and other factors, despite the increase in sales of motorcycles and automobiles for7

developed countries.
Consolidated operating income declined ¥4.0 billion year on year to ¥11.7 billion, due to a drop insales.
Precision Machinery
Consolidated orders received increased ¥33.6 billion year on year to ¥166.8 billion, due to theincrease in hydraulic components for construction machinery and various industrial robots, alongwith other factors.
Consolidated net sales increased ¥22.1 billion year on year to ¥155.2 billion, due to the increase in
hydraulic components for construction machinery and various industrial robots, along with otherfactors.
Consolidated operating income increased ¥4.5 billion year on year to ¥13.1 billion, due to theincrease in sales.
Other Operations
Consolidated net sales fell ¥31.4 billion year on year to ¥77.4 billion, due to the assignment of theconstruction machinery business in the same period of the previous fiscal year.
Consolidated operating income increased ¥0.2 billion year on year to ¥3.1 billion.
(2) Consolidated financial condition(i) Assets
Total assets at March 31, 2017, were ¥1,687.3 billion, a 4.1% increase from March 31, 2016.
Current assets increased 5.8% year on year to ¥1,077.8 billion, mainly attributable to an increasein trade receivables. Fixed assets increased 1.1% year on year to ¥609.5 billion, primarily due toan increase in holdings of property, plant and equipment due to capital investment.
(ii) Liabilities
Consolidated liabilities increased 5.2% year on year to ¥1,236.0 billion at March 31, 2017. The
increase was mainly attributable to an increase in advances from customers and other factors.
(iii) Net assets
Consolidated net assets increased 1.2% year on year to ¥451.3 billion, as the increase due to theposting of net income attributable to owners of parent was partly offset by dividend payments andother factors.

(3) Cash flows(i) Cash flows from operating activities
Operating activities provided net cash of ¥93.5 billion, a ¥7.4 billion increase from the previous
fiscal year. Major sources of operating cash flow included income before income taxes of ¥38.8
billion and depreciation and amortization of ¥51.5 billion. Major uses of operating cash flow
included expenditure of ¥13.1 billion for cash paid for income taxes and expenditure of ¥64.6
8

billion due to an increase in trade receivables.
(ii) Cash flows from investing activities
Investing activities used net cash of ¥64.8 billion, ¥9.3 billion less than in the previous fiscal year,
mainly to acquire property, plant and equipment, as well as intangible assets.
(iii) Cash flows from financing activities
Financing activities used net cash of ¥15.8 billion, ¥7.5 billion less than in the previous fiscal year.
The cash outflow was mainly the result of cash dividends paid.

(4) Consolidated earnings outlook
For the fiscal year ending March 31, 2018, we are expecting consolidated net sales of ¥1,555.0
billion, a ¥36.2 billion year-on-year increase, due to expected increases in the Rolling Stock, Gas
Turbine & Machinery, Motorcycle & Engine, Precision Machinery and other segments. In terms of
profit, we are forecasting consolidated operating income of ¥58.0 billion, recurring profit of ¥51.5
billion, and net income attributable to owners of parent of ¥36.0 billion. Furthermore, we are
expecting ROIC of 6.0% and ROE of 8.0%. These forecasts are based on the expectation for an
increase in profits in conjunction with a rise in sales, a recovery in the Ship & Offshore Structure
segment which posted a large loss in the previous fiscal year, and other factors, despite a drop in
production of component parts for commercial aircraft in the Aerospace segment and other factors.
Consolidated orders received are expected to increase ¥211.3 billion year on year to ¥1,560.0
billion, due to expected increases in the Rolling Stock and Aerospace segments.
Assumed exchange rates of ¥108/US$ and ¥114/Euro were used for the above consolidated
earnings outlook.
Note regarding consolidated earnings outlook
The above earnings outlook is based on information available at the time of preparation, andincludes risks and uncertainties. We therefore discourage making investment decisions depending
solely on this outlook. Actual earnings may differ materially from this outlook, due to a variety ofimportant factors stemming from changes in 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 (theyen/dollar exchange rate in particular), tax codes and other regulatory system-related issues.

92. Basic rationale for selecting accounting standards
In the near term, the Group plans to continue to use Japanese accounting standards to prepare
consolidated financial statements. The Group will continue to study the possible adoption of IFRS
from the standpoint of increasing corporate value over the medium- to long-term horizon as well as
promoting constructive dialogue with investors, all while taking the situation surrounding the Groupboth in Japan and overseas into consideration.

10

3. Consolidated Financial Statements(1) Consolidated balance sheets
March 31

Million yen

AssetsCurrent assets
Cash on hand and in banks
Trade receivables
Merchandise and finished products
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful receivables
Total current assets
Fixed assets
Net property, plant and equipment
Buildings and structures,
Machinery and equipment,
Land
Leased assets,
Construction in progress
Other,
Total property, plant and equipment
Intangible assets
Investments and other assets
Investments in securities
Long-term loans
Net defined benefit assets
Deferred tax assets
Other
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

11

2016

2017

42,157
381,339
57,092324,915
110,956
27,27576,743(2,578)1,017,903

55,388444,633
49,850323,433
111,577
26,566
68,978(2,593)
1,077,835

166,345
128,814
64,237
2,192
17,77257,195436,557
15,475

180,070
134,071
64,743
1,955
21,13359,906
461,881
15,284

13,781337
74
43,842
102,387(9,902)
150,521602,554
1,620,458

13,917301
86
36,49996,284(14,727)
132,362
609,527
1,687,363

Liabilities
Current liabilities
Trade payables
Electronically recorded obligations-operating
Short-term debt
Current portion of bonds
Lease obligations, current
Income taxes payable
Deferred tax liabilities
Accrued bonuses
Provision for product warranties
Provision for losses on construction contracts
Advances from customers
Other
Total current liabilities

233,979
87,798105,891
10,000156
10,889979
25,13812,642
7,926
170,454
101,854
767,711240,572
101,449
111,456
10,000
192
4,295
22
20,288
12,175
18,103205,871
119,013
843,441

Long-term liabilities
Bonds payable
Long-term debt
Lease obligations
Deferred tax liabilities
Provision for environmental measures
Net defined benefit liability
Asset retirement obligations
Other
Total long-term liabilities
Total liabilities

120,000
160,809
1,566
8,439
1,693
90,789650
23,170407,120
1,174,832

130,000
147,492
1,550
8,476
1,113
81,563619
21,778392,594
1,236,035

Total shareholders’ equity

104,484
54,394
279,627(86)
438,419

104,484
54,393
287,448(96)
446,230

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

2,705
692
8,990
(19,439)(7,051)
14,257445,625
1,620,458

3,232(1,182)((341)(10,692)(8,983)14,080451,327
1,687,363

Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock12(2) Consolidated statements of income and comprehensive income
Consolidated statements of income
Million yen

Years ended March 31
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Salaries and benefits
Advertising expenses
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
Gain on sale of fixed assets
Other
Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
Loss on disposal of fixed assets
Other
Total non-operating expenses
Recurring profit
Extraordinary income
Gain on sale of fixed assets
Gain on transfer of businessTotal extraordinary income
Extraordinary losses
Loss on overseas businessTotal extraordinary losses
Income before income taxes
Income taxes
Current
Deferred
Total income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent

13

2016

2017

1,541,096
1,253,691
287,405

1,518,830
1,278,906
239,923

52,683
12,06743,611
83,045
191,408
95,99651,436
11,241
43,62787,657
193,963
45,960748415(*1)2,876(*2)3,155
7,914
15,111

845
254
5,537
(*2)875
4,881
12,394

3,637
6,532
1,119
6,589
17,87893,229

2,859
7,724
2,233
8,866
21,68436,671(*3)901
901(*4)2,202
2,202(*1)19,298
19,29874,83238,873

20,1537,000
27,15347,6781,635
46,0437,470
3,477
10,94827,925
1,721
26,204

Consolidated statements of comprehensive income
Million yen

Years ended March 31
2016
Net income

2017

47,67827,925Net unrealized gains (losses) on securities

(910)

559

Deferred gains (losses) on hedges

2,649(1,844)Foreign currency translation adjustments(11,763)(3,742)Remeasurements of defined benefit plans(12,154)

8,777

Share of other comprehensive income of entities accounted forusing equity method(5,269)(6,340)Total other comprehensive income(27,448)(2,590)Comprehensive Income attributable to:20,23025,335

19,412

24,272817

1,062

Other comprehensive income

Owners of parent
Non-controlling interests14(3) Consolidated statements of changes in net assets
Million yen

Years ended March 31
2016
Shareholders’ equity
Common stock
Balance at end of previous year
Total changes during the period
Balance at end of year
Capital surplus
Balance at end of previous year
Treasury stock disposed
Total changes during the period
Balance at end of year
Retained earnings
Balance at end of previous year
Changes during the period
Cash dividend
Net income attributable to owners of parent
Change in the scope of consolidation
Increase (decrease) by change of consolidation period of subsidiaries
Total changes during the period
Balance at end of year
Treasury stock
Balance at end of previous year
Changes during the period
Treasury stock purchased
Treasury stock disposed
Total changes during the period

2017

104,484

104,484--

104,484

104,484

54,393054,394(0)0(0)

54,39454,393

253,605

279,627(20,047)
46,043
25(18,376)
26,204(7)-

26,021

7,820

279,627

287,448

(67)

(86)

(21)
1

(10)
0

(19)

(9)

(86)

(96)

412,416

438,419(20,047)
46,043(21)
2
25(18,376)
26,204
(7)
(10)
(0)
-

26,002

7,810

438,419446,230

3,704

2,705

Net changes in items other than shareholders’ equity

(999)

527

Total changes during the period

(999)

527

2,705

3,232

(1,985)

692

2,678

(1,874)

Balance at end of year
Total shareholders’ equity
Balance at end of previous year
Changes during the period
Cash dividend
Net income attributable to owners of parent
Change in the scope of consolidation
Treasury stock purchased
Treasury stock disposed
Increase (decrease) by change of consolidation period of subsidiaries
Total changes during the period
Balance at end of year
Comprehensive income
Net unrealized gain (loss) on securities
Balance at end of previous year
Changes during the period

Balance at end of year
Deferred gains (losses) on hedges
Balance at end of previous year
Changes during the period
Net changes in items other than shareholders’ equity

15

Total changes during the period

2,678(1,874)692(1,182)

25,1798,990(16,188)(9,331)(16,188)(9,331)

8,990

(341)

(7,318)(19,439)(12,121)(12,121)

8,747
8,747

(19,439)(10,692)

19,579(7,051)

Net changes in items other than shareholders’ equity(26,630)(1,931)

Total changes during the period

Balance at end of year
Foreign currency translation adjustments
Balance at end of previous year
Changes during the period
Net changes in items other than shareholders’ equity
Total changes during the period
Balance at end of year
Remeasurements of defined benefit plans
Balance at end of previous year
Changes during the period
Net changes in items other than shareholders’ equity
Total changes during the period
Balance at end of year
Total comprehensive income
Balance at end of previous year
Changes during the period(26,630)(1,931)

Balance at end of year

(7,051)(8,983)

Non-controlling interests
Balance at end of previous year

15,961

14,257(1,704)(176)(1,704)(176)

Balance at end of year

14,257

14,080Total net assets
Balance at end of previous year
Changes during the period

447,957445,625(20,047)(18,376)

46,043-

26,204
(7)

(21)
2

(10)
0

Net changes in items other than shareholders’ equity

25(28,335)(2,108)

Total changes during the period(2,332)

5,702

445,625

451,327

Changes during the period
Net changes in items other than shareholders’ equity
Total changes during the period

Cash dividend
Net income attributable to owners of parent (loss)
Change in the scope of consolidation
Treasury stock purchased
Treasury stock disposed
Increase (decrease) by change of consolidation period of subsidiaries

Balance at end of year16(4) Consolidated statements of cash flows
Million yen

Years ended March 31
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 provision for environmental measures
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expense
Equity in income non-consolidated subsidiaries and affiliates(Gain) loss on sale of property, plant, and equipment(Gain) loss on sale of business
Loss on overseas business(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables(Increase) decrease in advance payments
Increase (decrease) in advances 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 and equipment and intangible assets
Proceeds from sales of property, plant and equipment and intangible
assetsAcquisition of investments in securities
Proceeds from sales of investments in securities
Purchase of stocks of subsidiaries and affiliates
Proceeds from sales of stocks of subsidiaries and affiliates
Acquisition of investments in subsidiaries of affiliate
Proceeds from sale of business
Decrease (increase) in short-term loans receivable, net
Additions to long-term loans receivable
Proceeds from collection of long-term loans receivable
Other
Net cash used for investing activities
Cash flows from financing activities
Increase (decrease) in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds payable
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
Increase (decrease) in cash and cash equivalents resulting from change ofscope of consolidation
Increase (decrease) in cash and cash equivalents by change of consolidation
period of subsidiaries
Cash and cash equivalents at end of period

17

2016

2017

74,83249,004
(857)
(935)
1,590
2,228
(840)
(3,043)(1,164)
3,637(2,876)(3,155)(901)
19,298(7,657)(19,719)(5,441)(5,860)7,433(2,670)5,003
397
108,303
6,745(3,817)(25,172)
86,05938,87351,564
4,872(4,852)(385)
10,185(579)
3,537(1,100)2,859(5,537)(3,077)(64,605)
7,453
20,743
7,838
35,565(1,272)
1,468
20
103,572
5,870(2,827)(13,100)
93,514(79,463)(69,341)

1,202

4,810

(173)
702
(1,601)
5,390
(7)
(87)
92
(239)
(74,185)(1,208)
1,841
(625)
966
178
(70)
94
(1,525)(64,879)

4,132
19,648(25,651)
20,000(20,000)(20,022)(1,527)
20(23,400)
1,639(9,886)47,721(20,843)
31,734(16,946)
20,000(10,000)(18,351)
(765)
(679)
(15,850)543
13,327
37,832

-

(438)

(1)

-

37,83250,722

(5) Notes on financial statements
Notes on the going-concern assumption
Not applicable.

Related to consolidated statements of income(*1) Losses on Overseas Business
Fiscal year ended March 31, 2016 (April 1, 2015 – March 31, 2016)
Posting Losses on Joint Shipbuilding Venture in Brazil(Additional information)
Posting Losses on Overseas Business (Joint Shipbuilding Venture in Brazil)
Enseada Indústria Naval S.A.(hereinafter called ‘Enseada’) , in which KHI holds a 30% stake,has received no payments for drill ship construction work currently in progress for more than ayear due to the impact of corruption problems in Brazil, and this has seriously eroded Enseada’s
financial position and cash flow situation. As a result, Enseada has fallen behind in its payments
to KHI for the transfer of technology and for the construction of drill ship hull parts currently
under construction at KHI Sakaide Works. Enseada has also been unable to make progress on therepayment of loans extended by KHI.
Despite this adverse business situation, Enseada remains a going concern, and KHI continues
to cooperate with Enseada in line with the underlying joint venture agreement. However,considering the asset value of investment in and loans to Enseada as well as the recoverability oftrade receivables, KHI has decided to implement the necessary accounting treatment based on its
revaluation under relevant accounting principles.
Accounting treatment of losses on a consolidated basis for the fiscal year ended March 31,
2016, is presented below.
1.

Setting of allowance for doubtful receivables on tradereceivables from Enseada and loss on valuation of¥19,298 million（extraordinary losses）¥2,847 million（non-operating expenses）

inventories (work in process) destined for Enseada
2.

Losses on valuation of investments in and loans
receivable from Enseada
Total¥22,145 million(*2) Gain on sale of fixed assets
Fiscal year ended March 31, 2016 (April 1, 2015 – March 31, 2016)
Realized gains of deferred revenue in conjunction with the sale-and-leaseback related to fixed
assets of a North American subsidiary.
Fiscal year ended March 31, 2017 (April 1, 2016 – March 31, 2017)
Realized gains of deferred revenue in conjunction with the sale-and-leaseback related to fixed
18

assets of a North American subsidiary.
(*3) Gain on Transfer of Business
Fiscal year ended March 31, 2016 (April 1, 2015 – March 31, 2016)
Due to assignment of all shares of consolidated subsidiary KCM Corporation and allbusinesses of KCMJ Corporation.
(*4) Gain on sale of fixed assets
Fiscal year ended March 31, 2017 (April 1, 2016 – March 31, 2017)
In conjunction with the sale of the land and building of the Company’s Tokyo office.

19

Segment information and others
1. Overview of reportable segments
The Company’s reportable segments are components of the company about which separate
financial information is available. These segments are subject to periodic reviews by theCompany’s board of directors to decide how to allocate resources and assess performance. The
Company’s operations are divided into internal companies based on product categories. Certain
authority is delegated to each of the internal companies, based on which they conduct businesses
in Japan and overseas. The Company’s operations are therefore segmented based on each internal
company’s product categories. The Company’s eight reportable segments are the Ship & Offshore
Structure segment, the Rolling Stock segment, the Aerospace segment, the Gas Turbine &Machinery segment, the Plant & Infrastructure segment, the Motorcycle & Engine segment, thePrecision Machinery segment, and the Other segment.
Main segment businesses are listed below.
Industry segment
Ship & Offshore
Structure
Rolling Stock
Aerospace
Gas Turbines &Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other

Major products
Construction and sale of ships and other vessels, etc.
Production and sale of rolling stock, snow plows, etc.
Production and sale of aircraft, etc.
Production and sale of jet engines, general-purpose gas turbine
generators, prime movers, etc.
Production and sale of industrial equipment, boilers, environmental
equipment, steel structures, crushers, etc.
Production and sale of motorcycles, all-terrain vehicles (ATV), utility
vehicles, personal watercraft (“JET SKI”), general-purpose gasoline
engines, etc.
Production and sale of industrial hydraulic products, industrial robots, etc.
commercial activities, sales/order agency and intermediary activities,
administration of welfare facilities, etc.

2. Method for calculating sales, profit/loss, assets, liabilities, and other items for reportable segments
The accounting methods applied to the reported business segments generally follow theaccounting policies used to prepare the consolidated financial statements. The income of reporting
segments is based on operating income. Inter-segment earnings and transfers are based on market
prices.

20

3. Sales, income (loss), assets, liabilities, and other items by reportable segment
Fiscal year ended March 31, 2016 (April 1, 2015 – March 31, 2016)(Million yen)
Sales
Intersegment
External sales
sales ortransfer
Ship & Offshore
Structure

Rolling Stock
Aerospace
Gas Turbines& Machinery
Plant &
Infrastructure
Motorcycle &EnginePrecision
Machinery
Other
Operations
Total
Adjustments
Consolidated
total

Other items
Total

Segment
income(loss)

Segment
assetsDepreciation/amortization

Investment inequitymethod affiliates

Increase inproperty, plantand equipment
and intangibles

94,8882,791

97,679(7,926)

155,063994

52,063

2,672

146,646
351,858

1,230
1,727

147,877
353,586

9,299
45,657

171,322378,982

2,914
13,435

153
-

2,535
28,760236,445

16,634

253,079

16,962

314,548

4,332

745

7,917

135,668

14,205

149,874

8,516

120,740

1,472

17,276

1,444

333,595

1,116

334,711

15,769243,733

13,1581,332

14,513

133,175

15,518

148,694

8,542

142,959

6,034

371

8,129

108,81738,926

147,743

2,894

71,372

1,616

3,002

3,933

1,541,096-

92,150(92,150)

1,633,246(92,150)

99,716(3,719)1,598,723
21,73443,9605,044

74,944-69,906
6,404

1,541,096-

1,541,096

95,996

1,620,458

49,00474,94476,310Fiscal year ended March 31, 2017 (April 1, 2016 – March 31, 2017)(Million yen)
Sales
Intersegment
External sales
sales ortransfer
Ship & Offshore
Structure

Rolling Stock
Aerospace
Gas Turbines& Machinery
Plant &
Infrastructure
Motorcycle &EnginePrecision
Machinery
Other
Operations
Total
Adjustments
Consolidated
total

Other items
Total

Segment
income(loss)

Segment
assetsDepreciation/amortization

Investment inequitymethod affiliates

Increase inproperty, plantand equipment
and intangibles

103,204

2,447

105,651(21,423)

168,577

1,277

47,643

3,705

137,159
329,91575
1,614

137,235
331,530

3,485
25,034

164,412433,241

2,626
15,022

129
-

2,728
33,273241,953

12,823

254,776

15,294347,453

4,764

-

8,944

160,877

7,928

168,806

2,610

119,157

1,456

16,8992,207

313,030682

313,713

11,749243,412

13,1391,350

18,292

155,278

15,872

171,151

13,104

157,501

6,471

297

7,227

77,41040,041

117,452

3,137

86,465

1,672

3,173

1,174

1,518,830-

81,486(81,486)

1,600,317(81,486)

52,992(7,031)

1,720,222(32,858)

46,4305,134

69,493-77,553
5,191

1,518,830-

1,518,830

45,9601,687,363

51,56469,49382,74421

4. Reconciliation and main components of difference between total for reportable segments andamounts on the consolidated financial statements
Fiscal year ended March 31(Million yen)

Sales

2016

Total for reportable segments
Intersegment transactions
Net sales reported on the consolidated
financial statements

2017

1,633,246(92,150)

1,600,317(81,486)

1,541,096

1,518,830

Fiscal year ended March 31(Million yen)

Income2016

Total for reportable segments
Intersegment transactions
Corporate expenses*
Operating income (loss) on consolidated
financial statements

2017
99,716(22)(3,697)52,992(34)(6,997)

95,99645,960*Note: Corporate expenses mainly comprise general and administrative expenses not attributed toreportable segments.
Fiscal year ended March 31(Million yen)

Assets2016

Total for reportable segments
Intersegment transactions etc.
Corporate assets shared by all segments*
Total assets on consolidated financial
statements

2017

1,598,723(86,409)108,144

1,720,222(80,391)
47,532

1,620,458

1,687,363*Note: Corporate assets shared by all segments mainly comprise fixed assets not attributed to reportablesegments.
Fiscal year ended March 31
Other items

Total for reportablesegments

Adjustments*

2016

2017

2016

Depreciation/amortization

43,96046,430

5,044

Increase in property, plantand equipment andintangibles

69,90677,553

6,404

2017

(Million yen)Amounts reported on
the consolidated
financial statements
2016

2017

5,134

49,00451,564

5,191

76,31082,744*Note: Adjustments are mainly due to fixed assets not attributed to reportable segments.

22

Related information
Fiscal year ended March 31, 2016 (April 1, 2015 – March 31, 2016)
1. Information by product and service
Information by product and service is omitted here as segmentation is equivalent to that used forreportable segments.
2. Information by geographic area(a) Net salesJapan
636,565

USA
396,697

Europe144,894

Asia
241,424

Other areas
121,514(Million yen)Total
1,541,096

Note: Net sales are classified by country or region based on the location of customers.

(b) Property, plant and equipment
Japan378,380

North America
23,566

Europe3,691

Asia
30,090

Other areas
828(Million yen)Total
436,557

3. Information by major clients
Clients

Net sales

Ministry of Defense

227,333

The Commercial Airplane Company

159,683(Million yen)
Related segments
Ship & Offshore Structure, Aerospace, Gas
Turbines & Machinery
Aerospace

Fiscal year ended March 31, 2017 (April 1, 2016 – March 31, 2017)
1. Information by product and service
Information by product and service is omitted here as segmentation is equivalent to that used forreportable segments.
2. Information by geographic area(a) Net salesJapan
648,166

USA
371,249

Europe177,900

Asia
220,901

Other areas
100,611(Million yen)Total
1,518,830

Note: Net sales are classified by country or region based on the location of customers.

(b) Property, plant and equipment(Million yen)North
America
27,750Japan
401,309

Europe

Asia

3,054

28,865

Other areas
901

Total
461,881

3. Information by major clients
Clients
Ministry of Defense

Net sales
236,861

23(Million yen)
Related segments
Ship & Offshore Structure, Aerospace, Gas
Turbines & MachineryImpairment loss on fixed assets by reportable segment
Not applicable.
Amortization amount for and unamortized balance of goodwill
Not applicable.
Gain on negative goodwill by reportable segment
Not applicable.
Per share data
Years ended March 31

(Yen)
2016

2017

Net assets per share

258.21

Net assets per share

261.73

Earnings per share - basic

27.56

Earnings per share - basic

15.68

Notes:
1. Diluted net earnings per share is not stated because there are no potential shares.
2. Net income/loss per share and net income per share (diluted) were calculated based on the following:
Years ended March 31
2016
Earnings per share - basic
Net income attributable to owners of parent
Earnings not attributable to common shareholders
Net income allocated to the common shares
Average number of common shares outstanding(Thousands of shares)

Material subsequent events
Not applicable.

24(Million yen)
2017

46,043

26,20446,043

26,204

1,670,591

1,670,561

4. Others(1) Consolidated orders and sales
Orders received
Years ended March 31(Million yen)
2016（A）

2017（B）% of total

Change（B-A）% of total%

Ship & Offshore Structure
98,394
5.8
36,9792.7(61,414)(62.4)
Rolling Stock132,133
7.8
158,597
11.7
26,46320.0
Aerospace464,286
27.4
237,01617.5(227,270)(48.9)
Gas Turbine & Machinery
288,903
17.0
260,35419.3(28,548)(9.8)
Plant & Infrastructure
138,775
8.1
95,0127.0(43,762)(31.5)
Motorcycle & Engine
333,595
19.6
313,030
23.2(20,564)(6.1)
Precision Machinery
133,191
7.8
166,832
12.3
33,641
25.2
Other104,407
6.1
80,948
6.0(23,458)(22.4)
Total
1,693,687
100.0
1,348,773
100.0(344,914)(20.3)
Note: The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.

Net sales
Years ended March 31(Million yen)
2016（A）

2017（B）% of total

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other
Total

94,888
146,646
351,858
236,445
135,668
333,595
133,175
108,817
1,541,096

6.1
9.5
22.8
15.3
8.8
21.6
8.6
7.0
100.0

Change（B-A）% of total

103,204
137,159
329,915
241,953
160,877
313,030
155,278
77,4101,518,830

6.7
9.0
21.7
15.9
10.5
20.6
10.2
5.0
100.0

%

8,315
(9,487)(21,943)
5,507
25,208(20,564)
22,102(31,406)(22,266)

8.7
(6.4)
(6.2)
2.3
18.5
(6.1)
16.5
(28.8)(1.4)

Order backlog
Years ended March 31
2016（A）

2017（B）% of total

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other
Total

259,921375,729
608,352
381,787
255,944
26,35817,863
1,925,957

13.4
19.5
31.5
19.8
13.2
1.3
0.9
100.0

25

(Million yen)
Change（B-A）% of total

191,604
392,224
508,759
394,977
214,926
37,912
21,401
1,761,806

10.8
22.2
28.8
22.4
12.1
2.1
1.2
100.0

%

(68,317)
16,494(99,593)
13,190(41,017)
11,553
3,538(164,151)(26.2)
4.3(16.3)
3.4(16.0)
43.8
19.8
(8.5)

(2) Supplementary information on earnings forecasts for the fiscal year ending March 31, 2018
1. Consolidated earnings outlook(Billion yen)

Outlook for the fiscal year
ending March 31, 2018
(A)

Fiscal year ended
March 31, 2017(actual)(B)

Change (A – B)

Net sales
Operating income
Recurring profit
Net income attributable toowners of parent

1,555.0
58.0
51.5

1,518.8
45.9
36.6

36.2
12.1
14.9

36.0

26.2

9.8

Orders received
Before-tax ROIC (%)
R&D expenses
Capital expenditures
Depreciation/amortization
Number of employees
at end of period*Number of employees outside

1,560.0
6.0%
48.0
99.0

1,348.7
5.0%
43.6
82.7

211.3
1.0%
4.4
16.3

of Japan included therein

53.0

51.5

1.5

36,40035,127

1,273*9,100*8,779*(321)

Notes: 1. Outlook’s assumed foreign exchange rates: ¥108= US$1, ¥114 = 1 euro

2. Before-tax ROIC = EBIT(income before income taxes + interest expense) / invested capital(interest-bearing debt + shareholders’ equity).
3. Capital expenditures represent the total of newly recorded property, plant and equipment andnewly recorded intangible assets. Depreciation/amortization represents depreciation/amortization
expenses for property, plant and equipment and intangible assets.

2. Outlook by reportable segment(a) Net sales and operating income (loss)(Billion yen)

Fiscal year ended
March 31, 2017 (actual)(B)

Outlook for the fiscal year
ending March 31, 2018
(A)

Change (A – B)

Net sales

Operating
Income (loss)

Net sales

Operating
Income (loss)

Net sales

Operating
Income (loss)

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other
Adjustments

100.0
150.0
325.0
265.0
125.0
330.0
175.0
85.0

103.2
137.1
329.9
241.9
160.8
313.0
155.2
77.4

1,555.0(21.4)
3.4
25.0
15.2
2.6
11.7
13.1
3.1
(7.0)
45.9

(3.2)
12.9
(4.9)
23.1
(35.8)
17.0
19.8
7.6

Total

0
5.5
13.0
11.0
3.5
13.0
16.0
4.0
(8.0)
58.0

21.4
2.1
(12.0)
(4.2)
0.9
1.3
2.9
0.9
(1.0)
12.1

1,518.8

26

36.2

(b) Orders received(Billion yen)

Outlook for the fiscal year
Fiscal year ended
ending March 31, 2018
March 31, 2017 (actual)(A)(B)
Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other
Total

55.0
190.0
330.0
275.0
110.0
330.0
185.0
85.0
1,560.0

36.9
158.5
237.0
260.3
95.0
313.0
166.8
80.9
1,348.7

Change (A – B)
18.1
31.5
93.0
14.7
15.0
17.0
18.2
4.1
211.3

(c) Before-tax ROIC(%)

Outlook for the fiscal year
Fiscal year ended
ending March 31, 2018
March 31, 2017 (actual)(A)(B)
Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Total

0.5
6.9
5.5
4.9
9.0
9.5
15.8
6.0

27

(23.4)
3.0
15.1
7.1
8.9
7.3
13.4
5.0

Change (A – B)
23.9
3.9
(9.6)
(2.2)
0.1
2.2
2.4
1.0