Annual Report 2009
Year ended March 31, 2009

Founded in 1878, Kawasaki Heavy Industries, Ltd. (KHI), is a leading global comprehensive
manufacturer of transportation equipment and industrial goods. With a broad technologicalbase that encompasses mastery of the land, sea, and air, the KHI Group manufactures ships,
rolling stock, aircraft and jet engines, gas turbine power generators, environmental andindustrial plants, and a wide range of manufacturing equipment and systems. KHI also
produces such world-famous consumer products as Kawasaki-brand motorcycles andpersonal watercraft.

Contents
Consolidated Financial Highlights
To Our Shareholders
An Interview with Satoshi Hasegawa, President
Review of Operations:
Shipbuilding
Rolling Stock & Construction Machinery
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Six-Year Summary
Management’s Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditors’ Report
Directors, Corporate Auditors, and Executive Officers
Major Consolidated Subsidiaries and Affiliates
Network
Corporate Data

1
2
6
10
12
14
16
18
20
22
24
25
32
34
35
36
38
55
56
58
61
63

Forward-Looking Statements
Forecasts regarding the Company’s plans and strategies containedin this publication were prepared based on information available
at the time the forecasts were prepared. The Company’s actual
performance may differ from the forecasted figures due to a range
of factors.

On the Cover
The photograph on the cover shows KHI’s next-generation lightrail vehicle (LRV), dubbed SWIMO®, which is powered by KHIdeveloped onboard nickel-metal hydride Gigacell® batteries.
SWIMO® is capable of running for more than 10 kilometers on
battery power without a supply of electricity from overheadlines. In addition, the SWIMO® has features that are friendly tohuman beings and the natural environment. These include a
spacious, barrier-free configuration with a low floor and substantial energy conservation through the use of a regenerativeelectric power system that accumulates the power generated
when the LRV’s brakes are used. In April 2009, Gigacell® and
SWIMO® were recognized as innovative industrial technologies
and received the Judges’ Committee Special Award of theJapan Industrial Technology Grand Prize, sponsored by the
Nikkan Kogyo Shimbun Newspaper.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
2009

2008

2007

2009

¥1,501,097¥1,438,619$13,623,010

For the year:
Net sales ......................................................................................... ¥1,338,597
Operating income ...........................................................................

28,71376,91069,142292,215

Net income .....................................................................................

11,72835,141

29,772

119,357

Net cash provided by (used for) operating activities..........................

(41,257)

75,76645,859(419,876)

Capital expenditures........................................................................

82,45050,53839,269839,100

Earnings per share—basic................................................................

¥7.0

¥21.1

¥18.9

$0.07

Earnings per share—diluted.............................................................

6.9

20.6

17.2

0.07

Cash dividends ................................................................................

3.0

5.0

5.0

0.03

Total assets ..................................................................................... ¥1,399,771¥1,378,770¥1,357,980$14,245,583

295,246

319,038

295,378

3,004,743

Orders received during the fiscal year .............................................. ¥1,540,590¥1,610,757¥1,592,688$15,678,710

Order backlog at fiscal year-end ...................................................... 1,699,163

1,533,663

1,465,155

17,292,520

Per share (in yen and U.S. dollars):

At year-end:
Total net assets ...............................................................................
Orders received and outstanding:

300

800

20

250

319.0

243.1

30

206.2

1,200

295.4

350

35.1

40

29.8

1,241.6

1,600

1,501.1(Billions of yen)

1,338.6

Total Net Assets(Billions of yen)
1,438.6

Net Income(Billions of yen)

1,322.5

Net Sales

295.2

Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥98.26 to US$1, the approximate
rate of exchange at March 31, 2009.

11.7

11.5

16.5

200

100

10

400

150

50
0

0

05 06 07 08 09

0

05 06 07 08 09

05 06 07 08 09

1

To Our Shareholders

Our Mission:

Creating New Value for a Brighter
Future and a Better Environment
Review of Fiscal 2009

earnings to strengthen and expand the KHI Group’s
management base in preparation for our future growth.

During fiscal 2009, ended March 31, 2009, the yen appre-

Based on this policy, and after an overall appraisal of per-ciated substantially against the U.S. dollar and the euro

formance and other factors, we proposed and received

as well as other currencies in the third quarter, and theapproval from shareholders to pay an annual cash dividend

Japanese economy moved into a sharp downturn as a resultof ¥3.0 per share for fiscal 2009.

of a range of factors, such as weakening in personal consumption, declines in private capital investments, a slow-

Management Policies and Objectives

down in exports, and deterioration in the employment
situation. Thereafter, although there were signs of a bot-

The Kawasaki Group Mission Statement begins with thetoming out over the end of fiscal 2009, economic condi-

statement:

tions still remain lackluster. In the world economy also,

Kawasaki, working as one for the good of the planet

trends toward deceleration and recession became increas-(Enriching lifestyles and helping safeguard the environment:

ingly apparent, even in the rapidly developing economies.

Global Kawasaki)—Amid these economic conditions, orders won by the
Kawasaki Heavy Industries (KHI) Group on a consolidated
basis amounted to ¥1,540.6 billion, ¥70.2 billion, or 4.4%
lower than in the previous fiscal year. This was because
orders in the Shipbuilding and Consumer Products &• We are the Kawasaki Group, a global technology leader withdiverse integrated strengths.
• We create new value—for a better environment and a brighter
future for generations to come.

Machinery segments decreased, while orders in the Gas
Turbines & Machinery and Rolling Stock & Construction

Based on this Mission Statement, our fundamental

Machinery segments increased. Consolidated net sales

management policies are to increase customer satisfaction

declined to ¥1,338.6 billion, which was ¥162.5 billion,

through offering superior products and services that are dif-or 10.8% lower, than for the previous fiscal year, due

ferentiated by technology and the Kawasaki brand, increase

especially to declines in sales in the Consumer Products

the corporate value of the KHI Group, and meet the expec-& Machinery segment.

tations of our shareholders as well as customers, employ-

Profit was adversely affected, especially in the second

ees, and the community.

half of the fiscal year, by the appreciation of the yen andthe drop in sales, principally of mass-produced products. As

Target Management Indicators

a consequence, operating income decreased ¥48.2 billion,
or 62.7%, to ¥28.7 billion, and net income was down
¥23.4 billion, or 66.6%, to ¥11.7 billion.
Our basic dividend policy is to continue to pay stable

2

With the aim of satisfying the expectations of investors
for profitability, the principal management target indicator
we have adopted is before tax ROIC, which is a measure of

cash dividends that are appropriate to our performance

capital efficiency and is defined as earnings before interest

while giving careful attention to increasing retained

and taxes (EBIT) divided by invested capital. As we work toKawasaki Heavy Industries, Ltd. Annual Report 2009

Tadaharu Ohashi

Satoshi Hasegawa

ChairmanPresident

3maximize ROIC, we are aiming to expand profits and, at thea transition to a new stage that will differ from the frame-

same time, to strengthen our financial position. Moreover,works that existed when the United States was the focal

under our Medium-Term Business Plan “Global K,” we arepoint of the world economy. The fiscal policy initiatives ofstriving to strengthen profitability and have added the ratio

countries around the world, such as those that involveof recurring profit* to net sales as another key management

bringing forward infrastructure investments in the rapidly

indicator.

developing economies, including China, are expected to* Recurring profit is used in accounting standards generally
accepted in Japan. It is the sum of operating income, net
interest income (expenses), dividend income, and othernon-operating and recurring income items.

promote economic growth. In the developed countries,
however, although such policies will have the positive effectof providing a one-time stimulus for demand, we believe
recovery in the real economies of those countries will
require additional time. In our businesses also, we must be

Medium-Term Management Strategy

aware that in the developed countries, recovery in the fields
of consumer products, hydraulic machinery, and industrial

The KHI Group is currently implementing its Medium-robots and other mass-produced items will be delayed.

Term Business Plan entitled “Global K,” which began in

Therefore, we will have to review and revise our business

September 2006, and will continue through the end ofplans not only for mass-produced items but also our overall

fiscal 2011. Since the beginning of the plan, we haveplans for the Group.

aimed to make the leap to a highly profitable global enter-

So, in view of these considerations, during the first half

prise focusing on land, sea, and air transportation systemsof the current fiscal year, we will be monitoring carefully

and the energy and environmental engineering fields. At

the economic environment. In the second half, if future

present, we are unexpectedly facing difficult operating con-trends in the real economy become somewhat clearer, weditions as a result of the worst economic crisis in a century.

will begin to review our Medium-Term Business Plan, and,However, even during these times, we have been realizing

in April 2010, we will announce a revised medium-term

our corporate development, and in each of our businessbusiness plan that will start from fiscal 2011. In conducting

segments, we have been steadily implementing various

this review of the existing plan, we will maintain the corpo-

measures for future growth based on a long-term perspec-

rate vision of the Global K plan, but will review the compet-

tive under our Medium-Term Business Plan.

itive position and growth potential of our wide range ofCurrently, nations around the world are adopting fiscal

businesses and products in the light of the current market

policies of unprecedented magnitude to stimulate their realenvironment. We will then revise our road maps for reach-economies. Among these, the energy and environmental

ing our objectives in these businesses and product areas.

fields, such measures as the “Green New Deal” are rapidly
attracting attention around the world. At KHI, we have

Operating Policy for Fiscal 2010

focused on the energy and environmental fields since thetime we prepared our Global K plan and implemented

In fiscal 2010, ending in March 2010, we are assuming

measures to nurture businesses related to these fields. Thisthat we will have to conduct our business activities underis because we strongly believed that we would be able toeven severer operating conditions. We have, therefore,

expand significantly the relevant businesses by making use

positioned fiscal 2010 as a year for taking emergencyof our wide range of technological assets, and we havemeasures and will implement the following policies aimed

already accumulated a track record of accomplishments inat thoroughly and aggressively consolidating our businessthe rapidly developing economies through the delivery ofand financial positions in all aspects of our operations.

industrial and other plants, rolling stock, and other prod-• Since business risk will rise significantly, we will implement

ucts. We are convinced that the energy and environment

thoroughgoing risk management measures throughout

fields will continue to grow throughout the world.

the Group. In taking orders and in sales activities, we will

However, on the other hand, as a result of the economiccrisis, it appears that the world economy might be making

4

fully analyze and consider profitability and carry out
thorough cost control.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

• We will move ahead with measures to strengthen our

activities, including the distribution of various types offinancial position. These will include increasing the effi-

guidebooks and the creation of autonomous inspection

ciency of cash through recovering receivables as quickly

committees within each of our organizational units.

as possible, reviewing investments and other measures,

In addition, based on our Group mission, as set forth intaking initiatives to improve cash flow, and working to

the Kawasaki Mission Statement, we will strive to create

restrain the rise in interest-bearing debt, which turned for

management systems that meet the highest standards forincrease.

efficiency and compliance as we work to maintain and• In businesses where demand is trending downward, weenhance our internal control systems.

will assess risks more carefully and screen order bookings

During fiscal 2009, in view of the implementation ofand investment proposals more selectively. At the sameinternal control reporting systems based on the Financial

time, we will give priority to lowering our breakeven

Instruments & Exchange Law in Japan, we established apoint, improving cash flow, and streamlining our balance

specialist unit that is responsible for implementing neces-

sheets. In particular, in businesses where we engage insary measures for ensuring the appropriateness of financial

mass production, including consumer products, we willreporting.

implement drastic measures in the overall management ofGoing forward, we will continue to take thoroughgoingthese businesses. These will include shrinking the scale oforganizational initiatives to promote compliance andoperations to a level appropriate to the current market

enhance internal controls. Along with these initiatives, we

size, implementing thorough cost-cutting initiatives, andwill work to create a corporate culture that places highest

taking other measures to generate profit with a smallerpriority at all times on information disclosure and its trans-

scale of operations.

parency.
The KHI Group will continue to endeavor to increase its

On the other hand, however, even in this challenging

corporate value by strengthening profitability throughout

operating environment, we will continue to make strategic

its business operations and emphasizing maintenance ofinvestments as follows.

high standards in compliance and internal controls, with

• R&D, human resource development, and capital equip-

the aim of building further trust in the Kawasaki brand.

ment investment in growth businesses fields, such as

We of the KHI Group look forward to the continuingenergy and the environment, and the future technologicalsupport and cooperation of our shareholders.

base of the KHI Group• Continued investments of human and other resources in
the key markets

Strengthening Systems for Complianceand Internal Control

June 2009

To conduct successfully the business activities previously
mentioned, we must emphasize that compliance with applicable laws and regulations will be a major precondition.
We of the KHI Group declare that “We will absolutely not

Tadaharu Ohashi

engage in illegal activities” as our basic guidelines for our

Chairmanbusiness activities. To promote the maintenance of highcompliance standards, our CSR Department has taken aleadership role in preparing internal rules and regulations
regarding corporate ethics and in conducting compliancetraining activities for various levels of management andSatoshi Hasegawa

staff. The CSR Department has also engaged in other related

President

5

An Interview with Satoshi Hasegawa, President

Fiscal 2010 will be a year requiring staying power,
but a year that will separate the winners from the losers.
We will be preparing to seize new growth opportunities.
On June 25, 2009, Mr. Satoshi Hasegawa became the 14thenvironment responsively. We have already begun topresident of Kawasaki Heavy Industries, Ltd. (KHI). We asked

respond to the changes in the operating environment, start-

him about KHI's management objectives and the issues theing at the end of last year, and I want to follow through on

Group must confront.

these initiatives for the time being. On the other hand, I
intend to conduct our operations from a long-term perspective and make “indispensable investments for the futureQ: After receiving the baton from Mr. Tadaharu
Ohashi, who is now KHI’s Chairman, what aresome of the issues you decided to address
as President?

growth.” The Kawasaki Group Mission Statement, which
we adopted in May 2007, begins with a statement of KHI’s
mission in global society. That mission is “Kawasaki, working as one for the good of the planet” (Enriching lifestyles
and helping safeguard the environment: Global Kawasaki).

The most important issue for shareholders and for all stake-

It is especially in such times as these today, when the world

holders is that companies continue to grow. I believe thatsituation is in turmoil, that I am convinced that I should

increasing profitability is required as the wellspring of thisexamine our Mission Statement, which should be thegrowth. Under our current Global K Medium-Term Businesscompass for the KHI Group, and do my utmost to bring thePlan, my understanding is that KHI’s profitability has

members of the Group together to do our very best to fulfill

increased steadily. However, the operating environment is

our mission to society and increase KHI’s corporate value.

constantly changing, and I want to tighten our grip and bein a position to manage KHI to deal with changes in such an

6

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Q

: To attain its Group mission, what will KHI needto do?

1. Rolling Stock: Strengthen our operating systems in thethree major regions of Japan, North America, and the restof Asia, while having an abundant backlog of orders in

Our Group Mission Statement, as I mentioned, is “Kawasaki,

North America and other regions

working as one for the good of the planet” (Enriching

2. Aerospace: Move ahead with major projects, including

lifestyles and helping safeguard the environment: Global

moving into the mass production of the next fixed-wing

Kawasaki). However, the world is not a single market. The

maritime patrol aircraft, completing the development of thedesires of people around the world for “enriching lifestyles”

next transport aircraft, and responding to mass production

are far more diverse that those in Japan. Also, to grow inrequirements for supplying components for the Boeing 787

the world economy requires substantially more “market

3. Gas Turbines & Machinery: Proceed with the develop-

participation” than in the past.

ment of new jet engines for commercial aircraft as well as

Moreover, to strive for “harmony between human afflu-

strengthen our position in the energy and environment-

ence and the earth’s environment,” I believe one of our mis-related businesses by proceeding with the development ofsions will be to go beyond our current business fields andnew products and new models, including industrial gas tur-make contributions by using sophisticated technologicalbines and high-efficiency gas engines and other products,

capabilities in the fields of energy and the environment. To

and strengthening our competitiveness by boosting ourfulfill this mission, we must be tenacious.

overall productivity

When I was engaged in KHI’s V2500 jet aircraft engine
business, one of the things that impressed me was that,

4. Consumer Products: In the midst of challenging operating conditions because of the world economic downturn,

although we had major difficulties in getting a start in thisincrease the profitability of motorcycles supplied to thebusiness, today, after 20 years of efforts, this business hasdeveloped countries (the highest priority field in this busi-

grown and developed to become a mainstay of KHI’s prof-ness) and strengthen our development and production

itability. What I learned from being directly involved in thesystems on a global basis in the aim of boosting thejet engine business was that, over the past 20 years, thecompetitiveness of our products

heroes of this business have not been just one set of faces.

5. Plant & Infrastructure Engineering: Accelerate the

The important thing is that KHI should continue to be tena-development of our energy and environment-related busi-

cious as an organization and continue to have the will andnesses, designated in the Global K Medium-Term Businessdetermination to establish and maintain its position. What I

Plan, with KHI Group company Kawasaki Plant Systems,

would like to do is to promote growth by encouraging theLtd., as the focal point in these initiatives

development of this kind of corporate culture throughout

6. Shipbuilding: Solidify the improvement in earnings

the KHI Group.

through such means as optimizing the Kawasaki Shipbuilding
Corporation’s production systems, including our Chinese
operations, with our sights set on winning new orders

Q: Amid the difficult operating conditions KHI
faces this fiscal year, what measures are
you thinking of implementing in individual
businesses?

7. Hydraulic Machinery: Make flexible investments ofcorporate resources while lowering the breakeven point
for these operations, and strengthen the global pentapolarsystem (covering Japan, the United States, Europe, China,
and South Korea) for these business activities

As basic policies, we have adopted two concepts: namely,

8. Industrial Robots: Strengthen development capabilities“quality followed by quantity” and “thoroughness of risk

and develop new customers

management”. To increase profitability, we are implement-

9. Construction Machinery: Improve development

ing the following measures in individual businesses.

and sales capabilities through the alliances with Hitachi
Construction Machinery Co., Ltd., and TCM Corporation

7

Q: There is a possibility that challenging
operating conditions may continue in yourbusinesses that are engaged in mass
production. What policies will you be taking
in response?

Moreover, by strengthening teamwork with outside
research institutes, such as universities, KHI is working tospeed up the acquisition of sophisticated technologies
that will lead to the creation of new products and new
businesses.
The following paragraphs summarize some of the specific

In our businesses that are engaged in mass production,

R&D activities under way in major business areas.

such as Industrial Robots, Consumer Products, Hydraulic
Machinery, and Construction Machinery, concerns remain

TRANSPORTATION

that market conditions may show even further deterioration.

In the rolling stock business: Development of the

Therefore, we will take thoroughgoing measures to lower

SWIMO®, a low-floor streetcar without overhead wires,

fixed costs wherever possible and thereby minimize the risks

and the high-speed railcar efSET

of a further downturn. At the same time, we will watch

In the aerospace business: Development of the new-type

market trends carefully, and we believe that it is important

BK117 helicopter and research on the development ofto proceed with contingency planning to be prepared in the

future fixed-wing commercial aircraft based on the results

event that conditions deteriorate further.
In addition, in our businesses engaged in mass produc-of the development of the next fixed-wing maritime patrolaircraft and the next transport aircraft

tion, we have found it necessary to temporarily suspend

In the motorcycle business: Development of new models

operations at some business locations because of the dimin-in the motorcycles business and new engines that combine

ished volume of work. We are working to assign workers,

our high performance standards with eco-friendly features,

who have been idled by these suspensions, to productive

research on improvement of driving performance and safety

positions elsewhere in the Group.

In the shipbuilding business: Research on environmentally

In any event, we have positioned fiscal 2010 as a time forfriendly ships and high-performance propulsion systems

bolstering our operating and financial positions as well as
making preparations for future growth. We are managing

ENERGY AND ENVIRONMENT

these business operations with the awareness that this year

In the gas turbines and machinery business: Research

will separate the winners from the losers.

on improving the efficiency and realizing high-performancefeatures of industrial gas turbines, incineration equipmentwith low NOx combustors that have superior environmentalQ: What is the status of your R&D
aimed at future development?

features, high-efficiency and large-scale gas engines, andhigh-efficiency middle-class steam turbines
In the energy and environmental engineering

To realize Kawasaki Value (including value creation, original-

business: Development of bio-ethanol process technology

ity, and top quality) in the KHI Group’s many product lines,

and development of biomass gasification power generation

the R&D departments of individual businesses and the head-systems and oil coke fired boilers

quarters R&D department are working together to conduct

Other areas of focus in R&D: Development of Gigacell®,the R&D activities necessary for the new products, newlarge-scale metal-nickel hydride batteries and other new

technologies and product improvements, and the creation

products and businesses

and nurturing of new businesses for “tomorrow and the day

8

after tomorrow (candidates for the next wave of products).”

INDUSTRIAL INFRASTRUCTURE

In addition, KHI is nurturing and strengthening future basic

In the industrial robot business: Development of intelli-technologies (platform innovation technologies) based ongent, high-performance industrial robot systems with newa long-term perspective.

controllers and vision sensors

Kawasaki Heavy Industries, Ltd. Annual Report 2009

In the industrial facilities and tunneling equipment
business: Development of new-type shield machines
In the hydraulic machinery business: Development of
new types of pumps and technologies for increasing theefficiency of hydraulic pump motors and electronic control
technologies
In the construction machinery business: Developmentof medium-sized to large wheel loaders meeting emission
and noise restrictions
In addition to the above R&D activities, among basic technologies, we are placing priority on such fields as heat transmission/combustion, power electronics, electronic controls,
energy/environment, manufacturing technology, and certain
other areas. In addition to these priority areas, we are nurturing and strengthening our position in a wide range ofareas, including materials strength, materials, vibration and

Investment plans for fiscal 2010 include equipment

acoustics, fluid dynamics, mechanical elements, chemicals,

for increasing productivity in rolling stock manufacturing,light, electronic/power electronics, measurement/sensors,

facilities related to component supply for the Boeing 787,

control/information, mechatronics, production systems, andfacilities for the development of new gas turbines, facilities

simulation technologies. The KHI Group is working to build

for manufacturing new motorcycle models and improving

top-level positions in these fields, especially in technologies

productivity, the replacement of aging shipbuilding facilities,

that are linked to its products.

and the installation of equipment to enhance productivity
in shipbuilding operations. Many of these investments are
already in progress and will be completed by the end of thisQ

fiscal year, but we intend to reduce capital expenditures

In view of the deterioration in the operating environment inQ: What kinds of capital investments are you
thinking of making during this period of
economic downturn?

fiscal 2010, we plan to restrain increases in fixed costs andcompared with the previous fiscal year.

: Is there a special message you would liketo give to KHI shareholders?

interest-bearing debt. We have not placed any orders forequipment for the expansion of capacity, with the exception

As I mentioned before, fiscal 2010 will be a year requiringof what is indispensable for new projects. Plans for invest-

staying power, but it will also be a year that will separate

ments in aging facilities and other capital investments are

the winners from the losers. In other words, we are at abeing held to an absolute minimum. However, investments

critical moment that will decide whether we can make awill be made for equipment and facilities that are extremelysmooth transition to the next stage in growth. While we areold, such as production facilities that have exceeded theirfacing further deterioration in the business environment, ouruseful lifetimes, and employee welfare facilities, such as

objective should be to substantially increase the KHI Group’s

company housing and dormitories.
Regarding capital investment in fiscal 2011 and later, con-

growth potential and work toward fulfilling our Group mission in KHI’s Mission Statement: “Kawasaki, working as one

tents of investment proposals will be reviewed in detail, andfor the good of the planet.” As we of the KHI Group work

careful consideration will be given to such investment plans

toward these objectives, we look forward to the continuing

and their timing.

support and cooperation of our shareholders.

9Review of Operations

LNG carrier Energy Navigator

100,000
30,000313,987

289,227

263,707300,000

71,51360,000200,000

100,000

0

005 06 07 08 09

Business Results
In fiscal 2009, the shipping market, which had been
active for several years, experienced a major decline
as a result of the global recession. This, combined witha credit crunch in shipping finance in the wake of
the Lehman Brothers bankruptcy, led to a complete
halt in new vessel deals. Against this backdrop, theShipbuilding segment secured orders for 6 vessels:
namely, one LPG carrier and five bulk carriers. As
a consequence, total orders received decreased

10

200,000

135,600

90,000500,000

400,000

155,832

109,697

120,000

300,000

128,323

150,000

9.4%

414,176(Millions of yen)

251,331

Order Backlog(Millions of yen)
141,397

Orders Received(Millions of yen)

108,849• LNG carriers• LPG carriers• Container ships• VLCCs (Very Large Crude
Carriers) and other typesof tankers• Bulk carriers• High-speed vessels• Submarines• Maritime applicationequipment

Sales

126,426

Percentage of Net Sales

87,081Main Products

356,937

Shipbuilding

005 06 07 08 09

05 06 07 08 09¥179.8 billion, or 71.5%, to ¥71.5 billion.
Reflecting a drop in sales of large vessels and otherfactors, sales reported in fiscal 2009 fell ¥15.0 billion,or 10.6%, to ¥126.4 billion. This decrease—together
with the impact of such factors as a sharp rise in steel
prices and the trend of appreciation of the yen against
the U.S. dollar—caused the segment to record an operating loss of ¥1.0 billion, which represented a ¥4.3 billion deterioration from the ¥3.3 billion operating
income reported in fiscal 2008.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Submarine Unryu

In newbuilding activity, the segment delivered
15 vessels in all: namely, five LNG carriers, two LPG
carriers, one VLCC, and seven bulk carriers.

Outlook
Kawasaki Shipbuilding Corporation, which is the corecompany of this segment, has an extensive track recordin building gas carriers and submarines, which require
advanced design and construction technologies. The
vessels built at that company’s Kobe and Sakaide shipyards continue to win high marks from customers fortheir performance and quality. Following the delivery
in 1981 of the first LNG carrier built in Japan, we haveestablished ourselves as a pioneer in this field. We offer
a wide-ranging lineup of LNG carriers, extending fromsmall carriers with cargo tank capacities of 19,000m3
to newly developed large carriers with capacities of
177,000m3. We have also developed and offer in our
lineup a pressure build-up type LNG carrier for shortdistance and small-volume transportation. Looking
ahead, to respond to customer needs, we will draw
on cutting-edge technologies to develop new-type
LNG carriers.
Nantong COSCO KHI Ship Engineering Co., Ltd.
(NACKS), which Kawasaki Shipbuilding Corporation
established as a joint venture with China Ocean
Shipping (Group) Company, has now marked the 14th
year of operations since its founding and has become

one of the leading shipbuilding companies in China.
NACKS completed its second expansionary phase—
involving the construction of a second shipbuilding
dock and augmentation of fabrication, assembly, andpainting facilities—in October 2008. This expansion has
considerably increased NACKS’s shipbuilding capacity,and this upgraded capacity is expected to make a fullscale contribution to its performance during fiscal
2010.
Kawasaki Shipbuilding Corporation and its groupof companies, including NACKS, are endeavoring toenhance their technologies related to ship design,
manufacturing, and quality assurance to reinforce theirability to compete globally in terms of both quality andcosts and thus sustain their development into the
future.

11

Review of Operations

E3 Series 2000 Shinkansen

400,000

478,566

434,419
346,310

264,604

500,000

300,837

200,000

183,254

150,000

203,165

300,000

178,369

200,000

13.9%

269,120(Millions of yen)

186,454

Order Backlog(Millions of yen)
184,283

Orders Received(Millions of yen)
171,739• Electric train cars(including for Shinkansenbullet trains)• Electric and diesel locomotives• Passenger coaches• Integrated transit systems• Monorail cars
• Platform screen doors• Wheel loaders

Sales

171,731

Percentage of Net Sales

168,306

Main Products

431,377

Rolling Stock & Construction Machinery

300,000
100,000
200,000
100,000
50,000100,000

0

005 06 07 08 09

Business Results
During fiscal 2009, demand for rolling stock remained
strong in North America, Japan, and elsewhere in Asia.
In Japan, orders were received from the Japan Railways
Group for Shinkansen trains, commuter train cars,
locomotives, freight cars, and other rolling stock.
Orders were also obtained from both public and private railway companies for subway cars, commuter
train cars, and other rolling stock. Additional orders
from overseas customers included those from the
New York City Transit Authority and other sources.

12

0

05 06 07 08 09

05 06 07 08 09

Reflecting considerable rises in domestic orders forvarious types of products, orders during the fiscal
year under review grew ¥81.4 billion, or 44.4%, froma year earlier, to ¥264.6 billion.
Owing to a rise in deliveries to overseas customers,
overall sales of this segment grew ¥14.7 billion, or8.6%, to ¥186.5 billion. However, sales of construction
machinery fell below the level in the previous fiscal year
due to the impact of the global recession. As a consequence of the overall rise in sales of this segment,
operating income increased ¥4.2 billion, or 58.5%, to¥11.4 billion.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

135ZV-2 Wheel Loader

OutlookIn recent years in the industrialized countries, there has
been a pronounced “modal shift” to the use of railways as the principal means for mass transportation
because of the lower burden on the natural environment. In addition, the number of new projects for theconstruction of urban transport and interurban transport systems has shown a trend of increase in the
newly industrializing countries, while such policies as
the “Green New Deal Policy” in the United States arestimulating active moves toward railway-related investments. Expansion in demand for rolling stock is expected to continue on a global basis in the long term.
As Japan’s largest manufacturer of rolling stock, KHI
is working aggressively to meet this rising demand andis working to expand and upgrade its production systems, which are located in Hyogo and Harima in Japanand in Lincoln, Nebraska, and Yonkers, New York, in
the United States. Of special note is the segment’s
Lincoln plant, which originally went into operation as afully integrated rolling stock production facility in 2002.
At present, work on a new facility that will double theproduction capacity of the Lincoln plant is under way
and is scheduled for completion in the near future.
In Japan, along with the Hyogo Works, which is the“mother factory” for Kawasaki’s worldwide rollingstock operations, the Harima Works is manufacturing
a portion of Kawasaki’s rolling stock.
In new product development, Kawasaki completed
its next-generation light rail vehicle (LRV), dubbed

SWIMO®, in fall 2007, and work is currently under way
to introduce this leading-edge LRV to the market. In
addition, in September 2008, the Company announced
that it has decided to embark on the development of
the newly named “efSET” (Environmentally Friendly
Super Express Train) high-speed train, which willachieve a service speed of 350km/h. In addition, thisinnovative vehicle will draw on the technologies that
Kawasaki has developed through the design of anumber of Shinkansen train series and will feature
an improved level of passenger comfort and reducethe burden on neighboring environments.
Regarding the construction machinery business,because Kawasaki has arranged a business alliancewith Hitachi Construction Machinery Co., Ltd., andTCM Corporation, the Company split off its construction machinery business as a wholly owned subsidiaryof KHI, KCM Corporation, as of April 1, 2009, andestablished an integrated structure for production
and sales of construction machinery. Although market
conditions are projected to remain harsh, KCM will
optimize the effects of this business alliance throughincreasing efficiency and the co-development of nextgeneration models as well as other measures taken incooperation with the Company’s new business allies.
Also, since the construction machinery business unit is
now a wholly owned subsidiary of KHI, this segment
will be included in the “Others” segment beginningfrom fiscal 2010.

13

Review of Operations

Next fixed-wing maritime patrol aircraft (XP-1)

Aerospace
286,601

301,599

286,699

287,441

202,506

229,257

214,702

300,000

200,000

200,000

100,000

100,000
100,000

0

005 06 07 08 09

Business Results
Due to the receipt of such orders as those for component parts for the B777 of Boeing and the P-1 fixedwing maritime patrol aircraft of Japan’s Ministry of
Defense (MOD), orders received in the Aerospace segment were ¥36.7 billion, or 18.1%, higher than for theprevious fiscal year, and amounted to ¥239.2 billion.
As a result of a decrease in sales to the MOD and insales related to the B777, together with such factors
as the appreciation of the yen against the U.S. dollar,

14400,000

248,332

200,000

300,000

200,425300,000

15.0%

239,177(Millions of yen)

255,613

Order Backlog(Millions of yen)
269,108

Orders Received(Millions of yen)

218,533• CH-47, OH-1, and
BK117 helicopters• Component parts for
the Boeing 777 and
767 passenger airplanes• Component parts for
the Embraer 170 and
190 jet aircraft• Missiles• Electronic equipment• Space equipment

Sales

237,349

Percentage of Net Sales

188,255

Main Products

005 06 07 08 09

05 06 07 08 09

this segment’s sales declined ¥36.9 billion, or 15.6%,
to ¥200.4 billion. Because of the decline in sales and arise in such expenses as those associated with changes
in the accounting method for valuation of inventories,
this segment recorded an operating loss of ¥4.2 billion,
which represented a ¥15.1 billion decline from theoperating income reported in the previous fiscal year.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

KHI BK117C-2 type helicopter

Outlook
KHI is the prime contractor for the development of the
MOD’s large-scale XP-1 and C-X aircraft, which havebeen ongoing since 2001. KHI has acted as the corecompany and spearheaded the simultaneous development of these two aircraft types. These are the largest
aircraft projects being implemented currently in Japan.
Regarding the XP-1, the next fixed-wing maritime
patrol aircraft, the static test plane and the flight test
plane have been delivered to the MOD on schedule.
Development of the C-X, the next transport aircraft, isproceeding with the objectives of quickly conducting
the maiden flight and the delivery of the flight test
plane #1.
In the commercial aircraft field, KHI delivered a test
model of Boeing’s cutting-edge 787 Dreamliner passenger aircraft, which features advanced design andemploys revolutionary production technology, by June
2008, and is proceeding with the mass production ofthis plane. KHI is a partner corporation in the development and production of the 787 Dreamliner and is
responsible for the forward section of the composite,
one-piece-structure fuselage, which is the world’s firstto be used in a commercial aircraft, as well as other key
components. To be prepared for an increase in thescale of 787 Dreamliner production, KHI is currently
building the second new facility on the south side ofits Nagoya Works 1.

Accompanying progress on these major defense
and commercial aircraft development projects in the
Aerospace segment, up-front capital expenditures anddevelopment expenses are expected to run ahead ofrevenue streams. However, KHI is committed to successfully executing these projects and the creation of a
production structure for both MOD-commissioned andcommercial aircraft that will reinforce its operationalfoundation for the long term and thereby ensuresustained growth.

15

Review of Operations

GPB180D regional energy supply system in Gwanmyon, South Korea

Gas Turbines & Machinery

50,000405,196245,962

216,886

227,422204,847

200,000
100,000
100,000

0

005 06 07 08 09

Business Results
Total orders of this segment rose to a level considerably
higher than in the previous fiscal year, reflecting suchfactors as new orders for components for Trent XWB
commercial aircraft engines, an order for a diesel generator set, and orders for marine propulsion systems.
Orders received increased ¥128.1 billion, or 56.3%,
from the previous year, to ¥355.5 billion.
Owing to a rise in sales of diesel engines and otherfactors, sales of this segment expanded ¥9.7 billion, or

16

300,000

195,108

200,000

163,440

100,000

500,000

400,000
300,000

188,068

150,000

400,000

162,700

200,000

14.6%

355,517(Millions of yen)

195,156

Order Backlog(Millions of yen)
185,486

Orders Received(Millions of yen)
183,309• Jet engines• Small and medium-sizedgas turbine generators• Gas turbine cogeneration
systems• Gas turbines for naval vessels• Steam turbines for marine
and industrial applications• Diesel engines and marine
propulsion systems• Gas engines• Aerodynamic machinery

Sales

161,431

Percentage of Net Sales

141,366

Main Products

005 06 07 08 09

05 06 07 08 09

5.2%, to ¥195.2 billion. Despite the rise in sales, operating income declined ¥2.4 billion, or 17.7%, to ¥11.0
billion, as a result of such factors as the appreciation of
yen against the U.S. dollar and changes in the accounting method for valuation of inventories.

Outlook
The Gas Turbines & Machinery segment has a wide
range of products for the energy and transportationequipment field, and although demand for some of

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Azimuth thruster Rexpeller®

these products is temporarily weak due to such factors
as the global recession, the markets for many of the
products are expected to grow over the medium-tolong term. Because of this, this segment is continuing
R&D and development of manufacturing systems andstrengthening total operations for future market
expansion, while effectively responding to the shortterm weakness in demand.
In the energy field, it is anticipated that the deregulation of electric power industry along with risinginterest in preserving the global environment andconserving energy will expand demand for gas turbine
generators and gas engines that offer high and total
thermal efficiency and environment-friendliness.
As Japan’s largest manufacturer of small to mediumsized gas turbine power generators, KHI intends toexpand its global business by offering comprehensive
solutions for its customers that include a strong lineup
of in-house developed gas turbines together withproduct support and maintenance.
At the end of 2008, the 8MW-class power-generating
capacity Kawasaki Green Gas Engine had completed one
year (4,000 hours) of operational testing. Through thisone-year test of the Green Gas Engine, we have confirmed the engine’s stable performance capabilities andother outstanding features, including the world’s highest
electric generating efficiency (48.5%), the lowest NOx
emissions, and superior reliability and durability. Basedon this proven performance, KHI plans to progressively
expand related business centered on overseas markets
with developed natural gas infrastructures.
Also, in the oil and gas field, KHI has extensive experience as a world-leading manufacturer of natural gas
compression modules for offshore platforms. Alongwith the rise in demand for natural gas, needs forthese gas compression modules are increasing as a key
component for gas field development.
In the transportation equipment field, the commercial aircraft market is temporarily depressed, but KHI
has been moving forward with preparations for the
production of the Trent 1000, which is designed to
power the Boeing 787. Moreover, KHI has recently
decided to participate in the Trent XWB project for
the Airbus A350XWB.
In the field of marine propulsion systems, KHI is
preparing to expand the scope of its business, whichcurrently centers on merchant ships and ferries, byexpanding operations related to oil and gas development, a market that is projected to offer increasing
demand in the future. Accordingly, the Company iscontinually working to increase manufacturing efficiency and manufacturing capacity at a new Harima Works
that began operating from October 2008.

17

Review of Operations

Coal-fired boiler delivered to Nippon Paper Chemicals Co., Ltd.

172,255

144,147

106,046

150,000

112,163

100,000

200,000

83,649100,000

150,000

97,332150,000

210,160

250,000

150,221200,000

200,000

7.9%

126,403(Millions of yen)

142,547

Order Backlog(Millions of yen)

105,178

Orders Received(Millions of yen)

122,062• Cement, chemical,
and other industrial plants• Power plants• Municipal refuse
incineration plants• LNG and LPG tanks• Shield machines andtunnel-boring machinesSales
191,012Percentage of Net Sales

164,506

Main Products

135,288

Plant & Infrastructure Engineering

100,000
50,00050,00050,0000

005 06 07 08 09

Business Results
During fiscal 2009, although restraints on capital
investments accompanying the worldwide recession
caused a slackening of orders for various types ofindustrial plants, orders were obtained for waste heatrecovery boilers, equipment for nuclear plants, small-lot
facilities, and maintenance services. As a result, orders
for the year under review declined ¥22.4 billion, or
21.1%, from the previous fiscal year, to ¥83.6 billion.

18

0

05 06 07 08 09

05 06 07 08 09

Overseas sales of nonferrous metal refining plants
increased, but a drop in sales of municipal incineration
waste treatment plants and other factors caused segment sales to fall considerably below the level of sales
in fiscal 2008, when sales for numerous overseas projects were recorded. Thus, sales of this segment
declined ¥37.4 billion, or 26.2%, to ¥105.2 billion.
Reflecting the decrease in sales, the operating incomeof this segment declined ¥1.9 billion, or 17.2%, to¥9.0 billion.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Ferronickel production delivered to SNNC in South Korea

OutlookThis business segment encompasses the operations of
Kawasaki Plant Systems, Ltd. (K Plant)—which undertakes projects to supply energy-related, industrial infrastructure, and environmental preservation systems andequipment—and the operations of the parent company’s Industrial Facilities and Tunneling Equipment
Division—which mainly focuses on LNG tanks anddiverse other storage tanks along with shield machines
and tunnel-boring machines. This segment is aggressively working to further develop its business activities basedon the sophisticated technologies it has accumulated.
Especially, in energy-related business, K-Plant has
strengthened its partnership in China with the Anhui
Conch Group—this group includes Anhui Conch
Cement Company Limited, China’s largest cement
maker and the fourth largest cement maker in theworld. In 2006, K-Plant established Anhui Conch
Kawasaki Engineering Co., Ltd. (ACK), as a joint
venture company with the Auhui Conch Group. ACK
is engaged in the design of, procurement of parts for,and sales of waste heat recovery power generation
systems for cement plants. Following the establishmentof ACK, K-Plant established Anhui Conch Kawasaki
Energy Conservation Equipment Manufacturing Co.,
Ltd. (CKM), which is engaged in the manufacturing ofPH boiler parts that are employed in waste heat power
plants. To expand the scope of its business operations,CKM has now commenced the manufacturing andsales of environmental preservation related products,
including cement plant components, such as highefficiency vertical mills, boilers for waste heat recovery
power generation systems, and waste gasification
systems and sewage treatment systems that can be
integrated with cement kilns to enable municipal waste
recycling.
Under its current Global K Medium-Term Business Plan,
the KHI Group is endeavoring to strengthen its positionin the energy and environmental engineering business,where major growth in demand is anticipated in theyears to come. This business segment is aiming tobecome the top engineering company in the fields ofclean energy and environmental preservation by fusing
a broad range of technologies and further stepping up
the development of new technologies and products.

19

Review of Operations

Ninja ZX-6R

Consumer Products & Machinery
Main Products

Percentage of Net Sales

Sales

433,963
336,459

366,960

400,000

338,450

500,000

25.1%

403,702(Millions of yen)

• Motorcycles• ATVs• Utility vehicles• Personal watercraft• General-purpose
gasoline engines• Industrial robots

300,000

200,000

100,000

00

0

05 06 07 08 09

Business Results
Sales by this segment in the fiscal year under review
decreased ¥97.5 billion, or 22.5%, to ¥336.5 billion.
Sales of motorcycles increased in Asian markets but
declined in the United States and Europe, and sales ofindustrial robots to the semiconductor and automobile
industries were down. Due to such factors as the lower
level of sales—particularly a slump in sales of large
motorcycles—and the rapid appreciation of the yen
against the U.S. dollar, the euro, and other currencies,

20

this segment recorded an operating loss of ¥10.1 billion, which represented a ¥29.8 billion deteriorationfrom the ¥19.7 billion of operating income reported infiscal 2008.
Worldwide sales of motorcycles, ATVs, utility vehicles, and personal watercraft amounted to 523,000
units, 4,000 units, or 0.8% higher than in the previous
fiscal year. By geographical region, sales in Japanamounted to 19,000 units, 1,000 units, or 5.0% lower
than in the previous year. Sales in North America fellKawasaki Heavy Industries, Ltd. Annual Report 2009

Teryx 750 FI 4x4 Sport

33,000 units, or 14.3%, to 197,000 units, and salesin Europe dropped 21,000 units, or 17.8%, to 97,000
units. However, sales in other regions surged 59,000
units, or 39.1%, to 210,000 units.

New Models
Principal new models introduced in fiscal 2009
included the following items. In the motorcycle line,
Kawasaki launched the ZRX1200 DAEG, a flagshipmodel for the Japanese market, that has been exclusively engineered to meet the needs of Japanese riders;
and the Ninja ZX-6R, developed through a full modelchange to its predecessor mid-size supersport model
based on technical feedback from a wide range of racing activities. Kawasaki also undertook a full modelchange for the ER-6f and the ER-6n, two mid-size sportmodels that are highly acclaimed in Europe. In thecruiser segment, Kawasaki launched its Vulcan 1700
series with newly developed engine and chassis. This
series includes the Vulcan 1700 Voyager, a full-dress
V-twin engine tourer with a full load of long-distancetouring equipment. In the utility vehicle category, we
equipped the Teryx 750 series with an electronic fuelinjection system, mainly for recreational use; and our
MULE utility-oriented vehicle series was restyled withthe launch of the MULE 4010 series. Among personal
watercraft, Kawasaki introduced the Jet Ski Ultra 260X

RS20N

series which features a supercharger and improved
engine performance.

Outlook
Regarding fiscal 2010 unit sales of motorcycles, ATVs,
utility vehicles, and personal watercraft, we project thata rise in Southeast Asia will be offset by a large drop inother regions centered on North America and Europe
owing to the impact of a drop in purchasing power
and a credit contraction that have accompanied thecontinued deterioration of economic conditions thatbegan in fiscal 2009. Amid this harsh business environment, we will strengthen this segment’s global development and manufacturing systems while also taking
measures aimed at improving the profit structure byboosting the profit margin ratio, reducing fixed costs,
and making other business improvements. With
respect to industrial robots, in preparation for a recovery in demand, we are placing top priority on developing new models for automobile welding and painting
applications as well as for semiconductor manufacturing processes.

21

Review of Operations

Hydraulic components

Orders Received

Order Backlog(Millions of yen)

(Millions of yen)

(Millions of yen)

40,00060,00040,00021,01030,00020,00014,741

92,33572,91880,00050,18166,64936,87160,00046,26080,000100,000

36,06584,028100,000

6.3%

84,919• Industrial hydraulic products

29,317

Sales

9,900

Percentage of Net Sales

84,143Main Products

28,539Hydraulic Machinery

10,00020,00020,0000

005 06 07 08 09

22

0

05 06 07 08 09

05 06 07 08 09

Business Results

Outlook

Orders in the Hydraulic Machinery segment decreased¥8.2 billion, or 8.9% from the previous fiscal year, to¥84.1 billion, mainly because of a drop in orders fromthe construction machinery industry.
Reflecting strong sales to the construction machineryindustry during the first half of the fiscal year, segment
sales for the fiscal year as a whole were up ¥0.9 billion,
or 1.1%, to ¥84.9 billion, although operating income
declined ¥0.7 billion, or 8.0%, to ¥8.4 billion.

Regarding markets, a decrease in demand accompanying the global recession has led to slack conditions in
the construction machinery markets of principal industrialized countries, and while market growth is still projected in the NICs over the long term, the NIC markets
are currently in the process of rapidly decelerating.
Market conditions for industrial equipment are showing a similar slackening, and while marine vessel-use
equipment markets are relatively strong, the impact ofKawasaki Heavy Industries, Ltd. Annual Report 2009

Hydraulic products for construction machinery

the recession is projected to hit those markets going
forward.
Amid these conditions, the core company in thissegment, Kawasaki Precision Machinery Ltd. (KPM), is
implementing various measures in accordance with its
Medium-Term Business Plan objective of becoming oneof the world’s top five hydraulic equipment makers,
with outstanding technologies and product quality as
well as its longer-term goal of becoming the world’s
top brand in the hydraulic machinery industry by 2020.
In particular, KPM is shifting away from its previous
expansion policy centered on moves to strengthen
manufacturing capabilities and adopting a corporate
organization strengthening policy that emphasizes thestrengthening of such corporate characteristics as profitearning capacity and financial standing as a meansof building a more-solid management base.
Specifically, KPM is striving to increase the precisionof its information regarding order taking and manufacturing activities while moving forward with steps toincrease automation and reduce staffing requirements
at manufacturing lines. In these ways, the company isseeking to increase the efficiency of its cycle of ordertaking, manufacturing, and shipping operations and to
improve its productivity and inventory turnover ratio sothat it can bolster its business profit-earning capacity andreinforce its financial standing. KPM is also proactively

endeavoring to upgrade such product differentiation
technologies as those associated with energy conservation, noise reduction, and electronic controls as well as
to develop and promote sales of environment-friendly
products as a means of increasing the power of its
product lineup. These efforts are designed to promote
the strengthening of the company’s business base in
the future. To facilitate these various initiatives, KPM issteadily advancing with such business base-building
measures as those involving capital investments forrationalization and renewal objectives, the promotionof R&D programs, the introduction and enhancementof information systems, and the development of
human resources.
KPM is strengthening its international network offive manufacturing and marketing facilities, which
comprises KPM’s headquarters plant and the facilities
of Kawasaki Precision Machinery (U.K.) Limited;
Kawasaki Precision Machinery (U.S.A.), Inc.; Chinabased Kawasaki Precision Machinery (Suzhou) Ltd.; andKorea-based Flutek, Ltd. KPM is focusing especially on
increasing overall customer satisfaction by developing
and supplying high-quality, high-performance products, responding quickly and accurately to customer
needs, and providing strong after-sales services.

23

Six-Year Summary
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31

Millions of yen
2009

2008

2007

2006

2005

2004

Operating results:
Net sales ....................................................... ¥1,338,597 ¥1,501,097 ¥1,438,619 ¥1,322,487 ¥1,241,592 ¥1,160,252
Cost of sales .................................................

1,146,944

1,262,032

1,213,524

1,148,547

1,088,219

998,416Gross profit ...................................................

191,653

239,065

225,095

173,940

153,373

161,836

Selling, general andadministrative expenses ................................

162,940

162,155

155,953

132,145

128,629

139,586

Operating income .........................................

28,71376,91069,142

41,79524,744

22,250Net income ...................................................

11,72835,141

29,772

16,467

11,4796,333

Capital expenditures .....................................

82,45050,53839,26941,72429,692

41,502

Depreciation and amortization ......................

44,33437,45530,27930,551

31,55532,590R&D expenses ...............................................

38,25636,22833,81927,04013,183

14,741

Financial position at year-end:
Working capital ............................................. ¥ 165,791 ¥ 157,741 ¥ 155,412 ¥ 113,240 ¥ 138,523 ¥ 121,941
Net property, plant and equipment ...............

284,118

259,927

253,819

246,219

243,166

248,922

Total assets ...................................................

1,399,771

1,378,770

1,357,980

1,284,085

1,194,473

1,156,904

Long-term debt, less current portion .............

181,933

138,766

165,754

157,057

207,279

210,819

Total net assets .............................................

295,246

319,038

295,378

243,096

206,156

194,030¥¥¥

Per share amounts ( yen):
7.0¥ 21.1¥ 18.9¥ 11.2

Earnings per share—diluted ..........................

Earnings per share—basic .............................

6.9

20.6

17.2

9.4

6.8

7.9

4.2

4.4

Cash dividends ..............................................

3.0

5.0

5.0

3.0

2.5

2.0

Net assets .....................................................

176.8

191.1

178.0

156.1

142.8

134.4

Number of shares issued (millions) .................

1,670

1,670

1,660

1,558

1,443

1,443

Number of employees ...................................

32,26630,56329,211

28,922

28,682

29,306

Other data:

Orders received ............................................. ¥1,540,590 ¥1,610,757 ¥1,592,688 ¥1,351,631 ¥1,301,845 ¥1,226,728
Order backlog ...............................................

24

1,699,163

1,533,663

1,465,155

1,310,444

1,254,409

1,189,374

Kawasaki Heavy Industries, Ltd. Annual Report 2009Management’s Discussion and Analysis

OVERVIEWRESULTS OF OPERATIONS

During fiscal 2009, ended March 31, 2009, the Japanese
economy slipped into a sharp downturn beginning in the third
quarter as a result of a range of factors, such as the sudden
appreciation of the yen against the U.S. dollar, euro, and othercurrencies, a slump in personal consumption, a decline in private capital investment, a slowing of exports, and deteriorationin employment conditions. Thereafter, although there weresigns of a bottoming out over the end of fiscal 2009, theeconomy still remains lackluster. In the world economy as well,trends toward deceleration and a downturn became increasingly apparent, even in the rapidly developing economies.
Amid this economic environment, the Kawasaki Heavy
Industries (KHI) Group reported a decline in orders on a consolidated basis of ¥70.2 billion, or 4.4%, from the previous fiscal
year, to ¥1,540.6 billion. This was because orders in the
Shipbuilding and Consumer Products & Machinery segments
decreased, while orders in the Gas Turbines & Machinery andRolling Stock & Construction Machinery segments increased.
Consolidated net sales decreased ¥162.5 billion, or 10.8%, to¥1,338.6 billion, as a decline in sales was posted in theConsumer Products & Machinery segment.
Profitwise, consolidated operating income dropped ¥48.2
billion, or 62.7%, to ¥28.7 billion, and net income decreased¥23.4 billion, or 66.6%, to ¥11.7 billion. This deterioration in
profitability was a consequence of the appreciation of the yen
in the second half of the fiscal year and persistence of highprices of raw materials.

Net Sales
As mentioned, consolidated net sales decreased ¥162.5 billion,or 10.8%, to ¥1,338.6 billion.
The principal factors accounting for this decline were(a) a drop in sales of ¥36.9 billion in the Aerospace segment
because of lower sales to Japan’s Ministry of Defense (MOD)and to Boeing combined with such factors as the appreciationof the yen against the U.S. dollar, (b) a decline of ¥37.4 billion
in the sales of the Plant & Infrastructure Engineering segmentowing to lower sales of municipal incineration waste treatment plants and other facilities, and (c) a decrease in sales of¥97.5 billion in the Consumer Products & Machinery segment
because of a significant downturn in sales of motorcycles andthe adverse impact of the rapid appreciation of the yen against
other currencies.
Overseas sales were down ¥91.9 billion, or 11.2%, to¥730.6 billion. By region, sales in North America decreased¥48.7 billion, or 13.6%, to ¥310.0 billion; sales in Europe fell
¥37.3 billion, or 24.3%, to ¥116.3 billion; sales in Asia outside
Japan rose ¥12.4 billion, or 7.7%, to ¥174.3 billion; and sales
in other areas decreased ¥18.3 billion, or 12.3%, to ¥130.1
billion. The ratio of overseas sales to consolidated net sales
declined 0.2 percentage point, to 54.5%, compared with
54.7% in the previous fiscal year.
The following sections provide additional details regarding
performance by business segment. Operating income or loss
includes intersegment transactions.

Sales by Segment(Billions of yen)

40

7.8

35.1

1,501.1

1,338.6

1,438.6

1,322.5

1,241.6

1,600

Net Income(%)(Billions of yen)

9.4

6.3

1,200

29.8

Net Sales

13.9

30

15.0

20

14.6

11.7

11.5

7.9
400

16.5

25.1
800

10

0

0

05 06 07 08 09

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

05 06 07 08 09

25

Sales of this segment decreased ¥36.9 billion, or 15.6%, to¥200.4 billion, because sales to the MOD and sales of component parts for the Boeing 777 both declined and the appreciation of the yen against the U.S. dollar had an adverse impact.
The segment reported an operating loss of ¥4.2 billion, adecrease of ¥15.1 billion from the previous fiscal year caused
by lower sales, increasing costs including the effects ofchanges in accounting methods for valuation of inventories
and other factors.

Shipbuilding
On a consolidated basis, this segment received orders for one
LPG carrier and five bulk carriers. In value terms, orders fell
¥179.8 billion, or 71.5%, to ¥71.5 billion, a marked drop fromthe previous year when a large number of orders for bulk carriers were received.
Consolidated sales decreased ¥15.0 billion, or 10.6%, to¥126.4 billion, mainly due to lower sales of large-scale vessels.
The segment reported an operating loss of ¥1.0 billion, as aresult of a decline of ¥4.3 billion from the previous fiscal year
because of the decline in sales combined with high costs of
raw materials and the appreciation of the yen against the U.S.
dollar.

Gas Turbines & Machinery
Orders on a consolidated basis received by this segment rosea substantial ¥128.1 billion, or 56.3%, to ¥355.5 billion, andwere on a level considerably higher than in the previous fiscal
year. This was because of the receipt of new orders for components for Trent XWB commercial aircraft engines, andan increase in orders for diesel generator set and marine
propulsion systems.
Sales rose ¥9.7 billion, or 5.2%, to ¥195.2 billion, supported by higher sales of diesel engines and other equipment.
Operating income, however, declined ¥2.4 billion, or 17.7%,
to ¥11.0 billion, despite the increase in sales because of the
impact of the appreciation of the yen against the U.S. dollar,
the adverse impact of changes in accounting methods forvaluation of inventories, and other factors.

Rolling Stock & Construction Machinery
Reflecting considerable rises in domestic orders for various
types of products, orders on a consolidated basis rose ¥81.4
billion, or 44.4%, to ¥264.6 billion. Orders received included
those for Shinkansen trains for the Japan Railways Group,
commuter trains, locomotives, and other rolling stock as wellas orders for subway cars from the New York City Transit
Authority and other sources.
Consolidated sales rose ¥14.7 billion, or 8.6%, to ¥186.5
billion, despite lower sales of construction machinery, as deliveries to overseas customers increased. Operating income
expanded ¥4.2 billion, or 58.5%, to ¥11.4 billion.

157.7

1,500

1,000

100

7.0

7.9

11.2

15

10

155.4
113.2

150

138.5

20

21.1

18.9

200

1,399.8

25

1,378.8(Billions of yen)
1,358.0

Total Assets(Billions of yen)

1,194.5

Working Capital

(Yen)

165.8

Net Income per Share

1,284.1

Plant & Infrastructure Engineering
On a consolidated basis, orders declined ¥22.4 billion, or
21.1%, to ¥83.6 billion, despite the receipt of orders for various types of plants and LNG storage tanks. Sales were down
¥37.4 billion, or 26.2%, to ¥105.2 billion, owing to increases
in overseas sales of nonferrous refining plants, but a drop insales of municipal incineration waste treatment plants, andAerospace
On a consolidated basis, orders of this segment rose ¥36.7
billion, or 18.1%, to ¥239.2 billion, on the strength of neworders for component parts for the B777 of Boeing andorders for the P-1 fixed-wing maritime patrol aircraft ofJapan’s Ministry of Defense (MOD).

500
50

5

0

0

05 06 07 08 09

26

0

05 06 07 08 09

05 06 07 08 09

Kawasaki Heavy Industries, Ltd. Annual Report 2009

other factors. Operating income slipped ¥1.9 billion, or
17.2%, to ¥9.0 billion, accompanying the drop in sales.

The following sections summarize performance by geographic
segment.

Consumer Products & Machinery
Consolidated sales of this segment decreased ¥97.5 billion, or
22.5%, to ¥336.5 billion. Although sales of motorcycles in
Asian markets increased, sales in Europe and the United States
declined, and sales of robots to the automobile and semiconductor industries decreased. This segment reported an operating loss of ¥10.1 billion, a decrease of ¥29.8 billion fromoperating income of ¥19.7 billion in the previous fiscal year.
This decline in profitability resulted from lower sales, especiallysales of large motorcycles, the averse impact of the appreciation of the yen against the U.S. dollar, euro, and other currencies, and other factors.
Please note that since production in this segment is carriedout mainly in anticipation of demand, figures for orders andsales are the same.

Japan
Sales in Japan decreased ¥84.0 billion, or 7.9% from the previous fiscal year, to ¥974.5 billion, mainly because of declines insales in the Shipbuilding and Aerospace segments. Operating
income dropped ¥61.5 billion, or 82.1%, to ¥13.4 billion, due
principally to the decrease in sales and the adverse impact ofchanges in accounting methods for valuation of inventories.
North America
Sales in North America were down ¥46.7 billion, or 17.5%, to¥220.9 billion, as a consequence of lower sales of motorcycles
and other products, and the segment reported an operating
loss of ¥1.4 billion.
EuropeSales in Europe decreased ¥40.7 billion, or 30.9%, to ¥90.9
billion, because of lower sales of motorcycles and other products. Operating income dropped ¥3.8 billion, or 84.2%, to¥0.7 billion.

Hydraulic Machinery
Orders of this segment on a consolidated basis, principallyfrom the construction machinery industry, decreased ¥8.2 billion, or 8.9%, to ¥84.1 billion. Consolidated sales rose ¥0.9
billion, or 1.1%, to ¥84.9 billion, because of strong sales tothe construction machinery industry in the first six months of
the fiscal year and other factors. Operating income decreased¥0.7 billion, or 8.0%, to ¥8.4 billion.

Asia
Sales in Asia outside Japan rose ¥10.0 billion, or 30.1%, to¥43.3 billion, and operating income jumped ¥3.1 billion, or
213.5%, to ¥4.6 billion.

156.1

10

8

100

6

150
4

3.8

200

100

11.1

191.1

12

7.3

150

142.8

200

5.7

250

206.2

300

243.1

295.4

350

176.8

(%)

178.0

Return on Equity

(Yen)
319.0

Net Assets per Share

(Billions of yen)

295.2

Total Net Assets

11.4

Other Areas
In other areas, sales decreased ¥1.1 billion, or 10.7%, to ¥9.1
billion, but operating income expanded ¥0.1 billion, or 34.4%,
to ¥0.4 billion.

Other
Sales on a consolidated basis declined ¥1.0 billion, or 1.0%, to¥103.6 billion. Operating income increased ¥1.9 billion, or
80.9%, to ¥4.3 billion.

50
2

50
0

0

05 06 07 08 09

0

05 06 07 08 09

05 06 07 08 09

27

Cost, Expenses, and Earnings
The cost of sales decreased 9.1%, to ¥1,146.9 billion, and therate of decrease in cost of sales was 1.7 percentage points
lower than the 10.8% drop in net sales. As a result, grossprofit decreased ¥47.4 billion, or 19.8%, to ¥191.7 billion,
and the gross profit margin fell 1.6 percentage points, to14.3%, compared with 15.9% in the previous fiscal year.
Selling, general and administrative expenses were up¥0.8 billion, or 0.5%, to ¥162.9 billion, owing to an increasein R&D expenses and other items. Operating income fell
¥48.2 billion, or 62.7%, to ¥28.7 billion. The principal factors
accounting for this decrease included (a) substantial declines
in sales of mass-produced items, principally those in theConsumer Products & Machinery segment, (b) the rapid appreciation of the yen against the U.S. dollar, euro, and othercurrencies in the latter half of the fiscal year, and (c) the
persistence of high prices of raw materials. As a consequence,
the ratio of operating income to net sales fell 3.0 percentage
points, to 2.1%, compared with 5.1% in the previous fiscal
year.
Other income (expenses) for fiscal 2009 amounted to
expenses of ¥5.1 billion, compared with expenses of ¥18.9 billion for the previous fiscal year. The principal cause of thisdecline was a decrease of expenses in “other, net” from ¥23.5
billion in the previous fiscal year to ¥11.5 billion for the fiscal
year under review. The main factors influencing this outcome
were (a) an increase in the provision for loss on damages suitfrom ¥2.2 billion in the prior fiscal year to ¥5.2 billion for fiscal
2009 and (b) the movement of the loss (gain) on contributionof securities to the pension trust from a gain of ¥1.4 billion in
the previous fiscal year to a loss of ¥4.5 billion for the fiscal
year under review as well as increases in certain other expense
items. However, a foreign exchange gain of ¥10.4 billion(compared with a foreign exchange loss of ¥11.5 billion forthe previous fiscal year) offset (a) and (b) above.
Primarily as a result of the considerable decline in operating
income from the previous fiscal year, income before income
taxes and minority interests declined ¥34.4 billion, or 59.3%,
to ¥23.6 billion. The ratio of net current and deferred income
taxes to income before income taxes and minority interests
was 45.6%, versus 37.9% for the previous year and higher
than the statutory tax rate of 40.5%. This difference wasmainly due to provisions to reserves for valuation allowancewith deferred tax assets. As a result of these factors, after the
deduction of minority interests in net income of consolidated
subsidiaries, net income for the fiscal year decreased ¥23.4 billion, or 66.6%, to ¥11.7 billion. The ratio of net income to net
sales declined 1.4 percentage points, to 0.9%, compared with28

2.3% for the previous fiscal year. ROE (calculated using
average total net assets) decreased 7.6 percentage points,
to 3.8%, versus 11.4% for the previous fiscal year.
Capital expenditures for the fiscal year under review
amounted to ¥82.5 billion, compared with ¥50.5 billion in
the previous fiscal year, and R&D expenses were ¥38.3 billion,
versus ¥36.2 billion in the previous fiscal year.

FINANCIAL CONDITION
Total assets at the end of the fiscal year were ¥21.0 billion,
or 1.5%, higher than at the end of the previous fiscal year
and amounted to ¥1,399.8 billion. Of this total, current assets
were ¥13.5 billion, or 1.4%, higher than at the end of the previous fiscal year and amounted to ¥995.8 billion. This increase
was primarily due to an increase in work in process, reflecting
progress toward the completion of orders received. Investments
and long-term loans decreased ¥25.4 billion from the previous
fiscal year as a result of the decrease in the value of investments in securities accompanying the drop in stock prices.
Net property, plant and equipment rose ¥24.2 billion over theprevious fiscal year-end as a result of active capital investment.
Deferred tax assets, intangible and other assets were up ¥8.7
billion over the previous fiscal year.
Liabilities increased ¥44.8 billion, or 4.2%, to ¥1,104.5 billion. This overall balance of liabilities was influenced mainly by(a) a decrease of ¥72.5 billion, or 16.8% in trade payables and(b) an increase of ¥112.8 billion, or 40.8% in interest-bearing
debt, such as borrowings, bonds payable, and other factors.
Current liabilities were up ¥5.5 billion, or 0.7%, to ¥830.0
billion, and long-term liabilities increased ¥39.3 billion, or
16.7%, to ¥274.5 billion.
Net assets declined ¥23.8 billion, or 7.5%, to ¥295.2 billion.
This was mainly because of a decrease in foreign currencytranslation adjustments due to the appreciation of the yen andother factors.
The ratio of shareholders’ equity to total assets fell 2.0 percentage points, to 20.7%, compared with 22.7% at the endof the previous fiscal year. In addition, the net debt-to-equity
ratio rose substantially from 75.5% at the previous fiscal yearend to 122.9% at the end of the fiscal year under review.

MANAGEMENT INDICATORSThe Company’s objective is to meet and exceed the expectations of investors for profitability. The management indicatorKawasaki Heavy Industries, Ltd. Annual Report 2009

we have adopted is before-tax return on invested capital(ROIC), which measures how efficiently the Company uses
its capital. As it works to maximize before-tax ROIC, theCompany is working to strengthen its financial position byimplementing measures to expand profit and simultaneously
improve the efficiency of invested capital. Before-tax ROIC is
computed by calculating the ratio of earnings before interestand taxes (EBIT) to the sum of interest-bearing debt and total
shareholders’ equity. (Shareholders’ equity is defined as net
assets minus minority interests.)
Applying this formula, before-tax ROIC for the year underreview was 4.5%, which was 6.7 percentage points lower
than the figure of 11.2% for the previous fiscal year.
In addition, under the Group’s Medium-Term Business
Plan “Global K,” announced in September 2006, the Group isaiming to strengthen its earning power and has therefore also
adopted the ratio of recurring profit to net sales as a key management indicator. Recurring profit is used in accounting standards generally accepted in Japan. It is the sum of operating
income, net interest income (expenses), dividend income, andother non-operating and recurring items.
For the fiscal year under review, the Group’s ratio of recurring profit to net sales was 2.9%, which was 1.4 percentage
points lower than the 4.3% reported for the previous fiscal
year.

As a result of these cash flows, cash and cash equivalents at
the end of fiscal 2009 amounted to ¥31.4 billion, which was¥6.8 billion less than in the previous fiscal year.

DIVIDENDS
The Company’s policy is to pay stable cash dividends to its
shareholders, giving due consideration to increasing retained
earnings to strengthen and expand its business foundations
for future growth.
The Company’s basic policy regarding cash dividends fromretained earnings is to pay two dividends, one for the interim
period and the other at the end of the fiscal period. The entity
making final decisions on dividends is the meeting of theBoard of Directors for the interim dividend and the general
meeting of shareholders for the year-end dividend.
In view of the Company’s policy of paying stable cash dividends, the decision was made to pay a dividend of ¥3 pershare (an interim dividend of ¥0 and a year-end dividend of¥3). The remainder of retained earnings will be used to makeinvestments related to the Company’s businesses, the repayment of borrowings, and for other uses.
Please note that the Company’s Articles of Incorporation
provide for paying an interim dividend as stipulated in Article454-5 of the Japanese Corporate Law.

CASH FLOWS
BUSINESS RISK
During fiscal 2009, net cash used for operating activities was¥41.3 billion, ¥117.0 billion more than in the previous fiscal
year. Principal cash inflow items were depreciation and amortization of ¥44.3 billion and income before income taxes andminority interests of ¥23.6 billion. Among cash outflow items
were the decline in trade payables of ¥55.1 billion, theincrease in inventories of ¥54.7 billion, and income taxes of¥25.1 billion.
Net cash used for investing activities amounted to ¥72.3 billion, ¥23.2 billion higher than in the previous fiscal year. The
principal use of this cash was for the acquisition of property,
plant and equipment.
Free cash flow, which is the net amount of cash fromoperating and investing activities, amounted to an outflow
of ¥113.5 billion, compared with an inflow of ¥26.7 billion
for the previous fiscal year.
Net cash provided by financing activities was ¥107.7 billion,¥135.1 billion more than in the previous fiscal year. This
increase was mainly due to a rise in borrowings.

External factors that may have an effect on the KHI Group’s
performance and financial position include the following:(1) Political and Economic Conditions
The Group conducts its business activities not only in Japan but
also elsewhere in Asia, North America, Europe, and other areasand is subject to the consequences of political and economic
developments in these regions. For example, trends in personal
consumption may have an impact on the sales of theConsumer Products & Machinery segment, while trends in private-sector capital investment and public works investment
may have an influence on orders of the Gas Turbines &Machinery and the Plant & Infrastructure Engineering segments. Moreover, demand for passenger air travel and conditions in shipping markets may have an impact on the
Aerospace and Shipbuilding segments, respectively. Disputes
and political changes may have an effect on the Company’s
overseas projects.

29

(2) Fluctuations in Foreign Exchange Rates
During fiscal 2009, overseas sales accounted for 54.5% ofconsolidated net sales. Accordingly, the Group has a substantial volume of transactions denominated in U.S. dollars, euros,and other currencies. To reduce foreign exchange risk, theGroup is working to increase the ratio of the total cost of
goods sold that is denominated in foreign currencies and,while taking into due account trends in foreign exchange
rates, endeavors to take flexible measures to hedge the effectof exchange rate fluctuations through the use of forward contracts and other hedging techniques. However, the majority of
the Group’s manufacturing facilities are located in Japan, andits sales to overseas markets are, therefore, subject to foreignexchange fluctuation risk.
(3) Fluctuations in Prices of Raw Materials
Since the Group has many projects that require considerable
time for completion, from the receipt of orders to final delivery, fluctuations in the prices of steel and other raw materials
may have an impact on the profitability of such projects.
Accordingly, the Group is subject to the risk of fluctuationsin prices of raw materials.
(4) Government Regulations
The Group conducts its business activities in compliance withthe restrictions in effect, including laws and regulations, in the
countries and regions where it operates. However, the Group’s
operations may be affected if such restrictions are subject tounpredictable changes and if new restrictions are put into
effect.

CORPORATE GOVERNANCE(1) Basic Stance toward Corporate Governance—
Enhancing Internal Control Systems
KHI has created a corporate governance structure appropriate
for its operations, with members of the Board of Directors andauditors playing central roles, and is working to enhance andimprove its internal control systems. Specific aspects of thissystem are as follows. Regarding the decision making and the
conduct of operations of directors and employees, the scopeof authority, responsibilities, and duties of directors andemployees is clearly stated in the Company’s internal rules.
In addition, those responsible are required to keep records ofactual decisions made and the conduct of operations, and anauditing system has been established to check on whether the30

content and form of these decisions and conduct of operations
are in accordance with the Company’s internal rules. As aresult, the basic stance of the KHI Group as a whole regarding
corporate governance is to endeavor to increase its corporate
value through the highly transparent, efficient, and soundmanagement of its operations as the Group works to buildsmooth relationships with all its stakeholders, including shareholders, customers, employees, and the community.
(2) KHI’s Corporate Governance Framework
1. Conduct of Operations
KHI has established a Board of Directors with ten members
who are responsible for formulating management strategy andsupervising the conduct of operations. In addition, to createa management system that can respond quickly to changes
in the operating environment, executive officers are appointed
by the Board of Directors to be responsible for the day-to-day
conduct of business operations.
The Board of Directors decides on the basic objectives
and policies for the conduct of operations as it formulates
management plans. These objectives and policies are thentransmitted to all the executive officers and reviewed in detailto ensure full understanding at the meeting of the Group
Executive Officer Committee. Subsequently, the Management
Committee, which is composed of representative directors andmanagement responsible for major subsidiaries, and the Boardof Directors follow up on the implementation of management
plans. To make the responsibility for management clear, thecompensation of directors is incentive-based, reflecting corporate performance, and directors must stand for re-election
annually. For major management issues, the Management
Committee discusses such issues in detail, and then designated matters are decided by the Board of Directors. The
Management Committee, in principle, meets three times amonth, and discusses management policy, management strategy, important management issues, and other matters fromthe perspective of the Group as a whole.
2. Auditing Functions
KHI has formed a Board of Auditors with four members (twoof whom are outside auditors), and, under the provisions ofJapanese Corporate Law, the Board of Auditors conducts
examinations of business operations and audits the financial
accounts. Accordingly, the corporate auditors examine andmonitor the state of operations and Group assets through anumber of activities. These include attending the meetingsof the Board of Directors and the Management Committee,

Kawasaki Heavy Industries, Ltd. Annual Report 2009

examining important documents, holding periodic meetings
with the representative directors, and auditing KHI’s divisions
and subsidiaries. In addition, the two outside corporate auditors on the Board of Auditors, who have no transactions orother relationships that represent a conflict of interest, perform their surveillance duties as neutral and objective third
parties. The internal corporate auditors share information
with the outside corporate auditors and work to enhance theeffectiveness of their management surveillance functions.
Please note that the contracts signed between the Company
and the outside corporate auditors, the scope of whose
authority is based on Article 427-1 of the Japanese Corporate
Law and Article 43 of KHI’s Articles of Incorporation, provide
for a limit on compensation to the outside auditors of thehigher of ¥10 million or the amount stipulated in Article 425-1of the Corporate Law (the equivalent of two years’ compensation paid to the corporate auditors).
Moreover, KHI has appointed KPMG AZSA & Co. as its independent public accounting firm, and this firm conducts auditsof the Company’s financial statements. The corporate auditors
and the Board of Auditors receive reports regarding theaccounting audit, including the outline of the audit plans of
the independent accounting firm, the items the accounting
firm selects for particular focus, and other matters. In addition,
the Board of Auditors explains the Company’s auditing plans
to the independent public accounting firm. Reports on the
results of audits by the accounting firm are presented periodically (twice annually), and the corporate auditors and theaccounting firm work closely together, exchanging informationand opinions. As deemed necessary, the corporate auditors
attend the audits conducted by the independent accounting
firm and receive reports from time to time from the accounting firm.
Moreover, separately from the auditing activities previously
mentioned, which are based on the Corporate Law, KHI’s

Auditing Department, which acts as the internal auditing unit,
monitors the overall conduct of management activities within
the KHI Group and carries out audits on a continuing basis ofwhether operations are being conducted appropriately and incompliance with laws and internal rules as well as other matters while endeavoring to upgrade internal control functions.
In addition, to raise the level of auditing activities, the corporate auditors and the Auditing Department exchange information on a monthly basis and share information regarding theresults of their auditing activities and items they have singled
out for attention.
3. Compliance Systems
Along with updating and improving internal regulations
related to ethical matters, in addition to the CSR Committee,
KHI has formed compliance committees in each of its organizational units in Japan to take the initiative in promoting theself-assessment and verification of compliance. In addition, aCompliance Guidebook has been prepared and distributed to
employees, not only of the parent company but also to thoseof virtually all subsidiaries and affiliates in Japan, and measures
are being implemented to conduct various forms of compliance training, along with concerted efforts to raise the level ofawareness of compliance matters within the Group. In addition to these initiatives, a Compliance Reporting andConsultation System has been created through an outside
legal office to enable employees to receive advice without
being concerned about being observed by other employees.

(3) Compensation Paid to Directors
and Corporate Auditors
During the fiscal year under review, the amounts of compensation paid to the Company’s directors and corporate auditors
were as follows.

Amounts Paid (Millions of yen)Compensation based on the Articles of Incorporationand decisions of the General Meeting of Shareholders
Retirement payments based on decisions of theGeneral Meeting of Shareholders
Total

Directors

Corporate Auditors

Total

¥575

¥75

¥650

35

6

41

¥610

¥81

¥691

31

Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of March 31, 2009 and 2008

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

ASSETS

2009

2008

2009

Current assets:
Cash on hand and in banks .......................................................................... ¥31,956¥39,875$325,219

Receivables:
Trade ........................................................................................................

402,342

417,934

4,094,667

Other ........................................................................................................

19,406

19,361

197,497

Allowance for doubtful receivables ...........................................................

(3,112)(4,140)(31,671).............................................................................................................................

418,636

433,155

4,260,493

Inventories ....................................................................................................

476,441

439,310

4,848,779

Deferred tax assets (Note 12) ........................................................................

33,232

25,250338,205

Other current assets ......................................................................................

35,532

44,692361,611

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

995,797

982,282

10,134,307

Investments in securities (Notes 3 and 4) .......................................................

45,85270,052466,640

Long-term loans ...........................................................................................

560

2,006

5,699

Investments and long-term loans:

Other (Note 6) ..............................................................................................

9,064

8,962

92,245

Allowance for doubtful receivables ...............................................................

(1,187)(1,345)(12,080)

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

54,28979,675552,504

Land .............................................................................................................

64,28764,457654,254

Buildings and structures ................................................................................

302,033

293,150

3,073,814

Machinery and equipment ............................................................................

494,938

468,065

5,037,024

Property, plant and equipment (Note 6):

Construction in progress ...............................................................................

19,573

9,938

199,197.............................................................................................................................

880,831

835,610

8,964,289

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

(596,713)(575,683)(6,072,797)

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

284,118

259,927

2,891,492

Deferred tax assets (Note 12) ........................................................................

42,77338,337435,304

Intangible and other assets (Note 5) ..............................................................

22,794

18,549231,976.............................................................................................................................

65,56756,886667,280

Total assets ................................................................................................... ¥1,399,771¥1,378,770$14,245,583

Deferred tax, intangible and other assets:

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

32

Kawasaki Heavy Industries, Ltd. Annual Report 2009

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

LIABILITIES AND NET ASSETS

2009

2008

2009

¥ 137,681$ 2,110,269

Current liabilities:
Short-term borrowings and current portionof long-term debt (Note 6) .......................................................................... ¥ 207,355
Trade payables (Note 6) ................................................................................

358,478

431,000

3,648,260

Advances from customers .............................................................................

125,763

124,679

1,279,900

Income taxes payable (Note 12) ....................................................................

8,710

16,836

88,642

Accrued bonuses ..........................................................................................

14,242

19,263

144,942

Provision for product warranties ...................................................................

7,638

6,734

77,733

Provision for losses on construction contracts ................................................

20,931

8,836

213,016

Provision for losses on damages suit .............................................................

7,411

2,245

75,422

Deferred tax liabilities (Note 12) ....................................................................

932

270

9,485

Other current liabilities ..................................................................................

78,54676,997799,369

Total current liabilities ...............................................................................

830,006

824,541

8,447,038

Long-term debt, less current portion (Note 6) ...............................................

181,933

138,766

1,851,547

Employees’ retirement and severance benefits (Note 7) .................................

79,96981,928813,851

Deferred tax liabilities (Note 12) ....................................................................

2,938

5,433

29,900

Provision for environmental measures ...........................................................

3,981

2,168

40,515Long-term liabilities:

Other ............................................................................................................

5,698

6,896

57,989Total long-term liabilities ...........................................................................

274,519

235,191

2,793,802

104,329

104,329

1,061,765

Contingent liabilities (Note 8)
Net assets (Note 9):
Common stock:
Authorized—3,360,000,000 shares
Issued—1,669,629,122 shares in 2009
—1,669,629,122 shares in 2008 .....................................................
Capital surplus ..............................................................................................

54,28254,291

552,432

Retained earnings .........................................................................................

154,273

151,401

1,570,049

Net unrealized gains on securities .................................................................

3,140

10,292

31,957

Gains/losses on hedging items ......................................................................

(264)

5,217

(2,687)

Foreign currency translation adjustments ......................................................

(24,851)(11,878)(252,911)

Treasury stock—1,394,288 shares in 2009
—1,324,199 shares in 2008 ...................................................

(468)

(460)

(4,763)

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

4,805

5,846

48,901

Total net assets .........................................................................................

295,246

319,038

3,004,743

Total liabilities and net assets .................................................................... ¥1,399,771¥1,378,770$14,245,583

33

Consolidated Statements of Income
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2009, 2008 and 2007

Thousands of
U.S. dollars(Note 1)Millions of yen
2009

2008

2007

2009

Net sales ..................................................................................... ¥1,338,597¥1,501,097¥1,438,619$13,623,010

Cost of sales ...............................................................................

1,146,944

1,262,032

1,213,524

11,672,542

Gross profit .........................................................................

191,653

239,065

225,095

1,950,468

Selling, general and administrative expenses (Note 10) ..........

162,940

162,155

155,953

1,658,253

Operating income ....................................................................

28,71376,91069,142292,215

4,352

5,005

3,807

44,291

8,709

7,642

2,694

88,632Other income (expenses):
Interest and dividend income ...............................................
Equity in income of nonconsolidated
subsidiaries and affiliates ...................................................
Interest expense ...................................................................

(6,658)(7,980)(6,650)(67,759)

Other, net (Note 11) ............................................................

(11,491)(23,522)(23,725)(116,945)

Income before income taxes and minority interests ..........

23,62558,05545,268240,434

Current ................................................................................

(16,783)(23,271)(16,623)(170,802)Deferred ..............................................................................

6,022

1,260

1,337

61,286

Income taxes (Note 12):

Minority interests in net incomeof consolidated subsidiaries ...................................................

(1,136)

Net income ................................................................................ ¥11,728(903)¥

35,141(210)¥

29,772(11,561)$

119,357

U.S. dollars(Note 1)Yen

Per share amounts (Note 16):
Earnings per share—basic ....................................................

¥7.0

¥21.1

¥18.9

Earnings per share—diluted .................................................

6.9

20.6

17.2

0.07

Cash dividends ....................................................................

3.0

5.0

5.0

0.03

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

34

$0.07

Consolidated Statements of Changes in Net Assets

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2009, 2008 and 2007

Thousands

Millions of yen

Number ofshares ofcommonstock

Netunrealized
gains onsecurities

Gains/
losses on
hedgingitems

Foreigncurrencytranslation
adjustments

Commonstock

CapitalsurplusRetainedearnings

Balance at March 31, 2006 ...................................... 1,557,715 ¥ 92,085
Net income for the year ...................................
——
Adjustments from translation of foreign
currency financial statements .........................
——
Increase in net unrealized gains on securities ....
——
Treasury stock purchased, net ..........................
——Cash dividends .................................................
——
Gain on sales of treasury stock .........................
——
Bonuses to directors and statutory auditors ......
——
Conversion of convertible bonds ...................... 101,911
11,103
Other ...............................................................
——
Balance at March 31, 2007 ...................................... 1,659,626 103,188
Net income for the year ...................................
——
Adjustments from translation of foreign
currency financial statements .........................
——
Decrease in net unrealized gains on securities ...
——Treasury stock purchased, net ..........................
——Cash dividends .................................................
——
Loss on sales of treasury stock ..........................
——
Conversion of convertible bonds ......................
10,003
1,141
Other (Note 13) ...............................................
——
Balance at March 31, 2008 ...................................... 1,669,629 104,329
Net income for the year ...................................
——
Adjustments from translation of foreign
currency financial statements .........................
——
Decrease in net unrealized gains on securities ...
——Treasury stock purchased, net ..........................
——Cash dividends .................................................
——
Loss on sales of treasury stock ..........................
——
Other ...............................................................
——
Balance at March 31, 2009 .................................... 1,669,629 ¥104,329¥42,094—¥100,776 ¥14,097 ¥
29,772
—

—
—
—
—
1
—
11,084—53,179————(4,673)
—
(14)
—
(62)
125,799
35,141

—
5,245
—
—
—
—
—
—
19,342
—

—
—
—
—
—
—
—
(1,608)(1,608)
—

2,009
—
—
—
—
—
—
—
(9,417)
—

—
—
(17)
—
—
—
—
—
(55)
—

—
—
—
—
—
—
—
4,950
4,950
—

—
—
—
—
(1)
1,113
—
54,291————(8,298)——(1,241)
151,401
11,728—(9,050)—————
10,292
—

—
—
—
—
—
—
6,825
5,217
—

(2,461)——————(11,878)
—

—
—
(410)
—
—
—
5
(460)
—

—
—
—
—
—
—
896
5,846
—

— ¥(11,426)——

Treasury Minority
stock
interests¥ (38) ¥
—

—
—

—
—
—
— (12,973)————(7,152)
—
—
—
—
—
—
—
—
—
(8)
—
—
(8,342)
—
—
—
—
—
(9)
—
—
—
—
—
—
—
(514)
— (5,481)—— (1,041)¥54,282 ¥154,273 ¥ 3,140 ¥ (264) ¥(24,851) ¥(468) ¥4,805
Thousands of U.S. dollars (Note 1)

Commonstock

CapitalsurplusRetainedearnings

Net
unrealized
gains onsecurities

Gains/
losses on
hedgingitems

Foreigncurrencytranslation
adjustments

Treasurystock

Minority
interests

Balance at March 31, 2008 ....................................................... $1,061,765 $552,524 $1,540,820 $104,743 $53,094 $(120,883) $(4,681) $59,495
Net income for the year ....................................................
——
119,357—————
Adjustments from translation of foreign
currency financial statements ..........................................
————— (132,028)——
Decrease in net unrealized gains on securities ...................
——— (72,786)————
Treasury stock purchased, net ...........................................
—
—
—
—
—
—
(82)
—
Cash dividends .................................................................
——(84,897)—————
Loss on sales of treasury stock ..........................................
—
(92)
—
—
—
—
—
—
Other ................................................................................
——(5,231)— (55,781)—— (10,594)
Balance at March 31, 2009 .................................................... $1,061,765 $552,432 $1,570,049 $ 31,957 $ (2,687) $(252,911) $(4,763) $48,901
The accompanying notes to the consolidated financial statements are an integral part of these statements.

35

Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2009, 2008 and 2007

Thousands of
U.S. dollars(Note 1)Millions of yen
2009

2008

2007

2009

¥58,055¥45,268$ 240,434

30,279451,191

Cash flows from operating activities:
Income before income taxes and minority interests ................................. ¥23,625
Adjustments to reconcile net income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization ...........................................................

44,33437,455

Loss on impairment of fixed assets .....................................................

1,399

2,764

—

14,238Provision for retirement and severance benefits .....................................

2,315

7,124

8,460

23,560

Reversal of allowance for doubtful receivables ....................................

(849)

(406)

(2,224)(8,640)

Provision for product warranties ..........................................................

1,162

—

—

11,826

Provision for losses on construction contracts .....................................

12,202(3,498)(247)

124,181

Provision for restructuring charges on commercial
aircraft manufacturing business ........................................................

——(9,557)—

Provision for loss on damages suit ......................................................

5,165

(153)

2,398

52,565

Provision for environmental measures .................................................

1,812

2,168

—

18,441

Loss on disposal of inventories ............................................................

2,382

1,350

1,025

24,242Gain on sale of marketable and investment securities .........................

(620)

(349)

(889)

(6,310)Loss on sale of property, plant, and equipment ..................................

164

1,397

1,414

1,669

Loss (gain) on contribution of securities to pension trust .....................

4,492(1,376)—45,715Investment gain on equity method .....................................................

(8,709)(7,642)—(88,632)

Interest and dividend income ..............................................................

(4,352)(5,005)(3,807)(44,291)

Interest expense .................................................................................

6,658

7,980

6,650

67,759Changes in assets and liabilities:
Decrease (increase) in:
5,398(11,102)(2,867)54,936Inventories ................................................................................. (54,709)

Trade receivables ........................................................................

(19,046)(40,608)(556,778)

Other current assets ...................................................................

(2,709)(10,723)

5,157(27,570)

Increase (decrease) in:
Trade payables ........................................................................... (55,077)

26,870(1,248)(560,523)

Advances received ......................................................................

8,274

1,849

25,28584,205

Accrued bonuses ........................................................................

(5,335)

1,451

2,634

(54,295)

Other current liabilities ...............................................................

(8,867)

7,758

223

(90,240)

Other, net ..........................................................................................

4,794(3,314)

2,887

48,788Subtotal ......................................................................................... (17,051)

93,607

70,233(173,529)

9,608

5,393

90,841

Cash received for interest and dividends .................................................

8,926

Cash paid for interest .............................................................................

(6,481)(8,035)(6,438)(65,958)

Cash paid for income taxes .................................................................... (25,064)(19,414)(23,329)(255,078)(1,587)——(16,152)

Net cash provided by (used for) operating activities ............................ (41,257)

75,76645,859(419,876)

Cash paid for suspension of activities for participation in MotoGP ...........

(Continues to next page)36

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Thousands of
U.S. dollars(Note 1)Millions of yen(Continued from previous page)

2009

2008

2007

2009

Cash flows from investing activities:
706(1,635)27

7,185

Acquisition of property, plant and equipment ......................................... (68,059)

Decrease (increase) in time deposits with maturities over three months ...

(45,598)(31,651)(692,642)

Proceeds from sales of property, plant, and equipment ..........................

2,903

469

2,301

29,544

Acquisition of intangible assets ...............................................................

(6,400)(5,238)(3,625)(65,133)

Proceeds from sales of intangible assets .................................................

15

55

176

153

Acquisition of investments in securities ...................................................

(3,043)(1,183)(10,089)(30,969)

Acquisition of investments in affiliates .....................................................

(1,241)——(12,630)

Proceeds from sale of investments in securities .......................................

1,796

5,731

1,589

18,278Decrease (increase) in short-term loans receivable ...................................

(33)

(278)

254

(336)

Additions to long-term loans receivable ..................................................

(165)

(990)

(88)

(1,679)Proceeds from collection of long-term loans receivable ...........................

1,475

94

18

15,011Other .....................................................................................................

(238)

(517)

(2,224)(2,422)

Net cash used for investing activities ....................................................... (72,284)(49,090)(43,312)(735,640)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings ..........................................

67,881

13,099(9,958)690,830

Proceeds from long-term debt ................................................................

73,551

3,328

62,061

748,535

Repayment of long-term debt ................................................................ (25,017)(34,817)(48,586)(254,600)

Acquisition of treasury stock ...................................................................

(17)

(479)

(68)

(173)

Cash dividends paid ...............................................................................

(8,321)(8,262)(4,577)(84,684)

Cash dividends paid to minority interests ................................................

(362)

(261)

(179)

(3,684)

Other .....................................................................................................

(22)

—

—

(224)

Net cash provided by (used for) financing activities ................................. 107,693(27,392)(1,307)

1,096,000

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

(907)

(501)

482

(9,230)Net increase (decrease) in cash and cash equivalents ......................................

(6,755)(1,217)

1,724(68,746)

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

38,16939,22837,506

388,449

—

158

—

—

Cash and cash equivalents at end of year ....................................................... ¥31,414¥38,169¥39,228$ 319,703

Increase in cash and cash equivalents due to changes
in fiscal period of consolidated subsidiaries ...................................................

Supplemental information on cash flows:
Cash and cash equivalents:
Cash on hand and in banks in the balance sheets ............................... ¥31,956¥39,875¥39,351$ 325,219(542)(1,706)(123)(5,516)

Total (Note 14) ............................................................................... ¥31,414¥38,169¥39,228$ 319,703

Time deposits with maturities over three months ................................

The accompanying notes to the consolidated financial statements are an integral part of these statements.
See Note 15 for significant noncash transactions.

37

Notes to the Consolidated Financial Statements
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries

38

1. Basis of
Presenting
Consolidated
Financial
Statements

Kawasaki Heavy Industries, Ltd. (the “Company”) and its consolidated domestic subsidiaries maintain their official
accounting and disclosure records in Japanese yen. The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law
and its related accounting regulations and in conformity with accounting principles generally accepted in Japan,
which are different in certain respects as to application and disclosure requirements from International Financial
Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. The accompanying consolidated financial statements have been restructured and translated into English, with some expanded descriptions
and the inclusion of consolidated statements of changes in net assets, from the consolidated financial statementsof the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial Instruments and Exchange Law. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fairpresentation, is not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenienceof readers outside Japan, using the prevailing exchange rate at March 31, 2009, which was ¥98.26 to US$1.00.
The translations should not be construed as representations that the Japanese yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2. Significant
Accounting
Policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies (together, the “Companies”) over which the Company has power of control through majority voting rights orthe existence of certain other conditions evidencing control.
The consolidated financial statements include the accounts of the Company and 97 subsidiaries (95 in 2008 and
96 in 2007).
For the year ended March 31, 2009, 5 subsidiaries (3 in 2008 and 3 in 2007) were excluded from the consolidation. The amount of total assets, net sales, net income and retained earnings of these excluded subsidiaries,
in the aggregate, would not have had a material effect on the consolidated financial statements if they were
included in the consolidation.
( b) Application of the equity method of accounting
Investments in nonconsolidated subsidiaries and affiliates over which the Company has the ability to exercise
significant influence over operating and financial policies are accounted for by the equity method.
For the year ended March 31, 2009, 12 affiliates (18 in 2008 and 19 in 2007) were accounted for by the equity
method.
For the year ended March 31, 2009, investments in 0 nonconsolidated subsidiaries (2 in 2008 and 3 in 2007)
and 14 affiliates (14 in 2008 and 13 in 2007) were stated at cost without applying the equity method of accounting. If the equity method had been applied for these investments, the net income and retained earnings of theseexcluded subsidiaries and affiliates would not have had a material effect on the consolidated financial statements.
(c) Consolidated subsidiaries’ fiscal year-end
The fiscal year-end of 28 consolidated subsidiaries (28 in 2008 and 29 in 2007) is December 31.
These subsidiaries are consolidated as of December 31, and unusual significant transactions for the period
between December 31 and March 31, the Company’s year-end, are adjusted on consolidation.
(d) Elimination of intercompany transactions and accounts
All significant intercompany transactions and accounts and unrealized intercompany profits are eliminated on
consolidation, and the portion attributable to minority interests is credited to minority 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 controlof the respective subsidiary.
(e) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into Japanese yen at year-end rate.
The balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at year-end rate,
except for shareholders’ equity accounts, which are translated at historical rates. The income statements ofconsolidated overseas subsidiaries are translated at average rates, except for transactions with the Company,
which are translated at the rates used by the Company.
The Company and its domestic subsidiaries report foreign currency translation adjustments in net assets.
(f ) Appropriations of retained earnings
Appropriations of retained earnings are recorded in the fiscal year when the proposed appropriations are approved.

Kawasaki Heavy Industries, Ltd. Annual Report 2009(g ) Revenue recognition
Sales of products and construction contracts
Sales of products such as ships, rail cars, airplanes, machinery and motorcycles are principally recognized upondelivery. Contract revenue for the construction of plants, machinery, bridges, etc. is principally recognized on a customer acceptance basis. When prices for components or contract amounts for nearly completed contracts are not
finalized, sales and cost of sales are estimated. The percentage-of-completion method is applied to long-term
contracts such as those for ships, airplanes and plants exceeding ¥3,000 million. The stage of completion is normally determined based on the proportion of costs incurred to date to the estimated total costs of the contract.
The completed contract method is applied to long-term contracts not exceeding ¥3,000 million.
Service revenues
Service revenues are recognized when the services have been rendered. Services include supervisory or installation
services for products such as rail cars, machinery and plants. When the price of such services is individually determined by the contract and the collectability of the revenue is reasonably assured, the service revenue is recognizedon an accrual basis. Otherwise, the service revenue is recognized on a completion basis.
( h) Cash and cash equivalents
Cash on hand, readily available deposits and short-term highly liquid and low risk investments with maturities notexceeding three months at the time of purchase are considered to be cash and cash equivalents in preparing theconsolidated statements of cash flows.
(i) Allowance for doubtful receivables
The allowance for possible losses from notes and accounts receivable, loans and other receivables is provided basedon past experience and the Companies’ estimates of losses on collection.
( j) Inventories
Prior to April 1, 2008, inventories of the Company and its consolidated domestic subsidiaries were stated at cost
determined principally by the specific identification cost method, the moving average method and the first-in, firstout method. However, if the market value of inventories had declined significantly and was not expected to recover to cost, cost was reduced to net realizable value. Effective April 1, 2008, the Company and its consolidated
domestic subsidiaries adopted a new accounting standard, “Accounting Standard for Measurement of Inventories”(Statement No. 9 issued by the Accounting Standards Board of Japan on July 5, 2006), for the measurement of
inventories and have stated the inventories at March 31, 2009 at the lower of cost determined principally by the
specific identification cost method, the moving average method and the first-in, first-out method or net realizablevalue. As a result of this change, operating income and income before income taxes and minority interests forthe year ended March 31, 2009 were ¥4,074 million ($41,461 thousand) less than they would have been without
the change.
( k) Assets and liabilities arising from derivative transactions
Assets and liabilities arising from derivative transactions are stated at fair value.
( l) Investments in securities
The Company and its consolidated domestic subsidiaries classify securities as (a) debt securities intended to be held
to maturity (hereafter, “held-to-maturity debt securities”), (b) equity securities issued by subsidiaries and affiliatedcompanies and (c) all other securities (hereafter, “available-for-sale securities”). There were no trading securities at
March 31, 2009 or 2008.
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 net assets. Realized gains and losses on the sale 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 nonconsolidated subsidiaries
or affiliated companies or 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 nonconsolidated subsidiaries and affiliated companies not subject to the equity method is not readily available, such securities should be written down to net asset
value with a corresponding charge in the statements of income in the event net asset value declines significantly.
In these cases, the fair market value or the net asset value will be the carrying amount of the securities at the
beginning of the next year.
(m) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation, except for buildings acquired after April 1998 in
Japan, is mainly computed on a declining balance basis over the estimated useful life of the asset. Depreciationof buildings acquired after April 1998 in Japan is computed on a straight-line basis over the building’s estimateduseful life.

39

(n) Intangible assets
Amortization of intangible assets, including software for the Company’s own use, is computed by the straight-line
method over the estimated useful life of the asset.
Goodwill is amortized on a straight-line basis over the period its effect lasts. If the amount is not significant, it isexpensed when incurred.
(o) Accrued bonuses
Accrued bonuses for employees are provided based on the estimated amount of payment.
(p) Provision for product warranty
The provision for product warranty is based on past experience and separately provided when able to be reasonably estimated.
(q) Provision for losses on construction contracts
The 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 beyond and such losses can be reasonably estimated.
(r) Provision for environmental measures
The Company reserved an estimated amount to cover expenditures for environmental measure expenses such as
the disposal of PCB waste required under the “Law Concerning Special Measures for Promotion of Appropriate
Disposal of PCB (poly chlorinated biphenyl) Waste” and soil improvement.
(s) Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for loss carryforwards and 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) Employees’ retirement and severance benefits
Employees who terminate their services with the Company and its consolidated domestic subsidiaries are generally
entitled to lump-sum payments, the amounts of which are determined by reference to basic rates of pay at thetime of termination and length of service.
The liabilities and expenses for retirement and severance benefits are determined based on amounts actuariallycalculated using certain assumptions. The Company and its consolidated domestic subsidiaries provided theallowance for employees’ retirement and severance benefits based on the estimated amounts of projected benefit
obligation and the fair value of plan assets (including the retirement benefit trust).
The excess of the projected benefit obligation over liabilities for retirement and severance benefits recorded asof April 1, 2000 (the “net transition obligation”) is being recognized in expenses in equal amounts primarily over
10 years commencing with the year ended March 31, 2001. Actuarial gains and losses and prior service costs arerecognized in expenses in equal amounts within the average of the estimated remaining service years of theemployees commencing with the following and the current period, respectively.
Employees of the Company’s overseas consolidated subsidiaries are generally covered by various pension plansaccounted for in accordance with generally accepted accounting principles in the country of domicile.
(u) Accounting standard for statement of changes in net assets
Effective from the year ended March 31, 2007, the Company and its consolidated subsidiaries adopted the new
accounting standard, “Accounting Standard for Statement of Changes in Net Assets” (Statement No. 6 issued by
the Accounting Standards Board of Japan on December 27, 2005), and the implementation guidance for theaccounting standard for statement of changes in net assets (the Financial Accounting Standard Implementation
Guidance No. 9 issued by the Accounting Standards Board of Japan on December 27, 2005), (collectively, the“Additional New Accounting Standards”).
Accordingly, the Company prepared the statements of changes in net assets for the year ended March 31, 2007
in accordance with the Additional New Accounting Standards. Also, the Company voluntarily prepared the consolidated statement of changes in net assets for 2006 in accordance with the Additional New Accounting Standards.
(v) Hedge accounting
The Company and its consolidated subsidiaries employ deferred hedge accounting. If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer
recognition of gain or loss resulting from a change in the fair value of the derivative financial instrument until the
related loss or gain on the hedged item is recognized.
(w) Finance leases
Prior to April 1, 2008, the Company and its consolidated domestic subsidiaries accounted for finance leases which
did not transfer ownership of the leased property to the lessee as operating leases, with the disclosure of certain“as if capitalized” information in the notes to the consolidated financial statements. Effective April 1, 2008, theCompany and its consolidated domestic subsidiaries adopted the new accounting standard, “Accounting Standard
for Lease Transactions” (Statement No. 13 issued by the Accounting Standards Board of Japan on March 30, 2007),and the implementation guidance for the accounting standard for lease transactions (the Financial AccountingStandard Implementation Guidance No. 16 issued by the Accounting Standards Board of Japan on March 30,2007) for finance leases commencing after March 31, 2008. The new accounting standards require that all finance40

Kawasaki Heavy Industries, Ltd. Annual Report 2009lease transactions be treated as capital leases, and that the Company and its consolidated domestic subsidiaries
capitalize assets used under such leases, except for certain immaterial or short-term finance leases accounted for as
operating leases. As permitted, finance leases which commenced prior to April 1, 2008 and have been accounted
for as operating leases, continue to be accounted for as operating leases, with the disclosure of certain “as if
capitalized” information. This change had minor effect on net income for the year ended March 31, 2009.
(x) Earnings per share
The computations of earnings per share shown in the consolidated statements of income are based upon net income
available to common stockholders and the weighted average number of shares outstanding during each period.
Diluted earnings per share is computed based on the assumption that all dilutive convertible bonds were converted at the beginning of the year.
(y) Cash dividends
Per share amounts of cash dividends for each period represent dividends declared as applicable to the respective year.
(z) Accounting changes in method of depreciation
Effective from the year ended March 31, 2008, the Company and its consolidated domestic subsidiaries changed themethod of depreciation for fixed assets acquired after April 1, 2007 in accordance with the revised corporation tax
law in Japan. As a result of this change, operating income and income before income taxes and minority interests
for the year ended March 31, 2008 were ¥1,162 million less than what they would have been without the change.
In addition, effective from the year ended March 31, 2008, the Company and its consolidated domestic subsidiaries started to depreciate the 5% residual value of fixed assets acquired before March 31, 2007 over 5 years
on a straight line basis to 1 yen from the year after the year when the book value of each asset reached 5% of theacquisition cost, in accordance with the revised Corporation Tax Law in Japan. As a result of this change, operating
income and income before income taxes and minority interests for the year ended March 31, 2008 were ¥2,761
million less than they would have been without the change.
Effective from the year ended March 31, 2009, the Company and its consolidated domestic subsidiaries reviewed
and changed the useful life of machinery and equipment in accordance with the revision of the tax law. As a resultof this change, operating income and income before income taxes and minority interests for the year ended March
31, 2009 were ¥1,690 million ($17,199 thousand) less than they would have been without the change.
(aa) Application of the practical solutions on unification of accounting policies
applied to foreign subsidiaries for consolidated financial statements
Effective from the year ended March 31, 2009, the Company applied the Practical Solutions on Unification of
Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements (Practical Issues Task
Force No. 18 issued by the Accounting Standards Board of Japan on May 17, 2006). This change did not haveany effect on net income for the year ended March 31, 2009.

3. Securities(a) Acquisition costs and book values (fair values) of available-for-sale securities with available fair values as ofMarch 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen
2009

Securities with book values exceeding acquisition costs:
Equity securities ..............................................................
Other securities:
Equity securities ..............................................................
Total ..................................................................................

Acquisition
cost

Book value

Difference

Difference¥5,263¥11,833¥6,570$66,863

4,432¥9,695

3,275¥15,108(1,157)¥5,413(11,774)$55,089

Millions of yen
2008
Acquisition
cost

Securities with book values exceeding acquisition costs:
Equity securities ............................................................... ¥15,982
Other securities:
Equity securities ...............................................................
3,878
Total .................................................................................... ¥19,860

Book value

Difference¥33,990¥18,008

2,732¥36,722(1,146)¥16,86241

(b) Acquisition costs and book values of held-to-maturity debt securities with available fair values as of March 31,
2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2009
Acquisition
cost

Book value

Difference

Difference

¥301

¥302

¥1

$10

Securities with book values exceeding acquisition costs:
Bonds.............................................................................

Millions of yen
2008
Acquisition
cost

Book value

Difference

¥301

¥303

¥2

Securities with book values exceeding acquisition costs:
Bonds.............................................................................

(c) Book values of investments in securities with no available fair values as of March 31, 2009 and 2008 wereas follows:

Held-to-maturity debt securities:
Public corporation bond ................................................................
Total ..................................................................................................
Available-for-sale securities:
Equity securities .............................................................................
Other ............................................................................................
Total ..................................................................................................

Millions of yen
2009
2008
Book value
Book value

Thousands of
U.S. dollars
2009Book value

¥
¥

$
$

2
2

¥7,732
1,721¥9,453¥¥

2
2¥ 8,445
1,717¥10,16220
20$78,689
17,514$96,203

See Note 4 for investments in nonconsolidated subsidiaries and affiliates.

(d) Sales amounts of available-for-sale securities and related gains and losses for the years ended March 31, 2009,2008 and 2007 were as follows:
Thousands of
U.S. dollars

Millions of yen
2009
Sales
amounts

Gains

LossesSalesamounts

Gains

LossesEquity securities ....................................................... ¥1,397

¥886

¥(34)

$14,217$9,016$(346)

Millions of yen
2008

Equity securities .........................................................

Sales
amounts

Gains

Losses

¥729

¥465

¥—

Millions of yen
2007
Sales
amounts

Gains

LossesEquity securities ....................................................... ¥1,493

¥880

¥(0)

For the years ended March 31, 2009, other than above, the Company has contributed investment securities of¥6,930 million (fair value) ($70,527 thousand) to the pension trust and recorded loss on contribution of securities
to the pension trust of ¥4,492 million ($45,715 thousand).

42

Kawasaki Heavy Industries, Ltd. Annual Report 2009

4. Investments in
Nonconsolidated
Subsidiaries
and Affiliates

Investments in nonconsolidated subsidiaries and affiliates as of March 31, 2009 and 2008 were ¥20,985 million($213,566 thousand) and ¥22,862 million, respectively.

5. Goodwill

Goodwill included in intangible and other assets was as follows:
Millions of yen
2009
2008

¥1,106

6. Short-Term
Borrowingsand Long-Term
Debt

¥41

Thousands of
U.S. dollars
2009$11,255

Short-term borrowings and long-term debt as of March 31, 2009 and 2008 comprised the following:
Millions of yen
2009
2008

Short-term borrowings:
Short-term debt, principally bank loans, bearing averageinterest rates of 1.964 percent and 2.904 percent as ofMarch 31, 2009 and 2008, respectively .........................................
Current portion of long-term debt, bearing averageinterest rates of 1.375 percent and 1.274 percent as ofMarch 31, 2009 and 2008, respectively .........................................
Lease obligations, current ..............................................................
Total short-term debt ..................................................................
Long-term debt:
Loans from banks and other financial institutions, partly securedby mortgage or other collateral, due from 2008 to 2035,
bearing average interest rates of 1.306 percent and1.487 percent as of March 31, 2009 and 2008, respectively ..........
Notes and bonds issued by the Company:
2.51–2.775 percent notes due 2008 ........................................
1.07–2.33 percent notes due 2009 ..........................................
1.52–1.60 percent notes due 2011...........................................
1.84 percent notes due 2013 ..................................................
0.90 percent convertible bonds due 2008 ................................
1.00 percent convertible bonds due 2011 ................................
Zero coupon convertible bonds due 2010* ..............................
Zero coupon convertible bonds due 2011* ..............................
Long-term lease obligation ..............................................................
................................................................................................................
Less portion due within one year .....................................................
Total long-term debt ...................................................................

Thousands of
U.S. dollars
2009¥176,924¥112,654$1,800,570

30,158273¥207,355

25,027¥137,681

306,921
2,778$2,110,269¥150,874¥ 85,285$1,535,457—
20,00020,00010,000
—
7,038
477
3,475
500
212,364(30,431)¥181,933

10,00020,00020,00010,000
7,518
7,038
477
3,475
—
163,793(25,027)¥138,766—
203,542
203,542
101,770—
71,6274,854
35,366
5,088
2,161,246(306,699)$1,851,547*As of March 31, 2009, convertible bonds due from 2010 through 2011 were convertible into shares of common stock at
the option of the holder at prices of ¥598 ($6.09), ¥182 ($1.85) and ¥230.3 ($2.34) per share. The conversion prices are
subject to adjustments under specified conditions.

As of March 31, 2009 and 2008, the following assets were pledged as collateral for short-term borrowings andlong-term debt:
Millions of yen
2009
2008

Land ............................................................................................................ ¥ 818
Buildings ..................................................................................................... 4,789
Other investments .......................................................................................
314
Total ........................................................................................... ¥5,921

¥ 940
5,522
315
¥6,777

Thousands of
U.S. dollars
2009$ 8,324
48,7393,195$60,258

43

As of March 31, 2009 and 2008, debt secured by the above pledged assets was as follows:
Millions of yen
2009
2008

Trade payables ............................................................................................ ¥ 53
Short-term and long-term debt ................................................................... 1,703
Total ........................................................................................... ¥1,756

¥ 79
2,698
¥2,777

Thousands of
U.S. dollars
2009

$ 539
17,331$17,870

The aggregate annual maturities of long-term debt as of March 31, 2009 were as follows:
Millions of yen

Thousands of
U.S. dollars

2010 ........................................................................................................................... ¥ 30,431
2011 ...........................................................................................................................
6,655
2012 ...........................................................................................................................
59,7712013 ...........................................................................................................................
21,412
2014 and thereafter ....................................................................................................
94,095
Total ................................................................................................................ ¥212,364$ 306,699
67,728608,295
217,911
957,613$2,161,246

Year ending March 31,

7. Employees’
Retirement
and Severance
Benefits

The liability for employees’ retirement and severance benefits included in the liability section of the consolidatedbalance sheets as of March 31, 2009 and 2008 consisted of the following:
Millions of yen
2009
2008

Projected benefit obligation ....................................................................
Unrecognized prior service costs .............................................................
Unrecognized actuarial differences .........................................................
Less fair value of plan assets ...................................................................
Less unrecognized net transition obligation .............................................
Prepaid pension cost ...............................................................................
Liability for retirement and severance benefits .....................................

¥185,597
11,273(46,541)(61,066)(12,243)
2,949¥ 79,969¥182,766
14,162
4,682(96,979)(25,029)
2,326¥ 81,928

Thousands of
U.S. dollars
2009$1,888,835
114,726(473,651)(621,473)(124,598)
30,012$ 813,851

Retirement and severance benefit expenses in the consolidated statements of income for the years ended March
31, 2009, 2008 and 2007 comprised the following:
2009

Service costs—benefits earned during the year ...................... ¥ 8,497
Interest cost on projected benefit obligation ..........................
4,745
Expected return on plan assets ..............................................
(1,250)
Amortization of prior service costs .........................................
(2,266)
Amortization of actuarial differences .....................................
(137)
Amortization of net transition obligation ............................... 12,784
Contribution to the defined contribution pension plans .........
598
Retirement and severance benefit expenses ....................... ¥22,971

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥ 8,556
4,625(945)(2,285)(1,983)
12,514483¥20,965¥ 8,722
4,676(974)(2,214)(782)
12,516420¥22,364$ 86,474
48,290(12,721)(23,061)(1,394)130,104
6,085$233,777

Basic assumptions and information used to calculate retirement and severance benefits were as follows:..............................................................................................................................

2009

2008

2007

Discount rate............................................................................ mainly 2.0%
mainly 2.5%
mainly 2.5%
Expected rate of return on plan assets(For the Company and consolidated domestic subsidiaries) ...
3.0 to 3.5%
0.0 to 3.5%
0.0 to 3.5%
(For consolidated overseas subsidiaries) ...............................
7.75%
7.75%
7.75%
Amortization period for prior service costs ............................... mainly 10 years mainly 10 years 10 to 15 years
Amortization period for actuarial gains and losses ................... mainly 10 years mainly 10 years 10 to 15 years
Amortization period for transition obligation ........................... mainly 10 years mainly 10 years mainly 10 years

8. Contingent
Liabilities

Contingent liabilities as of March 31, 2009 and 2008 were as follows:
Millions of yen
2009
2008

As guarantor of indebtedness of employees, nonconsolidated
subsidiaries, affiliates and others .............................................................. ¥36,391

44¥38,393

Thousands of
U.S. dollars
2009$370,354

Kawasaki Heavy Industries, Ltd. Annual Report 2009

9. Net Assets

As described in Note 2 (u), net assets comprises four subsections: owners’ equity, accumulated gains (losses) fromvaluation and translation adjustments, share subscription rights and minority interests.
The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese Commercial
Code (“the Code”).
The Law is generally applicable to events and transactions occurring after April 30, 2006 and for fiscal years ending after that date. Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an
amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included incapital surplus.
Under the Law, if a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings
reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included
in retained earnings in the accompanying consolidated balance sheets. Under the Law, legal earnings reserve
and additional paid-in capital could be used to eliminate or reduce a deficit, or capitalized by a resolution of theshareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated
financial statements of the Company in accordance with Japanese laws and regulations.

10. Research andDevelopment
Expenses

Research and development expenses, included in selling, general and administrative expenses, were as follows:2009

Research and development expenses ..................................... ¥38,256

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥36,228¥33,819$389,334

Throughout the year ended March 31, 2006, expenses to develop new models in the consumer products andmachinery business were included in cost of sales as production costs. However, as expenditures having researchand development characteristics such as the development of new techniques or the adaptation of new materials
increased, the Company decided to include the expenditures in selling and general administrative expenses fromthe year ended March 31, 2007 to improve the usefulness and comparability of the financial statements. Thischange has had little impact on net income. However as a result of this change, cost of sales was ¥18,008 million
less and selling and general administrative expenses the same amount more for the year ended March 31, 2007
than what they would have been with the previous method.
11. “Other, Net” in“Other Income(Expenses)”“Other, net” in “other income (expenses)” in the consolidated statements of income comprised the following:2009

Foreign exchange gain (loss), net .......................................... ¥ 10,373
Gain on sales of marketable securities andinvestments in securities .....................................................
620
Gain on sales of business (a) .................................................
594
Loss on damages suit (b) ......................................................
(5,165)
Loss (gain) on contribution of securities tothe pension trust (c) ...........................................................
(4,492)
Loss on suspension of activities for participationin MotoGP .........................................................................
(2,818)Loss on valuation of securities ..............................................
(1,875)
Loss on environmental measures (d) .....................................
(1,812)
Loss on impairment of fixed assets (e) ..................................
(1,399)Gain on sales of investments in affiliates ..............................
—
Loss on sales of investments in affiliates ...............................
—
Loss on breach of the Antimonopoly Act (f) ..........................
—
Other, net ............................................................................
(5,517)
Total .................................................................... ¥(11,491)

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥(11,549)¥(13,391)$ 105,566

465—(2,245)884—(2,398)

6,309
6,045
(52,564)

1,375—(45,715)——(2,167)(2,763)292(408)—(6,522)¥(23,522)

—
—
—
—
—
—
(1,387)(7,433)¥(23,725)(28,679)(19,082)(18,440)(14,237)———(56,148)$(116,945)

45

(a) “Gain on sales of business” is attributable to the transfer of the golf course operation business of Kawasaki Life
Corporation, a consolidated subsidiary of the Company.
(b) “Loss on damages suit” is a provision for compensation in case the Company faces a payout of monetary damages.
(c) “Loss (gain) on contribution of securities to the pension trust” resulted from additional contributions of investment securities to the pension trust.
(d) “Loss on environmental measures” is a provision for the disposal of PCB waste in accordance with the “Law
Concerning Special Measures for Promotion of Appropriate Disposal of PCB (poly chlorinated biphenyl) Waste”
and soil improvement.
(e) Loss on impairment of fixed assets
Because the profitability or market prices of some asset groups declined, the Company and its consolidated
domestic subsidiaries reduced the book value of such assets to the recoverable amounts. Assets are grouped
mainly by units of business. However significant assets for rent or those which are idle are treated separately.
Recoverable amounts were determined by net sales value, and net sales value was estimated by appraisal orproperty tax assessment.
Asset groups for which the Company and its subsidiaries recognized impairment loss for the year ended
March 31, 2008 were as follows:
Function or status

Operating property
Idle assets
Operating property

Location

Sodegaura City, Chiba
Sodegaura City, Chiba
Inami-cho, Kako-gun, Hyogo

Type of asset

Land
Land, etc.
Land

Impairment loss for the year ended March 31, 2008 consisted of the following:
Millions of yen

Land ................................................................................................................................................
Buildings, etc. ..................................................................................................................................
........................................................................................................................................................

¥2,277486¥2,763

Asset groups for which the Company and its subsidiary recognized impairment loss for the year ended March
31, 2009 were as follows:
Function or status

Operating property

Location

Type of asset

Sodegaura City, Chiba

Machinery and equipment, etc.

Impairment loss for the year ended March 31, 2009 consisted of the following:
Machinery and equipment, etc. ...............................................................................
.................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥1,399¥1,399$14,237$14,237(f) “Loss on breach of the Antimonopoly Act” is due to assessments, etc., that the Japan Fair Trade Commission
imposed on the Company with regard to bids for steel bridges, tunnel ventilations and water gates.

12. Income Taxes

Income taxes in Japan applicable to the Company and its consolidated domestic subsidiaries consist of corporationtax (national tax) and enterprise and inhabitants taxes (local taxes) which, in the aggregate, resulted in normal
statutory tax rate of approximately 40.5 percent for each of the years ended March 31, 2009 and 2008.
The significant differences between the statutory and effective tax rates for the years ended March 31, 2009
and 2008 were as follows:2009

Statutory tax rate ................................................................................................................ 40.5%
Valuation allowance ........................................................................................................... 19.7
Equity in income of nonconsolidated subsidiaries and affiliates ........................................... (12.8)
Research and development tax credit .................................................................................. (1.2)
Other ................................................................................................................................. (0.7)
Effective tax rate ................................................................................................................. 45.5%

46

2008

40.5%
—
.
—
.
(3.4)
0.8
37.9%

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Significant components of deferred tax assets and liabilities as of March 31, 2009 and 2008 were as follows:
Millions of yen
2009
2008

Deferred tax assets:
Accrued bonuses ................................................................................... ¥ 6,378
Retirement benefits ............................................................................... 40,130
Provision for losses on uncompleted contracts .......................................
8,164
Allowance for doubtful receivables ........................................................
1,164
Inventories—elimination of intercompany profits ...................................
646
Fixed assets—elimination of intercompany profits ..................................
449
Depreciation ..........................................................................................
1,699
Net operating loss carry forwards ..........................................................
4,803
Unrealized loss of marketable securities, investments
in securities and other .........................................................................
841
Other .................................................................................................... 33,023
Gross deferred tax assets ................................................................... 97,297
Less valuation allowance .................................................................... (11,618)
Total deferred tax assets .................................................................... 85,679
Deferred tax liabilities:
Deferral of gain on sale of fixed assets ...................................................
5,374
Net unrealized gain on securities ...........................................................
2,060
Unrealized gain on contribution of securities to the pension trust ..........
—
Other ....................................................................................................
6,110
Total deferred tax liabilities ................................................................ 13,544
Net deferred tax assets .................................................................. ¥72,135

Thousands of
U.S. dollars
2009¥ 8,655
44,835
3,285
894
6,246
566
1,702
1,038

$ 64,909
408,406
83,085
11,846
6,574
4,569
17,29048,8801,599
21,437
90,257(7,825)82,4328,558
336,082
990,199(118,237)
871,962

5,222
6,590
6,552
6,184
24,548¥57,884

54,691
20,964—62,183
137,838$734,124

13. Retained
Earnings(“Others”)

The decrease in retained earnings for the year ended March 31, 2008, mainly resulted from the cumulative effectof a new accounting standard in the United States for the unrecognized pension liability of subsidiaries, Kawasaki
Motors Manufacturing Corp., U.S.A. and Kawasaki Motors Corp., U.S.A.

14. Cash and Cash
Equivalents

Cash and cash equivalents reconciled to the accounts reported in the consolidated balance sheets in the years
ended March 31, 2009, 2008 and 2007 were as follows:
2009

Cash on hand and in banks ................................................... ¥31,956
Time deposits with maturities over three months ...................
(542)
Total .................................................................................. ¥31,414

15. Significant
NoncashTransactions

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥39,875(1,706)¥38,169¥39,351(123)¥39,228$325,219(5,516)$319,703

The increases in common stock and capital surplus and the decrease in convertible bonds due to conversion of
convertible bonds in the year ended March 31, 2009 and 2008 were as follows:
Millions of yen
2009
2008

Increase in common stock due to conversion .................................................. ¥—Increase in capital surplus due to conversion .................................................. —Decrease in convertible bonds due to conversion ............................................ —¥1,141
1,113
2,318

Thousands of
U.S. dollars
2009

$—
—
—

The sum of the increases in common stock and capital surplus differed from the decrease in convertible bonds
because the Company provided bondholders with treasury stock instead of issuing new shares.

47

16. Earnings
per Share

The basis of per share amount calculations for the years ended March 31, 2009, 2008 and 2007 were as follows:2009

Basic earnings per share:
Net income ....................................................................... ¥11,728
Earnings not attributable to common shareholders ............
—Net income allocated to common stocks ........................... 11,728

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥35,141—
35,141¥29,772—
29,772$119,357—
119,357

Number of shares in millions

Weighted average number of common stocks ...................

1,668

1,667

2009

Millions of yen
2008

Diluted earnings per share:
Net income adjustment ............................................................ ¥77(Interest expenses etc.) ............................................................. (77)

¥97
(97)

1,571

2007

Thousands of
U.S. dollars
2009

¥186
(186)

$783
(783)

Number of shares in millions

Increase in common stocks ....................................................... 35(Convertible bonds) .................................................................. (18)(Zero coupon convertible bonds) ............................................... (17)17. Derivative
Transactions

45
(24)
(21)

167
(43)
(124)

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 the risksof 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 purchase derivatives to hedge against risks of fluctuations incurrency exchange rates and interest rates rather than for dealing or speculation.
For derivative transactions that meet the conditions for hedge accounting, the Company and its consolidated
subsidiaries apply hedge accounting principles, and are excluded from the tables below.
In order to minimize credit risk, the Company and its consolidated subsidiaries use only highly rated international
financial institutions as counterparties to derivative transactions.
The Company and its consolidated subsidiaries have established policies that restrict the use of derivative 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, 2009 were as follows:
Contract
amountCurrency related contracts:
Foreign exchange contracts:
To sell ........................................................................... ¥82,692
To purchase ..................................................................
4,396
Total .................................................................................

Millions of yen
Marketvalue¥78,259
4,294

Gain(loss)

Thousands of
U.S. dollars
Gain(loss)¥4,433(102)¥4,331$45,115(1,038)$44,077(b) Outstanding positions and recognized gains and losses at March 31, 2008 were as follows:
Contract
amountCurrency related contracts:
Foreign exchange contracts:
To sell ........................................................................... ¥91,794
To purchase ..................................................................
1,865
Option contracts:
To sell ...........................................................................
3,320
To purchase ..................................................................
3,040
Total .................................................................................

48

Millions of yen
Marketvalue

Gain(loss)¥85,3811,854¥6,413
(11)

4
34

32
(2)
¥6,432

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Method of calculating market value: The market value of exchange contracts is calculated using the forward
exchange rate. The market value of options is calculated based on the prices provided by client financial institutions.
Derivative transactions are valued at fair market value at the year-end rate. Receivables and payables denominated in foreign currency are translated into Japanese yen at the year-end rate. Gain or loss from the translation andfrom changes in the fair market value of derivative transactions are recognized separately. They are offset on thestatements of income, and the effects of derivative transactions are realized.
Derivative transactions for forecasted transactions which are accounted for by hedge accounting are excluded
from disclosure.
The Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes but use
derivatives only for managing the risks of fluctuations in exchange rates.
Interest rate swaps which were accounted for by the hedge accounting are excluded.

18. Finance Leases

As discussed in Note 2 (w), finance leases commenced prior to April 1, 2008 which do not transfer ownership ofthe leased assets to the lessee are accounted for as operating leases. Information regarding such leases, as required
to be disclosed in Japan, is as follows:(a) As lessee
The original costs of leased assets under non-capitalized finance leases and the related accumulated depreciation
and amortization, assuming it was calculated by the straight-line method over the term of the respective lease,
as of March 31, 2009 and 2008 were as follows:
Millions of yen
2009
2008

Property, plant and equipment ..................................................................
Accumulated depreciation .........................................................................
..................................................................................................................
Intangible assets ........................................................................................
Accumulated amortization ........................................................................
..................................................................................................................

¥41,241(16,489)¥24,752
¥ 758
(356)
¥ 402

¥39,178(12,845)¥26,333¥ 1,110
(425)
¥ 685

Thousands of
U.S. dollars
2009$419,712(167,809)$251,903$ 7,714(3,623)$ 4,091

The present values of future minimum lease payments under non-capitalized finance leases as of March 31,
2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen
2009

Current portion ......................................................................................... ¥ 5,572
Noncurrent portion .................................................................................... 21,088
Total .............................................................................................. ¥26,660

2008

2009

¥ 5,737
22,691¥28,428$ 56,706
214,614$271,320

Lease payments, “as if capitalized” depreciation and amortization and interest expense for non-capitalized
finance leases were as follows:
2009

Lease payments ....................................................................... ¥6,273
Depreciation and amortization ................................................ 5,869
Interest ...................................................................................
680

Millions of yen
2008

2007

Thousands of
U.S. dollars
2009¥6,0285,671
644¥5,3494,956
444$63,840
59,7296,920(b) As lessor
The original costs of leased assets under finance leases and the related accumulated depreciation and amortization
as of March 31, 2009 and 2008 were as follows:
Millions of yen
2009
2008

Thousands of
U.S. dollars
2009

Property, plant and equipment .................................................................... ¥2,038
Accumulated depreciation ...........................................................................
(933).................................................................................................................... ¥1,105¥2,250(827)¥1,423$20,740(9,495)$11,245

Intangible assets .......................................................................................... ¥Accumulated amortization ..........................................................................
.................................................................................................................... ¥

¥

$

63
(34)
29

¥

88
(47)
41

$

641
(346)
295

49

The present values of future minimum lease payments to be received under finance leases as of March 31, 2009
and 2008 were as follows:
Millions of yen
2009
2008

Current portion ........................................................................................... ¥ 516
Noncurrent portion ..................................................................................... 1,056
Total ....................................................................................................... ¥1,572

Thousands of
U.S. dollars
2009

¥ 638
1,500
¥2,138$ 5,251
10,747$15,998

Lease payments received, depreciation and amortization and interest on finance leases were as follows:
2009

Lease payments received ............................................................ ¥402
Depreciation and amortization ................................................... 335
Interest .......................................................................................
69

19. Operating
LeasesMillions of yen
2008

2007

Thousands of
U.S. dollars
2009

¥379
307
65

¥285
244
32

$4,091
3,409
702

The present values of future minimum lease payments under operating leases as lessee as of March 31, 2009
and 2008 were as follows:
Millions of yen
2009
2008

Current portion .............................................................................................. ¥310
Noncurrent portion ........................................................................................ 621
Total .......................................................................................................... ¥931

20. Segment
Information

50

¥330
143
¥473

Thousands of
U.S. dollars
2009$3,1546,320$9,474(a) Information by industry segment
Industry segments of the Company and its consolidated subsidiaries are classified based on an internal company
system as follows:
1) Shipbuilding, 2) Rolling Stock & Construction Machinery, 3) Aerospace, 4) Gas Turbines & Machinery, 5) Plant &Infrastructure Engineering, 6) Consumer Products & Machinery, 7) Hydraulic Machinery and 8) Other.
The Shipbuilding segment manufactures and sells ships, submarines and maritime application equipment.
Operations within the Rolling Stock & Construction Machinery segment include the production and sale of rollingstock and construction machines. Products manufactured and sold by the Aerospace segment include airplanes
and helicopters. The Gas Turbines & Machinery segment manufactures and sells gas turbines, airplane engines andprime movers. Operations within the Plant & Infrastructure Engineering segment include the production and saleof boilers, chemical and cement plants and refuse incineration plants. Products manufactured and sold by theConsumer Products & Machinery segment include motorcycles, ATVs (All-Terrain Vehicles) and Jet Ski® watercrafts. Operations within the Hydraulic Machinery segment include the production and sale of hydraulic machines.
Operations within the Other segment include the production and sale of merchandise, etc. The operations also
involve trade, mediation of overseas sales and orders and other activities.

Kawasaki Heavy Industries, Ltd. Annual Report 2009

The Hydraulic Machinery segment, which had been included in “Other” until the year 2007, is presented separately from the year 2008
as its materiality has increased. The information for the year 2007 below has been retroactively restated based on the new industry segment categories.

External
sales

Shipbuilding ............................................. ¥ 126,426
Rolling Stock & Construction Machinery ...
186,454
Aerospace ................................................
200,425
Gas Turbines & Machinery ........................
195,156
Plant & Infrastructure Engineering .............
105,178
Consumer Products & Machinery ..............
336,459
Hydraulic Machinery ..................................
84,919Other ........................................................
103,580
Total ..................................................... 1,338,597
Eliminations and corporate .......................
—
Consolidated total ................................ ¥1,338,597

External
sales

Shipbuilding ............................................. ¥ 141,397
Rolling Stock & Construction Machinery ...
171,739
Aerospace ................................................
237,349
Gas Turbines & Machinery ........................
185,486
Plant & Infrastructure Engineering .............
142,547
Consumer Products & Machinery ..............
433,963
Hydraulic Machinery ..................................
84,028Other ........................................................
104,588
Total ..................................................... 1,501,097
Eliminations and corporate .......................
—
Consolidated total ................................ ¥1,501,097

External
sales

Shipbuilding ............................................. ¥ 108,849
Rolling Stock & Construction Machinery ...
184,283
Aerospace ................................................
269,108
Gas Turbines & Machinery ........................
183,309
Plant & Infrastructure Engineering .............
122,062
Consumer Products & Machinery ..............
403,702
Hydraulic Machinery ..................................
66,649Other ........................................................
100,657
Total ..................................................... 1,438,619
Eliminations and corporate .......................
—
Consolidated total ................................ ¥1,438,619

External
sales

Shipbuilding ............................................ $ 1,286,648
Rolling Stock & Construction Machinery ...
1,897,558
Aerospace ...............................................
2,039,742
Gas Turbines & Machinery .......................
1,986,118
Plant & Infrastructure Engineering ...........
1,070,405
Consumer Products & Machinery .............
3,424,170
Hydraulic Machinery.................................
864,228
Other ......................................................
1,054,141
Total ................................................... 13,623,010
Eliminations and corporate ......................
—
Consolidated total ............................... $13,623,010

Intersegment
sales

Total
sales

Millions of yen
2009
OperatingOperatingexpenses
income (loss)¥ 1,762
1,368
1,873
18,316
13,853
4,038
8,524
42,142
91,876(91,876)¥—¥ 128,188 ¥ 129,207 ¥ (1,019)
187,822
176,453
11,369202,298
206,476(4,178)
213,472
202,446
11,026
119,031
110,060
8,971
340,497
350,640 (10,143)
93,44385,054
8,389
145,722
141,466
4,256
1,430,473
1,401,802
28,671(91,876)(91,918)42¥1,338,597 ¥1,309,884 ¥28,713

Intersegment
sales

Millions of yen
2008
OperatingOperatingexpenses
income (loss)¥ 1,568
727
1,644
16,94013,7478,244
8,724
40,234
91,828(91,828)¥—

Intersegment
sales

Total
sales

¥ 142,965 ¥ 139,712 ¥ 3,253
172,466
165,293
7,173
238,993
228,117
10,876
202,426
189,034
13,392
156,294
145,455
10,839442,207422,537
19,67092,752
83,635
9,117
144,822
142,4692,353
1,592,925
1,516,252
76,673(91,828)(92,065)237¥1,501,097 ¥1,424,187 ¥76,910

Total
sales

Millions of yen
2007
OperatingOperatingexpenses
income (loss)¥ 1,861500
1,687
14,41019,6709,184
8,598
40,434
96,344(96,344)¥—¥ 110,710 ¥ 112,958 ¥ (2,248)
184,783
171,613
13,170270,795
257,395
13,400197,719
187,882
9,837
141,732
144,163(2,431)
412,886
385,323
27,56375,247
69,185
6,062
141,091
137,546
3,545
1,534,963
1,466,065
68,898(96,344)(96,588)244¥1,438,619 ¥1,369,477 ¥69,142

Intersegment
sales

Thousands of U.S. dollars
2009
OperatingOperatingexpenses
income (loss)

Total
sales

Total
assetsDepreciation
Capitaland amortization expenditures¥ 139,017
200,482
331,671
203,902113,158
268,01360,430149,478
1,466,151(66,380)¥1,399,771

Total
assets¥ 7,116
6,147
20,38010,176
1,270
24,298
10,539
1,174
81,1001,350¥82,450

Depreciation
Capitaland amortization expenditures¥ 134,577
161,585
281,517
188,133
132,174
315,30953,348164,445
1,431,088(52,318)¥1,378,770

Total
assets¥ 2,459
3,579
6,232
3,765
1,926
13,5172,659
1,699
35,836
1,619¥37,455¥ 4,161
6,454
6,154
5,392
1,318
19,3674,801
1,674
49,321
1,217¥50,538

Depreciation
Capitaland amortization expenditures¥ 117,832
172,615
279,574
165,412
141,472
303,730
46,788
159,432
1,386,855(28,875)¥1,357,980

Total
assets¥ 3,987
5,140
6,659
4,607
1,716
14,9573,729
1,847
42,642
1,692¥44,334¥ 2,169
2,660
5,291
3,076
1,816
10,5391,631
1,519
28,701
1,578¥30,279¥ 1,194
8,253
3,029
5,354
996
12,828
4,955
1,177
37,786
1,483¥39,269

Depreciation
Capitaland amortization expenditures$ 17,932 $ 1,304,580 $ 1,314,950 $ (10,370) $ 1,414,787 $ 40,576
13,922
1,911,480
1,795,777 115,703
2,040,322
52,31019,062
2,058,804
2,101,323 (42,519)
3,375,443
67,769186,4032,172,521
2,060,309 112,212
2,075,127
46,886140,983
1,211,388
1,120,090
91,2981,151,618
17,46441,095
3,465,265
3,568,492 (103,227)
2,727,590
152,219
86,749950,977865,601
85,376
615,001
37,950428,884
1,483,025
1,439,711
43,314
1,521,250
18,797935,030 14,558,040 14,266,253 291,787 14,921,138
433,971(935,030)(935,030)(935,458)
428(675,555)
17,220$— $13,623,010 $13,330,795 $292,215 $14,245,583 $451,191$ 72,420
62,559207,409103,562
12,925247,283
107,256
11,947825,361
13,739$839,10051

As discussed in Note 2 (j), prior to April 1, 2008, inventories of the Company and its consolidated domestic subsidiaries were stated at cost determined principally by the specific identification cost method, the moving averagemethod and the first-in, first-out method. However, if the market value of inventories had declined significantly
and was not expected to recover to cost, cost was reduced to net realizable value. Effective April 1, 2008, theCompany and its consolidated domestic subsidiaries adopted a new accounting standard, “Accounting Standard
for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards Board of Japan on July 5,2006), for the measurement of inventories and have stated the inventories at March 31, 2009 at the lower of cost
determined principally by the specific identification cost method, the moving average method and the first-in, firstout method or net realizable value. As a result of this change, operating income for the year ended March 31,
2009 in the Rolling Stock & Construction Machinery segment decreased by ¥516 million ($5,251 thousand), in
the Gas Turbines & Machinery segment by ¥1,677 million ($17,067 thousand), in the Plant & Infrastructure
Engineering segment by ¥29 million ($295 thousand), in the Hydraulic Machinery segment by ¥103 million ($1,048
thousand) and in the Other segment by ¥34 million ($346 thousand), and operating loss in the Aerospace segment
increased by ¥1,226 million ($12,477 thousand) and in the Consumer Products & Machinery segment by ¥486 million ($4,946 thousand) compared to amounts that would have been recorded with the previous standard.
As discussed in Note 2 (z), effective from the year ended March 31, 2009, the Company and its consolidated
domestic subsidiaries reviewed and revised the useful life of machinery and equipment in accordance with the revision of the tax law. As a result of this change, operating income for the year ended March 31, 2009 in the Rolling
Stock & Construction Machinery segment decreased by ¥473 million ($4,814 thousand), in the Gas Turbines &Machinery segment by ¥260 million ($2,646 thousand), in the Plant & Infrastructure Engineering segment by ¥53
million ($539 thousand), in the Other segment by ¥48 million ($488 thousand), and in the Hydraulic Machinery
segment increased by ¥166 million ($1,689 thousand) and operating loss in the Shipbuilding segment increasedby ¥543 million ($5,526 thousand), in the Aerospace segment by ¥271 million ($2,758 thousand) and in theConsumer Products & Machinery segment by ¥205 million ($2,086 thousand) compared to amounts that would
have been recorded with the previous standard.
(b) Information by geographic area

External
sales

Japan ......................................... ¥ 974,454
North America ............................
220,856
Europe .......................................
90,898Asia ............................................
43,328Other areas ................................
9,061
Total ...................................... 1,338,597
Eliminations and corporate .........
—
Consolidated total .................. ¥1,338,597

External
sales

Japan ......................................... ¥1,058,487
North America ............................
267,560
Europe .......................................
131,608
Asia ............................................
33,297
Other areas ................................
10,145
Total ...................................... 1,501,097
Eliminations and corporate .........
—
Consolidated total .................. ¥1,501,097

External
sales

Japan ......................................... ¥1,042,993
North America ............................
261,254
Europe .......................................
98,842
Asia ............................................
22,690
Other areas ................................
12,840Total ...................................... 1,438,619
Eliminations and corporate .........
—
Consolidated total .................. ¥1,438,619

52

Intersegment
sales

Millions of yen
2009
Total
Operatingsales
expenses

Operatingincome (loss)

Total
assets¥247,020 ¥1,221,474 ¥1,208,067 ¥13,407
24,500245,356
246,742(1,386)
4,563
95,461
94,753708
41,81885,14680,594
4,552
251
9,312
8,945
367
318,152
1,656,749
1,639,101
17,648(318,152)(318,152)(329,217) 11,065¥— ¥1,338,597 ¥1,309,884 ¥28,713¥1,169,702
182,269
59,21738,4212,970
1,452,579(52,808)¥1,399,771

Millions of yen
2008
Total
Operatingsales
expenses

Total
assetsIntersegment
sales

Operatingincome (loss)¥ 307,546 ¥1,366,033 ¥1,291,102 ¥74,931
25,202292,762
293,276(514)
5,321
136,929
132,449
4,480
24,75258,04956,597
1,452
247
10,392
10,119273
363,068
1,864,165
1,783,543
80,622(363,068)(363,068)(359,356)(3,712)¥— ¥1,501,097 ¥1,424,187 ¥76,910

Intersegment
sales

Millions of yen
2007
Total
Operatingsales
expenses

Operatingincome (loss)¥ 278,960 ¥1,321,953 ¥1,256,538 ¥65,415
18,017279,271
277,533
1,738
4,320
103,162
100,783
2,379
18,73741,42740,728699
187
13,027
12,808219
320,221
1,758,840
1,688,390
70,450(320,221)(320,221)(318,913)(1,308)¥— ¥1,438,619 ¥1,369,477 ¥69,142¥1,103,514
191,075
83,92837,917
3,335
1,419,769(40,999)¥1,378,770

Total
assets¥1,093,598
202,539
70,36026,081
2,869
1,395,447(37,467)¥1,357,980

Kawasaki Heavy Industries, Ltd. Annual Report 2009

External
sales

Intersegment
sales

Thousands of U.S. dollars
2009
Total
Operatingsales
expenses

Operatingincome (loss)

Total
assetsJapan ....................................... $ 9,917,097 $2,513,943 $12,431,040 $12,294,596 $136,444 $11,904,152
North America ..........................
2,247,669
249,338
2,497,007
2,511,113 (14,106)
1,854,966
Europe .....................................
925,076
46,438
971,514964,309
7,205
602,656
Asia ..........................................
440,953
425,585
866,538
820,21246,326
391,014
Other areas ..............................
92,215
2,555
94,77091,034
3,736
30,226
Total ..................................... 13,623,010 3,237,859 16,860,869 16,681,264 179,605 14,783,014
Eliminations and corporate .......
— (3,237,859) (3,237,859) (3,350,469) 112,610(537,431)
Consolidated total ................ $13,623,010 $— $13,623,010 $13,330,795 $292,215 $14,245,583
North America includes mainly the U.S.A. and Canada. Europe includes mainly the Netherlands, the United
Kingdom and Germany. Asia includes Thailand, Indonesia, the Philippines and Korea. Other areas include mainly
Australia and Brazil.
As discussed in Note 2 (j), prior to April 1, 2008, inventories of the Company and its consolidated domestic subsidiaries were stated at cost determined principally by the specific identification cost method, the moving averagemethod and the first-in, first-out method. However, if the market value of inventories had declined significantly
and was not expected to recover to cost, cost was reduced to net realizable value. Effective April 1, 2008, theCompany and its consolidated domestic subsidiaries adopted a new accounting standard, “Accounting Standard
for Measurement of Inventories” (Statement No. 9 issued by the Accounting Standards Board of Japan on July 5,2006), for the measurement of inventories and have stated the inventories at March 31, 2009 at the lower of cost
determined principally by the specific identification cost method, the moving average method and the first-in,
first-out method or net realizable value. As a result of this change, operating income in Japan for the year ended
March 31, 2009 was ¥4,074 million ($41,461 thousand) less than they would have been without the change.
As discussed in Note 2 (z), effective from the year ended March 31, 2009, the Company and its consolidated
domestic subsidiaries reviewed and revised the useful life of machinery and equipment in accordance with therevision of the tax law. As a result of this change, operating income in Japan for the year ended March 31, 2009was ¥1,690 million ($17,199 thousand) less than they would have been without the change.
(c) Corporate assets
Included in eliminations and corporate under total assets in (a) and (b) above are corporate assets of ¥96,934 million ($986,505 thousand), ¥115,076 million and ¥124,152 million at March 31, 2009, 2008 and 2007, respectively, which mainly comprised cash and time deposits of the Company and property, 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 outside of Japan.
Overseas sales information for the years ended March 31, 2009, 2008 and 2007 were as follows:
Millionsof yen%2009
Overseas
Againstsales
net sales

North America ........................... ¥309,979 23.1%
Europe ...................................... 116,298 8.7
Asia ........................................... 174,310 13.0
Other areas ............................... 130,051 9.7
Total ...................................... ¥730,638 54.5%

Millionsof yen%2008
Overseas
Againstsales
net sales¥358,717
153,613
161,906
148,315¥822,551

23.9%
10.2
10.7
9.9
54.7%

Millionsof yen%2007
Overseas
Againstsales
net sales¥336,765
119,408
186,066
135,506¥777,745

23.4%
8.3
12.9
9.4
54.0%

Thousands of
U.S. dollars
2009
Overseassales$3,154,681
1,183,574
1,773,967
1,323,540$7,435,762

North America includes mainly the U.S.A. and Canada. Europe includes mainly the United Kingdom, France,
the Netherlands, Germany and Italy. Asia includes China, Korea, the Philippines, Taiwan and Indonesia. Other areas
include mainly Panama, the Bahamas, Brazil, and Australia.

21. Additional
Information(a) Effective April 1, 2007, the Company changed the accounting periods for consolidation of 2 subsidiaries,
Kawasaki Robotics (USA) Inc. and Kawasaki Construction Machinery Corp. of America, from the 12 months
ended December 31 to the 12 months ended March 31 to improve transparency and quality of the consolidated
financial statements.
(b) Accounting Standards Board of Japan Statement No. 11, “Accounting Standard for Related Party Disclosures” andAccounting Standards Board of Japan Guidance No. 13, “Guidance on Accounting Standard for Related Party
Disclosures” issued by the Accounting Standards Board of Japan on October 17, 2006, require certain additional
related party disclosures effective for years beginning on or after April 1, 2008. Pursuant to the new accounting
standards, there was no information which was necessary to disclose for the year ended March 31, 2009.

53

(c) A summary of the total financial information of all affiliates (15 companies) which was the basis for calculatingof equity in income of nonconsolidated affiliates, including of ANHUI CONCH KAWASAKI ENERGY CONSERVATION EQUIPMENT MANUFACTURING CO., LTD. which is a significant affiliate, for the year ended March 31,
2009 was as follows:
Millions of yen
2009

Total current assets ...................................................................................................... ¥116,719
Total fixed assets .........................................................................................................
65,741
Total current liabilities .................................................................................................. 111,588
Total long-term liabilities ..............................................................................................
14,574
Total net assets ............................................................................................................
56,298
Total net sales .............................................................................................................. 176,380
Total minority interests in net income of consolidated subsidiaries ................................
22,815
Total net income ..........................................................................................................
17,73022. Subsequent
Events54

2009$1,187,859
669,051
1,135,640
148,321572,949
1,795,034
232,190
180,440

On June 25, 2009, the following appropriation of nonconsolidated retained earnings was approved at the ordinary
meeting of shareholders of the Company:
Cash dividends (¥3.0 per share) .....................................................................................

23. Other Matters

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars¥5,004$50,926(a) On June 27, 2006, the Company received a decision from the Japan Fair Trade Commission ordering correctionof unfair bids that the Company may have committed on construction contracts for garbage incineration facilities from 1994 through 1998. On July 27, 2007, the Company appealed the decision to the Tokyo High Court
demanding revocation of the decision. On April 17, 2007, the Company also sought an inquiry objecting to anorder to pay penalties of ¥5,165 million ($52,565 thousand) which the Fair Trade Commission imposed on
March 28, 2007.
In addition, the Company reserved an amount for the reimbursement payment as provision for losses on adamages suit in the year ended March 31, 2009.
(b) On November 16, 2007, the Company received a judgment from the Kobe District Court requiring reimbursement of ¥1,364 million ($13,882 thousand) to Kobe City in a suit brought by citizens of the city claiming that
the Company unfairly bid on a construction contract for a garbage incineration facility in Kobe City which theCompany was awarded in 1995. On November 29, 2007, the Company appealed the judgment to the Osaka
High Court, but the Company received a judgment requiring reimbursement of ¥1,637 million ($16,660 thousand), which was equivalent to 6% of the order price to Kobe City on October 30, 2007. On November 10,
2007, the Company appealed the judgment to the Supreme Court, but the Court dismissed the appeal on
April 23, 2009.
(c) On April 25, 2007, the Company received a judgment from the Fukuoka District Court requiring reimbursementof ¥2,088 million ($21,250 thousand) jointly with Hitachi Zosen Corporation and 3 other companies to Fukuoka
City in a suit brought by citizens of the city claiming that the Company unfairly bid on a construction contract
for a garbage incineration facility in Fukuoka City which Hitachi Zosen Corporation was awarded in 1996. On
May 9, 2007, the Company appealed the judgment to the Fukuoka High Court, but the Court dismissed theappeal on November 30, 2007. On December 12, 2007, the Company appealed the judgment to the Supreme
Court, but the Court dismissed the appeal on April 23, 2009.
(d) On November 16, 2007, the Company received a judgment from the Kobe District Court requiring reimbursement of ¥530 million ($5,394 thousand) jointly with Hitachi Zosen Corporation and 4 other companies in a suitbrought by citizens of the city claiming that the Company unfairly bid on a construction contract for a garbage
incineration facility in Amagasaki City which Hitachi Zosen Corporation was awarded in 1996. On November
29, 2007, the Company appealed the judgment to the Osaka High Court and won the case on November 30,
2007. On December 7, 2007, the citizens of Amagasaki City, the complainants, appealed the judgment to theSupreme Court. The Supreme Court reversed the Osaka High Court decision and remanded the case back to
Osaka High Court on April 28, 2009.
(e) On September 25, 2008, the Company received a judgment from the Otsu District Court requiring reimbursement of ¥409 million ($4,162 thousand) jointly with Mitsubishi Heavy industries, Ltd. and 3 other companies
to Kohoku Greater Area Administrative Affairs Centre in a suit brought by them claiming that the Company
unfairly bid on a construction contract for a garbage incineration facility in Otsu City which Mitsubishi Heavy
Industries, Ltd. was awarded in 1996. On October 10, 2008, the Company appealed the judgment to the Osaka
High Court, but the Company and other 4 companies lost the case on June 18, 2009.

Kawasaki Heavy Industries, Ltd. Annual Report 200955

Directors, Corporate Auditors, and Executive Officers

DIRECTORSCORPORATE AUDITORS
Nobuyuki Okazaki
Tatsuyoshi Ogushi
Kenzo Doi**
Michio Oka**

Tadaharu Ohashi*
ChairmanSatoshi Hasegawa*President

56

Shuji Mihara*

Masashi Segawa*Senior Executive Vice President

Senior Executive Vice President

Chikashi Motoyama*

Mitsutoshi Takao*

Yuichi Asano*

Senior Vice President

Senior Vice President

Senior Vice President

Nobumitsu Kambayashi*

Kyohei Matsuoka*

Hiroshi Takata*

Senior Vice President

Senior Vice President

Senior Vice President* Representative Director** Outside Auditor

Kawasaki Heavy Industries, Ltd. Annual Report 2009EXECUTIVE OFFICERS
President

Managing Executive Officer

Satoshi Hasegawa

Shigeru Murayama

Senior Executive Vice Presidents

Executive Officers

Shuji Mihara

Akira Hattori

Masashi Segawa

Toru Yamaguchi
Sosuke Kinouchi

Senior Vice Presidents

Seiji Yamashita

Chikashi Motoyama

Takeshi Sugawara

President
Aerospace Company

Sumihiro Ueda

Mitsutoshi Takao

Wataru Kanamori

Senior Manager
Corporate Planning Division

Takeshi Watanabe

Yuichi Asano
President
Gas Turbines & Machinery Company

Nobumitsu Kambayashi
Senior Manager
Corporate Business Development Division

Yasuo Murata
Minoru Makimura
Tamaki Miyatake
Shuichi Yamanaka
Masahiko Hirohata

Kyohei Matsuoka
President
Rolling Stock Company

Hiroshi Takata
President
Consumer Products & Machinery Company

Shinsuke Tanaka
Yutaka Shimomura
Masatoshi Yamaguchi
Naomi Sera
Joji Iki
Yoshizumi Hashimoto
Yukio Hayano
Masahiro Ibi
Takafumi Shibahara
Yoshinori Kanehana(As of June 25, 2009)57

Major Consolidated Subsidiaries and Affiliates

Name

Location

Paid-in Capital

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

Principal Businesses

SHIPBUILDING
Kawasaki Shipbuilding CorporationJapan

10,000100.00Design, manufacture, sale, and maintenance ofcommercial and naval vessels and marine applicationequipment

Nantong COSCO KHI Ship Engineering Co., Ltd.†

China

CNY1,462,200*

50.00

Japan

1,093

100.00

Manufacture and sale of ships

ROLLING STOCK & CONSTRUCTION MACHINERY
Kawasaki Machine Systems, Ltd.
★❊
Alna Yusoki-Yohin Co., Ltd.

Sale and repair of construction machinery,gas turbine generators, and industrial robots

Japan

400

100.00

Manufacturing and sales of doors/window frames fortrain cars and buses, signs for bus stops, advertisingmaterials, bus shelters, automobile sign lights,
various types of panels, and waiting rooms

Nichijo Manufacturing Co., Ltd.

Japan

120

75.02

Manufacture and sale of snowplows

Kawasaki Rail Car, Inc.

U.S.A.

US$60,600*

100.00Engineering, manufacture, sale, and after-sales

Kawasaki Construction Machinery Corp. of America (Note)

U.S.A.

US$8,000*

100.00service of rolling stock in the United States
Manufacture and sale of construction machineryin the United States
EarthTechnica Co., Ltd.†

Japan

1,200

100.00Design, manufacture, and sale of crushers, grinders,sorters, and other equipment

Fukae Powtec Corporation

Japan

300

100.00

Japan

6,048

100.00

Manufacture and sale of crushers and related plants

AEROSPACENIPPI Corporation

Manufacture, maintenance, and modification of aircraft and components; manufacture of rocket components, aerospace equipment, targeting systems,
nondestructive testing systems, and industrial fans

Nippi Kosan Co., Ltd.

Japan

120

100.00Design and supervision of building construction
work, sale of herbicidal soil, manufacturing and saleof rust-resistant packaging materials, and insurance
agency business

GAS TURBINES & MACHINERY
Kawasaki Thermal Engineering Co., Ltd.

Japan

1,460

83.07

Manufacture, sale, and installation of generalpurpose boilers and air-conditioning equipment

Wuhan Kawasaki Marine Machinery Co., Ltd.

China

1,100

55.00

Manufacture, sale, and after-sales serviceof Kawasaki-brand azimuth thrusters, side thrusters,
and other machinery

Tonfang Kawasaki Air-Conditioning Co., Ltd.†

China

US$9,673*

50.00

Manufacture, sale, and maintenance of absorption
cooling and heating machinery and refrigerationequipment

58

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Name

Location

Paid-in Capital

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

Principal Businesses

PLANT & INFRASTRUCTURE ENGINEERING
Kawasaki Plant Systems, Ltd.

Japan

8,500

100.00Design, manufacture, installation, maintenance, andsale of various types of industrial plants

JP Steel Plantech Co.†

Japan

1,995

24.81

Sale of and engineering services for steelworks plants
and equipment

Shanghai COSCO Kawasaki Heavy Industries

China

US$29,800*

45.00

Japan

350

100.00

Manufacture and sale of steel structures

Steel Structure Co., Ltd.†CONSUMER PRODUCTS & MACHINERY
Kawasaki Metal Industries, Ltd.

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, personal
watercraft, small gasoline engines, industrial robots,and rolling stock

Kawasaki Motors Corp., U.S.A.

U.S.A.

US$65,900*

100.00Distribution of motorcycles, ATVs, personal
watercraft, and small gasoline engines in the UnitedStatesKawasaki Motors Finance Corporation

U.S.A.

US$10,000*

100.00Inventory financing for dealers of Kawasaki
Motors Corp., U.S.A.

KM Receivables Corporation

U.S.A.

US$100100.00Management of accounts receivable of Kawasaki
Motors Finance Corporation

Canadian Kawasaki Motors Inc.

Canada

C$2,000*

100.00Distribution of motorcycles, ATVs, and personal
watercraft in Canada

Kawasaki Motors Europe N.V.

Netherlands

A34,093*

100.00Sole distribution of motorcycles, ATVs, personal
watercraft, and small gasoline engines in Europe

Kawasaki Motors Pty. Ltd.

Australia

A$2,000*

100.00Distribution of motorcycles, ATVs, and personal
watercraft in Australia

P.T. Kawasaki Motor Indonesia

Indonesia

US$40,000*

83.00

Manufacture and distribution of motorcycles
in Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

P101,430*

50.001

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

B1,900,000*

100.00

Manufacture and distribution of motorcycles in thePhilippines
Manufacture and distribution of motorcycles
in Thailand

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

U.S.A.

US$1,000*

100.00

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

Kawasaki Robotics (UK) Ltd.

U.K.

£917*

100.00

Sale and after-sales service of industrial robots
in the U.K. and Ireland

Kawasaki Machine Systems Korea, Ltd.

Korea

W1,500**100.00

Sale and after-sales service of industrial robots androbot systems

Kawasaki Robotics (Tianjin) Co., Ltd.

China

CNY13,174*

100.00

Sale and after-sales service of industrial robots in
China

59

Name

Location

Paid-in Capital

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

Principal Businesses

HYDRAULIC MACHINERY
Kawasaki Precision Machinery Ltd.

Japan

3,000

100.00Design, manufacture, sale, after-sales service, and maintenance for hydraulic machinery and equipment, electricpowered devices, and control systems

Kawasaki Precision Machinery (U.S.A.), Inc.

U.S.A.

US$5,000*

100.00Kawasaki Precision Machinery (U.K.) Limited

U.K.

£5,000*100.00

Manufacture and sale of hydraulic products
Manufacture and sale of hydraulic products

Flutek, Ltd.

Korea

W1,310**50.38

Manufacturing, sales, and repair of hydraulic equip-

Kawasaki Precision Machinery (Suzhou) Ltd.

China

500

100.00ment, marine equipment, and other machinery
Assembly of hydraulic pumps and motors forconstruction machinery
OTHER
Kawasaki Trading Co., Ltd.

Japan

600

70.00

Kawasaki Hydromechanics Corporation

Japan

436

100.00

Trading
Manufacture, sale, and installation of hydraulicpresses and other hydraulic equipment

Kawasaki Life Corporation

Japan

400

100.00Administration of Company welfare facilities; realestate sales, leasing, and construction; insurance
representation, administration and maintenance,leasing, and provision of loans

Kawasaki Heavy Industries (U.K.) 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

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

U.S.A.

US$600*100.00

Responsible for sales and acting as intermediary inNorth America for orders of KHI products and forproviding various types of engineering support

Kawasaki do Brasil Industria e Comercio Ltda.

Brazil

R1,136*100.00

Responsible for sales and acting as intermediary
in Brazil and the rest of Latin America for orders of
KHI products and for providing various types of engineering business services* Monetary unit in thousands** Monetary unit in millions†
Affiliate accounted for using equity method
Partially included in:● Rolling Stock & Construction Machinery★ Gas Turbines & Machinery❊ Consumer Products & Machinery
Note: In April 2009, the corporate name of Kawasaki Construction Machinery Corp. of America was changed to KCMA Corporation.

(As of March 31, 2009)60

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Network

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

Tokyo Head OfficeWorld 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

DOMESTIC WORKS
Gifu Works
1, Kawasaki-cho, Kakamigahara,
Gifu 504-8710, Japan
Phone: 81-58-382-5712
Fax: 81-58-382-2981

Nagoya Works 1
3-11, Kusunoki, Yatomi,
Aichi 498-0066, Japan
Phone: 81-567-68-5117
Fax: 81-567-68-5090

Nagoya Works 2
7-4, Kanaoka, Tobishima-mura,Ama-gun, Aichi 490-1445, Japan
Phone: 81-567-55-0800
Fax: 81-567-55-0803

Kobe Works
1-1, Higashikawasaki-cho 3-chome,
Chuo-ku, Kobe, Hyogo 650-8670, Japan
Phone: 81-78-682-5001
Fax: 81-78-682-5503

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

Akashi Works
1-1, Kawasaki-cho, Akashi,
Hyogo 673-8666, Japan
Phone: 81-78-921-1301
Fax: 81-78-924-8654

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

Kakogawa Works
170, Yamanoue Mukohara, Hiraoka-cho,
Kakogawa, Hyogo 675-0112, Japan
Phone: 81-79-427-0292
Fax: 81-79-427-0556

Harima Works
8, Niijima, Harima-cho,Kako-gun, Hyogo 675-0155, Japan
Phone: 81-79-435-2131
Fax: 81-79-435-2132

OVERSEAS OFFICES
Beijing Office
Room No. 2602, China World Tower 1,
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

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

Delhi Office
5th Floor, Meridien Commercial Tower,
8 Windsor Place, Janpath,
New Delhi, 110001 India
Phone: 91-11-4358-3531
Fax: 91-11-4358-3532

Moscow Office
6th Floor (605), Bolshoy
Ovchinnikovsky per.,
16 Moscow, 115184,
Russian Federation
Phone: 7-495-933-1953~54
Fax: 7-495-933-1955

MAJOR SUBSIDIARIES AND AFFILIATES
Kawasaki Shipbuilding Corporation
1-1, Higashikawasaki-cho 3-chome, Chuo-ku,
Kobe, Hyogo 650-8670, Japan
Phone: 81-78-682-5501
Fax: 81-78-682-5514

Sakaide Shipyard
1, Kawasaki-cho, Sakaide,
Kagawa 762-8507, Japan
Phone: 81-877-46-1473
Fax: 81-877-46-7006

Kawasaki Precision Machinery Ltd.
234, Matsumoto, Hazetani-cho, Nishi-ku,
Kobe, Hyogo 651-2239, Japan
Phone: 81-78-991-1133
Fax: 81-78-991-3186

Kawasaki Plant Systems, Ltd.
Kobe Head Office
1-1, Higashikawasaki-cho 3-chome, Chuo-ku,
Kobe, Hyogo 650-8670, Japan
Phone: 81-78-682-5200
Fax: 81-78-682-5574

Tokyo Head Office11-1, Minamisuna 2-chome, Koto-ku,
Tokyo 136-8588, Japan
Phone: 81-3-3615-5200
Fax: 81-3-5690-3159

KCM Corporation
2680, Oka, Inami-cho,Kako-gun, Hyogo 675-1113, Japan
Phone: 81-79-495-1211
Fax: 81-79-495-1226

Kawasaki Thermal Engineering Co., Ltd.
18-31, Higashinakajima 1-chome,
Higashiyodogawa-ku, Osaka 533-0033, Japan
Phone: 81-6-6325-0300
Fax: 81-6-6325-0301

NIPPI Corporation
3175 Showa-machi, Kanazawa-ku,
Yokohama, Kanagawa 236-8540, Japan
Phone: 81-45-773-5100
Fax: 81-45-773-5101

EarthTechnica Co., Ltd.
2-4, Kanda, Jimbocho, Chiyoda-ku,
Tokyo 101-0051, Japan
Phone: 81-3-3230-7151
Fax: 81-3-3230-7158

Kawasaki Heavy Industries (U.S.A.), Inc.
60 East 42nd Street, Suite 2501,
New York, NY 10165, U.S.A.
Phone: 1-212-759-4950
Fax: 1-212-759-6421

Houston Branch
333 Clay Street, Suite 4310,
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.
28140 Lakeview Drive,
Wixom, MI 48393, U.S.A.
Phone: 1-248-446-4100
Fax: 1-248-446-4200

San Jose Office3081 North 1st Street,
San Jose, CA 95134, U.S.A.
Phone: 1-408-432-0990
Fax: 1-408-432-0996

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

Kawasaki Precision Machinery (U.S.A.), Inc.
5080 36th Street S.E.,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-975-3103

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

KCMA Corporation
2140 Barrett Park Drive, Suite 101,
Kennesaw, GA 30144, U.S.A.
Phone: 1-770-499-7000
Fax: 1-770-421-6842

Canadian Kawasaki Motors Inc.
101 Thermos Rd., Toronto,
Ontario, Canada M1L 4W8
Phone: 1-416-445-7775
Fax: 1-416-445-0391

Kawasaki do Brasil Indústriae Comércio Ltda.
Avenida Paulista, 542-6 Andar,
Bela Vista, 01310-000, São Paulo, S.P., Brazil
Phone: 55-11-3289-2388
Fax: 55-11-3289-2788

61

Kawasaki Heavy Industries (U.K.) Ltd.

Sweden Branch

Kawasaki Motors Pty. Ltd.

4th Floor, 3 St. Helen’s Place,
London EC3A 6AB, U.K.
Phone: 44-20-7588-5222
Fax: 44-20-7588-5333

Häradsvägen 255, S-14172
Huddinge, Sweden
Phone: 46-8-464-0200
Fax: 46-8-464-0240

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

Kawasaki Precision Machinery (U.K.) Limited

Spain BranchErnesettle Lane, Ernesettle, Plymouth,
Devon PL5 2SA, U.K.
Phone: 44-1752-364394
Fax: 44-1752-364816

Jose Agustin Goytisolo,
29-31 08908-L‘Hopitalet,de Llobregat (Barcelona) Spain
Phone: 34-93-264-2200
Fax: 34-93-263-5367

Wuhan Kawasaki Marine Machinery Co.,Ltd.

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

Kawasaki Gas Turbine Europe G.m.b.H.
Nehring Strasse 15,61352 Bad Homburg, Germany
Phone: 49-6172-7363-0
Fax: 49-6172-7363-55

Kawasaki Robotics G.m.b.H.
29 Sperberweg, 41468 Neuss, Germany
Phone: 49-2131-3426-0
Fax: 49-2131-3426-22

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

Kawasaki Motors Europe N.V.
Jacobus Spijkerdreef 1-3,
2132 PZ HOOFDDORP,The Netherlands
Phone: 31-2356-70500
Fax: 31-2356-39884

Benelux Brancht Hofveld 6-C2,
1702 Groot-Bijgaarden,
Brussels, Belgium
Phone: 32-2-481-7820
Fax: 32-2-481-7829

Kawasaki Motors Racing B.V.

Kawasaki Machine Systems Korea, Ltd.

Nantong COSCO KHI Ship Engineering Co., Ltd.

69BL 1LT, 638, Gojan-Dong, Namdong-Gu,
Incheon, 405-817, Korea
Phone: 82-32-821-6941
Fax: 82-32-821-6947

117, Linjiang Road, Nantong City,
Jiangsu Province, People’s Republic of China
Phone: 86-513-8350-0666
Fax: 86-513-8351-4349

Flutek, Ltd.

Tonfang Kawasaki Air-Conditioning Co., Ltd.

192-11, Shinchon-dong,
Changwon, Kyungnam, 641-370, Korea
Phone: 82-55-286-5551
Fax: 82-55-286-5553

Yunpeng Road 333,
Economic and Technological Development Zone,
Langfang, Hebei, People’s Republic of China
Phone: 86-316-597-8866
Fax: 86-316-597-8098

Kawasaki Motors Enterprise (Thailand) Co., Ltd.
129 Rama 9 Road, Kwaeng Huaykwang,
Khet Huaykwang, Bangkok 10320, Thailand
Phone: 66-2-246-1510
Fax: 66-2-246-1517

Kawasaki Gas Turbine Asia Sdn Bhd
Lot 40, Jalan Pengacara U1/49 Temasya Industrial
Park, Glenmarie 40150 Shah Alam, Selangore,
Malaysia
Phone: 60-3-5569-2882
Fax: 60-3-5569-3093

Germany Branch

KHI Design & Technical Service Inc.

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

20F, 6788 Ayala Avenue,
Olden Square, Makati,
Metro Manila, The Philippines
Phone: 63-2-810-9213
Fax: 63-2-816-1222

Italy Branch
Via Luigi Meraviglia 31,
20020 Lainate, Italy
Phone: 39-02-9328521
Fax: 39-02-932852-84

Room 3710-14, Sun Hong Kai Centre,
30 Harbour Road, Wanchai, Hong Kong,
People’s Republic of China
Phone: 852-2522-3560
Fax: 852-2845-2905

Kawasaki Precision Machinery (Suzhou) Ltd.

U.K. Branch

Parc d’Activités de la Clef de Saint-Pierre,
Rond-Point de l’Epine des Champs, Bâtiment 1,
78990 Elancourt Cedex, France
Phone: 33-1-30-69-0000
Fax: 33-1-30-69-5001

Kawasaki Heavy Industries (H.K.) Ltd.

Jacobus Spijkerdreef 1-3,
2132 PZ HOOFDDORP,The Netherlands
Phone: 31-2356-70500
Fax: 31-2356-39884

1 Dukes Meadow,
Millboard Road, Bourne End,
Buckinghamshire SL8 5XF, U.K.
Phone: 44-1628-856600
Fax: 44-1628-856799

France Branch

No. 43 Wudong Road,
Qingshan, Wuhan,People’s Republic of China
Phone: 86-27-86410132
Fax: 86-27-86410136

Kawasaki Motors (Phils.) Corporation
Km. 23 East Service Road,
Bo. Cupang, Muntinlupa,
Metro Manila 1771, 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: 65-62255133~4
Fax: 65-62249029

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

Yangshan Industrial Park, 9 Guanshan Rd.,
New District, Suzhou, People’s Republic of China
Phone: 86-512-66160365
Fax: 86-512-66160366

Shanghai COSCO Kawasaki Heavy Industries
Steel Structure Co., Ltd.
5198 Hutai Road, Baoshan District,
Shanghai 201907, People’s Republic of China
Phone: 86-21-5602-8888
Fax: 86-21-5602-5198

KHI (Dalian) Computer Technology Co., Ltd.
Room 205, International Software Service Center,
Dalian Software Park, 18 Software Park Road,
Dalian, People’s Republic of China
Phone: 86-411-84748270
Fax: 86-411-84748275

Kawasaki Heavy Industries Consulting& Service (Shanghai) Company, Ltd.
10th Floor, Chong Hing Finance Center,
288 Nanjing Road West, Huangpu District,
Shanghai 200003, People’s Republic of China
Phone: 86-21-3366-3100
Fax: 86-21-3366-3108

Kawasaki Heavy Industries Machinery
Trading (Shanghai) Co., Ltd.
10th Floor, Chong Hing Finance Center,
288 Nanjing Road West, Huangpu District,
Shanghai 200003, People’s Republic of China
Phone: 86-21-3366-3200
Fax: 86-21-3366-3205

Kawasaki Robotics (Tianjin) Co., Ltd.
Hongtai Industrial Park, B-1, Taifeng Road 87,
Tianjin Economic-Technological Development Area,
People’s Republic of China
Phone: 86-22-5983-1888
Fax: 86-22-5983-1889

Kawasaki Heavy Industries Middle East FZE
Dubai Airport Free Zone, Bldg. W6 Block-A,
Office No. 709, P.O. Box 54878, Dubai, U.A.E.
Phone: 971-(0)4-214-6730
Fax: 971-(0)4-214-6729(As of August 1, 2009)62

Kawasaki Heavy Industries, Ltd. Annual Report 2009

Corporate Data

Kawasaki Heavy Industries, Ltd.
Kobe Head Office:
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, JapanTokyo Head Office:World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, JapanFounded:1878

Incorporated:

1896

Paid-in Capital:¥104,328,628,664

Number of Shares Issued:

1,669,629,122 shares

Number of Shareholders:

171,908

Number of Employees:

32,266

Stock Exchange Listings:

Tokyo, Osaka, Nagoya

Method of Publication of Notices:
http://www.khi.co.jp
The method of publication of notices of the Corporation shall bemade electronically. Provided, if the Corporation is unable to makean electronic publication of notice due to an accident or otherunavoidable reason, the notice shall be inserted in the Nihon Keizai
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:
KPMG AZSA & Co.
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-0044, 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 fourordinary shares.
ADR Depository:
The Bank of New York Mellon
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-866-680-6825
U.S. Toll Free: 888-269-2377(888-BNY-ADRS)
http://adrbnymellon.com
KHI Web Site at: http://www.khi.co.jp(As of March 31, 2009)63

Kawasaki Heavy Industries, Ltd. Annual Report 2009This report is printed on paper certified by the Forest Stewardship Council(FSC)―an internationallabeling scheme that provides a credible guarantee that the raw materials used in the productcome from an environmentally well-managed forest―and with vegetable ink for waterless printing(non-VOC ink) that does not contain volatile organic compounds.

Printed in Japan
ISSN 0287 - 1793