Report of Earnings and Financial Statements for the
Six Months Ended September 30, 2009
November 2, 2009
Listed company’s name:

Kawasaki Heavy Industries, Ltd.

Listed on:
1st sections of TSE, OSE, NSE
Stock code:
7012
URL:
http://www.khi.co.jp/
Representative:
Satoshi Hasegawa, President
Contact:
Minoru Akioka, Senior Manager, Accounting DepartmentTel:+81 3-3435-2130
Scheduled dates:
Submission of quarterly securities filing:
November 12, 2009
Commencement date of dividend payments-

1. Consolidated Financial Results for the Six Months Ended September 30, 2009
(April 1, 2009 to September 30, 2009)(Amounts in millions of yen rounded down to the nearest million yen)

(1) Operating Results(Percentage figures represent changes versus the year-ago period)
Net sales
Six months ended
September 30, 2009
Six months ended
September 30, 2008

Operating income
million yen%

516,053(21.0)(6,167)-(1,223)-(6,294)-652,923-

24,353-30,718-12,335-yen
Six months ended
September 30, 2009
Six months ended
September 30, 2008

million yen

Net income

million yen

Earnings per share%

Recurring profit%

million yen%

Earnings per share– dilutedyen(3.77)

-

7.39

7.24

(2) Financial Condition

Total assets

Net assets

million yen

million yen

Ratio ofshareholders’ equity
to total assets%

September 30, 2009

1,368,010

289,60720.8

170.60March 31, 2009

1,399,770

295,24520.7

174.10Note: Shareholders’ equity: September 30, 2009: 284,598 million yen
March 31, 2009: 290,440 million yen

1

Net assets per shareyen2. Dividends

Record date or term

End of firstquarteryen

End of second
quarteryen

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

Full year
yenYear ended
0.00
3.00
March 31, 2009
Year ending
0.00
March 31, 2010
Year ending March
3.00
31, 2010 (forecast)
Note: Revision of dividend forecast during the six months ended September 30, 2009: None

3.00

3.00

3. Forecast of Consolidated Earnings for the Year Ending March 31, 2010
(April 1, 2009 to March 31, 2010)
Net sales

Full year

million yen%

1,200,000(10.3)(Percentage figures represent changes versus the year-ago period)
Earnings per
Operating income
Recurring profit
Net income
sharemillion yen%
million yen%
million yen
%
yen
5,000

(82.5)

10,000(74.1)

3,000(74.4)

Note: Revision of earnings forecast during the six months ended September 30, 2009: Yes

4. Other Information
1) Changes affecting the status of material subsidiaries (scope of consolidation): None
2) Use of simplified accounting methods and/or accounting methods specific to the preparation ofquarterly consolidated financial statements: Yes
Note: For details, see “4. Other Information” on page 7 in the “Qualitative Information and Financial
Statements” section.
3) Changes in accounting principles, procedures, and methods of presentation used in the preparation ofquarterly consolidated financial statements:(1) Changes in accord with revisions to accounting standards: Yes(2) Changes other than (1) above: None
Note: For details, see “4. Other Information” on page 7 in the “Qualitative Information and Financial
Statements” section.
4) Number of shares issued (common stock)(1) Number of shares issued at end of period (treasury stock included):
September 30, 2009:
1,669,629,122 shares
March 31, 2009:
1,669,629,122 shares(2) Number of shares held in treasury at end of period:
September 30, 2009:
1,424,175 shares
March 31, 2009:
1,394,288 shares(3) Average number of outstanding shares:
Six months ended September 30, 2009: 1,668,216,376 shares
Six months ended September 30, 2008: 1,668,285,278 shares

2

1.79

*Appropriate Use of Financial Forecasts and Other Important Matters
Forward-Looking Statements
1. The Company has revised the consolidated earnings forecasts issued on April 28, 2009. For details,
see “3. Consolidated Earnings Outlook” on page 7 in the “Qualitative Information and Financial
Statements” section.
2. These materials contain various forward-looking statements and other forecasts regarding
performance and other matters. Such statements are based on information available at the time of
preparation. Actual results may differ from those expressed or implied by forward-looking
statements due to a range of factors. For the assumptions underlying the earnings forecasts presented
and other information regarding the use of such forecasts, refer to “3. Consolidated Earnings
Outlook” on page 7 in the “Qualitative Information and Financial Statements” section.

3

Qualitative Information and Financial Statements
1. Consolidated Operating Results
In the six months to September 30, 2009 (first half of the fiscal year ending March 31, 2010), theJapanese economy emerged from the crisis conditions of the latter half of last fiscal year but remained
under pressure from the looming specter of yet deeper recession brought on by a capital spending andexport slump, ongoing yen appreciation, a deteriorating employment environment, and a downturn inconsumer spending.
The global economy, particularly Europe and the Americas, likewise continue to languish, althoughsome emerging economies showed signs of recovery.
This adverse operating environment weighed heavily on KHI Group businesses, all of which continued
to experienced declines in order bookings throughout the fiscal first half.
Although the Shipbuilding segment managed to achieve sales growth, overall sales declined. Profits
declined across all business segments, with the exception of the Aerospace and Shipbuilding segments,
under the weight of yen appreciation and downturns in European and American markets.
Relative to the first half of fiscal 2009, the Group’s consolidated order bookings declined ¥314.2 billion
to ¥403.0 billion while consolidated net sales decreased ¥136.8 billion to ¥516.0 billion. The Group
consequently incurred a consolidated operating loss of ¥6.1 billion, recurring loss of ¥1.2 billion, and net
loss of ¥6.2 billion. These losses respectively represent decreases of ¥30.5 billion, ¥31.9 billion, and¥18.6 billion from fiscal 2009’s first-half operating, recurring, and net incomes.
Consolidated operating performance in the six months to September 30, 2009, is summarized bysegment below.
Effective from the first quarter of fiscal 2010, the Construction Machinery business, previously part of
the Rolling Stock segment (formerly the Rolling Stock & Construction Machinery segment), is includedin the Other segment, as disclosed below under the heading “Information by industry segment” on page
13 (subsection (5) 1) of “5. Consolidated Financial Statements”).

Shipbuilding
With no newbuilding orders received in the fiscal first half, consolidated order bookings decreased ¥55.7
billion year on year to ¥2.7 billion.
Consolidated net sales increased ¥11.5 billion year on year to ¥65.2 billion, boosted by a spate of salesof large vessels.
Operating income increased ¥1.1 billion year on year to ¥1.4 billion on improved margins reflecting adecline in raw materials costs and other factors.

4

Rolling Stock
Consolidated order bookings included orders from Singapore for subway cars but declined to ¥44.5
billion, down ¥91.5 billion from the first half of fiscal 2009, which was marked by an influx of large
orders.
Consolidated net sales fell ¥3.5 billion year on year to ¥80.1 billion due mainly to resegmentation of
the Construction Machinery business, despite growth in sales of rolling stock to JR Group and overseas
sales of rolling stock.
Consolidated operating income decreased ¥3.7 billion year on year to ¥3.2 billion due to lower margins
on export deals as a result of yen appreciation.
The above year-on-year changes reflect the impact of the resegmentation involving the Construction
Machinery business. Retroactively adjusted to reflect the resegmentation, the Rolling Stock segment had
consolidated order bookings of ¥119.9 billion, consolidated net sales of ¥64.5 billion, and operating
income of ¥6.5 billion in the first half of fiscal 2009.

Aerospace
Consolidated order bookings decreased ¥11.8 billion year on year to ¥46.5 billion as a result of decreasedorders for component parts for the Boeing 777 and other aircraft.
Consolidated net sales were down ¥21.9 billion year on year to ¥73.3 billion, largely due to decreased
sales to Japan’s Ministry of Defense.
Despite the decline in sales, consolidated operating income was up ¥2.0 billion year on year to ¥2.6
billion, due in part to adjustments to expense recognition timing resulting from changes to the Boeing
787’s development schedule.

Gas Turbines & Machinery
Consolidated order bookings decreased ¥19.4 billion year on year to ¥99.8 billion as a result of decreasedorders for marine diesel engines, marine propulsion systems, and other items.
Consolidated net sales declined ¥8.3 billion year on year to ¥83.4 billion, despite strong sales ofcomponents for aircraft engines, due to lower sales of marine turbines and gas compressor equipment andlower sales to Japan’s Ministry of Defense.
Consolidated operating income decreased ¥4.1 billion year on year to ¥600 million, largely as a resultof yen appreciation and the sales decline.

Plant & Infrastructure Engineering
Despite a diverse influx of plant orders, consolidated order bookings fell to ¥32.5 billion, down ¥16.5
billion from the first half of fiscal 2009, when the segment booked a large order for LNG storage tanks.
Consolidated net sales decreased ¥10.9 billion year on year to ¥35.7 billion, largely reflecting a falloff

5in overseas sales of large plant installations.
Consolidated operating income decreased ¥3.5 billion year on year to ¥1.0 billion, largely as a result of
the sales decline.

Consumer Products & Machinery
Consolidated net sales fell ¥71.3 billion year on year to ¥106.2 billion amid a decline in European andNorth American motorcycle sales coupled with a falloff in industrial robots sales.
The sales decline, compounded by yen appreciation against the US dollar, the euro, and othercurrencies led to a consolidated operating loss of ¥16.6 billion, ¥16.9 billion worse than the year-earlier
first-half operating loss, despite progress made in boosting product margins and cutting fixed costs andexpenses.

Hydraulic Machinery
Consolidated order bookings fell ¥27.5 billion year on year to ¥27.5 billion, mainly as a result of
diminished demand from construction machinery makers.
Consolidated net sales were down ¥18.2 billion year on year to ¥29.0 billion, largely due to decreased
sales to construction machinery makers.
Operating income decreased in tandem with sales, down ¥3.0 billion year on year to ¥1.9 billion.

Other Operations
Consolidated net sales declined ¥13.9 billion year on year to ¥42.8 billion.
We booked a consolidated operating loss of ¥300 million, ¥2.1 billion below year-earlier first-halfoperating income, largely due to the Construction Machinery business’s resegmentation.
The above year-on-year changes reflect the impact of the resegmentation involving the Construction
Machinery business. Retroactively adjusted to reflect the resegmentation, the Other segment had
consolidated net sales of ¥75.9 billion, and operating income of ¥2.3 billion in the first half of fiscal 2009.

2. Consolidated Financial Position
At September 30, 2009, consolidated assets totaled ¥1,368.0 billion, a decrease of ¥31.7 billion fromMarch 31, 2009. The decrease was attributable to reduction in trade receivables resulting from collectionof receivables and reduced sales. The decrease in receivables outweighed growth in property, plant andequipment due to capital investment and growth in work-in-process stemming from progress toward
completion of existing contracts.
Consolidated liabilities totaled ¥1,078.4 billion at September 30, a decrease of ¥26.1 billion fromMarch 31, 2009. The decrease was attributable to reduction in trade payables, partially offset by growth inborrowings and other items.

6Consolidated net assets decreased ¥5.6 billion from March 31, 2009, to ¥289.6 billion at September 30,
largely as a result of the first-half net loss and payment of dividends.

3. Consolidated Earnings Outlook
Recovery signs dot the economic landscape but have yet to spark a concerted revival from the economic
downturn brought on by the global financial crisis. The Company inevitably expects the harsh conditions
its faces to persist, particularly in mass-production businesses, but will forge ahead with the rebuilding of
its earnings base with a view to returning to a sustained-growth trajectory.
The Company now forecasts consolidated net sales of ¥1,200.0 billion for the full fiscal year, down
¥40.0 billion relative to the forecast issued in April, due to anticipated underperformance relative toforecasts in the Consumer Products & Machinery and Aerospace segments.
Although the Company expects the decline in net sales to impact on profits, it intends to follow throughwith efforts to improve profitability throughout its operations by cutting fixed costs and expenses andincreasing productivity. For the full fiscal year, the Company therefore forecasts consolidated operating
income of ¥5.0 billion and consolidated recurring profit of ¥10.0 billion, unchanged from the forecasts
issued in April. The forecast of net income has been revised downward to ¥3.0 billion to account for thebooking of extraordinary losses.
The Company’s earnings forecast assumes exchange rates of ¥90 to the US dollar and ¥130 to the euro.

4. Other Information
1) Changes affecting the status of material subsidiaries (scope of consolidation) during the period
Not applicable2) Use of simplified accounting and/or accounting procedures specific to preparation of quarterly
consolidated financial statements
Simplified accounting(1) Bad debt estimation method for general claims
The Company estimates the value of uncollectible general claims based on the preceding fiscal
year's actual credit loss rate, unless the credit loss rate is deemed to have substantially changed
relative to the historical rate calculated at the end of the preceding fiscal year.
(2) Inventory valuation method
The Company estimates quarter-end inventories by a rational method based on the preceding fiscal
year's physical inventory count, without conducting a physical inventory count.
The Company writes down inventory from book value to estimated net realizable value only when
its utility has clearly diminished. In the case of inventory expected to be disposed of andslow-moving inventory with a turnover period that extends beyond the Company’s operating cycle,
the Company writes the inventory down to its estimated liquidation value. Such inventories arecarried at their written-down book value, unless their value was deemed to have substantiallychanged during the second quarter of the fiscal year under review.
(3) Fixed-asset depreciation method
For fixed asset depreciated by the declining-balance method, the Company calculates quarterly

7

depreciation expense by prorating annual depreciation expense. For certain consolidated subsidiaries,
quarterly depreciation expense is calculated by prorating annual depreciation expense based on abudget that factors in expected acquisitions, sales, and disposals of fixed assets during the fiscal year.
(4) Deferred-tax asset and liability calculation method
To assess deferred assets' collectability, the Company uses tax planning and earnings forecasts usedin the preceding fiscal year if it deems that the operating environment and status of temporary
differences have not changed substantially since the preceding fiscal year-end.
If the operating environment or status of temporary differences is deemed to have changed
substantially since the preceding fiscal year-end, the Company uses said tax planning and earnings
forecasts adjusted to reflect the changes' impact.
(5) Elimination of unrealized gains/losses on inventories
For some products, the Company calculates unrealized gains/losses on inventories using thegain/loss rate used in the preceding fiscal year or quarter or a gain/loss rate based on rational
budgeting, unless business conditions are deemed to have changed substantially from the preceding
fiscal year or quarter.
Accounting procedures specific to preparation of quarterly consolidated financial statements
The Company calculates tax expense by rationally estimating its effective tax rate after applicationof deferred-tax accounting to pretax net income for the fiscal year that 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
other than temporary differences.
Income taxes are reported inclusive of income tax adjustments.
3) Changes in accounting principles, procedures, or presentation methods applicable to preparation ofquarterly consolidated financial statements
Changes related to accounting standards
Change in accounting standard for construction revenue and cost
The Company previously used the percentage-of-completion method for accounting revenues
associated mainly with construction contracts with a contract amount of three billion yen or more
and a construction period of over one year, and other construction works were accounted for with thecompleted-contract method. Effective the first quarter of the fiscal year ending March 31, 2010,
however, in conjunction with adoption of the Accounting Standard for Construction Contracts(ASBJ Statement No.15, December 27, 2007) and its accompanying Guidance on AccountingStandard for Construction Contracts (ASBJ Guidance No.18, December 27, 2007), thepercentage-of-completion method was applied to construction contracts that were started during thefirst quarter ended June 30, 2009, for which certain elements were determinable with certainty as of
September 30, 2009. The percentage of completion is estimated with the proportion-of-cost method,under which the percentage of construction completed during the period is calculated as the ratio of
the construction cost incurred during that period relative to the total construction cost. The
completed-contract method was applied to other works.
Due to this change, net sales for the second quarter of the fiscal year ending March 31, 2010 was
3,612 million yen higher, and operating loss, recurring loss, loss before income taxes and minority
interests were each 293 million yen lower.
The change's impact by segment is detailed below under “Segment Information” in the“Consolidated Financial Statements” section.

85. Consolidated Financial Statements(1) Consolidated Balance Sheets
Millions of yen
As of
As of
September 30, 2009
March 31, 2009
AssetsCurrent assets
Cash on hand and in banks
Trade receivables
Merchandise and finished products
Work in process
Raw materials and supplies
Other current assets
Allowance for doubtful receivables

24,875335,939
56,223
347,462
81,27595,828(2,492)
939,112

31,955402,341
69,609325,578
81,253
88,169(3,111)
995,796

294,075

284,117986
19,684
20,6701,106
18,466
19,573

115,433(1,281)
114,151
428,898
1,368,010

101,470(1,187)100,283
403,974
1,399,770

Liabilities
Current liabilities
Trade payables
Short-term borrowings
Income taxes payable
Accrued bonuses
Provision for losses on construction contracts
Other provisions
Advances from customers
Other
Total current liabilities

279,592
130,526
3,520
13,97915,43812,306
129,478
143,442728,283

358,478
157,082
8,710
14,241
20,93015,049125,762
129,751
830,006

Long-term liabilities
Bonds payable
Long-term debt
Employees’ retirement and severance benefits
Other provisions
Other
Total long-term liabilities
Total liabilities

40,513
206,803
84,5479,850
8,405
350,118
1,078,402

40,990140,715
79,9693,980
8,862
274,518
1,104,525

104,328
54,281
142,594(474)
300,730

104,328
54,281
154,272(467)
312,415

4,456
2,051
(22,639)(16,131)5,009
289,607
1,368,010

3,139
(263)
(24,850)(21,974)
4,804
295,245
1,399,770

Total current assets
Fixed assets
Net property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Other
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Net unrealized gains (losses) on securities
Gains (losses) on hedging items
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests
Total net assets
Total net assets and liabilities9(2) Consolidated Statements of Income
Millions of yen
Six months ended
September 30, 2008
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 (loss)
Non-operating income
Interest income
Dividend income
Gain on sale of marketable and investment securities
Equity income of non-consolidated subsidiaries and affiliates
Foreign exchange gain, net
Other
Total non-operating income
Non-operating expenses
Interest expense
Other
Total non-operating expenses
Recurring profit (loss)
Extraordinary income
Reversal of provision for environmental measures
Total extraordinary income
Extraordinary losses
Provision for losses on damages suit
Total extraordinary losses
Income (loss) before income taxes and minority interests
Income taxes
Minority interests in net income of consolidated subsidiaries
Net income (loss)

10

Six months ended
September 30, 2009

652,923547,662
105,260

516,053448,226
67,827

21,268
17,687
41,95180,907
24,353

19,975
17,21336,80573,994(6,167)

1,812
689
875
3,310
3,022
2,424
12,134

1,651
434
0
2,582
3,277
2,916
10,864

3,428
2,341
5,770
30,718

2,848
3,071
5,920
(1,223)

-

1,212
1,212

5,165
5,165
25,552
12,588627
12,335

6,983
6,983(6,994)(1,043)343(6,294)

(3) Consolidated Cash Flow Statement
Millions of yen
Six months ended
Six months ended
September 30,
September 30,
2008
2009
Cash flow from operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Increase (decrease) in provisions
Interest and dividend income
Interest expense
Investment (gain) loss on equity method(Gain) loss on sale and disposal of property, plant, and equipment(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables
Increase (decrease) in advances from customers
Other
Subtotal
Cash received for interest and dividends
Cash paid for interest
Cash paid for income taxes
Net cash provided by (used for) operating activities

25,552
20,0241,830(2,501)
3,428(3,310)(755)
83,385(56,939)(51,528)
21,143(11,146)
29,183
2,630(3,464)(19,801)
8,547(6,994)23,556
1,289(2,086)
2,848(2,582)322
64,575(6,842)(80,247)
1,915(11,762)(16,008)
2,354(2,661)(8,910)(25,226)(30,787)(36,141)

Cash flow from investing activities
Acquisition of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment and intangible
assetsAcquisition of investments in securities
Proceeds from sale of investments in securities
Acquisition of equity interest in subsidiaries resulting in change inscope of consolidation
Acquisition of affiliates’ shares(Increase) decrease in short-term loans receivable
Additions to long-term loans receivable
Proceeds from collection of long-term loans receivable
Other
Net cash used for investing activities

(943)

-

(371)
(60)
84
(658)
(29,583)(1,331)
160
(55)
71
537
(36,470)

Cash flow from financing activities
Increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayment of long-term debt
Redemption of bonds payable
Acquisition of treasury stock
Cash dividends paid
Cash dividends paid to minority interests
Other
Net cash provided by financing activities
Effect of exchange rate changes
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

20,381
21,008(3,392)(17,518)(11)(8,294)(329)
11,843(360)(9,553)38,16928,616

6,921
69,500(4,418)(10,000)(6)(4,986)(426)(19)
56,564(1,629)(6,762)
31,41324,651

11

1,549

381

(24)
1,626

(102)
10

(4) Notes on the going-concern assumption
Not applicable(5) Segment Information
1) Information by industry segment
Six months ended September 30, 2008 (April 1, 2008 – September 30, 2008)
Millions of yen

Shipbuilding
Rolling Stock & Construction Machinery
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Other
Total
Eliminations/corporation
Consolidated total

External sales

Intersegment
sales

Total sales

Operatingincome53,734
83,67895,29091,79046,692
177,62147,29656,818652,923
652,923

905
730
809
8,484
5,170
3,661
4,355
19,48843,606(43,606)-

54,64084,40996,100100,274
51,862
181,282
51,65276,306
696,529(43,606)
652,923

257
7,064
559
4,785
4,693
301
5,044
1,819
24,525(172)
24,353

Notes: 1. Method of segmentation
Business segmentation is based on the categorization used by management.
2. Major products by industry segment
Industry segment
Shipbuilding
Rolling Stock &Construction Machinery
Aerospace
Gas Turbines &Machinery
Plant & Infrastructure
Engineering
Consumer Products &MachineryHydraulic Machinery
Other

Major products
Ships and vessels
Rolling stock, construction machinery, snowplows, crushers
Aircrafts
Jet engines, general-purpose gas turbine generators, movers
Industrial equipment, boilers, environmental equipment, steel structures
Motorcycles, personal watercraft, all-terrain vehicles (ATV), utility
vehicles, general-purpose gasoline engines, industrial robots
Industrial hydraulic products
Commercial activities, sales/order agency and intermediary activities,
management of welfare facilities

3. Change in inventory valuation standard and method
The Company previously valued ordinary held-for-sale inventories mainly at cost by the
specific identification, moving average, and FIFO methods. Effective the first quarter of the
fiscal year ending March 31, 2009, in conjunction with adoption of the Accounting Standard
for Measurement of Inventories (ASBJ Statement No. 9, as revised July 5, 2006), the Company
switched to valuing inventories mainly at cost (writing down of inventories’ carrying value toreflect impairment of the goods’ utility) by the specific identification, moving average, andFIFO methods. Due to this change, operating income for the second quarter of the fiscal year
ending March 31, 2009, in the Rolling Stock & Construction Machinery segment was 388
million yen lower; in the Aerospace segment, 390 million yen lower; in the Gas Turbines &Machinery segment, 644 million yen lower; in the Plant & Infrastructure Engineering segment,
31 million yen lower; in the Consumer Products & Machinery segment, 389 million yen lower;
in the Hydraulic Machinery segment, 127 million yen lower.

12

4. Change in useful life for property, plant and equipment
The Company and its consolidated subsidiaries in Japan have revised machinery’s useful life
pursuant to 2008 amendments to the tax code. Due to this change, operating income for thesecond quarter of the fiscal year ending March 31, 2009, in the Shipbuilding business was 261
million yen lower; in the Rolling Stock & Construction Machinery segment, 187 million yen
lower; in the Aerospace segment, 115 million yen lower; in the Gas Turbines & Machinery
segment, 110 million yen lower; in the Plant & Infrastructure Engineering segment, 25 million
yen lower; in the Consumer Products & Machinery segment, 84 million yen lower; and in the
Other segment, 15 million yen lower; while in the Hydraulic Machinery segment, it was 58
million yen higher.

Six months ended September 30, 2009 (April 1, 2009 – September 30, 2009)
Millions of yen

Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Other
Total
Eliminations/corporation
Consolidated total

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

65,26180,14273,322
83,44635,745106,252
29,00642,876
516,053
516,053

857
578
1,097
9,800
3,990
1,179
3,620
15,351
36,476(36,476)-

66,11880,72074,41993,24739,736
107,432
32,62658,227552,529(36,476)
516,053

1,433
3,273
2,646
638
1,098
(16,609)
1,991
(311)
(5,839)(328)(6,167)

Notes: 1. Method of segmentation
Business segmentation is based on the categorization used by management.
2. Major products by industry segment
Industry segment
Shipbuilding

Ships and vessels

Major products

Rolling Stock

Rolling stock, snowplows, crushers

Aerospace
Gas Turbines &Machinery
Plant & Infrastructure
Engineering
Consumer Products &MachineryHydraulic Machinery
Other

Aircrafts
Jet engines, general-purpose gas turbine generators, movers
Industrial equipment, boilers, environmental equipment, steel structures
Motorcycles, personal watercraft, all-terrain vehicles (ATV), utility
vehicles, general-purpose gasoline engines, industrial robots
Industrial hydraulic products
Construction machinery, commercial activities, sales/order agency andintermediary activities, management of welfare facilities

3. Change in method of segmentation
In October 2008, the Company, Hitachi Construction Machinery Co., Ltd., and TCM
Corporation reached an agreement on forming an alliance with respect to their wheel loader
businesses. The alliance is to involve (i) joint research and development and (ii) a spin-off ofthe Company's wheel loader operation into a newly created subsidiary of the Company, andHitachi’s investment in that subsidiary.
In accord with the agreement, the construction machinery business was spun-off in April
2009 and succeeded by the Company's subsidiary, KCM Corporation. As a result, saidbusiness’s relationship with the Rolling Stock & Construction Machinery segment was
weakened and effective the first quarter of the fiscal year ending March 31, 2010, it wastherefore shifted from the Rolling Stock & Construction Machinery segment to the Other

13

segment.
Due to this change, compared with what they would have been under the previous method,
net sales for the second quarter of the fiscal year ending March 31, 2010, in the Rolling Stocksegment was 7,997 million yen lower (including 8,198 million yen of external sales) and in the
Other segment, 7,882 million yen higher (including 8,198 million yen of external sales). By thesame comparison, operating income in the Rolling Stock segment was 1,441 million yen higher,
while operating loss in the Other segment was 1,441 million yen higher.
4. Change in accounting standard for construction revenue and cost

As stated under the heading “Changes related to accounting standards” in part 4., 3) of the“Qualitative Information and Financial Statements” section, the Company previously used thepercentage-of-completion method for accounting of revenues associated mainly withconstruction contracts with a contract amount of three billion yen or more and a construction
period of over one year, and other construction works were accounted for with thecompleted-contract method. Effective the first quarter of the fiscal year ending March 31,
2010, however, in conjunction with adoption of the Accounting Standard for Construction
Contracts (ASBJ Statement No.15, December 27, 2007) and its accompanying Guidance on
Accounting Standard for Construction Contracts (ASBJ Guidance No.18, December 27,2007), the percentage-of-completion method was applied to construction contracts that werestarted during the first quarter ended June 30, 2009, for which certain elements were
determinable with certainty as of September 30, 2009. The percentage of completion isestimated with the proportion-of-cost method, under which the percentage of construction
completed during the period is calculated as the ratio of the construction cost incurred duringthat period relative to the total construction cost. The completed-contract method was applied
to other works.
Due to this change, net sales for the second quarter of the fiscal year ending March 31,
2010, in the Shipbuilding segment was 2,201 million yen higher; in the Gas Turbines &Machinery segment, 1,199 million yen higher; and in the Plant & Infrastructure Engineering
segment, 211 million yen higher. Also due to the change, operating income in Shipbuilding
segment was 90 million yen higher; in the Gas Turbines & Machinery segment was 150
million yen higher; and in the Plant & Infrastructure Engineering segment was 52 million yen
higher.

14

2) Information by geographic area
Six months ended September 30, 2008 (April 1, 2008 – September 30, 2008)
Millions of yen

Japan
North America
EuropeAsia
Other areas
Total
Eliminations/corporate
Consolidated total

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

465,767
106,347
56,11919,856
4,832
652,923
652,923

119,155
12,943
2,539
19,298122
154,060(154,060)-

584,922
119,291
58,65839,155
4,955
806,984(154,060)
652,923

17,049(1,237)
1,100
1,916
304
19,134
5,218
24,353

Notes: 1. Classification method of geographic segment: by geographic proximity
2. Major countries or regions in each segment other than Japan:
North America
EuropeAsia
Other areas

The U.S.A. and Canada
The Netherlands, the United Kingdom,
and Germany
Thailand, Indonesia, the Philippines, and Korea
Australia and Brazil

3. Change in inventory valuation standard and method
The Company previously valued ordinary held-for-sale inventories mainly at cost by the
specific identification, moving average, and FIFO methods. Effective the first quarter of the
fiscal year ending March 31, 2009, in conjunction with adoption of the Accounting Standard
for Measurement of Inventories (ASBJ Statement No. 9, as revised July 5, 2006), the Company
switched to valuing inventories mainly at cost (writing down of inventories’ carrying value toreflect impairment of the goods’ utility) by the specific identification, moving average, andFIFO methods. Due to this change, operating income for the second quarter of the fiscal year
ending March 31, 2009, in Japan was 1,971 million yen lower.
4. Change in useful life for property, plant and equipment
The Company and its consolidated subsidiaries in Japan have revised machinery’s useful life
pursuant to 2008 amendments to the tax code. Due to this change, operating income for thesecond quarter of the fiscal year ending March 31, 2009, in Japan was 742 million yen lower.

15

Six months ended September 30, 2009 (April 1, 2009 – September 30, 2009)
Millions of yen

Japan
North America
EuropeAsia
Other areas
Total
Eliminations/corporate
Consolidated total

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

392,484
66,93533,70019,2993,633
516,053
516,053

67,1958,531
887
22,84585
99,545(99,545)-459,679
75,467
34,58842,145
3,718
615,599(99,545)
516,053(6,547)(2,171)
929
3,337
49
(4,402)(1,765)(6,167)

Notes: 1. Classification method of geographic segment: by geographic proximity
2. Major countries or regions in each segment other than Japan:
North America
EuropeAsia
Other areas

The U.S.A. and Canada
The Netherlands, the United Kingdom,
and Germany
Thailand, Indonesia, the Philippines, and Korea
Australia and Brazil

3. Change in accounting standard for construction revenue and cost

As stated under the heading “Changes related to accounting standards” in part 4., 3) of the“Qualitative Information and Financial Statements” section, the Company previously used thepercentage-of-completion method for accounting revenues associated mainly with construction
contracts with a contract amount of three billion yen or more and a construction period of over
one year, and other construction works were accounted for with the completed-contract method.
Effective the first quarter of the fiscal year ending March 31, 2010, however, in conjunction withadoption of the Accounting Standard for Construction Contracts (ASBJ Statement No.15,
December 27, 2007) and its accompanying Guidance on Accounting Standard for Construction
Contracts (ASBJ Guidance No.18, December 27, 2007), the percentage-of-completion method
was applied to construction contracts which were started during the first quarter ended June 30,
2009, for which certain elements were determinable with certainty as of September 30, 2009.
The percentage of completion is estimated with the proportion-of-cost method, under which thepercentage of construction completed during the period is calculated as the ratio of theconstruction cost incurred during that period relative to the total construction cost. The
completed-contract method was applied to other works.
Due to this change, net sales for the second quarter of the fiscal year ending March 31, 2010,
in Japan was 3,612 million yen higher, while operating loss in Japan was 293 million yen lower.

16

2. Overseas sales
Six months ended September 30, 2008 (April 1, 2008 – September 30, 2008)
Millions of yen
Overseas sales
North America
EuropeAsia
Other areas
Total

Consolidated net sales

148,385
68,37874,081
71,594362,439

Ratio of overseas sales toconsolidated sales (%)

652,923

22.7
10.4
11.3
10.9
55.5

Notes: 1. “Overseas sales” includes sales by the Company and its consolidated subsidiaries to the countries andregions other than Japan.
2. Classification method of geographic segment: by geographic proximity
3. Major countries or regions in each segment:
North America
EuropeAsia
Other areas

The U.S.A. and Canada
The United Kingdom, France, the Netherlands, Italy and Spain
China, Korea, Taiwan and the Philippines
Panama, The Bahamas, Brazil and Australia

Six months ended September 30, 2009 (April 1, 2009 – September 30, 2009)
Millions of yen
Overseas sales
North America
EuropeAsia
Other areas
Total

Consolidated net sales

108,843
43,73874,71845,446
272,746

Ratio of overseas sales toconsolidated sales (%)

516,053

21.0
8.4
14.4
8.8
52.8

Notes: 1. “Overseas sales” includes sales by the Company and its consolidated subsidiaries to the countries andregions other than Japan.
2. Classification method of geographic segment: by geographic proximity
3. Major countries or regions in each segment:
North America
EuropeAsia
Other areas

The U.S.A. and Canada
The United Kingdom, Germany, France, Italy, and the Netherlands
China, Taiwan, the Philippines, Indonesia and Korea
Panama, Australia and Brazil(6) Note on Significant Changes in the Amount of Shareholders’ Equity
Not applicable176. Other
Orders and sales (consolidated)
Effective the first quarter of the fiscal year ending March 31, 2010, the Construction Machinery
business was reclassified from the Rolling Stock & Construction Machinery segment into the Other
segment.
Due to this change, compared with what they would have been under the previous method in the six
months ended September 30, 2009, orders received in the Rolling Stock segment were 7,148 million
yen lower, and in the Other segment, higher by the same amount. Also due to the change, net sales in
the Rolling Stock segment were 8,198 million yen lower, and in the Other segment, higher by the sameamount. Order backlog in the Rolling Stock segment was 2,694 million yen lower, and in the Other
segment, higher by the same amount.

1) Orders received
Six months ended
September 30, 2008

Six months ended
September 30, 2009

Year ended March 31,
2009

million yen% of total
million yen% of total
million yen%
Shipbuilding
58,443
8.1
2,728
0.6
71,512
4.6
Rolling Stock
136,098
18.9
44,584
11.0
264,603
17.1
Aerospace
58,366
8.1
46,545
11.5
239,176
15.5
Gas Turbines & Machinery
119,369
16.6
99,89724.7
355,517
23.0
Plant & Infrastructure Engineering
49,032
6.8
32,5328.0
83,648
5.4
Consumer Products & Machinery
177,62124.7
106,252
26.3
336,459
21.8
Hydraulic Machinery
55,097
7.6
27,536
6.8
84,142
5.4
Other63,2378.8
42,952
10.6
105,528
6.8
Total
717,266
100.0
403,029100.0
1,540,589
100.0
Note: The Consumer Products & Machinery segment’s orders received are equal to its net sales as production isbased mainly on estimated demand.

2) Net sales

Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Other
Total

Six months ended
September 30, 2008
% of total
million yen
53,734
8.2
83,67812.8
95,29014.5
91,79014.0
46,692
7.1
177,62127.2
47,296
7.2
56,8188.7
652,923100.0

Six months ended
September 30, 2009
million yen% of total
65,261
12.5
80,142
15.4
73,322
14.1
83,44616.1
35,745
6.8
106,252
20.5
29,006
5.5
42,8768.2
516,053
100.0

Year ended March 31,
2009
million yen%
126,4269.4
186,45413.9
200,424
14.9
195,156
14.5
105,178
7.8
336,459
25.1
84,9196.3
103,579
7.7
1,338,597
100.0

End-Fiscal 2009
(March 31, 2009)% of total
million yen
356,93721.0
478,56528.1
286,600
16.8
405,19623.8
112,162
6.6
28,5391.6
31,1601.8
1,699,162
100.0

End-H1 Fiscal 2010
(September 30, 2009)
million yen % of total
291,77218.3
445,32928.0
254,07216.0
401,857
25.3
108,918
6.8
27,0691.7
34,9812.2
1,564,001
100.0

End-H1 Fiscal 2009
(September 30, 2008)
million yen%
421,51726.1
484,02630.0
215,31013.3
278,575
17.3
137,505
8.5
37,116
2.3
35,6312.2
1,609,684
100.03) Order backlog

Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Other
Total

18

Supplementary information on earnings forecasts for the fiscal year ending March 31, 2010
(1) Consolidated earnings outlook
Billions of yen
Outlook for the year ending March 31, 2010 (fiscal 2010)
Revised forecast(A)

Forecast issued
April 28, 2009
(B)

Change (A – B)

Fiscal 2009
(endedMarch 31, 2009)(actual)1,200.0
5.0
10.0
3.0

1,240.0
5.0
10.0
6.0

(40.0)(3.0)

1,338.5
28.7
38.7
11.7

Net sales
Operating income
Recurring profit
Net income

Orders received
1,080.0
1,180.0(100.0)1,540.5
Before-tax ROIC (%)
1.5%
2.6%
(1.1)%
4.5%
R&D expenses
38.0
40.0
(2.0)
38.2
Capital expenditures
71.0
78.0
(7.0)
82.4
Depreciation/amortization
52.0
54.0
(2.0)
44.3
Number of employees at
end of period
32,10033,000(900)
32,266*Number of employees
7,700*
8,400*(700)*
7,955*
outside of Japan included
thereinNotes: 1. The expected foreign exchange rate used for the outlook: ¥90=US$1, ¥130=1 Euro
2. Before-tax ROIC = (income before income taxes + interest expense) / invested capital
3. Capital expenditures represent the total of newly recorded property, plant and equipment and newly
recorded intangible assets. Depreciation/amortization represents depreciation/amortization expenses forproperty, plant and equipment and intangible assets.

(2) Outlook by industry segment
1) Net sales and operating income (loss)
Billions of yen
Outlook for the year ending March 31, 2010 (fiscal 2010)
Forecast issued
April 28, 2009
(B)

Revised forecast (A)Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure
Engineering
Consumer Products &MachineryHydraulic Machinery
Other
Total

Fiscal 2009
(ended March 31, 2009)(actual)Change (A – B)

Net sales

Operatingincome(loss)Net sales

Operatingincome(loss)Net sales

Operatingincome(loss)Net sales

Operatingincome(loss)

150.0
165.0
180.0
200.0

3.5
9.0
2.5
7.0

150.0
170.0
190.0
200.0

3.5
9.0
2.5
7.0

(5.0)
(10.0)
-

-

126.4
150.3
200.4
195.1

(1.0)
12.3
(4.1)
11.0

100.0

6.0

95.0

4.0

5.0

2.0

105.1

8.9

240.0

(26.0)

260.0(26.0)(20.0)-

336.4(10.1)

65.0
100.0
1,200.0

3.0
0.0
5.0

65.0
110.0
1,240.0

3.0
2.0
5.0

(10.0)(40.0)

(2.0)
-

84.9
139.6
1,338.5

8.3
3.3
28.7

19

2) Orders received
Billions of yen
Outlook for the year ending March 31, 2010 (fiscal 2010)
Revised forecast(A)

Forecast issued
April 28, 2009
(B)

Change (A – B)

Fiscal 2009
(ended March 31,
2009 )(actual)

Shipbuilding
50.0
110.0
(60.0)
71.5
Rolling Stock
140.0
150.0
(10.0)
235.0
Aerospace
160.0
170.0
(10.0)
239.1
Gas Turbines & Machinery
220.0
220.0
355.5
Plant & Infrastructure
Engineering
90.0
80.0
10.0
83.6
Consumer Products &Machinery
240.0
260.0
(20.0)
336.4
Hydraulic Machinery
70.0
70.0
84.1
Other
110.0
120.0
(10.0)
135.0
Total
1,080.0
1,180.0(100.0)1,540.5
Note: The construction machinery business, which was previously included in the Rolling Stock & Construction
Machinery segment, was spun-off in April 2009 to become KCM Corporation. Hitachi Construction
Machinery Co., Ltd., subsequently invested capital in, entered into business alliance with, KCM
Corporation. As a result, said business’s relationship with the Rolling Stock & Construction Machinery
segment was weakened, and effective the fiscal year ending March 31, 2010, it was therefore included in
the “Other” segment in the above segment outlook.
For reference, the construction machinery business’s sales, income (loss), and orders received for the year
ended March 31, 2009, were included in “Other” above.

20