Annual Report 2001

Profile

Founded in 1878, Kawasaki Heavy Industries, Ltd.
(KHI), is a leading global comprehensive manufacturer of transportation equipment and industrial goods.
With a broad technological base that encompasses
land, sea, and air, KHI manufactures ships, rollingstock, aircraft and jet engines, refuse incinerators,
industrial plants, steel structures, and a wide rangeof manufacturing equipment and systems. KHI also
produces such world-famous consumer products as
Kawasaki-brand motorcycles and Jet Ski® watercraft.

Contents
1
2
4
7
8
10
12
14
16
18
19
24
26
27
28
29
44
46
48
51
53

Financial Highlights
To Our Shareholders
Strategic Business Development
Review of Operations
Transportation Equipment
AerospaceIndustrial Equipment
Consumer Products
KHI and the Environment
Six-Year Summary
Financial Review
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Supplementary Information on Non-Consolidated Results
Directors, Corporate Auditors and Executive Officers
Major Consolidated Subsidiaries and Affiliates
Network
Kawasaki Corporate Data

Cover: L20A Gas Turbine (Featured on page 11)

Fi n a n c i a l H i g h l i g h t s
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

For the years ended March 31, 2001, 2000 and 1999

Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

For the year:
Net sales ...................................................................................... ¥1,060,479
Operating income .......................................................................
4,460
Net loss ........................................................................................
(10,320)
Net cash provided by operating activities .................................
9,236
Capital expenditures...................................................................
32,687¥1,149,698
1,251(18,632)
31,232
39,685¥1,202,189
21,666(6,132)
22,34742,143$ 8,559,152
35,997(83,293)
74,545
263,818(7.4)—(13.4)
—

(4.4)
6.0

(0.06)—At year-end:
Total assets .................................................................................. ¥1,247,472
Total shareholders’ equity..........................................................
164,081¥1,206,806
174,955¥1,204,857
199,637$10,068,378
1,324,302

Orders received and outstanding:
Orders received during the fiscal year....................................... ¥1,273,686
Order backlog at fiscal year-end................................................ 1,320,894¥1,071,104
1,072,645

N.A
N.A$10,279,953
10,660,965

Per share (in yen and U.S. dollars):
Net loss ........................................................................................
Cash dividends ............................................................................

Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥123.90 to $1.00, the approximate rate ofexchange at March 31, 2001. The Company began to disclose its orders received and outstanding on a consolidated basis in fiscal 2000.

(18.6)(10.3)

(6.1)

164.1

175.0

199.6

197.2

18.6
1,060.5

1,149.7

1,202.2

209.0(Billions of yen)

22.6

Total Shareholders’ Equity(Billions of yen)

1,297.2

Net Income (Loss)(Billions of yen)

1,224.3

Net Sales’97 ’98 ’99 ’00 ’01’97 ’98 ’99 ’00 ’01’97 ’98 ’99 ’00 ’01

11

To O u r S h a r e h o l d e r s

Performance in Fiscal 2001
uring the first half of fiscal 2001, ended March 31,
2001, the Japanese economy showed gradual improvement supported by government fiscal policies and an ultralow interest rate policy. In addition, theeconomy was boosted by growth in private capital investment, especially in Information Technology (IT)-relatedareas, and expansion in exports to the United States andthe rest of Asia. However, recovery in consumer spending
failed to materialize, and the sudden deceleration in the
U.S. economy from the end of 2000 clouded the outlook
for Japan’s exports, leading to a relatively weak overall
performance.
Against this backdrop, KHI took an aggressive approachto marketing that resulted in a substantial rise in orders
received during fiscal 2001—especially by the Transportation Equipment and the Industrial Equipment businesssegments—of 18.9%, or ¥202.6 billion, to ¥1,273.7 billion.
On the other hand, KHI’s net sales for the year under review
declined 7.8%, or ¥89.2 billion, to ¥1,060.5 billion, owing
principally to lower sales in Aerospace that accompanied adecline in deliveries to the Japan Defense Agency as well as
Industrial Equipment due to a low level of orders received
during the previous fiscal year. Operating income, however, shot up ¥3.2 billion, to ¥4.5 billion, supported by an
improvement in profitability, principally in Industrial
Equipment, and the success of various measures implemented to reduce fixed costs and lower the Company’s
breakeven point. Nevertheless, KHI reported a net lossof ¥10.3 billion due mainly to provision for losses on construction orders, expenses associated with consolidating
KHI’s production facilities, and other restructuring expenses as well as losses on the revaluation of securities. This
net loss, however, represented an improvement of ¥8.3 billion, or 44.6%, from the net loss recorded for the previous
fiscal year. In view of the net loss for the fiscal year, we
regret that we have decided to continue to suspend thepayment of cash dividends. We request you, our shareholders, to examine carefully our ongoing initiatives andwe look forward to your continued support.
Although the economic environment surrounding
KHI in Japan and overseas is expected to remain challenging, under the Company’s new medium-term businessplan, K21, KHI is placing maximum priority on returning
to profitability. Accordingly, we are confident that the
fiscal year ending March 31, 2002, will mark the first step
toward further gains in performance.

D

2Medium-Term Business Plan K21
or KHI to take its place among globally competitiveenterprises in the 21st century, continue to develop,
and enhance the trust of all its stakeholders, we haveadopted the objective of “Quality followed by Quantity.”
Briefly, this means we are giving quality priority overquantity, but will work aggressively to sell our high-valueadded products and differentiated services to a wider
range of customers; quality will drive quantity. In parallelwith this, we are drawing on management resources tocreate a more sophisticated business structure and haveadopted the goals of establishing strong earnings power
and returning to a sustainable growth path. With thesefundamental objectives in mind, we prepared our K21
medium-term business plan in November 2000 and will
be implementing it through the year ending March 2005.
The three objectives of this medium-term businessplan are:
1. Sharpening the focus of our business portfolio;
2. Transforming our business model; and3. Enhancing the effectiveness of our management
systems.
By the final year of the plan, we are aiming to achievea return on invested capital (ROIC) of 5% or more. In
addition, based on our K21 business plan, we must evolve
into an enterprise that is capable of responding speedily
and flexibly to major changes in the operating environment. To this end, we will work to increase the awarenessof every member of the management and staff of the
KHI Group regarding the changing environment andmotivate them to bring about KHI’s further evolution
and development.

F

Sharpening the Focus of Our Business Portfolio
e have identified Aerospace, Consumer
Products, Rolling Stock, and Gas Turbines &Machinery as both core businesses and business we must develop. To this end, we will be allocating
corporate resources to nurture and strengthen these businesses’ contributions to profitability.
In the Shipbuilding, Plant Engineering, and Steel
Structures businesses, however, markets are mature andexcess supply conditions are not forecast to improve. Therefore, in these businesses, we will be working to further
lower the breakeven points and strengthen profitability
even in the midst of intense competition for new orders.
In addition, to further strengthen our position, we are
aggressively pursuing the formation of alliances andbusiness partnerships.

WTransforming Our Business Modelo implement reforms in our business model––including the structure of our business operations
and sources of earnings––that will leadto enhanced profitability, we will beaggressively pursuing four initiatives.
The first will be to shift our focus fromprimarily accepting orders to meet highly specific customer needs to proposing
solutions applicable to a broader rangeof customers; this change will enable us
to achieve greater standardization andmaximize added value. Second, we will
work to increase customer satisfactionand expand our business domain byoffering sophisticated and efficientmaintenance services that cover thefull life cycles of our products. Third, we
will make the most effective use of ourcorporate resources, especially the capabilities for development of overseas
activities and the global network of ourconsumer products business by realizing
cross-divisional synergies, and finally,
we will differentiate our products and services through theapplication of IT.

T

Enhancing the Effectiveness of Our Management Systems
o substantially strengthen our operational structure, in April 2001 we took our previous divisional
system of organization a major step forward with
the introduction of an internal company system. The Company’s operations now encompass six in-house companies:
the Shipbuilding, Rolling Stock, Aerospace, Gas Turbines &Machinery, Plant & Infrastructure Engineering, and Consumer
Products & Machinery companies. This move has resulted
in increased autonomy and allowed the speedier management of operations in a manner suited to specific industrial sectors, as well as greater flexibility, including in theformation of alliances and pursuit of M&A. In addition,
we introduced an Executive Officer System with the objectives of achieving swift and flexible conduct of operations
and reducing the size of the Board of Directors. This has
increased the effectiveness of the Board in strategic decision making and the supervision of management functions.
By carrying out the various measures set out in K21,
we intend to increase enterprise value and become acompany that is highly valued in capital markets. Looking

Tforward, the staff of KHI will unite their energies to enhance the Company’s potential and, while expanding
KHI’s capabilities, will endeavor to raise enterprise value.
We have decided on a course of making reforms in ourorganization, improving our business model, and pursuing other initiatives. KHI will build on its long history to
break free from the traditional business model to becomea dynamic corporation. We would like our shareholders
to share our optimism regarding what we can accomplish
while continuing to offer their advice and support.
June 29, 2001

Masamoto Tazaki
President33Strategic Business Development

Aiming to Increase Enterprise Value
The “K21” Medium-Term Business Plan (FY2001 through FY2005)
To prepare the way for further development in the 21st century, KHI has formulated a new medium-term business plancontaining objectives to be attained by fiscal 2005. The principal management objective of the plan is to increase KHI’s
enterprise value, and we have set a goal of ROIC of 5% or more. We are also adopting the following specific strategies
under the plan’s basic guideline of “Quality followed by Quantity.”

Our strengths include a strong

In parallel, we will shift to arecord of accomplishments,

policy of developing andbrand equity, and technolog-

introducing standardized

ical capabilities, and we haveproducts in growth markets

identified four core busi-

and aggressively making

nesses with market growth

proposals to our customers

potential for particular focus

while nurturing these prod-

and development. KHI will

ucts to become important

allocate resources to theseincome generators. In addi-

businesses on a priority basis.

tion, to promote this policy

Sharpening the Focus of Our
Business Portfolio
Allocate resources to core businesses with growthpotential
KHI has identified Aerospace, Consumer Products, Rolling Stock,
and Gas Turbines & Machinery as both core businesses and businesses it must develop and is allocating corporate resources tonurture and strengthen these businesses’ contributions to profitability.

for increasing profitability,
we will further improve our

Improve the profitability of mature sectors

business model, including theIn other businesses, KHI will focus on lowering the breakevenpoints and strengthening profitability even under intensecompetition.

composition of our businessportfolio and sources of
earnings.

Transforming Our Business Model
KHI will pursue four initiatives to reform its business model.
Shift our focus from primarily accepting orders to meet highly
specific customer needs to proposing solutions applicable to abroader range of customers with the aims of achieving greater
standardization and maximizing added value.
Increase customer satisfaction and expand the Company’s business domain by offering sophisticated and efficient maintenance services that cover the full life cycles of its products.
Make optimal use of our corporate resources, especially ourcapabilities for development of overseas activities and the global network of our consumer products business, by realizing crossdivisional synergies.
Differentiate products and services through the application of IT.

4

Refocusing Our Business
Portfolio

Increasing
Enterprise Value

Core businesses––Aerospace and Consumer Products

Businesses for further
development––Rolling Stock and Gas Turbines

ROIC: 5% or more

Businesses for review
and structural reform––Shipbuilding, Plant Engineering,and Steel Structures

5Enhancing Our Management Systems
Under our K21 medium-term business plan, we are imple-

companies. By elevating these business units to company

menting policies to reallocate corporate resources andstatus, we have given them greater autonomy, allowing

sharpening the focus of our business portfolio. To this end,

them to manage their operations speedily and in ways

we have introduced an internal company system and an

best suited to their industrial sectors, as well as to act

Executive Officer System and are proceeding with otherflexibly in forming alliances and pursuing M&A.

improvements in our corporate headquarters organiza-

Also, in April 2001 we introduced an Executive

tion. These initiatives aim at speeding up management

Officer System with the objective of clearly separating

action, enhancing the effective use of our corporate re-the functions of the Board of Directors from the day-to-sources, and delegating greater autonomy and responsi-

day management of operations. Along with this change,

bility to individual business units.

we reduced the number of members of the Board to 11

In April 2001, to substantially strengthen our opera-

in July 2001.

tional structure, we introduced an internal company sys-

Within our corporate headquarters, we also made atem that takes the divisional system of organization weclear separation between those units responsible for for-had employed previously a major step forward. We creat-mulating corporate strategy and those providing services

ed six in-house companies: the Shipbuilding, Rolling Stock,for our internal companies. This clarification of the spe-

Aerospace, Gas Turbines & Machinery, Plant & Infrastruc-cialized functions of units has allowed us to streamline

ture Engineering, and Consumer Products & Machinery

the corporate headquarters.

Shipbuilding

Consumer Products& MachineryTransition to an internal
company system
Introduction of
an Executive
Officer System

Plant & Infrastructure
Engineering

Small but strong
headquarters

Gas Turbines &Machinery
6

Rolling Stock,
Construction Machinery& Crushing Plant

Aerospace

Beginning in fiscal 2002, ending March 31, 2002, theCompany is scheduled to report its performance according to a new business segment classification
based on its internal company system.

Review of Operations

8

Transportation Equipment

10

Aerospace

Review of Operations
12

Industrial Equipment

14

Consumer Products

7

Review of Operations

Transportation Equipment
Main Products
LNG carriers
LPG carriersContainer ships
VLCCs and other types of tankers
Bulk carriersOrders received by this segment jumped 72.2%, or ¥110.7 billion, to ¥264.1 billion, as a result of a marked increase indemand for ships and rolling stock from overseas, includingcars for the Taiwan Bullet Train.
During the year, although shipments of rolling stock increased due
to higher sales to overseas customers, including sales of subway cars to
Singapore and New York City, a drop in sales of new ships more thanHigh-speed vessels

offset the increase in rolling stock. Overall, sales declined 3.2%, or ¥5.2

Submarines

billion, to ¥159.7 billion. The segment reported an operating loss ofMaritime application equipment¥2.1 billion, an improvement of ¥7.6 billion, or 78.3%, compared with

Electric cars (including Shinkansen)

the previous year, owing to cost reductions in the Shipbuilding Division

Electric and diesel locomotives

and improved performance in the Rolling Stock Division.

Passenger coaches
Integrated transit systems

In fiscal 2001, KHI received orders for 16 vessels, including LPG
carriers, bulk carriers, and other types of ships. In addition, two VLCCs(Very Large Crude-oil Carriers) and two LPG carriers were delivered toMonorail carscustomers. In the shipbuilding area, KHI is streamlining operations andPlatform screen doors

improving productivity under the current K21 plan to cope with thesevere business conditions caused by worldwide overcapacity in theindustry. To improve cost-competitiveness, KHI thus far has concluded
alliances with Mitsui Engineering & Shipbuilding Co., Ltd., andIshikawajima-Harima Heavy Industries Co., Ltd. (IHI). Moreover, theCompany reached a basic agreement with IHI to consolidate the shipbuilding and marine operations of the two companies, including naval
vessel operations, in April 2001. As a premium shipbuilder, KHI aims tocontinue supplying the LPG carriers and other high-value-added vessels

 VLCC SANKO UNITY
KHI delivered a 300,000-dwt



VLCC on order from UNITYTANKSHIP, S.A. of Panama.
 CARS FOR THE
NEW YORK SUBWAY
Subway cars delivered for
New York City Transit;
these new stainless steel
cars are lightweight andequipped with state-of-theart electronic systems.
 SERIES 5000 CARSFOR THE KOBE CITY
SUBWAY SYSTEM:
Linear motor powered railcars delivered for use on
the Coast Line of the Kobe
subway system8that have earned it its outstanding reputation while further enhancing

Sales

its international competitiveness through alliances, consolidation, and(Millions of yen)

80,216

93,463In rolling stock, KHI has an enviable record of accomplishments in
manufacturing cars for Japan’s Shinkansen bullet trains and other high-131,176other efforts.

and it has another plant situated in Yonkers, New York, in the UnitedStates. At present, a third manufacturing plant for rolling stock is underconstruction in Lincoln, Nebraska, at Kawasaki Motors Manufacturing
Corp., a manufacturing subsidiary for consumer products. Equippedwith the most advanced production lines and systems, the Lincoln Plant
will be the full-scale manufacturing facility for rolling stock, handling’99

71,479KHI’s principal plant for rolling stock is in Hyogo Prefecture in Japan,

52,864including those in the United States, Southeast Asia, and elsewhere.

79,486speed railways as well as supplying rolling stock to overseas customers,

’00

’01

Ships
Rolling Stock

Orders Received(Millions of yen)

118,985

all stages from car body construction to interior fitting.
Countries around the world are showing renewed interest in rail-

ment and capacity-expansion demand for existing lines is increasing. In
addition, in the rolling stock field, KHI concluded an operating agreement with Hitachi, Ltd., in April 2001, for supplying railway systems tooverseas customers. Accordingly, KHI will work to substantially strengthen its capabilities for supplying rolling stock to overseas markets fromits plants in Japan and the United States.

145,163

the United States, in particular, demand for new lines as well as replace-

87,516 65,899

way transportation because of its low impact on the environment. In

’00

’01

Ships
Rolling Stock

Order Backlog

194,199

273,721

131,086

177,234(Millions of yen)

’00

’01

Ships
Rolling Stock

99

Review of Operations

Aerospace
Main Products
T-4 intermediate jet trainers
CH-47, OH-1, and BK117 helicopters
Component parts for B777 and B767
passenger airplanes
MissilesAlthough orders from the Japan Defense Agency (JDA) were virtually unchanged from the previous fiscal year, orders for aircraft
and jet engines from the commercial sector increased. Orders

for this segment rose 9.9%, or ¥21.1 billion, to ¥234.6 billion. Segment
sales declined 13.4%, or ¥32.1 billion, to ¥207.9 billion as deliveries ofaircraft to the JDA fell, and operating income decreased 11.3%, or¥1.3 billion, to ¥9.9 billion.

Electronic equipment

KHI ranks among Japan’s leading aircraft manufacturers and isSpace equipment

renowned internationally for its technological capabilities. KHI manu-

Jet engines

factures high-quality products, principally aircraft and jet engines, for

Gas turbines

both the defense and commercial sectors. In the commercial sector, KHI is

Small- and medium-sized

involved in joint development and production programs for the Boeing

gas turbine generators

767 and 777 passenger aircraft. In the jet engine field, KHI has participated in the international development and production project for theV2500 engine and jointly develops and manufactures aircraft engineswith leading international suppliers. This includes working together
with Rolls-Royce plc of the United Kingdom on the RB211/Trent series
and Pratt & Whitney of the United States on the PW4000 series.
In the aircraft business, during fiscal 2001, KHI jointly developed
the BK117 C-2 helicopter, the successor to the BK117 C-1, with Eurocopter of Germany. The BK117 C-2 offers improvements in flight
performance and comfort over the BK117 C-1 helicopter, a best-seller
with more than 400 units having been shipped worldwide. In the jet KHI BK117 C-2 HELICOPTER T-4 INTERMEDIATE JET TRAINERThis is a training aircraft
used mainly by Japan Air
Self Defense Force. KHI hasdelivered approximately 190
of these since 1988.
 L20A 20MW CLASS HIGHEFFICIENCY GAS TURBINE
GENERATOR

10

engine field, KHI completed a facility at its Akashi Works in Japan,

Sales

which is capable of operating and testing jet engines with thrust of up(Millions of yen)

’99

’00

207,933

strengthen its technological capabilities in the aerospace field and

240,072

development and maintenance of jet engines. KHI plans to continue to247,650

to 100,000lb, the highest class in the world. The facility will be used fordevelop its position as a supplier to defense and commercial aircraft
and engine markets.
Drawing on its sophisticated technology in the aircraft jet engine
field, KHI is a leading manufacturer in Japan of small- and medium-sizedindustrial gas turbine electric power generators. During fiscal 2001,’01

KHI successfully developed and introduced the L20A 20MW class highefficiency gas turbine generator, which it developed internally, making
use of its own technology. In recent years, there has been a trend toward

Orders Received(Millions of yen)ation systems and combined-cycle electric power plants are attracting
greater attention. In the years to come, demand for these systems

213,508

improving power generating efficiency. Along with this trend, cogener-

234,596

distributed energy sources both for environmental reasons and forboth in Japan and in Southeast Asia as well as other overseas markets is
expected to be strong. KHI plans to respond aggressively to this opportunity by supplying the L20A and other types of gas turbine generators.
’00

’01

Order Backlog

335,961

299,005(Millions of yen)



’00

’01

11

Review of Operations

Industrial Equipment
Main Products
Steelmaking, cement, chemical,
and other industrial plants
Power plants
Municipal refuse incineration plants
Aero-derived gas turbine engines

B

ecause of the receipt of major orders, including those for refuse
incineration plants from municipal governments in Japan, a fertilizer plant from China, and a cogeneration combined cycle power

plant from Mexico, orders in this segment rose 16.0%, or ¥57.0 billion,to ¥412.9 billion. Sales in this segment declined 17.5%, or ¥69.6 billion,to ¥327.7 billion, primarily owing to the low level of orders received forindustrial plants and steel structures in the previous fiscal year. Despite

for naval vessels

the drop in sales, operating loss was maintained at ¥11.0 billion, about

Bridgesthe same as for the previous year, as a result of measures to improve

LNG and LPG tanks

profitability and reduce fixed costs.
KHI is regarded as a leading engineering company in a diverse

Shield machines and tunnel
boring machines
Crushing machinery
Industrial hydraulic equipment
Wheel loaders

range of industrial plant construction projects in Japan and abroad.
In particular, the level of KHI’s proven technical expertise in steel andcement plant engineering is widely regarded as one of the highest in
the world. In the steel structure business, KHI has participated in theconstruction of a number of bridges and other major infrastructure
projects. KHI ranks in the top echelon of Japanese providers of municipal refuse incineration plants, both in terms of its solid customer baseand technical expertise.
In fiscal 2001, industrial plant sales included power generation equipment for the Chubu Electric Power Co., Inc.’s Hekinan thermal plant,
and sales of steel structures included a hovering stage for the Sapporo
Dome. Also, in the environmental field, KHI received its first order for a MUNICIPAL REFUSE INCINER-ATION PLANT FOR HONJO
CITY IN SAITAMA PREFECTURE
 ELECTRIC POWER GENERATION EQUIPMENT FOR THE
HEKINAN THERMAL POWER
PLANT OF CHUBU
ELECTRIC POWER HOVERING STAGE FOR THE
SAPPORO DOME
Delivered the world’s first
air-supported hovering andmovable natural grass football pitch for the Sapporo
Dome, where matches in the2002 World Cup—jointly
sponsored by Japan and
Korea—will be held.

12gasification and ash-melting refuse incineration plant from a regionalSales

government organization in Shiga Prefecture. Gasification and ash-

(Millions of yen)

327,650

refuse processing as well as the conversion of incinerated waste matter

397,240

dioxin synthesis and a lower burden on the environment as a result of

416,998

melting incinerators offer a number of advantages, including decreased

into usable resources. These systems are attracting considerable attention as a 21st century refuse processing method.
The Industrial Equipment segment reported substantial operating
losses in both fiscal 2000 and fiscal 2001 because of the deteriorationin profitability in industrial plants and steel structures owing to the

’99

’00

’01

prolonged stagnation in the Japanese economy as well as the delayed
recovery of economies in Southeast Asia. Giving a return to profitability
the highest priority, KHI is accelerating the streamlining of its opera-

Orders Received(Millions of yen)ucts and technologies applied to improve social infrastructure or utilized in key industries. By combining, upgrading, and optimizing them,

355,856

An important strength of this segment is its broad range of prod-

412,889

tions in this segment.

KHI will continue creating solutions to meet customer needs aroundthe world.
’00

’01

Order Backlog

514,970426,206(Millions of yen)



’00

’01

13

Review of Operations

Consumer Products
Main Products
Motorcycles
ATVs (All-Terrain Vehicles)®

Jet Ski watercraft
General-purpose gasoline engines
Brush cutters
Transmissions

S

ales in the Consumer Products segment amounted to ¥275.9 billion, virtually the same as in the previous fiscal year, as sales ofmotorcycles, ATVs, and MULE utility vehicles remained firm in

the United States. Operating income declined 32.1%, or ¥3.1 billion,
to ¥6.5 billion, because of the adverse impact of the decline in thevalue of the euro on motorcycle sales in Europe.
KHI introduced a number of new models in this segment during
fiscal 2001.

Industrial robots

Motorcycles: In Japan, North America, and Europe, the Company
launched the ZRX1200 large-displacement road sports series, following
up the concept of ZRX1100, which has been highly acclaimed in themarkets. Along with the “Ninja” Super Sports series, the ZRX1200 series
has substantially strengthened the competitiveness of the “Kawasaki”
brand in the large sports bike markets. In Asia, KHI introduced the
120cc “Leo Star,” a sports moped, in Thailand and the ELIMINATOR, a
175cc top-of-the-line motorcyle, in India.
ATVs: The PRAIRIE 650, a top-of-the-line sports utility ATV, wasreleased into the large-displacement, automatic transmission segmentof the U.S. market.
Jet Ski® watercraft: The Company expanded its lineup with theintroduction of the two-passenger Jet Ski Ultra 130 D.I., which incorporates an electronic fuel injection system that produces substantiallymore power while reflecting concern for the environment. KHI was
the first company in the world to successfully commercialize Jet Ski ®
watercraft.

 ZRX1200S PRAIRIE 650
 NS320 CLEAN ROBOT

14

In motor sports, Kawasaki team member Hitoyasu Izutsu won
the Japan Super Bike Championship, and, in the United States,

Sales(Millions of yen)

277,176

275,903

Also, in industrial robots, in tandem with development of the ITsociety, KHI made a full-scale entry into the clean robot market. Such

270,021

Ricky Carmichael won the U.S. National Motorcross Championship.

’99

’00

’01

robots are used in the manufacture of semiconductors and LCDs. KHI’s
NS320 Clean Robot joins KHI’s lineup of robots for welding, palletizing,
painting, and other tasks.
To strengthen sales capabilities, KHI established Kawasaki Motors
Europe N.V. (KMEU) in the Netherlands to take responsibility for consumer products. KMEU will take overall charge of sales and after-sales
service, as well as the management of inventories, finance, information, and other functions that were formerly performed by distributors
in each of the countries where KHI sold its products. The establishmentof KMEU will allow KHI make the transition to the centralized management of its sales activities in Europe.
In Japan, a wholly owned subsidiary, Kawasaki Machine Systems,
Ltd. (KMS), reinforced its responsibilities and business areas in fiscal
2001. KMS has been given overall responsibility for sales, after-sales service, proposals for system engineering, user education, and other tasks
related to mass produced industrial machinery, such as construction
machinery, industrial robots, and small- and medium-sized gas turbine
generators. KMS is therefore now well positioned to conduct sales andservice activities and strengthen ties with the communities where KHI’s
products are sold.



15

KHI and the Environment

Overview

2. Compliance with environmental legislation andK

3. Programs addressing global warming countermea-

Many of KHI’s products contribute to reducing the burden

4. Introduction of “green” procurementon the environment, and the Company believes it is

5. Introduction of life cycle assessment (LCA) analysis

important to broaden its lineup of such products.

6. Introduction of environmental performance

HI meets the needs of society in its role as a leader
in key industries providing a broad range of products that are used on land, at sea, and in the air.

At present, KHI is implementing environment-related
activities under the third three-year stage of its

regulations
sures

evaluations
7. Fuller disclosure in the Company’s environmental

Environmental Protection Activities Plan (EPAP), covering
fiscal 2001 through fiscal 2003. As a manufacturing com-report8. Introduction of environmental accounting

pany, in all its activities KHI aims to help create a sustainable recycling society, and seeks to maintain the

Basic Philosophy for the Environment

reputation of the “Kawasaki” brand as one that is syn-

KHI, as it develops its operations globally as “a leader inonymous with harmony with the environment.

key industries providing products that are used on land,
at sea, and in the air,” aims to contribute to the solution

Environmental Protection Activities

of global environmental problems. KHI’s goals in its envi-

Under the third three-year stage of EPAP, KHI is imple-

ronmental activities are to make its operations more eco-

menting the following environmental protection activities:

friendly and, through its technology and products,

1. Intensified environmental protection activities on a
Companywide basis

contribute to the realization of a recycling-oriented society that can coexist in harmony with the environment
and achieve sustainable development.

Organization for Environmental Management
President

Corporate Environment Committee

Chief Environmental Officer
Environmental Management Department“Kawasaki Heavy Industries Environmental Protection Activities Plan”
Committee for Promoting Protection of the
Global Environment

Workers’ Union Consultation Group
Agreement regarding
Environmental Protection

Waste Management Subcommittee

Corporate Environmental
Protection Committee

Energy Conservation Subcommittee

Zero Emission Working GroupLCA Subcommittee

Environmental protection committees
at the plant/office level

Product Assessment Subcommittee
Green Procurement Subcommittee
Environment ISO Subcommittee
Environmental Protection Officers

Departments responsible forenvironmental management
within operating divisions

Managers responsible for environmental protection

Employees

16

16

Divisional Environment Committees

Environmental Accounting Subcommittee

KHI has appointed an Executive Officer to take over-Environmentally Conscious Technology and Products

all responsibility for environmental matters. This officer

KHI contributes to society by providing products and tech-

convenes KHI’s Corporate Environment Committee peri-

nologies in a wide range of fields that help to maintainodically to discuss and revise KHI’s three-year EPAP withthe environment. KHI believes, as a manufacturing com-the aim of making continual improvements in the Com-pany, that reducing the burden on the environment of its

pany’s environmental activities.

production activities and the products it delivers is one ofits most important environment-related activities. At the

Climate Changesame time, for all its manufacturing processes and prod-

KHI is engaged in a range of activities that contribute toucts, KHI considers the full life cycle from the design stage

prevention of global warming.

and works to contribute in the following environmentrelated areas:
1. Energy,

Trends in CO2 Emissions(t-CO2)(%)

2. The atmosphere,•5263,054300,000•

200,000•

3.09

3. Soil,
4. Processing and recycling of waste materials,•4

5. Water, and6. Measures for controlling hazardous chemicals.

•3•2100,000•

Environmental Protection Expenses
Investment in environmental maintenance equipment

•1

0•

•0

Management Indicator
Volume of CO2’97 ’98 ’99 ’00 ’01

in fiscal 2001 was ¥750 million and total environmental
expenses amounted to ¥7.6 billion. To prepare for the
introduction of environmental accounting, KHI has formed

Resource Conservation and Recycling

an Environmental Accounting Subcommittee and is con-

In addition to activities to reduce the volume of industrial

ducting pilot tests for application of the Environmental

and other waste emissions, KHI is also working to makeAccounting Guidebook prepared by Japan’s Environment

effective use of resources through thoroughgoing efforts

Agency. Consideration is being given to introducing envi-

to increase the ratio of materials recycled.

ronmental accounting in fiscal 2003.

Trends in Waste Emissions

Environmental Protection Expenses(t)(Million ¥)

(%)
•20

10,000•60,000•40,000•8,000•

68,66080,000•7,601

100,000••10
6,000•

4.5

4,000•• 0

20,000•2,000••-10

0•’97 ’98 ’99 ’00 ’01

Reduction Rate
Waste Volume

Wastewater Treatment Cost
Waste Disposal Cost
Analysis Cost
R&D Expenditure

0•’97 ’98 ’99 ’00 ’01

17

17

S i x - Ye a r S u m m a r y
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

Years ended March 31

Millions of yen
2001

2000

1999

1998

Operating results:
Net sales ................................................... ¥1,060,479 ¥1,149,698 ¥1,202,189 ¥1,297,212
Cost of sales..............................................
924,522
1,008,860
1,045,143
1,114,693
Gross profit...............................................
135,957
140,838
157,046
182,519
Selling, general andadministrative expenses ......................
131,497
139,587
135,380
131,440
Operating income....................................
4,460
1,251
21,66651,079Net income (loss)......................................
(10,320)(18,632)(6,132)
18,556

1996¥1,224,259
1,041,697
182,562¥1,086,244
928,126
158,118

120,351
62,211
22,572

111,362
46,756
16,462

32,68733,303
17,54839,68535,081
19,90542,14334,607
18,61535,03032,416
17,80036,992
31,245
17,40038,03630,823
17,300Financial position at year-end:
Working capital ....................................... ¥ 148,577
Net property, plant and equipment .......
241,893
Total assets ............................................... 1,247,472
Long-term debt, less current portion .....
270,605
Total shareholders’ equity.......................
164,081¥ 188,403
245,278
1,206,806
264,048
174,955¥ 161,712
244,866
1,204,857
208,763
199,637¥ 162,084
242,435
1,222,906
198,135
209,040¥ 150,759
233,196
1,303,168
197,130
197,161¥ 127,644
231,615
1,252,371
204,801
162,984¥¥

Capital expenditures................................
Depreciation and amortization ..............
R&D expenses...........................................

Per share amounts (yen):
Net income (loss)...................................... ¥Cash dividends .........................................
Shareholders’ equity................................

(7.4) ¥—
118.0

(13.4) ¥—125.8(4.4) ¥
6.0
143.6

13.3
6.0
150.3

Other data:
Number of shares issued (millions) .........
Number of employees .............................

1,391
29,162

1,391
29,772

1,391
26,486

1,391
26,102

1,389
24,211

1,350
24,401

Non-consolidated data:
Orders received ........................................ ¥1,054,662¥ 865,317¥ 951,652¥1,007,115¥ 955,478¥1,030,339

18

18

1997

16.4
7.0
141.9

12.2
5.5
120.7

Fi n a n c i a l R e v i e w

Overview

Turning to profitability, consolidated operating income

During the first half of fiscal 2001, ended March 31, 2001, therose ¥3.2 billion, to ¥4.5 billion, despite the decline in sales andJapanese economy showed gradual improvement supported

the adverse impact of the depreciation of European currencies.

by the beneficial impact of government fiscal policies, includ-

The improvement in operating profitability was due mainly to

ing an ultralow interest rate policy as well as growth in private

the positive effects of improvements in margins especially incapital expenditure, especially in the IT area, and expansion in

the Industrial Equipment segment, and the implementation ofexports to the United States and the rest of Asia. However, forvarious measures to lower fixed costs and reduce the Group’s

the fiscal year as a whole, conditions were generally weak

breakeven point. However, the Group reported a net loss of

because of the lack of recovery in consumer spending and the¥10.3 billion because of additions to the reserve for possible

slowdown in exports accompanying the sudden deceleration

losses on construction orders, expenses associated with consoli-of the U.S. economy that began at the end of 2000.

dating Company production facilities, additional retirement

Amid these economic conditions, Kawasaki Heavy

benefit payments under the Company’s early retirement sup-Industries, Ltd. (the “Company”), and its consolidated sub-port program, and other restructuring expenses as well as loss-

sidiaries (collectively, the “Group”) conducted aggressive mar-es on the revaluation of securities and the early amortization

keting activities and, as a result, orders received on aof differences in employees’ retirement benefits for certain

consolidated basis, especially by the Transportation Equipment

subsidiaries arising with the application of new accounting

and the Industrial Equipment segments, rose a substantial

standards. This net loss, however, represented an improvement¥202.6 billion, or 18.9%, to ¥1,273.7 billion.

of ¥8.3 billion, or 44.6%, from the net loss recorded for the

On the other hand, consolidated net sales declined ¥89.2

previous fiscal year. In view of these financial results, the Com-billion, or 7.8%, to ¥1,060.5 billion, primarily because of apany regrets its decision to forgo the payment of cash dividends

decline in sales in the Aerospace segment accompanying a

for fiscal 2001.

drop in deliveries of defense-related products and lower sales
in the Industrial Equipment segment due to a relatively low

Results of Operations

level of orders won in the previous fiscal year.

Net Sales
As mentioned previously, the Group’s consolidated net sales
declined 7.8%, from ¥1,149.7 billion in fiscal 2000 to(Billions of yen)(Billions of yen)

18.6
1,060.5

1,149.7

22.6(Billions of yen)

1,202.2

Net Income (Loss)

1,297.2

Sales by Segment (FY2001)

1,224.3

Net Sales

89.3

159.7

275.9

207.9

’97 ’98 ’99 ’00 ’01(18.6)

Transportation Equipment
AerospaceIndustrial Equipment
Consumer Products
Other(10.3)

(6.1)

327.7

’97 ’98 ’99 ’00 ’01

19

19

¥1,060.5 billion in fiscal 2001. Total overseas sales declined

Profitability in the shipbuilding and rolling stock areas¥29.1 billion, to ¥432.4 billion, reflecting the weakness in sales

both showed improvement, with this segment reporting a net

in Europe. The drop in overseas sales, however, was partiallyoperating loss of ¥2.1 billion, a 78.3%, or ¥7.6 billion improve-

offset by an increase in sales to North America. The percentage

ment from the previous fiscal year.

of the Group’s overseas sales increased 0.6 percentage point, toAerospace

40.7%, reflecting the weakness in domestic sales.

Orders won by this segment in fiscal 2001 were 9.9%, or ¥21.1

The following paragraphs summarize performance bybillion higher than for the previous fiscal year and amounted

business segment.

to ¥234.6 billion. This increase was accounted for by new
Transportation Equipment

orders for T-4 intermediate jet trainers, OH-1 light observation

Orders received by this segment rose 72.2%, or ¥110.7 billion,

helicopters, helicopter engines, and other products. Otherto ¥264.1 billion. These included orders for 16 new vessels,

orders received included contracts for commercial-sector air-including LPG carriers and bulk carriers as well as orders forcraft and engines, including component parts for Boeing 777

rolling stock, including Shinkansen, commuter, and interurban

and 767 aircraft and parts for V2500, Trent, and other jet engines.

trains for the JR companies in Japan as well as an order for

Sales in this segment fell 13.4%, or ¥32.1 billion, to ¥207.9

Bullet Trains in Taiwan.

billion owing to a decline in deliveries to the Japan Defense

Sales in this segment declined 3.2%, or ¥5.2 billion, toAgency. The percentage of Group sales accounted for by this¥159.7 billion. Although sales of LPG carriers, VLCCs, and othersegment fell slightly from 20.9% in the previous year to 19.6%.

ships were recorded in the shipbuilding area, the volume ofOperating income for this segment declined 11.3%, or ¥1.3 bil-sales was lower than in the previous term, when deliveries oflion, to ¥9.9 billion.

new vessels were concentrated. In the rolling stock area, theYork and Singapore. The percentage of total Group sales ac-

Order-intake rose 16.0%, or ¥57.0 billion from the previous

counted for by this segment, however, rose from 14.3% in theyear, to ¥412.9 billion. Factors accounting for this increaseprevious fiscal year to 15.1% for the fiscal year under review.

included the receipt of major orders for municipal refuse(Yen)(Billions of yen)(Billions of yen)

148.6

1,303.2

188.4
161.7

162.1

(13.4)

(7.4)

(4.4)

150.8

13.3

1,204.9

Total Assets

1,222.9

Working Capital

16.4

Net Income (Loss)
per Share

1,247.5

Industrial Equipment

1,206.8

Group delivered subway cars overseas for the cities of New’97 ’98 ’99 ’00 ’01

20

20’97 ’98 ’99 ’00 ’01’97 ’98 ’99 ’00 ’01

incineration plants from regional government agencies in¥1.1 billion. The percentage of Group sales accounted for by

Japan, a fertilizer plant for China, and a cogeneration com-this segment rose from 6.1% in the previous year to 8.4% dur-

bined cycle power plant for Mexico.

ing the year under review.

Sales of this segment declined 17.5%, or ¥69.6 billion, to¥327.7 billion, owing mainly to the low level of orders received

Cost, Expenses, and Earnings

for industrial plants and steel structures in the previous fiscal

Cost of sales fell 8.4% and amounted to ¥924.5 billion. Gross

year. The percentage of total Group sales accounted for by thisprofit declined 3.5%, to ¥136.0 billion. As a result of activities

segment fell from 34.6% in the previous fiscal year to 30.9% in

to reduce costs, the gross profit ratio improved 0.6 percentage

the fiscal year under review. Despite the drop in sales, operat-

point, to 12.8%.
Selling, general and administrative expenses were down

ing loss was maintained at ¥11.0 billion, about the same as forthe previous year, as a result of measures to improve profit-

5.8%, to ¥131.5 billion. This decline was due to the impact ofability and reduce fixed costs.

concentration of R&D expenses for greater efficiency and reductions in fixed costs. As a result, operating income rose

Consumer Products

256.5% from ¥1.3 billion in the previous fiscal year to ¥4.5 bil-

Sales of motorcycles and ATVs remained generally firm andlion in fiscal 2001. The ratio of operating income to net sales

total sales of this segment amounted to ¥275.9 billion, repre-

improved from 0.1% to 0.4%.

senting a slight decline of 0.5%, or ¥1.3 billion, from the previ-

Other income (expenses) for fiscal 2001 amounted toous fiscal year. Sales in this segment accounted for 26.0% of

expenses of ¥22.9 billion, representing a 4.6% improvement

Group sales, compared with 24.1% for the previous fiscal year.

from expenses of ¥24.0 billion for the previous fiscal year.

Operating income of the segment was ¥6.5 billion, a decline of

Factors accounting for this improvement included (1) gain on

32.1%, or ¥3.1 billion, from the prior year, reflecting thesales of marketable securities and investments in securities andimpact of the depreciation of the euro on sales of motorcycles(2) a net foreign exchange gain amounting to ¥3.1 billion (ver-in Europe.

sus a net loss of ¥7.8 billion for the previous fiscal year) owing
to depreciation in the value of the yen in the second half of

Other

the fiscal year. Note that a number of developments resulted

Sales in this segment increased 27.1%, or ¥19.0 billion, to ¥89.3

in other expenses and losses, and these offset a portion of thebillion. Operating income declined 34.1%, or ¥0.6 billion, topreviously described improvements. These were (1) interest

(%)

9.1

(9.9)

(6.1)

(3.0)

118.0

125.8

143.6

141.9
164.1

175.0

12.5

(Yen)

150.3

(Billions of yen)

199.6

Return on Equity

209.0

Total Shareholders’Equity per Share

197.2

Total Shareholders’Equity’97 ’98 ’99 ’00 ’01’97 ’98 ’99 ’00 ’01’97 ’98 ’99 ’00 ’01

21

21

and dividends received less interest paid rose from ¥7.5 billion

securities was mainly the result of a shift of marketable securi-in the previous year to ¥8.3 billion, (2) equity in losses of un-ties of ¥45.9 billion to this item following a review of theconsolidated subsidiaries and affiliates expanded from ¥0.7 bil-objectives for holding such securities as of April 1, 2000, andlion in the previous fiscal year to ¥1.6 billion for the year under

an upward revaluation of these securities, which increased

review, (3) write-downs of securities and others increased fromthe value of the balance by ¥22.6 billion. Both of the latter¥3.9 billion in fiscal 2000 to ¥5.7 billion in fiscal 2001, and (4)changes took place as new accounting standards for financial

three other factors, namely provision for losses on construction

products were applied. Note that the change in value of in-contracts, expenses for making structural improvements (includ-

vestments in securities was reflected in contra accounts as fol-ing expenses for consolidating production facilities and addi-

lows. Total deferred tax liabilities increased ¥9.6 billion and ational employees’ retirement benefits under the Company’s

net unrealized gain on securities of ¥13.1 billion was included

system to support employees taking early retirement), andin the shareholders’ equity account. The net increase in deferred

expenses for net transition obligation of retirement and sever-tax assets reflects the amount of additional provisions forance benefits of certain subsidiaries, which amounted to

employees’ retirement benefits that exceeded the amount

expenses totaling ¥11.2 billion.

allowable as an expense for tax purposes and an increase in

As a result, the loss before income taxes and minority

items that cannot be included in losses, such as losses carriedinterests declined ¥4.3 billion from a loss of ¥22.7 billion to

forward. A portion of the increase in the valuation of invest-

a loss of ¥18.4 billion for fiscal 2001.

ments in securities was offset by the recognition of deferred

After application of tax-effect accounting to income taxes,

tax liabilities.

tax benefits increased 115.9%, or ¥4.1 billion, from ¥3.6 billion

The principal factors offsetting a portion of the increase

for the previous period to ¥7.7 billion for fiscal 2001. The prin-in assets were a decline in cash on hand and in banks of ¥8.7

cipal reasons for this increase in tax benefits was a rise in deferredbillion, a drop in marketable securities of ¥45.9 billion, a falltax assets because of an increase in additions to reserves forin net property, plant and equipment of ¥3.4 billion, and aemployees’ retirement benefits in excess of the limit allowable

decline in foreign currency translation adjustments of ¥17.8

as an expense for tax purposes. Minority interests in net loss ofbillion. The decline in cash on hand and in banks reflects theconsolidated subsidiaries declined from ¥0.5 billion in the pre-net decline in cash, which is described later. The drop in mar-vious period to ¥0.4 billion for the fiscal year under review.

ketable securities was mainly a result of the previously described

As a consequence of the factors previously mentioned,

shift of certain of these securities to the investments in securi-

the net loss for the fiscal year was reduced 44.6%, or ¥8.3 bil-ties account. Factors accounting for the decline in property,

lion, from ¥18.6 billion in fiscal 2000 to ¥10.3 billion in fiscal

plant and equipment were primarily investments in plant and2001. The ratio of net loss to shareholders’ equity thus improved

equipment in excess of depreciation. During the fiscal year

from minus 9.9% to minus 6.1%.

under review, capital investments in equipment were madeprincipally in the Consumer Products, Aerospace, and Industrial

Financial Condition

Equipment segments to rationalize production and reduce

The Group’s total assets rose 3.4%, or ¥40.7 billion, to ¥1,247.5

labor costs. Similarly, other capital investments were made inbillion.

these segments to introduce new models of equipment and

The four principal factors accounting for the increase in
assets were a rise in trade receivables of ¥20.4 billion, an in-under review amounted to ¥32.7 billion. The decline in foreign

crease in inventories of ¥30.0 billion, expansion in investments

currency translation adjustments included among assets wasin securities of ¥59.0 billion, and a net increase in the liquid

the result of the application of revisions in accounting regula-and fixed portions of deferred tax assets of ¥6.3 billion. The

tions for foreign currency transactions, which require that theincrease in trade receivables was because of an increase in suchforeign currency translation adjustment item be included inreceivables of the subsidiaries in Europe and the United States

shareholders’ equity. The amount of this item included inand an increase in work in process accompanying the recovery

shareholders’ equity was a negative balance of ¥13.6 billion.

in the balance of orders received. The rise in investments in22

22

new products. Total capital investment during the fiscal year

The Group’s total liabilities rose 5.2%, or ¥53.3 billion, tofor depreciation of ¥33.3 billion, compared with ¥35.1 billion¥1,078.7 billion. The factors accounting for this increase includ-for the previous fiscal year, which were not accompanied by

ed a gain in trade payables of ¥15.7 billion, an increase in

cash outflows, (2) an evaluation loss on marketable and invest-

short-term and long-term debt of ¥12.7 billion, and a rise inment securities (after deduction of gains), which is an item

advances from customers of ¥18.2 billion. The increase in tradetransferred from cash flows from investing activities and waspayables was mainly due to the same factor as for the increase

also not accompanied by cash outflows, of ¥0.7 billion, com-in trade receivables. The rise in borrowings was basically topared with ¥3.0 billion in the previous fiscal year, and (3) net

raise funds to finance capital investments. The increase ininflow from other current assets and liabilities of ¥1.5 billion,

advances from customers was due to higher payments

compared with a net outflow of ¥5.6 billion in the previous

obtained to cover a portion of construction work commis-

year. The principal operating cash outflows were (1) a loss

sioned. Minority interests declined from ¥6.4 billion in the pre-before income taxes and minority interests of ¥18.4 billion,

vious fiscal year to ¥4.7 billion.

compared with a loss of ¥22.7 billion for the previous fiscal

The Group’s shareholders’ equity declined 6.2%, or ¥10.9

year, (2) outflows of ¥8.9 billion (compared with inflows ofbillion, to ¥164.1 billion. This decrease was basically a reflec-¥28.1 billion in the previous fiscal year) in connection with thetion of the net loss for the fiscal year, which lowered the

conduct of operations, including trade receivables, inventories,

Group’s retained earnings. The previously mentioned unreal-

and advances from customers, and (3) cash paid for income

ized gains on securities (after adjustment for the tax effect) in

taxes of ¥1.9 billion, compared with payments of ¥8.6 billion inshareholders’ equity had a positive effect on shareholders’

the previous fiscal year.

equity, but the inclusion of foreign currency translation adjust-Net cash used in investing activities amounted to ¥20.7

ments, which were negative on balance, in the shareholders’billion, compared with ¥46.6 billion for the prior year. Principal

equity account accompanying the revision of accounting reg-

cash inflows were (1) net recoveries of short- and long-term

ulations for foreign currency transactions almost offset theloans of ¥3.0 billion, compared with net outflows of ¥5.9 bil-previously mentioned inclusion of unrealized gains on otherlion in the previous fiscal year and (2) net inflows from the salesecurities. As a result, the shareholders’ equity ratio declinedof securities of ¥8.3 billion, which had no corresponding item

1.3 percentage points, from 14.5% in fiscal 2000 to 13.2% inin the previous fiscal year, after offsetting cash outflows forfiscal 2001.

purchase of shares of newly consolidated subsidiaries. The
principal cash outflow item was expenditures of ¥33.0 billion,

Cash Flows

compared with ¥37.5 billion for the previous fiscal year, for

The Group’s cash flows from operating activities are the basic

the acquisition of property, plant and equipment related tosource of funds for supplying operating cash requirements andthe Group’s capital investment activities.

financing capital investment. When cash flows from operations

Net cash provided by financing activities was ¥3.6 billion,

are insufficient, the Group finances its requirements fromcompared with ¥39.7 billion for the previous fiscal year. The

retained earnings and external borrowings. The balance ofprincipal financial cash inflow items were a net increase in

cash and cash equivalents at the end of the year amounted toshort-term and long-term debt of ¥3.6 billion, compared with¥75.2 billion, which was ¥6.9 billion lower than at the end of¥44.0 billion for the previous fiscal year. The substantial decline

the previous fiscal year. Apart from the cash movements

in net new borrowings for the fiscal year under review was

described in the following paragraphs, this overall decline

due to borrowings made in advance of actual capital invest-

includes an increase in cash of ¥1.0 billion due to foreign cur-ments in the previous fiscal year. Other financial cash outflows

rency conversion of cash and cash equivalents.

for the previous fiscal year included ¥4.2 billion in cash divi-

Net cash provided by operating activities was ¥9.2 billion,
compared with ¥31.2 billion for the previous year. The princi-

dends, compared with no such payments for the fiscal year
under review.

pal operating cash inflows for the fiscal year were (1) expenses

23

23

Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

As of March 31, 2001 and 2000

ASSETS

2000

2001

2001

Current assets:
Cash on hand and in banks ......................................................................... ¥ 77,048
Marketable securities (Note 5) ....................................................................
—
Receivables (Note 5):
Trade .........................................................................................................
418,064
Other.........................................................................................................
12,942
Allowance for doubtful receivables........................................................
(5,076)¥85,782
46,021$

621,856—

397,616
16,304(3,375)

3,374,205
104,455(40,968)

425,930

410,5453,437,692

Inventories (Notes 4 and 5) .........................................................................
Deferred tax assets (Note 9) ........................................................................
Other current assets .....................................................................................

346,567
14,922
19,830316,529
4,216
16,3452,797,151
120,436
160,049

Total current assets ..................................................................................

884,297

879,438

7,137,184

Investments and long-term loans:
Investments in securities (Notes 3 and 10) .................................................
Long-term loans ...........................................................................................
Other (Note 5) ..............................................................................................
Allowance for doubtful receivables............................................................

91,154
4,882
15,355(4,173)32,136
8,716
13,734(7,327)735,706
39,403
123,930(33,680)

Total investments and long-term loans ..................................................

107,218

47,259865,359

Property, plant and equipment (Note 5):
Land ..............................................................................................................
Buildings .......................................................................................................
Machinery and equipment ..........................................................................
Construction in progress..............................................................................

53,018248,388452,840
3,572

50,822
244,103443,876
5,829

427,9092,004,746
3,654,883
28,830

Accumulated depreciation ..........................................................................

757,818(515,925)

744,630(499,352)

6,116,368(4,164,044)

Net property, plant and equipment .......................................................

241,893245,278

1,952,324

Intangible and other assets:
Deferred tax assets (Note 9) ........................................................................
Intangible and other assets .........................................................................

4,924
9,140

9,315
7,676

39,74273,769Foreign currency translation adjustments .........................................................

14,064—

16,991
17,840113,511—

Total assets ................................................................................................... ¥1,247,472¥1,206,806$10,068,378

The accompanying notes to the consolidated financial statements are an integral part of these statements.

24

24

Millions of yen

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

Thousands of
U.S. dollars(Note 1)

2001

2000

2001

Current liabilities:
Short-term borrowings and current portionof long-term debt (Note 5)........................................................................ ¥ 228,462
Trade payables .............................................................................................
326,257
Advances from customers............................................................................
104,194
Accrued income taxes (Note 9) ...................................................................
3,393
Accrued expenses .........................................................................................
15,583
Provision for product warranty ...................................................................
1,551
Provision for losses on construction contracts............................................
6,571
Deferred tax liabilities (Note 9)...................................................................
457
Other current liabilities ...............................................................................
49,252¥ 222,302
310,557
86,012
2,441
19,549
1,648
3,794
515
44,217$ 1,843,923
2,633,228
840,952
27,385
125,771
12,51853,035
3,689
397,514735,720

691,035

5,938,015

270,605
56,331

264,048
56,6692,184,060
454,649

1,388
4,654
10,025

1,663
2,705
9,313

11,20337,56280,912

343,003334,398

2,768,386

Minority interests ................................................................................................

4,668

6,418

37,675

Shareholders’ equity (Note 6):
Common stock of ¥50 par value:
Authorized—3,360,000,000 shares
Issued—1,390,595,964 shares ..................................................................
Capital surplus ..............................................................................................
Retained earnings .......................................................................................
Net unrealized gains on securities ..............................................................
Foreign currency translation adjustments ..................................................
Treasury stock...............................................................................................

81,427
24,68258,452
13,091(13,571)—

81,427
24,682
68,846———657,199
199,209471,768
105,658(109,532)—

Total shareholders’ equity .......................................................................

164,081

174,955

1,324,302

Total liabilities and shareholders’ equity ............................................... ¥1,247,472¥1,206,806$10,068,378

LIABILITIES AND SHAREHOLDERS’ EQUITY

Total current liabilities.............................................................................
Long-term liabilities:
Long-term debt, less current portion (Note 5) ...........................................
Employees’ retirement and severance benefits (Note 14).........................
Directors’ and statutory auditors’ retirement
and severance benefits ..............................................................................
Deferred tax liabilities (Note 9)...................................................................
Other.............................................................................................................
Total long-term liabilities ........................................................................
Contingent liabilities (Note 11)2525

Consolidated Statements of Operations
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

For the three years ended March 31, 2001, 2000 and 1999

Millions of yen

Thousands of
U.S. dollars(Note 1)

2001

2000

1999

2001

Net sales........................................................................................ ¥1,060,479
Cost of sales..................................................................................
924,522¥1,149,698
1,008,860¥1,202,189
1,045,143$8,559,152
7,461,840

Gross profit ...........................................................................
Selling, general and administrative expenses (Note 7).............

135,957
131,497

140,838
139,587

157,046
135,380

1,097,312
1,061,315

Operating income ................................................................
Other income (expenses):
Interest and dividend income ..............................................
Equity in income (loss) of unconsolidated
subsidiaries and affiliates...................................................
Interest expense ...................................................................
Other, net (Note 8) ...............................................................

4,460

1,251

21,66635,997

4,480

4,274

5,495

36,158(1,586)(12,779)(12,981)(654)(11,782)(15,819)683(12,646)(15,723)(12,800)(103,140)(104,770)

Loss before income taxes and minority interests ...........

(18,406)(22,730)(525)(148,555)

Income taxes (Note 9):
Current ..................................................................................
Deferred ................................................................................
Minority interests in net loss of consolidated subsidiaries.......

(5,609)13,309386(5,899)9,466
531(9,358)2,943
808(45,270)
107,4173,115

Net loss ......................................................................................... ¥(10,320)Per share amounts (Note 2(w)):
Net loss ..................................................................................
Cash dividends ......................................................................

¥(7.4)—¥(18,632)¥(13.4)—

The accompanying notes to the consolidated financial statements are an integral part of these statements.

26

26

¥

(6,132)$(83,293)

Yen

U.S. dollars(Note 1)¥(4.4)
6.0$(0.06)—

Consolidated Statements of Shareholders’ Equity
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

For the three years ended March 31, 2001, 2000 and 1999

Thousands

Balance at March 31, 1998 ............................
Net loss for the year...............................
Cumulative effect of adopting
tax effect accounting...........................
Increase in retained earnings arisingfrom affiliates newly accounted
for by the equity method ....................
Merger of unconsolidated subsidiaries
with consolidated subsidiary...............
Adjustment for changes ofinterests in affiliates accounted
for by the equity method ....................
Cash dividends........................................
Bonuses to directors
and statutory auditors .........................
Balance at March 31, 1999 ............................
Net loss for the year...............................
Increase in retained earnings arisingfrom newly consolidated subsidiaries ...
Increase in retained earnings arisingfrom affiliates newly accounted
for by the equity method .....................
Decrease due to companies ceasing
to be affiliates accounted
for by the equity method ....................
Decrease due to merger of
unconsolidated subsidiaries
with consolidated subsidiary...............
Adjustment for changes ofinterests in affiliates accounted
for by the equity method ....................
Cash dividends........................................
Bonuses to directors
and statutory auditors .........................
Balance at March 31, 2000 ............................
Net loss for the year...............................
Adjustment for changes ofinterests in affiliates accounted
for by the equity method ....................
Adjustments from translation offoreign currency financial statements ...
Adoption of new accounting
standard for financial instruments .....
Treasury stock.........................................
Bonuses to directors
and statutory auditors .........................
Balance at March 31, 2001 ............................

Millions of yen

Number ofshares ofcommonstock

Commonstock

1,390,596—¥81,427
—

—

—

—

5,652

—

—

—

—

—

—
—

CapitalsurplusRetainedearnings¥24,682 ¥102,931—(6,132)Net
unrealized
gains onsecurities¥

Foreigncurrencytranslation Treasury
adjustments
stock

—
—

¥

—
—

¥—
—

—

—

—

65

—

—

—

—

24

—

—

—

—
—

—
—

(406)
(8,344)

—
—

—
—

—
—

—
1,390,596——
81,427——
24,682—(262)
93,528(18,632)

—
—
—

—
—
—

—
—
—

—

—

—

2,677

—

—

—

—

—

—

34

—

—

—

—

—

—

(3,996)

—

—

—

—

—

—

(357)

—

—

—

—
—

—
—

—
—

(64)
(4,172)

—
—

—
—

—
—

—
1,390,596——
81,427——
24,682—(172)
68,846(10,320)

—
—
—

—
—
—

—
—
—

—

—

—

(17)

—

—

—

—

—

—

—

—

(13,571)

—

—
—

—
—

—
—

—
—

13,091
—

—
—

—
—

—
1,390,596—¥81,427—(57)¥24,682 ¥ 58,452—¥13,091—¥(13,571)—¥—

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2000 ................................................. $657,199 $199,209 $555,658 $—Net loss for the year....................................................
——(83,293)—
Adjustment for changes ofinterests in affiliates accounted forby the equity method ...............................................
—
—
(137)
—
Adjustments from translation offoreign currency financial statements .......................
————
Adoption of new accounting
standard for financial instruments ..........................
———
105,658
Treasury stock..............................................................
————
Bonuses to directors
and statutory auditors ..............................................
—
—
(460)
—
Balance at March 31, 2001 ................................................. $657,199 $199,209 $471,768 $105,658

$

—
—

$—
—

—

—

(109,532)

—

—
—

—
—

—
$(109,532)—$—

The accompanying notes to the consolidated financial statements are an integral part of these statements.

27

27

Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

For the three years ended March 31, 2001, 2000 and 1999

Millions of yen
2001

1999

2001

(525)

$(148,555)

35,081
3,479(3,419)(4,111)
3,031
4,765(4,274)
11,782(266)

34,607
1,842
186
5,784
—
876
(5,495)
12,646
1,077

268,789(5,117)(32,244)
49,96046,118(11,138)(36,158)
103,139(40,153)

3,583
21,447(5,615)

6,985
3,471
1,258

(95,642)(189,508)(3,559)(2,911)
5,972
38
1,151
47,003
4,122(11,270)(8,623)(5,346)(16,294)
2,552
1,722
45,346
6,562(12,380)(17,181)

73,382
140,307
15,956
4,197
139,774
43,963(93,914)(15,278)

9,236

31,232

22,34774,545(32,967)
10,673
1,415(1,693)
3,241(37,513)——(5,866)—(40,428)
—
—
(406)
—

(266,077)
86,142
11,420(13,664)
26,158(2,375)973—(3,200)—(2,546)(19,169)
7,853

Net cash used for investing activities .........................................

(20,733)(46,579)(43,380)(167,337)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings ...........................
Proceeds from long-term debt ...................................................
Repayment of long-term debt....................................................
Cash dividends paid.....................................................................
Cash dividends paid to minority interests..................................

1,497
40,840(38,689)(9)(56)(4,643)88,368(39,719)(4,203)(64)(6,514)54,894(37,681)(8,310)(62)

12,082
329,621(312,260)
(73)
(452)

Net cash provided by financing activities ......................................

3,583

39,7392,327

28,918

Effect of exchange rate changes ............................................................

966(1,408)

(946)

7,797

Net increase (decrease) in cash and cash equivalents ...........................

(6,948)22,984(19,652)(56,077)

Cash and cash equivalents at beginning of year ...................................

82,16054,83774,489663,115

Increase in cash and cash equivalents arising fromnewly consolidated subsidiaries ...........................................................

—

4,339

—

—

Cash and cash equivalents at end of year.............................................. ¥ 75,212¥82,160¥54,837$ 607,038

Supplemental information on cash flows:
Cash and cash equivalents:
Cash on hand and in banks in the balance sheet ...................... ¥ 77,048
Time deposits with maturities over three months ....................
(1,836)
Total ......................................................................................... ¥ 75,212¥85,782(3,622)¥82,160¥55,306(469)¥54,837$ 621,856(14,818)$ 607,038

Cash flows from operating activities:
Loss before income taxes and minority interests .......................... ¥(18,406)
Adjustments to reconcile loss before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization ..................................................
33,303
Provision for (reversal of) retirement and severance benefits .....
(634)
Accrued bonuses .........................................................................
(3,995)
Provision for (reversal of) losses on construction contracts ......
6,190
Write-downs of securities and others ........................................
5,714
Provision for (reversal of) allowance for doubtful accounts ....
(1,380)Interest and dividend income .....................................................
(4,480)Interest expense...........................................................................
12,779Gain on sale of marketable & investments securities................
(4,975)
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables ................................................................. (11,850)
Inventories ........................................................................... (23,480)
Other current assets ............................................................
(441)
Increase (decrease) in:
Trade payables.....................................................................
9,092
Advances received ...............................................................
17,384
Other current liabilities .......................................................
1,977
Other, net.....................................................................................
520
Sub total...................................................................................
17,318Cash received for interest and dividends ...................................
5,447
Cash paid for interest .................................................................. (11,636)
Cash paid for income taxes .........................................................
(1,893)
Net cash provided by operating activities......................................
Cash flows from investing activities:
Acquisition of property, plant and equipment .........................
Proceeds from sale of investments in securities ........................
Decrease in short-term loans ......................................................
Additions to long-term loans receivable....................................
Proceeds from collection of long-term loans receivable...........
Payment for purchase of newly consolidated
subsidiaries’ stock ......................................................................
Other ............................................................................................

2000¥(22,730)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

28

28

Thousands of
U.S. dollars(Note 1)¥

N o t e s t o t h e C o n s o l i d a t e d Fi n a n c i a l S t a t e m e n t s
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

1. Basis of presenting
consolidated
financial statements

Kawasaki Heavy Industries, Ltd. (the “Company”) and its consolidated domestic subsidiaries maintaintheir accounts and records in accordance with the provisions set forth in the Japanese Commercial
Code and the Securities and Exchange Law and in conformity with accounting principles and practices
generally accepted in Japan (“Japanese GAAP”), which are different from the accounting and disclosure requirements of International Accounting Standards. The accounts of overseas consolidated subsidiaries are based on their accounting records maintained in conformity with generally accepted
accounting principles and practices prevailing in the respective countries of domicile.
The accompanying consolidated financial statements are a translation of the audited consolidated
financial statements of the Company which were prepared in accordance with Japanese GAAP fromthe accounts and records maintained by the Company and its consolidated subsidiaries and were filedwith the appropriate Local Finance Bureau of the Ministry of Finance as required by the Securities andExchange Law.
In preparing the accompanying consolidated financial statements, certain reclassifications have been
made in the consolidated financial statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan. The consolidated cash flow statement for 1999 andstatements of shareholders’ equity for 2001, 2000 and 1999 have been prepared for the purpose ofinclusion in the consolidated financial statements, although such statements were not customarily
prepared in Japan and not required to be filed with the regulatory authorities.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using the prevailing exchange rate at March 31, 2001, which was ¥123.90 to
US$1.00. The convenience translations should not be construed as representations that the Japanese
yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at thisor any other rate of exchange.

2. Significant
accounting policies(a) Consolidation
The Company prepared the consolidated financial statements for the years ended March 31, 2001 and2000 in accordance with the revised Accounting Principles for Consolidated Financial Statements (the“Revised Accounting Principles”) effective from the year ended March 31, 2000.
The accompanying consolidated financial statements include the accounts of the Company and significant companies, over which the Company has power of control through majority voting right orexistence of certain conditions evidencing control by the Company. Investments in non-consolidated
subsidiaries and affiliates, over which the Company has the ability to exercise significant influence
over operating and financial policies of the investees, are accounted for on the equity method. The
effect of adopting the Revised Accounting Principles is immaterial.
The consolidated financial statements include the accounts of the Company and 105 (112 in 2000
and 65 in 1999) subsidiaries.
For the year ended March 31, 2001, 4 (4 in 2000 and 58 in 1999) subsidiaries are excluded from theconsolidation. The amounts of total assets, net sales, net income and retained earnings of theseexcluded subsidiaries, in the aggregate, would not have had a material effect on the consolidated
financial statements.

(b) Application of the equity method of accounting
For the year ended March 31, 2001, 18 (20 in 2000 and 12 in 1999) affiliates are accounted for by theequity method.
For the year ended March 31, 2001, investments in 4 (4 in 2000 and 58 in 1999) unconsolidated subsidiaries and 12 (14 in 2000 and 22 in 1999) affiliates, respectively, are stated at cost without applying
the equity method of accounting. If the equity method had been applied for these investments, theamounts of net income and retained earnings of these excluded subsidiaries and affiliates would nothave had a material effect on the consolidated financial statements.

(c) Consolidated subsidiaries’ fiscal year-ends
Fiscal year-ends of 32 (29 in 2000 and 20 in 1999) consolidated subsidiaries end on December 31. The
Company consolidates such subsidiaries’ financial statements as of each subsidiary’s latest year-end.
Unusual significant transactions for the period between each subsidiary’s year-end and the Company’s
year-end are adjusted on consolidation.

29

29

(d) Elimination of inter-company transactions and accounts
All significant inter-company transactions and accounts and unrealized inter-company profits are
eliminated on consolidation, and the portion thereof attributable to minority interests is credited tominority interests.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time
the Company acquired control of the respective subsidiaries.
When the excess of cost over equity is considered significant, it is amortized to income by thestraight-line method over five years. Otherwise, it is charged to income in the year of acquisitionor the year newly included in consolidation.
(e) Foreign currency translation
Short-term receivables and payables denominated in foreign currencies are translated into Japanese
yen at the year-end rates. Prior to April 1, 2000, long-term receivables and payable denominated inforeign currencies were translated at historical rates.
Effective April 1, 2000, the Company and its consolidated subsidiaries adopted the revised accounting standard for foreign currency translation, “Opinion Concerning Revision of Accounting Standard
for Foreign Currency Translation”, issued by the Business Accounting Deliberation Council on October
22, 1999 (the “Revised Accounting Standard”). Under the Revised Accounting Standard, long-term
receivables and payables denominated in foreign currencies are also translated into Japanese yen at
the year-end rate.
The effect on the consolidated statement of operations of adopting the Revised AccountingStandard was immaterial.
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the yearend rate except for shareholders’ equity accounts, which are translated at the historical rates. Income
statements of consolidated overseas subsidiaries are translated at average rates except for transactions with the Company, which are translated at the rates used by the Company.
Due to the adoption of the Revised Accounting Standard, the Company and its domestic subsidiaries report foreign currency translation adjustments in shareholders’ equity (and minority interests). The prior year’s amount, which is included in assets, has not been reclassified.

(f) Appropriations of retained earnings
Appropriations of retained earnings are recorded in the fiscal year when the proposed appropriations
are approved.

(g) Revenue recognition
Sales are principally recognized at the time of completion of the contracts. However, the percentageof-completion method is applied to long-term contracts exceeding ¥5,000 million.

(h) Consolidated statements of cash flows
In accordance with the “Standards for Preparation of Consolidated Cash Flow Statement, etc.”(the“New Standards”), effective from the year ended March 31, 2000, the Company is required to prepare
consolidated cash flow statements. The 1999 consolidated cash flow statement, which was preparedfor readers outside Japan although such statement was not required, has been restated to conform to
the New Standards.

(i) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits andshort-term highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.

(j) Allowance for doubtful receivables
Effective April 1, 2000, the Company and its consolidated domestic subsidiaries adopted the newJapanese accounting standard for financial instruments (“Opinion Concerning Establishment of
Accounting Standard for Financial Instruments“ issued by the Business Accounting Deliberation
Council on January 22, 1999).
Upon applying the new accounting standard, possible losses from notes and accounts receivable,loans and other receivables are provided for based on past experience rate and the Companies’ estimates of losses on collection.

30

30

As a result of adopting the new accounting standard for financial instruments, loss before income
taxes and minority interests increased ¥2,983 million ($24,076 thousand) compared with the amounts
which would have been recognized under the previous method of accounting.

(k) Inventories
Inventories are stated at cost, as determined principally by the specific identification cost method, thefirst-in, first-out method or the moving-average method.
(l) Assets and liabilities arising from derivative transactions
Assets and liabilities arising from derivative transactions are stated at fair value.

(m) Investments in securities
Prior to April 1, 2000, securities of the Company and its consolidated subsidiaries were stated atmoving-average cost.
Effective April 1, 2000, the Company and its consolidated domestic subsidiaries adopted the newJapanese accounting standard for financial instruments (“Opinion Concerning Establishment of
Accounting Standard for Financial Instruments“ issued by the Business Accounting Deliberation
Council on January 22, 1999).
Upon applying the new accounting standard, the Company and its consolidated domestic subsidiaries examined the intent of holding each security and classified those securities as (a) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (b) equity
securities issued by subsidiaries and affiliated companies and (c) for all other securities that are notclassified in any of the above categories (hereafter, “available-for-sale securities”). There were no
trading securities at March 31, 2001.
Held-to-maturity debt securities are stated mainly at amortized cost. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method
are stated at moving-average cost. Available-for-sale securities with available fair market values are stated at fair market value. Unrealized gains and unrealized losses on these securities are reported, net of
applicable income taxes, as a separate component of shareholders’ equity. Realized gains and losses onsale of such securities are computed using moving-average cost.
Other securities with no available fair market value are stated at moving-average cost.
If the market value of held-to-maturity debt securities, equity securities issued by unconsolidated
subsidiaries and affiliated companies and available-for-sale securities, declines significantly, such securities are stated at fair market value and the difference between fair market value and the carrying
amount is recognized as loss in the period of the decline. If the fair market value of equity securities
issued by unconsolidated subsidiaries and affiliated companies not on the equity method is not readily available, such securities should be written down to net asset value with a corresponding charge in
the income statement in the event net asset value declines significantly. In these cases, such fair market value or the net asset value will be the carrying amount of the securities at the beginning of thenext year.
As a result of adopting the new accounting standard for financial instruments, loss before income
taxes and minority interests increased ¥2,731 million ($22,042 thousand) compared with the amounts
which would have been recognized under the previous method of accounting. Also, based on theexamination of the intent of holding each security upon application of the new accounting standard
on April 1, 2000, held-to-maturity debt securities and available-for-sale securities maturing within one
year from the balance sheet date are included in current assets, and other securities are included ininvestments and other assets.
As a result, at April 1, 2000, securities in current assets decreased by ¥45,875 million ($370,258 thousand) and investment securities increased by the same amount compared with what would have beenreported under the previous accounting policy.

(n) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed principally by the
declining-balance method over estimated useful lives.
(o) Intangible assets
Amortization of intangible assets is computed by the straight-line method.

31

31

(p) Provision for product warranty
Expected future product warranty costs are provided for ships and consumer products.

(q) Provision for losses on construction contracts
Provision for losses on uncompleted construction contracts at the fiscal year-end is made when substantial losses are anticipated for the next fiscal year and later and such losses can be reasonably estimated.
(Change in accounting policy)
Effective for the year ended March 31, 2001, the Company changed its accounting policy for the provision for losses on uncompleted construction contracts. Previously, it was applied only for the subsidiary in the United States based on U.S. GAAP.
The Company made this change in accounting policy following the preparation of its Medium-TermBusiness Plan in November 2000 and as a result of a review of construction contracts at the end of theyear, which led to the judgment that factors of losses on construction contracts are increasing. In viewof these circumstances, this change was deemed prudent to increase the soundness of the Company’s
financial position and substantially better reflect profitability.
As a result of this change, loss before income taxes and minority interests increased ¥6,190 million($49,959 thousand) compared with the amounts which would have been recognized under the previous method of accounting.

(r) Bond issue expenses
Bond issue expenses are charged to income as incurred.

(s) Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.

(t) Retirement and severance benefits
Employees who terminate their services with the Company and its domestic consolidated subsidiaries
are generally entitled to lump-sum payments, the amounts of which are determined by reference totheir current basic rates of pay and length of service. At March 31, 2000, the Company and its domestic consolidated subsidiaries provided for 40 percent of the amount which would be required to be
paid if all eligible employees voluntarily terminated their services at the balance sheet date.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted the new
accounting standard, “Opinion on Setting Accounting Standard for Employees’ Severance and Pension
Benefits”, issued by the Business Accounting Deliberation Council on June 16, 1998 (the “New
Accounting Standard”). Under the New Accounting Standard, the liabilities and expenses for retirement and severance benefits are determined based on the amounts actuarially calculated using certain assumptions. The Company and its domestic consolidated subsidiaries provided allowance for
employees’ retirement and severance benefits at March 31, 2001 based on the estimated amounts ofprojected benefit obligation at that date.
The excess of the projected benefit obligation over the liabilities for retirement and severance benefits recorded as of April 1, 2000 (the “net transition obligation”) amounted to ¥130,928 million($1,056,723 thousand), which will be recognized in expenses in equal amounts primarily over 10 years
commencing with the year ended March 31, 2001. Actuarial gains and losses are recognized in expenses in equal amounts over the average of the estimated remaining service lives of the employees commencing with the following period. As a result of the adoption of the New Accounting Standard, inthe year ended March 31, 2001, retirement and severance benefit expenses increased by ¥2,935 million ($23,688 thousand), operating income decreased by ¥1,215 million ($9,806 thousand) and loss
before income taxes and minority interests increased by ¥2,793 million ($22,542 thousand) comparedwith what would have been recorded under the previous accounting standard.
Employees of the Company’s overseas consolidated subsidiaries are generally covered by various
pension plans, accounted for in accordance with generally accepted accounting principles in the country of incorporation. In addition, the Company and its domestic consolidated subsidiaries provide forretirement and severance benefits for directors and statutory auditors principally at 50 percent of theamount required if they retired at the balance sheet date.

32

32

Due to the adoption of the Revised Accounting Principles, the Company and its domestic subsidiaries report Employees’ retirement and severance benefits. The prior year’s amount, which isincluded in Retirement and severance benefits, has not been reclassified.

(u) Hedge accounting
The Company and its consolidated subsidiaries employ deferred hedge accounting. If financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer recognition of gains or losses resulting from changes in fair value of financial
instruments until the related losses or gains on the hedged items are recognized.

(v) Finance leases
For the Company and its domestic consolidated subsidiaries, finance leases which do not transfer ownership and do not have bargain purchase provisions are accounted for in the same manner as operating leases in accordance with Japanese GAAP.

(w) Per share amounts of net income (loss) and cash dividends
The computations of per share amounts of net income (loss) shown in the consolidated statements ofoperations are based upon the weighted average number of issued shares outstanding during eachperiod.
Per share amounts of cash dividends for each period represent dividends declared as applicable to
the respective year.

(x) Reclassifications
Certain prior year amounts have been reclassified to conform to 2001 presentation. These changes
had no impact on previously reported results of operations or shareholders’ equity.

3. Securities(a) Acquisition costs, book values and fair value of investments in securities with available fair values
as of March 31, 2001 is as follows:
Millions of yen

Available-for-sale securities:
Securities with book values
exceeding acquisition costs:
Equity securities ..............................................
Others..............................................................
Total ....................................................................
Other securities:
Equity securities ..................................................
Total ............................................................................

Thousands of
U.S. dollars

Acquisition cost

Book values

Difference

Difference¥35,61395¥35,708¥63,087
95¥63,182¥27,474—¥27,474$221,743—$221,743¥10,417¥46,125¥ 5,942¥69,124¥ (4,475)¥22,999$ (36,118)$185,625(b) Book values of investments in securities with no available fair values as of March 31, 2001 is as follows:

Held-to-maturity debt securities:
Non-listed securities ....................................................................................
Available-for-sale securities:
Equity securities ...........................................................................................
Others...........................................................................................................
Total .................................................................................................................
Equity securities issued by non-consolidated subsidiaries
and affiliated companies:
Subsidiaries ..................................................................................................
Affiliated companies ...................................................................................
Total .................................................................................................................

Millions of yen

Thousands of
U.S. dollars

Book values

Book values

¥

20

$

161

¥6,164448¥6,612$49,750
3,616$53,366¥ 19
3,167¥3,186$ 153
25,561$25,71433

33

(c) Market values, book values and unrealized and unrecognized gains of quoted securities as of March
31, 2000 is as follows:
Millions of yen

Market values:
Marketable securities ......................................................................................................................
Investments in securities:
Subsidiaries and affiliates .......................................................................................................
Others .......................................................................................................................................
Book values:
Marketable securities ......................................................................................................................
Investments in securities:
Subsidiaries and affiliates .......................................................................................................
Others .......................................................................................................................................
Unrealized and unrecognized gains...................................................................................................

4. Inventories

4,770
136
¥82,517¥45,867
8,134
104
54,105¥28,412Inventories as of March 31, 2001 and 2000 are comprised as follows:
Millions of yen

5. Short-term borrowings and long-term
debt¥77,611

Thousands of
U.S. dollars

2001

2000

2001

Finished products ....................................................................................... ¥ 50,747
Work in process .......................................................................................... 259,053
Raw materials and supplies .......................................................................
36,767
Total ............................................................................................ ¥346,567¥ 44,006
235,050
37,473¥316,529$ 409,580
2,090,823
296,748$2,797,151

Short-term borrowings and long-term debt as of March 31, 2001 and 2000 are comprised as follows:
Millions of yen
2001

Short-term borrowings:
Short-term debt, principally bank loans and commercial paper..... ¥196,535
Current portion of long-term debt ...................................................
31,927
Total short-term debt .................................................................... ¥228,462
Long-term debt:
Loans from banks and other financial institutions, partly securedby mortgage or other collateral, due from 2001 to 2035,
bearing interest ranging from 0.495 percent to 12.0 percent
and from 0.57 percent to 7.9 percent as of March 31, 2001
and 2000, respectively...................................................................... ¥101,635
2.50 percent notes due 2000 .............................................................
—
2.55 percent notes due 2001 .............................................................
10,0001.00 percent notes due 2002 .............................................................
10,0001.05-2.00 percent notes due 2003 .....................................................
20,0001.94 percent notes due 2004 .............................................................
20,0001.50-1.67 percent notes due 2005 .....................................................
20,0001.87 percent notes due 2006 .............................................................
10,0002.00 percent notes due 2007 .............................................................
10,0002.51-2.775 percent notes due 2008 ...................................................
20,0002.33 percent notes due 2009 .............................................................
10,0000.80 percent convertible bonds due 2001 ........................................
8,573
0.65-0.90 percent convertible bonds due 2003 ................................
19,0790.75 percent convertible bonds due 2005 ........................................
9,609
1.10 percent convertible bonds due 2006 ........................................
17,1180.90 percent convertible bonds due 2008 ........................................
8,926
1.00 percent convertible bonds due 2011 ........................................
7,592
302,532
Less portion due within one year...................................................... (31,927)
Total long-term debt ..................................................................... ¥270,605

Thousands of
U.S. dollars

2000

2001

¥187,211
35,091¥222,302$1,586,239
257,684$1,843,923¥108,242
10,00010,00010,00020,00020,00010,00010,000—20,00010,0008,573
19,0799,609
17,1188,926
7,592
299,139(35,091)¥264,048$ 820,299—
80,71080,710161,421
161,421
161,42180,71080,710161,42180,71069,193
153,987
77,554
138,160
72,042
61,2752,441,744(257,684)$2,184,060

The convertible bonds due 2001 through 2011 as of March 31, 2000 were convertible into
136,908,609 shares of common stock at the option of the holders at prices of ¥459 ($3.70) or ¥598($4.83) per share. The conversion prices are subject to adjustments under specified conditions.

3434

As of March 31, 2001 and 2000, the following assets were pledged as collateral for short-term borrowing and long-term debt:
Millions of yen
2001

Trade receivables ........................................................................................... ¥ 556
Marketable securities.....................................................................................
—
Inventories...................................................................................................... 12,301
Land ................................................................................................................
5,845
Buildings .........................................................................................................
6,551
Machinery and equipment ............................................................................
400
Other...............................................................................................................
154
Total................................................................................................ ¥25,807

Thousands of
U.S. dollars

2000

2001

¥

—
177
6,144
6,247
6,635
491
233
¥19,927$

4,488—
99,282
47,17552,8733,228
1,243$208,289

As of March 31, 2001 and 2000, debt secured by the above pledged assets was as follows:
Millions of yen
2001

Trade payables ............................................................................................... ¥53
Short-term and long-term debt .................................................................... 23,780
Total................................................................................................ ¥23,833

Thousands of
U.S. dollars

2000

2001

97
18,940¥19,037$
428
191,929$192,357¥

The aggregate annual maturities of long-term debt as of March 31, 2001 are as follows:Year ending March 31,

Millions of yen

2002 ..........................................................................................................................
2003 ..........................................................................................................................
2004 ..........................................................................................................................
2005 ..........................................................................................................................
2006 and thereafter ................................................................................................
Total .............................................................................................................

6. Shareholders’ equity¥ 31,927
37,60645,73436,626150,639¥302,532

Thousands of
U.S. dollars$

257,684
303,519
369,120295,6101,215,811$2,441,744(a) Capital surplus
The Commercial Code of Japan provides that the entire issue price of new shares must be credited tocommon stock, provided that, by resolution of the Board of Directors, up to one-half of such issue
price may be credited to capital surplus so long as the common stock is equal to at least the aggregate
par value of the shares issued.

(b) Dividends
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial statements of the Company in accordance with the Commercial Code of Japan.

(c) Restrictions on dividends
Under the terms of indentures for certain notes and convertible bonds due through 2006, cumulative
cash dividend payments by the Company are not to exceed an amount equivalent to accumulated net
income of the Company earned during the years such securities are outstanding plus ¥10,000 million(for certain indentures ¥10,100 million).

7. Research anddevelopment
expenses

Research and development expenses for the years ended March 31, 2001, 2000 and 1999 are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

Research and development expenses ........................................ ¥17,548¥19,905¥18,615$141,630

35

35

8. Other income(expenses):other, net

Other income (expenses): other, net in the consolidated statements of operations is comprised as follows:
Millions of yen
2001

Gain (loss) on sales of marketable securities
and investments in securities ................................................ ¥ 4,975
Foreign exchange gain (loss), net ...........................................
3,097
Provision for losses on construction contract.........................
(6,190)
Write-downs of securities and others.....................................
(5,714)
Expenses for net transition obligation of retirement
and severance benefits ..........................................................
(1,578)
Expenses for making structural improvements......................
(3,470)Gain on cancellation of the shipbuilding contracts...............
—
Prior-period retirement allowances........................................
—
Other, net.................................................................................
(4,101)
Total.......................................................................... ¥(12,981)

Thousands of
U.S. dollars

2000

1999

266
(7,774)—(3,917)¥ (1,077)(11,411)
—
—

$

—
—
2,053
(2,744)(3,703)¥(15,819)————(3,235)¥(15,723)(12,736)(28,006)——(33,099)$(104,770)

¥

2001

40,15324,996(49,960)(46,118)

Expenses for making structural improvements are consolidation of production facilities for steel
structures and special additional retirement allowance.

9. Income taxes

Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of
corporation tax (national tax) and enterprise tax and inhabitants’ taxes (local taxes) which, in theaggregate, result in normal statutory tax rates of approximately 41.9 percent for the years ended
March 31, 2001 and 2000.
Significant components of deferred tax assets and liabilities as of March 31, 2001 and 2000 are as follows:
Millions of yen
2001

Deferred tax assets:
Excess bonuses accrued.............................................................................. ¥ 2,574
Retirement benefits ................................................................................... 10,289
Estimated loss on uncompleted contracts ................................................
2,759
Allowance for doubtful receivables..........................................................
2,786
Fixed assets—inter-company profits .........................................................
1,128
Depreciation...............................................................................................
1,014
Net operating loss carryforwards.............................................................. 11,150
Write-down of marketable securities, investments
in securities and others............................................................................
904
Other...........................................................................................................
7,620
Gross deferred tax assets ....................................................................... 40,224
Less—valuation allowance ....................................................................
(8,084)
Total deferred tax assets ....................................................................... 32,140
Deferred tax liabilities:
3,985
Deferral of gain on sale of fixed assets ....................................................
Net unrealized gain on securities .............................................................
9,637
Unrealized gain on uncompleted contracts .............................................
—
Other...........................................................................................................
3,783
Total deferred tax liabilities .................................................................. 17,405
Net deferred tax assets .................................................................................. ¥14,735

10. Investments inunconsolidated
subsidiaries andaffiliates

36

36

Thousands of
U.S. dollars

2000

2001

¥ 2,085
5,872
1,653
2,868
1,046
999
4,844

$ 20,775
83,043
22,26822,486
9,104
8,184
89,992—
6,499
25,866(7,702)
18,164

7,296
61,501
324,649(65,246)
259,403

1,997
—
1,430
4,426
7,853
¥10,311

32,16377,780—30,533
140,476$118,927

Investments in unconsolidated subsidiaries and affiliates as of March 31, 2001 and 2000 are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

Investments in securities................................................................................ ¥15,399¥23,102$124,28611. Contingent liabilities

Contingent liabilities as of March 31, 2001 and 2000 are as follows:
Millions of yen
2001

As drawer of trade notes discounted ........................................................... ¥ 916
As endorser of trade notes............................................................................
34
As guarantor of indebtedness of employees,
unconsolidated subsidiaries and affiliates, and others ............................. 38,854

12. Finance leases

Thousands of
U.S. dollars

2000

¥

355
36
40,642

2001

$

7,393
274

313,592

Finance lease information, as required to be disclosed in Japan, for the respective years is as follows:(a) As lessee
The original cost of leased assets under non-capitalized finance leases and accumulated depreciation,
assuming it is calculated on the straight-line method over lease terms, as of March 31, 2001 and 2000
are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

Property, plant and equipment .................................................................... ¥15,324
Accumulated depreciation ............................................................................
(7,333)¥ 7,991
Intangible assets............................................................................................. ¥ 725
Accumulated amortization............................................................................
(340)
¥ 385

¥13,793(6,816)¥ 6,977
¥ 379
(261)
¥ 118

$123,680(59,185)$ 64,495$ 5,851(2,744)$ 3,107

The present values of future minimum lease payments under non-capitalized finance leases as ofMarch 31, 2001 and 2000 are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

Current portion................................................................................................ ¥2,825
Non-current portion ........................................................................................ 5,722
Total ..................................................................................................... ¥8,547¥2,556
4,715¥7,271$22,801
46,182$68,983

Lease payments and “as if capitalized” depreciation and amortization and interest expense for noncapitalized finance leases are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

1999

2001

Lease payments .................................................................................. ¥3,504
Depreciation and amortization......................................................... 3,243
Interest................................................................................................
232¥3,076
2,862
230¥3,094
3,058
277$28,281
26,174
1,872(b) As lessor
The original cost of leased assets under finance leases and accumulated depreciation, as of March 31,
2001 and 2000 are as follows:
Millions of yen

Property, plant and equipment .......................................................................
Accumulated depreciation ...............................................................................

Thousands of
U.S. dollars

2001

2000

2001

¥1,335(706)¥ 629¥1,295(714)¥ 581$10,775(5,698)$ 5,077

The present values of future minimum lease payments to be received under finance leases as of March
31, 2001 and 2000 are as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2000

2001

Current portion ........................................................................................................ ¥202
Non-current portion................................................................................................. 471
Total .......................................................................................................... ¥673

¥173
489
¥662

$1,6303,802$5,43237

37

Lease payments received, depreciation and amortization and interest on finance leases are as follows:
Millions of yen

13. Operating leases

2001

2000

1999

2001

Lease payments received ........................................................................... ¥223
Depreciation and amortization................................................................. 181
Interest........................................................................................................
37

¥218
147
38

¥325
276
50

$1,8001,461
299

The present values of future minimum lease payments under operating leases as of March 31, 2001
and 2000 are as follows:
Millions of yen

14. Employees’ severance and pension
benefitsThousands of
U.S. dollars

Thousands of
U.S. dollars

2001

2000

2001

Current portion ........................................................................................................ ¥ 48
Non-current portion................................................................................................. 131
Total .................................................................................................................. ¥179

¥ 50
178
¥228

$ 388
1,057
$1,445The liability for employees’ retirement and severance benefits included in the liability section of theconsolidated balance sheet as of March 31, 2001 consists of the following:
Projected benefit obligation...................................................................................
Unrecognized actuarial differences .......................................................................
Less fair value of pension assets .............................................................................
Less unrecognized net transition obligation .........................................................
Prepaid pension cost ...............................................................................................
Allowance for retirement and severance benefits ................................................

Millions of yen

Thousands of
U.S. dollars¥180,860(4,090)(4,182)(116,497)
240¥ 56,331$1,459,726(33,011)(33,753)(940,250)
1,937$454,649

Retirement and severance benefit expenses in the consolidated statements of operations for the year
end of March 31, 2001 are comprised as follows:
Service costs—benefits earned during the year ....................................................
Interest cost on projected benefit obligation........................................................
Expected return on plan assets...............................................................................
Amortization of net transition obligation.............................................................
Special additional retirement allowance ...............................................................
Retirement and severance benefit expenses .........................................................

Millions of yen

Thousands of
U.S. dollars¥ 8,700
6,532(304)
14,431
1,687¥31,046$ 70,218
52,720(2,454)116,473
13,616$250,573

The discount rate and the rate of expected return on plan assets are primarily 3.5 and 8.5 percent,respectively. The estimated amount of all retirement benefits to be paid at future retirement dates isallocated equally to each service year using the estimated number of total service years. Actuarial
gains and losses are recognized in expenses in equal amounts over 10 to 15 years commencing withthe following period.

15. Derivativetransactions

38

38

Since the Company and its consolidated subsidiaries operate internationally and have a substantial
volume of export and import transactions, they enter into foreign currency exchange and option
transactions in order to manage risk of fluctuations in exchange rates in relation to foreign currency
denominated assets, liabilities and future transactions.
The Company and its consolidated subsidiaries also enter into interest swap and option transactions
to hedge against future fluctuations in interest rates on borrowings, primarily to fix, cap or collar
interest rates on variable rate debt.
The Company and its consolidated subsidiaries’ purpose for purchasing derivatives is to hedge
against risks of fluctuations in currency exchange rates and interest rates rather to than be exposed tosuch risks through dealing or speculation.
For derivative transactions that meet the conditions for hedge accounting based on the standards
for accounting for financial instruments (“Opinion Concerning Establishment of Accounting Standard
for Financial Instruments“ issued by the Business Accounting Deliberation Council on January 22,1999), the Company and its consolidated subsidiaries apply hedge accounting principles.

In order to minimize credit risk, the Company and its consolidated subsidiaries use only highly-rated
international financial institutions as counterparty to derivative transactions.
The Company and its consolidated subsidiaries have established policies that restrict the use ofderivative instruments, including limits as to the purpose, nature, type and amount, and that require
reporting and review in order to control the use of derivatives and manage risk.
(a) Outstanding positions and recognized gains and losses at March 31, 2001 are as follows:
Millions of yen
Contract
amountCurrency related contracts:
Foreign exchange contracts:
To sell ................................................................................. ¥84,977
To purchase .......................................................................
7,364
Total .......................................................................................
Interest rate related contracts:
Option contracts
Collar purchase.................................................................. ¥10,000

Marketvalue

Thousands of
U.S. dollars

Gain (loss)

Gain (loss)¥90,558
7,787¥(5,581)423¥(5,158)$(45,047)
3,412$(41,635)¥¥ (115)

$

(116)

(928)

Effective April 1, 2000, the Company and its consolidated subsidiaries adopted the new Japanese
accounting standard for financial instruments and changed their method of accounting for derivatives
from non-recognition of derivatives not accounted for as hedges to recognition at market value as of
the balance sheet date. Also, those transactions that were accounted for as hedges and excluded fromdisclosure in the notes in the previous year, have been disclosed in the notes for the current year.
In addition, foreign currency monetary assets and liabilities are now converted at the exchange
rates prevailing on the balance sheet date. Gains (losses) due to the valuation of derivatives at market
value and gains (losses) on revaluation of foreign currency assets and liabilities are first recognizedindividually and then offset against one another in the consolidated statements of operations toshow the net effect.
For derivative transactions arranged in connection with scheduled transactions, the Company andits consolidated subsidiaries have applied hedge accounting from the current year, and these havebeen excluded from disclosure.
(b) Outstanding positions and unrealized and unrecognized gains and losses at March 31, 2000 are as
follows:
Millions of yen
Contract amountCurrency related contracts:
Foreign exchange contracts:
Sell
U.S. dollars...................................................................
Other currencies..........................................................
Purchase
German marks.............................................................
U.S. dollars...................................................................
Pounds .........................................................................
Euro .............................................................................
Other currencies..........................................................
Option contracts:
Sell option
Call
U.S. dollars...................................................................
Purchase options
Put
U.S. dollars...................................................................
Total ......................................................................................................
Interest rate related contracts:
Option contracts:
Collar purchase .................................................................................
Swap contracts:
Receive fixed for variable rates .......................................................
Receive variable for fixed rates .......................................................
Total ......................................................................................................

¥

291
240
640
570
515
423
1,003

Unrealized gain (loss)

¥

8
3
(66)
9
13
(10)
(101)

6,635

59

6,300

(39)
¥(124)¥ 3,000¥(8)—
92,000—(977)¥(985)

39

39

16. Segment
information

Industry segments of the Company and its consolidated subsidiaries are classified into Transportation
Equipment, Aerospace, Industrial Equipment, Consumer Products and Other.
The Transportation Equipment segment manufactures and sells ships and rolling stock. Operations
within the Aerospace segment include the production and sale of airplanes, helicopters, gas turbines
and airplane engines. Products manufactured and sold by the Industrial Equipment segment include
boilers, prime movers, hydraulic, crushing, and construction machines, chemical and steelmaking plants,
refuse incineration plants, steel bridges and hospital respiration equipment. The Consumer Products
segment manufactures and sells motorcycles, ATVs (All-Terrain Vehicles) and Jet Ski® watercraft.
Operations in the Other segment involve trade, mediation of overseas sales and orders and otheractivities.

(a) Information by industry segment
Millions of yen
2001
External Intersegment
sales
sales

Transportation equipment ...... ¥ 159,702
Aerospace .................................
207,933
Industrial equipment ...............
327,650
Consumer products ..................
275,903
Other.........................................
89,291
Total.......................................... 1,060,479
Eliminations and corporate .....
—
Consolidated total ................... ¥1,060,479

Total
sales

OperatingOperatingexpenses income (loss)¥ 1,611 ¥ 161,313 ¥ 163,425
8,351
216,284
206,343
41,611
369,261
380,274
3,374
279,277
272,798
34,709124,000
122,90789,656 1,150,135 1,145,747(89,656)(89,656)(89,728)¥— ¥1,060,479 ¥1,056,019

Total
Depreciation
Capitalassets and amortization expenditures¥ (2,112) ¥ 185,427
9,941
226,174(11,013)403,9296,479
260,143
1,093
174,098
4,388
1,249,771
72(2,299)¥ 4,460 ¥1,247,472¥ 3,466
5,182
8,549
11,304
2,482
30,983
2,320¥33,303¥ 2,525
5,861
5,119
14,1101,621
29,236
3,451¥32,687
Millions of yen
2000

External Intersegment
sales
sales

Transportation equipment ...... ¥ 164,942
Aerospace .................................
240,072
Industrial equipment ...............
397,240
Consumer products ..................
277,176
Other.........................................
70,268
Total.......................................... 1,149,698
Eliminations and corporate .....
—
Consolidated total ................... ¥1,149,698

Total
sales

OperatingOperatingexpenses income (loss)¥ 1,857 ¥ 166,799 ¥ 176,534
7,400
247,472
236,264
31,082
428,322440,013
1,986
279,162
269,62143,499113,767
112,10885,824 1,235,522 1,234,540(85,824)(85,824)(86,093)¥— ¥1,149,698 ¥1,148,447

Total
Depreciation
Capitalassets and amortization expenditures¥ (9,735) ¥ 159,783
11,208226,552(11,691)
417,365
9,541
208,780
1,659
133,706982
1,146,186
269
60,620¥ 1,251 ¥1,206,806¥ 3,680
4,953
9,511
11,095
3,152
32,391
2,690¥35,081¥ 2,794
7,297
7,817
16,485
3,904
38,297
1,388¥39,685
Millions of yen
1999

External Intersegment
sales
sales

Transportation equipment ...... ¥ 184,040
Aerospace .................................
247,650
Industrial equipment ...............
416,998
Consumer products ..................
270,021
Other.........................................
83,480Total.......................................... 1,202,189
Eliminations and corporate .....
—
Consolidated total ................... ¥1,202,189

40

40

¥

Total
sales

OperatingOperatingexpenses income (loss)

2,326 ¥ 186,366 ¥ 201,461
9,285
256,935
238,657
50,094
467,092
466,306
4,747
274,768
259,133
44,138
127,618
125,460
110,590 1,312,779 1,291,017(110,590) (110,590) (110,494)¥— ¥1,202,189 ¥1,180,523

Total
Depreciation
Capitalassets and amortization expenditures¥(15,095) ¥ 181,425
18,278
251,660
786
410,790
15,635
188,316
2,158
151,977
21,762
1,184,168(96)
20,689¥ 21,666 ¥1,204,857¥ 3,696
5,076
10,8399,888
2,383
31,882
2,725¥34,607¥ 3,814
5,024
7,810
17,4491,893
35,9906,153¥42,143

Thousands of U.S. dollars
2001
External Intersegment
sales
sales

Transportation equipment ...... $1,288,959
Aerospace ................................. 1,678,232
Industrial equipment ............... 2,644,471
Consumer products .................. 2,226,820
Other.........................................
720,670
Total.......................................... 8,559,152
Eliminations and corporate .....
—
Consolidated total ................... $8,559,152

Total
sales

OperatingOperatingexpenses income (loss)$ 13,002 $1,301,961 $1,319,007
67,401 1,745,633 1,665,400
335,844 2,980,315 3,069,201
27,232 2,254,052 2,201,760
280,137 1,000,807
991,985
723,616 9,282,768 9,247,353(723,616) (723,616) (724,198)$— $8,559,152 $8,523,155

Total
Depreciation
Capitalassets and amortization expenditures$(17,046) $ 1,496,586
80,233
1,825,456(88,886) 3,260,121
52,292
2,099,621
8,822
1,405,149
35,415 10,086,933
582(18,555)$ 35,997 $10,068,378$ 27,974
41,824
68,99991,23520,033250,065
18,724$268,789$ 20,379
47,30441,316
113,882
13,083235,964
27,854$263,818

As explained in Note 2(t), the accounting policy for retirement and severance benefits, has changed in
2001. The change resulted in increases in operating loss of ¥170 million ($1,372 thousand) for“Transportation equipment” and ¥406 million ($3,277 thousand) for “Industrial equipment”, andresulted in decreases in operating income of ¥244 million ($1,969 thousand) for “Aerospace”, ¥179
million ($1,445 thousand) for “Consumer products” and ¥216 million ($1,743 thousand) for “Other”,
for the year ended March 31, 2001, compared to what these would have been if the prior accounting
policies had been used.

(b) Information by geographic area
Segment information by geographic area, as required to be disclosed in Japan, for the respective
years is as follows:
Millions of yen
2001
External Intersegment
sales
sales

Japan........................................ ¥ 824,213
North America.........................
176,071
Europe .....................................
38,573
Asia ..........................................
17,791Other areas..............................
3,831
Total......................................... 1,060,479
Eliminations and corporate ....
—
Consolidated total .................. ¥1,060,479

Total
sales

OperatingOperatingexpenses income (loss)¥171,516 ¥ 995,729 ¥ 992,563
9,076
185,147
181,893
3,232
41,80542,722
5,323
23,11423,076
165
3,996
3,907
189,3121,249,791
1,244,161(189,312)(189,312)(188,142)¥— ¥1,060,479 ¥1,056,019

Total
assets¥ 3,166
3,254
(917)
38
89
5,630
(1,170)¥ 4,460¥1,097,447
137,89036,017
19,5681,809
1,292,731(45,259)¥1,247,472

Millions of yen
2000
External Intersegment
sales
sales

Japan........................................ ¥ 929,110
North America.........................
160,436
Europe .....................................
39,554
Asia ..........................................
16,321Other areas..............................
4,277
Total......................................... 1,149,698
Eliminations and corporate ....
—
Consolidated total .................. ¥1,149,698

Total
sales

OperatingOperatingexpenses income (loss)¥ 148,766 ¥1,077,876 ¥1,082,344
11,288
171,724
167,977
4,515
44,06943,231
4,009
20,33021,927
128
4,405
4,318
168,706
1,318,404
1,319,797(168,706)(168,706)(171,350)¥— ¥1,149,698 ¥1,148,447¥(4,468)
3,747
838(1,597)87(1,393)
2,644¥ 1,251

Total
assets¥1,046,115
105,322
24,496
16,675
1,894
1,194,502
12,304¥1,206,806

41

41

Millions of yen
1999
External Intersegment
sales
sales

Japan........................................ ¥ 982,857
North America.........................
155,635
Europe .....................................
46,287
Asia ..........................................
12,881Other areas..............................
4,529
Total......................................... 1,202,189
Eliminations and corporate ....
—
Consolidated total .................. ¥1,202,189

Total
sales

OperatingOperatingexpenses income (loss)¥154,699 ¥1,137,556 ¥1,110,276
11,869167,504
172,780
6,252
52,53951,224
2,855
15,736
16,611
—
4,529
4,482
175,675
1,377,864
1,355,373(175,675)(175,675)(174,850)¥— ¥1,202,189 ¥1,180,523¥27,280(5,276)
1,315
(875)
47
22,491(825)¥21,666

Total
assets¥1,066,392
112,105
25,736
17,036
1,777
1,223,046(18,189)¥1,204,857

Thousands of U.S. dollars
2001
External Intersegment
sales
sales

Total
sales

OperatingOperatingexpenses income (loss)

Japan........................................ $6,652,244 $ 1,384,310 $ 8,036,554 $ 8,011,001
North America......................... 1,421,073
73,253
1,494,326
1,468,063
Europe .....................................
311,324
26,085
337,409344,810
Asia ..........................................
143,591
42,962
186,553
186,247
Other areas..............................
30,9201,332
32,252
31,534
Total......................................... 8,559,152
1,527,942 10,087,094 10,041,655
Eliminations and corporate ...
— (1,527,942) (1,527,942) (1,518,500)
Consolidated total .................. $8,559,152 $— $ 8,559,152 $ 8,523,155

Total
assets$25,553 $ 8,857,522
26,263
1,112,914(7,401)
290,694306
157,934718
14,60045,439 10,433,664(9,442)(365,286)$35,997 $10,068,378

As explained in Note 2(t), the accounting policy for retirement and severance benefits, has changed
in 2001. The change resulted in a decrease in operating income of ¥1,215 million ($9,806 thousand)for “Japan” for the year ended March 31, 2001, compared to what this would have been if the prioraccounting policy had been used.

(c) Corporate assets
Included in eliminations and corporate in (a) and (b) above under total assets are corporate assets of¥80,928 million ($653,172 thousand), ¥106,738 million and ¥74,912 million at March 31, 2001, 2000
and 1999, respectively, which are mainly comprised of cash and time deposits of the Company andproperty, plant, equipment and intangible assets of the Company’s Head Office.

(d) Overseas sales
Overseas sales consist of the total sales of the Company and its consolidated subsidiaries made outsideof Japan. Overseas sales information, as required to be disclosed in Japan, for the respective years is asfollows:
Millionsof yen%Millionsof yen%Overseassales% against
net sales

Overseassales

North America ................ ¥233,976
Europe.............................
62,815
Asia..................................
76,809Other areas .....................
58,759Total ................................ ¥432,359

22.1%
5.9%
7.2%
5.5%
40.7%

¥221,272
93,98475,05871,191¥461,505

2001

42

42

Millionsof yen

%
1999

2001

% against
net sales

Overseassales% against
net sales

Overseas
sales

19.2%
8.2%
6.5%
6.2%
40.1%

¥231,159
87,68370,84581,453¥471,140

19.2%
7.3%
5.9%
6.8%
39.2%

$1,888,426
506,982
619,927474,245$3,489,580

2000

Thousands of
U.S. dollars

Report of Independent Public Accountants

To the Shareholders and the Board of Directors of Kawasaki Heavy Industries, Ltd.:We have audited the accompanying consolidated balance sheets of Kawasaki Heavy Industries, Ltd. (a Japanese corporation) and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2001, expressed in Japanese yen.
Our audits were made in accordance with generally accepted auditing standards in Japan and, accordingly, included suchtests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial positionof Kawasaki Heavy Industries, Ltd. and subsidiaries as of March 31, 2001 and 2000, and the consolidated results of theiroperations and their cash flows for each of the three years in the period ended March 31, 2001 in conformity with accounting principles generally accepted in Japan consistently applied during the periods, except for the change, withwhich we concur, made as of April 1, 2000, in the method of accounting for the provision for losses on construction
contracts referred to in Note 2.(q).
As explained in Notes 2.(e), (m), (t) and 15, in the year ended March 31, 2001, Kawasaki Heavy Industries, Ltd. and subsidiaries prospectively adopted new Japanese accounting standards for foreign currency translation, financial instruments
and retirement and severance benefits.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated from Japanese yen on the basis set forth in Note 1.

Asahi & Co.
Kobe, Japan
June 28, 2001

Statement on Accounting Principles and Auditing Standards
This statement is to remind users that accounting principles and auditing standards and their application in practice mayvary among nations and therefore could affect, possibly materially, the reported financial position and results of operations. The accompanying financial statements are prepared based on accounting principles generally accepted in Japan,
and the auditing standards and their application in practice are those generally accepted in Japan. Accordingly, theaccompanying financial statements and the auditors’ report presented above are for users familiar with Japanese
accounting principles, auditing standards and their application in practice.

43

43

Supplementary Information on Non-Consolidated Results(Years ended March 31)

Ships(Billions of yen)

’97

’98

’99

’00

’01

Sales

100.6

154.5

124.9

88.0

76.0

Exports

49.0

59.4

60.2

52.4

45.9

Orders Received

56.3

120.9

86.5

60.6

115.0

Order Backlog

243.5

213.6

168.0

130.1

176.5

(Billions of yen)
160

(Billions of yen)
300

140

250

Major Orders

Major Components of Sales• 1 LNG carrier• 7 LPG carriers• 2 VLCCs(Very Large Crude-oil Carriers)• 6 Bulk carriers• VLCC• LPG carrier• Container ship
• Submarine

Major Orders

Major Components of Sales• 207 cars for the JR Group,
including 80 Shinkansen cars
• 20 cars for other domestic
railways• 360 cars for Taiwan
Bullet Train• 120 subway cars for New
York City• 262 cars for JR Group,
including 91 Shinkansen cars
• 140 cars for other domestic
railways• 42 subway cars for Singapore• 260 subway cars for New
York City

Major Orders

Major Components of Sales• T-4 intermediate jet trainers• CH-47J large transport helicopters• OH-1 light observation helicopters• Helicopter engines• Gas turbine engines for naval
vessels• Component parts for the
Boeing 767 and 777• Component parts for the
ERJ-170• Component parts for V2500,
RB211/Trent and PW4000
turbo-fan engines• Small- and medium-sized gas
turbine generators• T-4 intermediate jet trainers• CH-47J large transport helicopter• OH-1 light observation helicopters• Helicopter engines• Gas turbine engines fornaval vessels• Component parts for the
Boeing 767 and 777• Component parts for V2500,
RB211/Trent and PW4000
turbo-fan engines• Small- and medium-sized gas
turbine generators

120
100

200

80

150

60

100

40
50

20
0

’97

’98

’99

Sales

’00

0

’01

’97

’98

’99

Orders Received

Exports’00’01

Order Backlog

Rolling Stock(Billions of yen)

Sales

’97

’98

’99

’00

’01

68.0

57.1

57.2

54.2

70.1

Exports

1.3

6.7

15.9

7.0

18.3

Orders Received

62.0

77.0

85.1

72.5

133.8

Order Backlog

67.2

87.5

111.5

125.2

193.6

(Billions of yen)
250

(Billions of yen)
80
70

200

60
50

150

40
100

30
20

50

10
0

’97

’98

’99

Sales

’00

0

’01

’97

’98

’99

Orders Received

Exports’00’01

Order Backlog

Aerospace(Billions of yen)

Sales

’97

’98

’99

’00

’01

219.4

277.6

250.4

241.5

208.2

Exports

45.1

64.6

81.9

62.0

63.0

Orders Received

238.5

248.5

239.9

214.1

237.8

Order Backlog

385.8

358.2

342.8

304.0

343.9

(Billions of yen)
400

(Billions of yen)
300
250

300
200
200

150
100

100
50
0

’97
Sales

44

44

’98

’99

’00

Exports

’01

0

’97

’98

’99

Orders Received

’00

’01

Order Backlog

Industrial Equipment(Billions of yen)

Sales

’97

’98

’99

’00

’01

480.6

426.3

361.4

345.1

283.4

Exports

113.0

96.2

67.5

85.3

58.4

Orders Received

424.3

376.0

327.1

302.1

355.0

Order Backlog

576.6

527.2

486.4

439.9

513.6

(Billions of yen)
600

(Billions of yen)
600

500

500

400

400

300

300

200

200

100

100

0

’97

’98

’99

Sales

’00

0

’01

’97

’98

’99

Orders Received

Exports’00’01

Order Backlog

Major Orders

Major Components of Sales• Municipal refuse incineration
plants and modifications fordioxin reduction• Continuous annealing line
for tin plates from Turkey• Cement plant from Morocco• Fertilizer plant from China• Cogeneration combined cycle
power plant from Mexico• Heat recovery steam generator (HRSG) from theUnited States• Marine gas turbines anddiesel engines for domestic
and overseas customers• Bridges• LPG tanks• Refuse paper and plastic fuelprocessing facilities• Municipal refuse incineration
plants and modifications fordioxin reduction• Cogeneration power plant
for a domestic steel manufacturer• Ash handling equipment andcoal handling systems for adomestic power company• Marine gas turbines anddiesel engines for domestic
and overseas customers• Bridges• Container cranes• Shield machines

Consumer Products(Billions of yen)

Sales

’97

’98

’99

’00

’01

174.4

184.7

213.1

216.0

213.1

Exports

137.3

151.7

178.6

180.8

179.5

Orders Received

174.4

184.7

213.1

216.0

213.1

Order Backlog

0.0

0.0

0.0

0.0

0.0

(Billions of yen)
250
200

Sales of motorcycles and ATVs
(All-Terrain Vehicles) as well
as MULE utility vehicles werestrong in the United States.
In addition, sales of industrial
robots for use with IT-related
equipment increased, but as aresult of the decline in the valueof the euro, sales of motorcycles to Europe declined. Total
sales amounted to ¥213.1 billion, virtually the same as forthe previous year.

150
100
50
0

’97

’98

’99

Sales

’00

’01

Exports

Total(Billions of yen)

Sales

’97

’98

’99

’00

’01

1,043.0

1,100.2

1,007.0

944.8

850.8

Exports

345.7

378.6

404.1

387.5

365.1

Orders Received

955.5

1,007.1

951.7

865.3

1,054.7

Order Backlog

1,273.1

1,186.5

1,108.7

999.2

1,227.6(Billions of yen)
1,200(Billions of yen)
1,500

1,000

1,200

800

900

600
600

400

300

200
0

’97
Sales

’98

’99

’00

Exports

’01

0

’97

’98

’99

Orders Received

’00

’01

Order Backlog

45

45

D i r e c t o r s, C o r p o r a t e A u d i t o r s a n d E x e c u t i v e O f f i c e r s

DIRECTORS
President

Masamoto Tazaki*

Executive Vice Presidents

Yoshiro Inoue*
Overall Administration of Planning and Control

Tadashi Nishimura*
Overall Administration of Marketing and Sales*Representative Director

Executive Vice President YOSHIRO INOUE

46

46

President MASAMOTO TAZAKI

Executive Vice President TADASHI NISHIMURACORPORATE AUDITORSEXECUTIVE OFFICERSManaging Directors

Toshiaki Tatsuki

Toshio Atsuta

Toru Ohmae*

Tsunemitsu Nishio

Tadao Katoh

Mitsugi Maeda

Yousuke Fujii

President, Consumer Products& Machinery Company

Takashi Sugoh*
President, Aerospace Company

Hironobu Hashiguchi

Shiro Ikeda
Masakazu Sato

General Manager,
Corporate Technology Division

Isao Shindo

Takehiko Saeki*

Fumitake Kadowaki

President, Rolling Stock,
Construction Machinery &Crushing Plant Company

Mikihiko Nakayama

Takuya Maeda*
President, Plant & Infrastructure
Engineering Company

Shuichi Tadokoro*

Kimio ItohYoshimitsu Kurosaki
Shoji Aoki

President, Shipbuilding Company

Akiji Nakamura
Kengo Yamashita*
President, Gas Turbines& Machinery Company

Masatoshi Terasaki
Takashi Yoshino

Shinichi Morita
Senior Manager,
Corporate Planning Department

Akira Matsuzaki
Tadaharu Ohashi
Chikashi Motoyama
Nobuichi Kozai
Shigeru Hamada
Shuji Mihara(As of July 1, 2001)

47

47

Major Consolidated Subsidiaries and Affiliates

Name

Location

Paid-in Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)

Principal Businesses

Manufacture and repair of parts andcomponents for rolling stock; designof rolling stock
Construction of arcades; manufacture andinspection of high-pressure containers;
maintenance and repair of rolling stock
Engineering, manufacture, sale andafter-sales service of rolling stock in
the United States
Manufacture and sale of ships

TRANSPORTATION EQUIPMENT
Kawasaki Rolling Stock Engineering Co., Ltd.

Japan

140

100.00Kawasaki Industrial Co., Ltd.

Japan

125

98.71

Kawasaki Rail Car, Inc.

U.S.A.

US$60,600*

100.00(owned by KMM)

Nangtong Cosco KHI Ship Engineering Co., Ltd.†AEROSPACE
Kawasaki Helicopter System Ltd.

US$80,000*

50.00

Japan

200

100.00

Advanced Technology Institute ofCommuter-Helicopter †Japan Aircraft Manufacturing Co., Ltd.†INDUSTRIAL EQUIPMENT
Kawasaki Safety Service Industries, Ltd.

Japan

8,697

19.43

Japan

6,048

25.70

Japan

1,708

72.02

Kawasaki Thermal Engineering Co., Ltd.

Japan

1,460

83.01

Kawasaki Hydromechanics Corporation

Japan

272

99.71

Kawasaki Construction Co., Ltd.
Kawasaki Machine Systems, Ltd.

Japan
Japan

350
343

100.00100.00Nichijo Manufacturing Co., Ltd.

Japan

120

50.04

Kawasaki Construction Machinery Corp.
of America
Kawasaki Precision Machinery (UK) Limited

U.S.A.

US$8,000*

U.K.

£5,000*100.00Wuhan Kawasaki Marine Machinery Co., Ltd.

China

1,100

55.00

Kawasaki Setsubi Kogyo Co., Ltd.†

Japan

1,581

33.62

Japan Gas Turbine K.K.†

Japan

1,500

40.00

Shanghai Cosco Kawasaki Heavy Industries
Steel Structure Co., Ltd.†

China

US$14,900*

40.00

48

48

China

100.00(owned by KMC)

Transportation of passengers or cargo byhelicopter; maintenance and repair ofhelicopters and flight training services;
research, design and construction ofheliports
Research and development of basic
technology for commuter helicopters
Manufacture and sale of aircraft parts
Manufacture, sale and installation of
hospital respiration, fire-extinguishingand medical equipment
Manufacture, sale and installation ofgeneral purpose boilers and airconditioning equipment
Manufacture, sale and installation of
hydraulic presses and other hydraulicequipment
Installation of steel structures
Sale and repair of industrial machineryand equipment
Manufacture and sale of snow removal
equipment
Manufacture and sale of construction
machinery in the United States
Manufacture and sale of hydraulicproducts
Manufacture, sale and after-sales serviceof Kawasaki-brand azimuth thrusters, sidethrusters and other machinery
Design and installation of air conditioning,heating/cooling, plumbing and hygiene,
lighting and power equipment and facilities
Sale, assembly, site engineering support,
repair, testing, pilot operation, installation
and arrangement of power generationequipment, as well as related servicebased businesses
Manufacture and sale of steel structures

Name

Location

Paid-in Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)

Principal Businesses

CONSUMER PRODUCTS
Kawasaki Motors Corporation Japan

Japan

560

100.00Distribution of motorcycles and Jet Ski®
watercraft in Japan

Kawasaki Metal Industries, Ltd.

Japan

350

100.00

Manufacture, processing and assembly of various steel products

Kawasaki Motors Manufacturing Corp., U.S.A.

U.S.A.

US$70,000*

100.00

Manufacture of motorcycles, ATVs (all-terrain
vehicles), Jet Ski® watercraft, small gasoline
engines and industrial robots

Kawasaki Motors Corp., U.S.A.

U.S.A.

US$65,900*

100.00Distribution of motorcycles, ATVs, Jet Ski®
watercraft and small gasoline engines in
the United States

Kawasaki Motors Finance Corporation

U.S.A.

US$10,000*

100.00(owned by KMC)

KM Receivables Corporation
Canadian Kawasaki Motors Inc.

U.S.A.
Canada

US$100
C$2,000*

Inventory financing for dealers of Kawasaki
Motors Corp., U.S.A.

100.00Management of account receivables of(owned by KMFC)

Kawasaki Motors Finance Corporation

100.00Distribution of motorcycles, ATVs and Jet Ski®
watercraft in Canada

Kawasaki Motors (UK) Ltd.

U.K.

£2,000*100.00(owned by KMEU)

Kawasaki Motoren GmbHGermany

DM12,300*

100.00(owned by KMEU)

Kawasaki Motors Europe N.V.

The Netherlands

euro100.0014,093*
Kawasaki Motors N.V.

The Netherlands

fl.3,000*FranceFr8,180*

100.00100.00(owned by KMEU)

Kawasaki Motors Italy S.p.A.

Italy

L4,000**100.00(owned by KMEU)

Kawasaki Motors Pty. Ltd.

Australia

A$2,000*

Distribution of motorcycles, ATVs and Jet Ski®
watercraft in Germany
Sole distribution of motorcycles, ATVs, Jet Ski®
watercraft and small gasoline engines in Europe(owned by KMEU)

Kawasaki Motors France S.A.

Distribution of motorcycles, ATVs and Jet Ski®
watercraft in the United Kingdom

100.00Distribution of spare parts for motorcycles,
Jet Ski® watercraft and small gasoline engines
Distribution of motorcycles, ATVs and Jet Ski®
watercraft in France
Distribution of of motorcycles, ATVs and
Jet Ski® watercraft in Italy
Distribution of motorcycles, ATVs and Jet Ski®
watercraft in Australia

P.T. Kawasaki Motor Indonesia

Indonesia

US$10,000*

51.00

Manufacture and distribution of motorcycles
in Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

P101,430*

50.001

Manufacture and distribution of motorcycles
in the Philippines

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

B1,900,000*

81.95

Manufacture and distribution of motorcycles
in Thailand

Kawasaki Robotics (U.S.A.), Inc.

U.S.A.

US$1,000*

100.00(owned by KMC)

Sale and after-sales service of industrial
robots in the United States

49

49

Name
Kawasaki Robotics (UK) Ltd.

Location
U.K.

Paid-in Capital

Equity(Millions of yen,unless otherwise noted)(% ownership by KHI,
unless otherwise noted)£917*

100.00(owned by KMEU)

Kawasaki Machine Systems Korea, Ltd.

Korea

W1,500**100.00Principal Businesses
Sale and after-sales service of industrial robots
in the U.K. and Ireland
Sale and after-sales service of industrial robots,robot systems and other industrial machinery

Hainan Sundiro-Kawasaki Engine Co., Ltd.†

China

US$29,900*

33.00

Manufacture and sale of motorcycle engines

Kawaju Shoji Co., Ltd.

Japan

Kawaju Real Estate Co., Ltd.

Japan

600

70.00

Trading

320

100.00OTHER
Administration of Company welfare facilities;
real estate sales, leasing and construction
Kawasaki Kosan Co., Ltd.

Japan

300

100.00Insurance representation, real estate leasing,administration and maintenance, leasing andprovision of loans

Kawasaki Foods Co., Ltd.

Japan

160

100.00Food supply to Company facilities, operation ofdining facilities

Kawaju Tomakomai Kanko Kaihatsu Co., Ltd.

Japan

300

100.00Management of a golf course

Uji Kanko Co., Ltd.

Japan

240

100.00Management of a golf course

Kawasaki do Brasil Industria e Comércio Ltda.

Brazil

R1,136*100.00

Sale of KHI Products in Brazil and the rest ofCentral and South America; provision of orderintermediation and various engineering services

Kawasaki Heavy Industries (U.S.A.), Inc.

U.S.A

US$600*100.00

Product sales, mediation of orders and provision of various engineering support services inNorth America

Kawasaki Heavy Industries (UK) Ltd.

U.K.

£500*

100.00

Sale of KHI products in various countries in
Europe (principally the U.K.), the Middle East
and Africa; provision of order intermediation
services(As of March 31, 2001)* Monetary unit in thousands** Monetary unit in millions†
Affiliate accounted for using equity method
KMM: Kawasaki Motors Manufacturing Corp., U.S.A.
KMC: Kawasaki Motors Corp., U.S.A.
KMFC: Kawasaki Motors Finance Corporation
KMEU: Kawasaki Motors Europe N.V.

50

50

Network(As of August 2001)

Kobe Head Office

Sydney Office

Canadian Kawasaki Motors Inc.

Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe 650-8680, Japan
Phone: 81-78-371-9530
Fax: 81-78-371-9568

c/o Kawasaki Motors Pty. Ltd.
Unit Q, 10-16 South Street,
Rydalmere, N.S.W. 2116, Australia
Phone: 61-2-9684-2585
Fax: 61-2-9684-4580

25 Lesmill Road, Don Mills, Toronto,
Ontario M3B 2T3, Canada
Phone: 1-416-445-7775
Fax: 1-416-445-0391

Tokyo Head Office

OVERSEAS SUBSIDIARIES

Avenida Paulista, 542-6 Andar,
Bela Vista, 01310-000, São Paulo, S.P., Brazil
Phone: 55-11-289-2388
Fax: 55-11-289-2788

World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, Japan
Phone: 81-3-3435-2111
Fax: 81-3-3436-3037

OVERSEAS OFFICES

Kawasaki Heavy Industries (U.S.A.), Inc.
599 Lexington Avenue, Suite 3901,
New York, NY 10022, U.S.A.
Phone: 1-212-759-4950
Fax: 1-212-759-6421

Houston Branch
Seoul Office2302 Changgyo Bldg.,
1 Changgyo-Dong, Chung-Gu,
Seoul, Korea
Phone: 82-2-778-6637
Fax: 82-2-778-6638

Beijing Office
Room No. 2602, China World Tower,
China World Trade Center,
No. 1, Jian Guo Men Wai Avenue,
Beijing 100004,
People’s Republic of China
Phone: 86-10-6505-1350
Fax: 86-10-6505-1351

Shanghai Office
13th Floor, HSBC Tower,
101, Yin Cheng East Road,
Pudong New Area,
Shanghai, 200120,
People’s Republic of China
Phone: 86-21-6841-3377
Fax: 86-21-6841-2266

Taipei Office
15th Floor, Fu-key Bldg.,
99 Jen-Ai Road, Section 2,
Taipei, Taiwan
Phone: 886-2-2322-1752
Fax: 886-2-2322-5009

Bangkok Office
17th Floor, Ramaland Building,952 Rama IV Road, Bangrak,
Bangkok 10500, Thailand
Phone: 66-2-632-9511
Fax: 66-2-632-9515

Manila Office
20th Floor, Metrobank Plaza Bldg.,
Gil J. Puyat Avenue, Makati,
Metro Manila,
The Philippines
Phone: 63-2-818-2786
Fax: 63-2-818-2787

Kuala Lumpur Office
Letter Box No. 162,
6th Floor, UBN Tower,
10 Jalan P. Ramlee,
50250 Kuala Lumpur, Malaysia
Phone: 60-3-2070-5141
Fax: 60-3-2070-5148

Jakarta Office
9th Floor, Skyline Bldg.,
Jl. M.H. Thamrin 9,
Jakarta 10340, Indonesia
Phone: 62-21-314-0737
Fax: 62-21-314-1049

333 Clay Street, Suite 4480,
Houston, TX 77002-4103, U.S.A.
Phone: 1-713-654-8981
Fax: 1-713-654-8187

Kawasaki Rail Car, Inc.
29 Wells Avenue, Building #4,
Yonkers, NY 10701, U.S.A.
Phone: 1-914-376-4700
Fax: 1-914-376-4779

Kawasaki Robotics (U.S.A.), Inc.
28059 Center Oaks Court,
Wixom, MI 48393, U.S.A.
Phone: 1-248-305-7610
Fax: 1-248-305-7618

Kawasaki Motors Corp., U.S.A.
9950 Jeronimo Road,
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600

Grand Rapids Office5080 36th Street S.E.,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-954-3031

Green River Insurance Company
7 Burlington Square, #600,
Burlington, VT 05402, U.S.A.
Phone: 1-802-860-0444
Fax: 1-802-860-0440

Kawasaki Motors Finance Corporation
9950 Jeronimo Road,
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600

KM Receivables Corporation
9950 Jeronimo Road, Suite 203,
Irvine, CA 92618-2084, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600

Kawasaki Motors Manufacturing Corp., U.S.A.
6600 Northwest 27th Street,
Lincoln, NE 68524, U.S.A.
Phone: 1-402-476-6600
Fax: 1-402-476-6672

Maryville Plant
28147 Business Highway 71,
Maryville, MO 64468, U.S.A.
Phone: 1-660-582-5829
Fax: 1-660-582-5826

Kawasaki Construction Machinery Corp. of
America
2140 Barrett Park Drive, Suite 101,
Kennesaw, GA 30144, U.S.A.
Phone: 1-770-499-7000
Fax: 1-770-421-6842

Kawasaki do Brasil Industria e Comércio Ltda.

Kawasaki Heavy Industries (UK) Ltd.
4th Floor, 3 St. Helen’s Place,
London EC3A 6AB, U.K.
Phone: 44-20-7588-5222
Fax: 44-20-7588-5333

Kawasaki Precision Machinery (UK) Limited
Ernesettle Lane, Ernesettle, Plymouth,
Devon PL5 2SA, U.K.
Phone: 44-1752-364394
Fax: 44-1752-364816

Kawasaki Robotics (UK) Ltd.
Unit 6&7, Easter Court,
Europa Boulevard, Westbrock,
Warrington WA5 5ZB, U.K.
Phone: 44-1925-713000
Fax: 44-1925-713001

Kawasaki Motors (UK) Ltd.
1 Dukes Meadow,
Millboard Road, Bourne End,
Buckinghamshire SL8 5XF, U.K.
Phone: 44-1628-856600
Fax: 44-1628-856799

Kawasaki Heavy Industries GmbH
5th Floor, Wehrhahn Center,
Oststrasse 10, 40211 Düsseldorf, Germany
Phone: 49-211-1792340
Fax: 49-211-161844

Kawasaki Gas Turbine Europe GmbH
Max-Planck-Strasse 21A,
61381 Friedrichsdorf, Germany
Phone: 49-6172-7363-0
Fax: 49-6172-736355

Kawasaki Robotics GmbH
29 Sperberweg 41468 Neuss, Germany
Phone: 49-2131-34260
Fax: 49-2131-930973

Kawasaki Motoren GmbH
Max-Planck-Strasse 26,
61381 Friedrichsdorf, Germany
Phone: 49-6172-7340
Fax: 49-6172-734160

Kawasaki Heavy Industries (Europe) B.V.
7th Floor, Riverstaete,
Amsteldijk 166,
1079 LH Amsterdam,
The Netherlands
Phone: 31-20-6446869
Fax: 31-20-6425725

KHI Europe Finance B.V.
Hoekenrode 6,1102 BR Amsterdam,
The Netherlands
Phone: 31-20-6293800
Fax: 31-20-6294661

Kawasaki Motors Europe N.V.
Diamantlaan 14,2132 WV Hoofddorp,
The Netherlands
Phone: 31-23-5670500
Fax: 31-23-5670583

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DOMESTIC WORKS

Kawasaki Motors France S.A.

Kawasaki Motors Pty. Ltd.

Rue Marie Curie Z.A. de Coignieres,
Maurepas 78312, France
Phone: 33-1-30-69-0000
Fax: 33-1-30-69-5001

Unit Q, 10-16 South Street,
Rydalmere, N.S.W. 2116, Australia
Phone: 61-2-9684-2585
Fax: 61-2-9684-4580

Kawasaki Motors Italy S.p.A.

OVERSEAS JOINT VENTURES

118, Futatsuzuka, Noda,
Chiba 278-8585, Japan
Phone: 81-471-24-1121
Fax: 81-471-24-7645

Tiesse Robot S.p.A.

Yachiyo WorksVia Isorella 24,
25010 Visano (Brescia), Italy
Phone: 39-30-9958621
Fax: 39-30-9958677

1780 Kamikoya, Yachiyo,
Chiba 276-0022, Japan
Phone: 81-474-83-1111
Fax: 81-474-82-3227

Robots International Limited

Gifu Works

21, Archbishop Street,
Valetta, Malta
Phone: 356-320897
Fax: 356-346041

1, Kawasaki-cho, Kakamigahara,
Gifu 504-8710, Japan
Phone: 81-583-82-5712
Fax: 81-583-82-2981

Nantong Cosco KHI Ship Engineering Co., Ltd.

Nagoya Works 1

117, Linjiang Road, Nantong City,
Jiangsu Province, People’s Republic of China
Phone: 86-513-350-0666
Fax: 86-513-351-4349

3-11, Oaza Kusunoki, Yatomi-cho,Ama-gun, Aichi 498-0066, Japan
Phone: 81-567-68-5117
Fax: 81-567-68-5090

Shanghai Cosco Kawasaki Heavy Industries
Steel Structure Co., Ltd.

Nagoya Works 2

Via Anna Kuliscioff,
35-20152 Milano, Italy
Phone: 39-02-41-2821
Fax: 39-02-48-37-0616

Kawasaki Machine Systems Korea, Ltd.
3rd Floor (307),
Industrial Complex Support Bldg.,
637, Kojan-Dong, Namdong-Gu,
Inchon, 405-310, Korea
Phone: 82-32-821-6941~5
Fax: 82-32-821-6947

KHI (Dalian) Computer Technology Co., Ltd.
Building Foreign Specialist of
the Dalian Maritime University,
Ling Shui Qiao, Dalian,
People’s Republic of China
Phone: 86-411-467-2507
Fax: 86-411-467-2459

Wuhan Kawasaki Marine Machinery Co., Ltd.
No. 43 Wudong Street,
Qingshan, Wuhan,People’s Republic of China
Phone: 86-27-86410132
Fax: 86-27-86410136

5198 Hutai Road, Baoshan District,
Shanghai, People’s Republic of China
Phone: 86-21-5602-8888
Fax: 86-21-5602-5198

Hainan Sundiro-Kawasaki Engine Co., Ltd.

Room 1619, Jardine House,
Connaught Road, Central, Hong Kong
Phone: 852-2522-3560
Fax: 852-2845-2905

Lingui Dadao No. 3,
Guilinyang Economic Development Area,
Qiongshan City, Hainan Province,
People’s Republic of China
Phone: 86-898-5711586
Fax: 86-898-6715518

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Glory Kawasaki Motors Co., Ltd.

Kawasaki Heavy Industries (H.K.) Ltd.

119/18 Moo 4, Pluak Daeng-Wangtapin,
Sapansi Road, Tambon Pluak Daeng,
Amphur Pluak Daeng, Rayong 21140, Thailand
Phone: 66-38-955050~58
Fax: 66-38-955067

KHI Design & Technical Service Inc.

221/1 Rama IX Road, Huay Kwang,
Bangkok 10320, Thailand
Phone: 66-2-643-0813
Fax: 66-2-247-7924

KHITKAN Co., Ltd.

6F The Island Plaza, 105 L.P. Leviste St.,
Salcedo Village, Makati, Metro Manila,
The Philippines
Phone: 63-2-810-9213
Fax: 63-2-816-1222

G.K. Land Industrial Park, Moo 4,
Tambon Pluak Daeng,
Amphur Pluak Daeng, Rayong Province,
ThailandPhone: 66-38-955062~66
Fax: 66-38-955067

Kawasaki Motors (Phils.) Corporation

Kawasaki Motors Holding (Malaysia) Sdn. Bhd.

Km. 24 East Service Road,
Bo. Cupang, Alabang, Muntinlupa,
Metro Manila, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730

Kawasaki Heavy Industries (Singapore) Pte. Ltd.
6 Battery Road, #18-04,
Singapore 049909
Phone: 65-2255133~4
Fax: 65-2249029

P.T. Kawasaki Motor Indonesia
JI. Perintis Kemerdekaan, Kelapa Gading,
Jakarta Utara 14250, Indonesia
Phone: 62-21-452-3322
Fax: 62-21-452-3566

Noda Works

7-4, Kanaoka, Tobishima-mura,Ama-gun, Aichi 490-1445, Japan
Phone: 81-5675-5-0800
Fax: 81-5675-5-0803

Kobe Works
1-1, Higashikawasaki-cho 3-chome,
Chuo-ku, Kobe 650-8670, Japan
Phone: 81-78-682-5001
Fax: 81-78-682-5500

Hyogo Works
1-18, Wadayama-dori 2-chome,
Hyogo-ku, Kobe 652-0884, Japan
Phone: 81-78-682-3111
Fax: 81-78-671-5784

Nishi-Kobe Works
234, Matsumoto, Hazetani-cho,Nishi-ku, Kobe 651-2239, Japan
Phone: 81-78-991-1133
Fax: 81-78-991-3186

Seishin Works
8-1, Takatsukadai 2-chome,
Nishi-ku, Kobe 651-2271, Japan
Phone: 81-78-992-1911
Fax: 81-78-992-1910

Lot 6&8, Jalan Segambutpusat,
Segambut, 51200,
Kuala Lumpur, Malaysia
Phone: 60-3-6251-2591
Fax: 60-3-6251-2688

Akashi Works

Kawasaki Motors Service Co., Ltd.

Banshu Works

129 Rama IX Road, Kwaeng Huaykwang,
Khet Huaykwang, Bangkok 10320, Thailand
Phone: 66-2-246-1510

KMPC Realty Corporation
Km. 24 East Service Road,
Bo. Cupang, Alabang, Muntinlupa,
Metro Manila, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730

1-1, Kawasaki-cho, Akashi,
Hyogo 673-8666, Japan
Phone: 81-78-921-1301
Fax: 81-78-913-1366
2680, Oka, Inami-cho,Kako-gun, Hyogo 675-1113, Japan
Phone: 81-794-95-1211
Fax: 81-794-95-1226

Harima Works
8, Niijima, Harima-cho,Kako-gun, Hyogo 675-0155, Japan
Phone: 81-794-35-2131
Fax: 81-794-35-2132

Sakaide Works
1, Kawasaki-cho, Sakaide,
Kagawa 762-8507, Japan
Phone: 81-877-46-1473
Fax: 81-877-45-0556

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Kawasaki Corporate Data
(As of March 31, 2001)

Kawasaki Heavy Industries, Ltd.
Head Office:
Kobe Crystal Tower, 1-3,
Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe 650-8680, JapanFounded: 1878
Incorporated: 1896
Paid-in Capital: ¥81,426,590,792
Number of Shares Outstanding: 1,390,595,964 shares
Number of Shareholders: 126,423
Number of Employees: 29,162
Stock Exchange Listings:
Tokyo, Osaka, Nagoya, Fukuoka, Sapporo
Newspapers in Which Public Notices Are Made:
The Nihon Keizai Shimbun
The Kobe Shimbun
Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, Japan
Handling Office
The Chuo Mitsui Trust and Banking Company, Limited
Osaka Branch Office,2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan
Independent Auditors:
Asahi & Co.
Kobe Crystal Tower, 1-3,
Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe 650-8680, JapanADR Facility:
KHI has a sponsored American Depository Receipt (ADR) facility.
ADRs are traded in the over-the-counter (OTC) market in the
United States under cusip number 486 359 20 1 with each ADR
representing four ordinary shares.
ADR Depository:
The Bank of New York
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-212-815-2042
U.S. Toll Free: 888-269-2377(888-BNY-ADRS)
http://www.bankofny.com/adr
KHI Website at: http://www.khi.co.jp

This annual report is printed on recycled paper.

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KAWASAKI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2001

Printed in Japan
ISSN 0287-1793