Annual Report 99

Profile
Founded in 1878, Kawasaki Heavy Industries, Ltd.
(KHI) is a leading comprehensive manufacturer oftransportation equipment and industrial goods inthe world. With a broad technological base thatencompasses land, sea and air, KHI manufactures
ships, rolling stock, aircraft and jet engines, refuse
incinerators, industrial plants, steel structures andvarious manufacturing equipment and systems.
KHI also produces such world-famous consumer
products as Kawasaki brand motorcycles and Jet
Ski® personal watercraft.

Contents
Financial Highlights
To Our Shareholders
Concern for the Environment
Outline of Kawasaki Global Operations
Transportation Equipment
Ships
Rolling Stock
Consumer Products
AerospaceIndustrial Equipment
Plant Engineering
Machinery & Steel Structures
Composites of Consolidated Sales
Financial Review
Year 2000 Problem Compliance
Six-Year Summary
Supplementary Information on Non-Consolidated Results
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Board of Directors
Consolidated Subsidiaries
Network
Annual Report 99
Kawasaki Corporate Data

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Cover: Kawasaki motorcycle W650
(featured on page 15)

Financial Highlights
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
Years ended March 31, 1999, 1998 and 1997
Thousands of
U.S. dollars

Millions of yen

1999

1998

1997

1999

For the year:
Net sales
Net income (loss)
Capital expenditure
Depreciation and amortization¥1,202,189(6,132)40,42834,607¥1,297,212
18,55642,92832,416¥1,224,259
22,57235,13031,245$9,972,534(50,867)
335,363
287,076

At year-end:
Total assets
Total shareholders’ equity
Interest-bearing debt

1,204,857
199,637
447,028

1,222,906
209,040
437,387

1,303,168
197,161
447,210

9,994,666
1,656,051
3,708,237

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

¥

(4.4)
6.0

¥

13.3
6.0

¥

16.4
7.0

$

(0.04)
0.05

Note: The U.S. dollar amounts represent arithmetical results of translating Japanese yen to dollars on the basis of ¥120.55=$1, the rate prevailing as of March 31, 1999.
These translations are solely for the convenience of the readers.

Net sales

Net income

Total shareholders’ equity(Billions of yen)(Billions of yen)(Billions of yen)1

To Our Shareholders
We are pleased to report on the business results of Kawasaki Heavy Industries, Ltd. (the“Company”) and its consolidated subsidiaries (collectively, with the Company, “KHI”) for the
fiscal year ended March 31, 1999 (“fiscal 1999”).
2

operating results

During the fiscal year ended March 31, 1999 (“fiscal 1999”), the Japanese economy remained mired inrecession, due principally to a prolonged downturn in consumer spending, a decline in private-sector
capital investment as a result of falling corporate profitability, and persistent worries about theJapanese financial system. With the effects of two large government fiscal stimulus packages not
making themselves felt sufficiently, the economy shrank for the second successive year. Overseas, thepicture continued to be mixed. While Western economies in the main exhibited healthy growth,
prolonged economic turmoil in Asian markets caused a downturn in demand.
Despite the adverse business environment, we proactively pursued sales initiatives and developed
our operations. Nevertheless, sales fell across all of our operating divisions, with total net sales
amounting to ¥1,202.2 billion, a 7.3% decline over fiscal 1998. In particular, in the domestic market,
custom-ordered capital goods and mass-produced industrial machinery and related products both
declined, while sales of motorcycles and other items in Asian markets also suffered. Despite vigorouscompany-wide measures to raise our margins, the aforementioned falls in sales revenues, combinedwith an exceptional loss on large rolling stock orders for U.S. customers, caused profits to fall.
Operating income slipped to ¥21.7 billion, and we posted a net loss for the year of ¥6.1 billion.
One of the main exceptional factors dragging us into loss in fiscal 1999 was significant manufacturing
disruption on major U.S. rolling stock contracts, which was precipitated by a confluence of unforeseen
events. Recognizing that the effects of this were transient, and in keeping with our policy ofmaintaining stable dividends, the total cash dividend for fiscal 1999 was ¥6.00 per share—the sameas in the previous year—comprising final and interim dividends of ¥3.00 per share each.

strategic focus forthe 21st century

As stated previously, our operating environment remains harsh, both in Japan and overseas. As theworld economy rapidly becomes borderless, this is leading to intensified price competition between
companies. In the face of the worldwide consolidation of entire industries—a phenomenon that puts
firms’ very survival at stake—companies are increasingly forming networks of global alliances.
Against this backdrop, we are redoubling our efforts to strengthen sales functions and to boost ourcost-competitiveness, concentrating our efforts in areas of higher earnings potential. Further, toensure our prosperity as a global enterprise in the upcoming century, we are implementing a numberof measures designed to make radical improvements to management. As well as constructing a more
efficient organizational structure, we are focusing the power of the KHI Group on boosting earnings at
the consolidated level, and introducing new management methods.
Further, as part of this program, we are in the process of revising our medium-term business plan. The
new plan, whose target date for completion is fiscal 2004, builds on many of the principles and aims
incorporated in the original plan. These included: transforming our operations to create and develop acomprehensive systems engineering enterprise capable of taking up the challenges of the coming
decades; drastically reducing our expenses, with the aim of halving total costs; and, taking

3

Dr. Hiroshi Ohba
Chairman and CEO

Toshio Kamei
President

fundamental measures to promote the development of our business on a global basis. In addition tothese policies, the revision process involves us reviewing the mix of businesses that we are in, andincreasing the speed of management decision-making. Once completed, we will actively promote theswift and accurate implementation of this plan throughout the Company.
Thus, it is our firm belief that we are steadily developing and implementing the management policies
that will guide our business in the 21st century. Let us now move on to describe in more detail someof the principal measures we are taking within this program.
Our broad range of products gives us a big advantage, namely that cyclical variations in the earnings ofour various businesses tend to complement each other. In particular, our varied product mix, good
customer balance between the private and public sectors, and between domestic and overseas markets,
makes it easier to balance out the effects of fluctuations in exchange rates, public investment levels, andthe state of the domestic economy. We also derive operational synergies from a combination of thetechnological, manufacturing and sales expertise in each business. Finally, the high loyalty, transferability
and quality of our employees afford us great versatility in combining the efforts of our various divisions.
Nevertheless, if we are to build on the stability we have enjoyed until now and move forward as a global
enterprise combining high profitability with solid growth potential, we need to refocus management.
Specifically, while taking advantage of our considerable strengths, we must proceed further with thepriority investment of our management resources, to select and focus on sectors where we anticipate
strong growth over the medium and long term. Using our technological competitiveness to generatehigh earnings, over the coming decades we must leverage the economies of scale we can enjoy fromthe wide scope of our business mix. We must nurture and strengthen our core businesses, focusing on
those where we can expect a combination of high, stable earnings and good growth potential.

nurturing andstrengthening ourcore businesses

4

Currently, through revising the medium-term business plan, we are analyzing the market potential,
earnings potential and market share, both of our existing businesses and the various candidates for
new product and business development. Based on the results of this analysis, and having identified
new businesses with potential, we will invest management resources on a priority basis in thoseexisting businesses that we can expand and grow, and in new products and businesses withsignificant long-term potential. The overall aim is to develop our core businesses for the coming
century. Moreover, by ensuring that each area effectively manages the internal balance between
collaboration and competition expertly, we intend to achieve a conglomerate premium.

reforming management With the rapid globalization of financial and capital markets, it is incumbent on us not only to build up ourcore businesses, but also to move towards a greater management emphasis on consolidated results andefficient use of shareholder capital. Only this way can we hope to gain a fitting valuation for our Company.
To date, across the entire Company, we have set financial targets for managers to achieve in order toaccomplish this objective. As well as the principal yardstick, recurring profit, target indicators haveincluded net sales, the level of orders and various balance sheet items. As we stated before, if we are to
successfully focus on and develop our core businesses, it is vital that we evaluate all of them from theperspective of their return on capital. Accordingly, from this year (fiscal 2000), we will be measuring allthese indicators at the consolidated level. Further, in addition to the usual numerical targets, we haveadded an extra measure of profitability, namely return on invested capital, which we define as the ratioof EBIT (earnings before interest and tax) to the sum of shareholders’ equity and interest-bearing debt.
Through this system, which makes each division accountable for raising earnings while helping to shrink
the balance sheet, we aim to boost the efficient use of capital throughout the Company. By focusing on
this task, we hope to raise our long-term growth potential and thus enhance shareholder value.

effecting drastic cost
reductions

Today’s global market is characterized by fierce competition between firms, with the result that producer
price deflation is gradually eroding margins. To strengthen and enhance the value of our core businesses,
cost reduction is an inevitable necessity. We are in the midst of a drastic program of cost cutting designed
to reduce our cost base significantly.
We have set ourselves a notional target of cutting our costs in half. The purpose of this ‘goal’ is not theactual number itself, but the recognition that attaining a reduction of the order of 50% necessarily entails
a paradigm shift in our thinking. Our ultimate goal is to redesign and rebuild from the ground up all of ourdesign and manufacturing processes. By approaching our design and manufacturing processes from sucha business process re-engineering standpoint, and painstakingly evaluating all aspects of our operations
to eradicate all surplus product and process-related expenses, we aim to significantly reduce the total
costs of these operation areas.
In particular, reducing the costs involved in our business processes is essential to the success of the5program. With this in mind, we are also reviewing how we operate, and our use of information technology.
We aim to overhaul all of our business processes, resulting in dramatically improved efficiency.
Alongside this initiative, we are also slimming down our head office functions to enable swift decisionmaking within the organization, partly by delegating greater responsibility to individual productdivisions. By reviewing our Company structure, we aim to end up with a ‘small but strong headquarters’
and a more efficient organization.
With worldwide competition increasing in intensity, we need to boost our international competitiveness by
globalizing our business. In line with this goal, we must further develop our overseas operations, both interms of investing in local manufacturing bases and increasing the level of overseas procurement activities.
As well as boosting our presence in foreign markets, we need to strengthen our entire global network.
Motorcycles were the first of our major product categories that we began making overseas. Since then, we
have greatly expanded the scope of our offshore manufacturing operations in the United States, Europe
and Asia to include ships, rolling stock, construction machinery, hydraulic machinery, marine propulsion
systems, industrial robots, and steel structures. We intend to build further on this base by expanding thenumber of overseas production bases, principally for motorcycles, mass-manufactured industrial goods
and related products, and by manufacturing more products for overseas markets locally.
To promote this localized approach and increase the ties linking our Japanese and overseas operations, weare seeking to apply the engineering expertise we have accumulated in Japan, as well as Japanese
production technology, to these local manufacturing operations. This process is designed to ensure that
production costs are in line with market prices, and also to improve quality control systems, so that output
is always of a high quality. As a company, the forces driving our competitiveness are our technical prowess
and our manufacturing technology—and this will continue to be the case. As our prime location fortechnological development, Japan will rightly continue to play the key role in our operations as the main
center of our state-of-the-art technological development efforts.
As we have described above, to develop our business as a global enterprise over the coming decades,
we are committed to resolutely developing our management abilities, all the while seeking to enhanceshareholder value. We would therefore ask our shareholders for their continued understanding andsupport as we take up the challenges before us.
June 1999

Dr. Hiroshi Ohba

- Chairman and CEO

Toshio Kamei- President

promoting the globalizationof our operations

Concern for the Environment
With the dawn of the new millennium imminent, our coexistence with the environment is perhaps
the single most important issue facing mankind. Today, in countries around the world, the quest forsustainable development is leading scientists and engineers to take on the intensifying challengeof balancing the demands posed by modern economies with the need to protect the naturalenvironment.
6

Awareness of global environmental issues
Having first established an environmental management department
as far back as 1972, KHI has been concerned with the environment
from an early stage. Today’s realities are, however, making KHI still
more aware that its development as a sound, global enterprise in the
coming decades is critically dependent on the Company’s attitude
towards the environment. In short, a company that does not take careof the environment will simply not survive. With this imperative in
mind, KHI is expanding the scope of its environment-oriented
activities on a variety of fronts.
One example of these activities is the Company-wide introduction ofenvironmental management systems based on the international
standards stipulated in the ISO 14001 protocols. This initiative aims
to lower environmental risks and promote ongoing improvement inmanagement practices to ensure that concern for the environment
continues to be one of KHI’s foremost priorities. Growing beyond
creation and introduction of such systems, which are now in various
stages of securing third-party certification, all KHI divisions haveinstituted regular internal environmental audits.

A structured and planned approach
The basic rationale guiding KHI’s development of its environmental
management systems was formulated in a fundamental planningdocument, first produced in fiscal 1 9 9 5, which provided an
overview of all the Company’s aims and activities directed atenvironmental protection.
The basic thinking that underpinned the first stage of this plan, which
covered the three years spanning fiscal 1 9 9 5 - 9 7 , was one ofcoordinating independent action throughout the Company to tackle
environmental problems proactively. The three main thrusts of theinitiative were to institute preventive measures to stop pollution at its
source, to initiate programs aimed at maintaining the naturalenvironment, and to encourage collaboration with local organizations
to promote more effective environmental protection. In terms ofspecific environmental criteria, this stage of the plan focused on six
principal goals:

1. Develop and establish sound, effective environmental
management systems.
2. Develop a comprehensive pollution prevention program.
3. Promote energy-saving measures.
4. Conserve resources and promote recycling measures.
5. Reduce or eliminate use of specified CFCs.
6. Accelerate research and development work on environment-related
products and technologies.
The second stage of this plan, which covers the three years spanningfiscal 1998-2000, builds on the achievements of the first stage. It
defines that environmental protection as one of the most important
issues now facing the Company’s management and stresses that theneed for all KHI’s divisions to tackle environmental issues proactively
is more pronounced than ever. As a manufacturer of fundamental
industrial products with wide-ranging operations covering land, sea
and air, KHI must naturally observe all aspects of environmental
legislation as it develops its businesses worldwide.
The new plan also stipulates that, as part of the creation of a society
with recycling at its core, KHI must work to convert waste products
into reusable materials, and to promote the effective use of energy.
The plan also commits the Company to increasing its social
contribution by accelerating the development of new products andtechnologies designed with the demands of environmental protection
in mind. Another new initiative of this plan is to use KHI’s ISO 14001related environmental management systems activities as an effective
tool for building more powerful environmental protection programs.
To oversee environment-related activities throughout KHI, a new
Environmental Management Department was established in April
1999. This group is now working to ensure that at every level of
the Company, and in every field in which KHI operates, theCompany’s operations are managed with due consideration toenvironmental protection.

7

Working towards ISO 14001 accreditation
As of the end of March 1999, KHI had gained ISO 14001 certification
at three sites in Japan. The first to be awarded certification was the
Nishi-Kobe Works of the Precision Machinery Division, in February
1998, and second was the Industrial Robots Division, in October
1998, followed by the Environmental Plant Division in March 1999.
These three divisions commenced their drive towards certification in
fiscal 1998 through the establishment of internal environmental ISO
progress committees and other measures and have since served as
leaders in the accreditation process throughout KHI.
Following the example of the three leading divisions, all of remaining
KHI divisions are currently moving to begin the accreditation process,taking into account the unique features of their business areas andthe special needs of their customers. The aim is for all the principal
domestic divisions to have successfully gained ISO 14001 recognitionby the end of March 2002.

A pilot plant for gasifying melting incineration system in
Sodegaura, Chiba Prefecture, has been in operation
since April 1998.

Creating products that are kind to the environment
KHI operates as a comprehensive plant engineering firm, and, assuch, produ ces a wide variety of products that benefit theenvironment. KHI is an active developer of new environmentfriendly technologies that reduce pollution from waste disposal
plants and help promot e the recycling of materials. In theenvironmental equipment field, the company has been responsible
for a variety of innovations:
1. Gasifying melting incineration systems: the next generation ofmunicipal refuse incinerators
2. Ash melting systems: reducing refuse volume while converting
wastes to usable resources and non-polluting substances
3. Fly ash processing systems: helping to eliminate dioxins andother pollutants
4. Flue gas processing facilities: curbing dioxin, HCl, SOx and NOx
pollution
5. Refuse-derived fuel (RDF) production plants: transforming
wastes into fuels
6. Liquefaction systems for waste plastic: creating liquid fuelsThis 300 kW ceramic gas turbine generator, developed
under a contract with New Energy Development
Organization (NEDO) of Japan, promises to boost
energy efficiency substantially. In tests, this unit has
produced thermal conversion ratios in excess of 42%—
more than double conventional equivalents.

KHI is committed to playing its part to protect the environment in every way possible. This means
getting fully involved in saving energy, conserving resources, reducing the impact on the environment,in constructing functional recycling systems, and working towards a society that is free of the scourgeof waste gas emissions.
8

Last year saw the completion of two pilot plants in this area. The first,
a gasifying melting refuse incinerator, can convert municipal refuse
directly into industrial slag while effectively suppressing production of
toxic dioxins. This is made possible by using a conversion process thattakes place at 500°C and under a pressure of 85 atm. The highpressure, high-temperature steam produced drives turbines that cangenerate electric power with an overall conversion efficiency in excess
of 3 0%. In combination, these benefits mak e this plant aground–breaking achievement.
The other pilot plant, constructed jointly with another firm, is a waste
plastic liquefaction plant, which is capable of recycling the waste
plastic elements in household refuse into kerosene and other light-oil
fractions of high enough quality to be used as fuels.
In the power plant field, KHI is supplying high-efficiency, low-NOx
combined-cycle power plants. KHI has also developed proprietary
boiler technology that ensures ultra-low levels of NOx waste
pollutants in power generation and industrial processes (see page 18
and 19). In the industrial gas turbine field, KHI is developing a newkind of ceramic turbine generator that produces very low levels of NOxemissions. In tests conducted in 1998, this turbine achieved theworld’s highest-ever recorded thermal conversion efficiency.
As a motorcycle manufacturer, KHI formulated its own plan to reduce
the environmental impact of motorcycles back in 1994, and has
steadily upgraded its environmental protection program ever since. In
February 1998, the Consumer Products division launched a fresh
initiative to increase the recycling of used Kawasaki motorcycles. The
division has subsequently continued to expand the scope of its
activities targeted at enhancing environmental protection. Based onthese plans, the division is currently working towards several goals,
which include two specific numerical targets:
1. Achieve 90%+ recyclability for all new vehicles by the end of
fiscal 2003.
2. Keep the small amount of lead metal used in new motorcycles inabsolute terms at 1996 levels.

To meet targets such as these, KHI has instituted a prior evaluation
system to assess the environmental risks posed by products
throughout their lifecycle.

Future outlook
The Earth Summit convened in 1992 in Rio de Janeiro marked the startof a new age of environmental awareness. Today, nearly a decade on,
the seriousness of various environmental problems of global
proportions—such as global warming—has become apparent, andthere is a pronounced and accelerating trend towards concerted
international efforts to tackle these problems. In addition, being a‘good corporate citizen’ now means being obliged to take positive
action on environmental issues.
KHI is committed to playing its part to protect the environment in every
way possible. This means getting fully involved in saving energy,
conserving resources, reducing the impact on the environment, inconstructing functional recycling systems, and working towards asociety that is free of the scourge of waste gas emissions.
By doing so, KHI is not only fulfilling its obligations to its shareholders
and business partners, but is also making a valuable contribution to
the global community. KHI is committed to earning the trust andsupport of society by continuing to ensure that all corporate activities
are compatible with the protection and preservation of ourirreplaceable environment.

Outline of Kawasaki Global Operations

9

Transportation Equipment
Ships
Rolling Stock
Consumer Products
AerospaceIndustrial Equipment
Plant Engineering
Machinery & Steel Structures

Main Products
LNG carriers
LPG carriersContainer ships
VLCCs and other types of tankers
Bulk carriers
High-speed vessels (Jetfoils, Jet Piercers)
Submarines
Maritime application equipment

10

Ships

KHI has a long history in shipbuilding extending back over a century. Today, having developed awealth of innovative technologies to make ships larger, faster and more automated, KHI ranks as oneof the world’s leading shipbuilding firms. The Company’s advanced shipyards are capable of building
a wide variety of ships, from large vessels such as LNG or LPG carriers, VLCCs (very large crude-oil
carriers) and container ships, to the ultrahigh-speed passenger ship, the Kawasaki Jetfoil. Supported
by high-level production technology and management expertise, the Sakaide Works is the site for theconstruction of large vessels. At the Kobe Works, KHI makes submarines and smaller, special-purpose
vessels for the Japan Defense Agency and other customers.
During fiscal 1999, KHI received orders for nine vessels, including three LPG carriers and four VLCCs.
A total of ten ships were delivered to customers during the year, including one LNG carrier and threecontainer ships.
Since the latter part of 1998, the Sakaide Works has introduced continuous production of doublehull VLCCs. KHI has also successfully developed a new structural formula for the hulls of ships that isboth innovative and unique within the industry. This strengthens hulls while simultaneously reducing
the amount of reinforcing materials required during construction. The new method has thus boosted
both quality and productivity.
KHI’s joint venture in Nantong, Jiangsu Province, China, completed its new shipbuilding dock in
May 1999, at which time a ceremony was held to mark the commencement of operations. Currently
this shipyard is constructing its first vessel, a bulk carrier, which is due to be delivered at the endof 1999.
T he world shipb uilding industry is facing a supply-demand imbalance, particularly as aconsequence of the recent downturn in the Asian economy. In response, KHI is striving to reducematerials costs and raise productivity to boost cost competitiveness. At the same time, KHI iscontinuing to develop new, advanced products and technologies that will serve to differentiate theCompany from its competitors.

Annual Report 99

11‘‘Alnoof” Container Ship
Capable of single-man operation, the Alnoof, ordered by theUnited Arab Shipping Company, is a state-of-the-art
container ship of the Panamax type, with a maximum
capacity of 3,800 containers.

“Al Wakrah” LNG Carrier
A 135,000 m3 capacity makes the Al Wakrah the world’s
largest LNG carrier. Supplying Japanese electric utilities
from Qatar, the vessel features a special thermal insulation
panel designed by KHI that enhances the efficienttransportation of cargo.

Chinese Joint Venture Launches First Vessel
KHI’s joint venture in Nantong, Jiangsu Province, China,
launched its first vessel on May 8, 1999.

Main ProductsElectric cars (including Shinkansen)
Electric and diesel locomotives
Passenger coaches
Integrated transit systems
Monorail cars
Platform screen doors

12

Rolling Stock

Since it first began producing rolling stock in 1906, KHI has accumulated a wealth of experienceand technological expertise in this field. Over the years, KHI has been responsible for the designand construction of a large number of trains, many of which enjoy a significant place in Japanese
railway history.
KHI’s Hyogo Works features an online production control system and the latest robotics. As well as
car-rotating jigs that greatly facilitate welding and outfitting operations, the plant makes use of
automatic robot welding and many types of numerical control devices.
The latest technology is also employed at KHI’s rolling stock R&D center. As well as a climatetesting laboratory that can recreate every kind of weather condition to test suitability for different
climates, KHI makes use of special load-testing facilities and bogie-rotating test stands that canassess the performance of rolling stock by simulating speeds of up to 420 km/h. At the design
stage, KHI uses CAD/CAM processes to tailor the projected design to diverse individual customer
requirements, and then test the strength and integrity of the resulting structure on computer. Thiskind of technological prowess has enabled KHI to maintain its position as Japan’s top rolling stock
manufacturer, leading the way in the development of the latest trains, notably the new generationof Shinkansen bullet trains.
KHI has also been proactive in pushing into overseas markets. In the United States, KHI has been
supplying the New York City Transit Authority (NYCTA) with subway cars over many years. KHI has
received orders for next-generation subway cars from the NYCTA in each of the past two fiscal years,
bringing the cumulative number of cars ordered to over 1,000. In conjunction with the Hyogo Works,
Kawasaki Rail Car, Inc., the Company’s U.S. rolling stock manufacturing subsidiary, is in the final
stages of assembling large orders of bi-level passenger coaches for U.S. customers.
Partly due to increasing environmental concerns, railways are currently being reconsidered in the
United States as one of the more effective means of urban mass transit—a trend that is expected toboost future demand. For this reason, KHI is focusing its overseas sales efforts on the U.S. market,
while also working to improve manufacturing efficiency through further development of its system ofshared responsibility between the U.S.-based and domestic production sites.
KHI aims to develop its rolling stock business further by increasing its systems integration expertise,
to enable it to supply a wider range of rolling stock and associated systems both at home and abroad,and thereby burnish its reputation as a comprehensive rolling stock supplier.

Annual Report 99

13

Series 700 Shinkansen Bullet Train
Jointly developed with Japan Railways (JR) West and JR
Central, the 700-series Nozomi Shinkansen bullet train
boasts enhanced passenger comfort and an advanced,
streamlined profile that reduces wind noise. It went into
service in March 1999.

Bi-Level Passenger Coaches for U.S. Market
These bi-level passenger coaches went into service in Long
Island, New York, in October 1998.

Series 285 Express Train
Jointly developed with JR West and JR Central, the Sun Risebi-level express train features sleeper coaches withindividual compartments suitable for one or twopassengers, together with other luxurious features such as
lounges and shower rooms.

Main Products
Motorcycles
All-terrain vehicles (ATVs)
Jet Ski® personal watercraft
General-purpose gasoline engines
Brush cutters
Transmissions

14

Consumer Products

KHI’s Consumer Products enjoy a wide customer base throughout the world. Particularly overseas, theKawasaki brand name is intimately associated with motorcycles and enjoys high recognition. Other
popular consumer products are Jet Ski® watercraft, which KHI was the first firm in the world tocommercialize successfully. In recent years, KHI has also become well-known for ATVs (all-terrain
vehicles) and the MULE, a multi-purpose four-wheeled vehicle.
A global network of 16 manufacturing bases and over 6,000 dealerships supplies KHI products aroundthe world. Of these, the most long-lived overseas manufacturing operation is the Lincoln plant in
Nebraska managed by Kawasaki Motors Manufacturing Corp., U.S.A., which this year celebrated the25th anniversary of breaking ground at the site. When it commenced operations back in 1975, theLincoln plant was the first Japanese-owned motorcycle factory in the United States. It was producing
motorcycles before any other Japanese motor vehicle maker had established any local U.S.
manufacturing operations. Today, as well as large-displacement motorcycles destined for the U.S.
market, the plant is a worldwide supply base for Jet Ski® watercraft, ATVs, and MULE multi-purpose
four-wheeled vehicles. Production capacity has also been expanded to incorporate manufacturing
facilities for industrial robots.
During fiscal 1999, the economic slump in Thailand, Indonesia and other parts of Southeast Asia had
a negative impact on sales of motorcycles in these markets. However, this was offset by strong
demand in Europe and North America. Sales of super-sports motorcycles such as the new ZX-6R and
the ZX-9R models grew substantially, while good sales progress was also made with ATVs and MULE
multi-purpose four-wheeled vehicles in Canada and the United States. Moreover, having commenced
operations in October 1998, production at KHI’s manufacturing joint venture for motorcycle engines
on Hainan Island in China is progressing smoothly.
The motto of the Consumer Products Division is ‘Let the good times roll!’ Based on this notion ofproviding consumers with personal transportation products that afford great satisfaction andenjoyment, KHI will continue to develop new products, while striving to expand its global sales andmanufacturing network.

Annual Report 99

15

Kawasaki W650
With its elegant lines and powerful SOHC air-cooled
twin-cylinder engine, the W650 road sportsbike isengineered down to the finest detail to combine
riding pleasure with mesmerizing beauty. Its stylingand unique, throaty growl have won many fansaround the world.

Kawasaki Ninja ZX-9R
Supreme in its class, this classic 900cc road sports model has
awesome power and enhanced maneuverability to provide
the ultimate riding experience.

KVF400 All-Terrain Vehicle
Fitted with a continuously variable transmission, theKVF400 is a first-class sports or utility vehicle. With atorquey response and excellent maneuverability, it isideally suited for hunting or trail riding, and can also be
used in agricultural applications.

Main Products
T-4 intermediate jet trainers
CH-47, OH-1 and BK117 helicopters
Component parts for B777 and B767
passenger airplanes
MissilesElectronic equipment
Space equipment
Jet engines
Gas turbines

16

Aerospace

Aerospace promises to be one of most knowledge-intensive industries in the upcoming century. As
a manufacturer of aircraft and engines in both defense and commercial aviation, KHI is at theforefront of the Japanese aerospace industry, and is developing a wide range of business in theseimportant fields.
KHI has been the prime contractor in designing and manufacturing a number of projects for the Japan
Defense Agency, including the P-3C anti-submarine warfare patrol airplane, the T-4 intermediate jet
trainer and the CH-47J large transport helicopter. In 1997, KHI completed development work on OH-1
light observation helicopter prototypes, and the model went into mass production in 1998. In thesame year, KHI’s highly experienced helicopter development team received the Howard Hughes Award
from the American Helicopter Society for their work on the OH-1, into which they have incorporated avariety of technical innovations. This was the first time that this prize had been awarded to a teamfrom outside the United States.
In the commercial aviation field, KHI supplies component parts for the B777 and B767 passenger
airplanes developed jointly with The Boeing Company. KHI has also jointly developed the BK117 twinengine helicopter with MBB (currently Eurocopter Deutschland GmbH). This is the very first helicopter
to be developed solely in Japan, and is now being manufactured for customers around the world.
In the jet engine business, in addition to the production of gas turbine engines for naval vessels andmilitary aircraft, KHI is also involved in the international joint development and manufacture of V2500,
RB211/Trent and PW4000 turbo-fan engines for passenger aircraft. To further develop the civilian jetengine side of its business, in December 1998, KHI entered into a joint development and production
program with Rolls-Royce for the new Trent 500 engine model.
In fiscal 1999, KHI’s aerospace-related sales dropped below the level of the previous year principally
due to a drop-off in sales to the Japan Defense Agency. The level of orders also fell, reflecting weaker
demand in both the defense and commercial aviation sectors.
Having emerged just this century, aerospace is still a relatively new business. With the invention of thejet engine, aircraft have become larger and increasingly more sophisticated, and the spectrum of
applications in both the defense and commercial aviation markets has broadened. KHI has also
deepened its exposure to aerospace through involvement in various space programs. Looking to the
future, KHI intends to continue developing its technological expertise to lead the way ahead into thenext century.

Annual Report 99

17

T-4 Intermediate Jet Trainer
The T-4 intermediate jet trainer has been highly praised for
its use in training Japanese fighter pilots in tacticaloperations. It also makes regular appearances at aerial
demonstrations.

BK117 Helicopter
Packed with advanced features such as a GPS-basednavigation system and fly-by-wire controls, the BK117
helicopter is used in a wide range of applications, fromcarrying personnel to fire-fighting and police operations.

Trent 500 Turbo-Fan Engine
KHI is part of the international development team for theTrent 500 next-generation turbo-fan aircraft engine, which
will be used in Airbus A340-500 and A340-600 aircraft.

Main Products
Steel making, cement, chemical and otherindustrial plants
Power plants
Boilers
Ash handling equipment
Municipal refuse incineration plants
Bulky refuse crushing and screening plants

18

Plant Engineering

In April 1999, in a major reorganization of its plant engineering operations, KHI brought together into
one unit all of its sales, engineering support and other functions for industrial plants, power plants
and environment-related products. This will enable KHI to improve the speed and breadth of response
it can make to customers to meet all their general engineering needs. The move will also allow KHI todevelop further as a comprehensive supplier of industrial and power plants, as well as waste disposal
and other environment-related facilities.
In the industrial plant sector, KHI designs and builds factories for steel, cement, chemicals andother key industrial products. KHI’s technological expertise has been the main factor in its
involvement in a large number of such projects both at home and abroad. During fiscal 1999, thedivision received orders from the United States for cattle-feed and food additive production plants,
and from Taiwan and Kenya for zinc galvanizing plants. In Japan, the year saw the delivery of asteelmaking plant to a domestic steel manufacturer.
In the power plant sector, the main thrust of KHI’s business is a technical tie-up with ABB (currently
ABB Alstom Power) for combined-cycle power plants (CCPP). During fiscal 1999, KHI received an orderfrom a domestic steel manufacturer for a high-efficiency 90 MW cogeneration power plant. By
operating using only blast furnace gases with a low calorific value, these power generation systems
can achieve total thermal conversion efficiencies of around 50%. This order represents Japan’s firstsuch cogeneration system.
Other major products in this sector are boilers that are specially designed for power generation andindustrial processes. During the year, the Company delivered KHI’s specially-developed boiler for a
Japanese firm. This involves a proprietary method of NOx and dust reduction called KACC (Kawasaki
Advanced Clean Combustion) technology, which ensures that the plant’s waste gases have
exceptionally low concentrations of these types of environmental pollutants.
In the environmental field, KHI is one of Japan’s top manufacturers of municipal refuse incineration
plants. During the year, KHI received orders for a number of these plants, as well as orders for various
plant modifications designed to reduce the amounts of dioxin released into the atmosphere from such
facilities. Several of these kinds of products were recognized within sales during the year. In addition,
KHI made delivery of a recycling complex known as a Recycling Plaza to the city of Fukushima.
In the plant engineering sector, demand is growing for plants that are more environment-friendly or boast
leading-edge technologies. KHI is committed to developing and supplying a variety of plants and facilities
with an ever-widening array of capabilities to meet this demand.

Annual Report 99

Steelmaking Plant
KHI designed, manufactured and managed the installationof this steelmaking plant for Sumitomo Metal Mining. It
incorporates the latest environment-friendly designs andboasts world-leading productivity levels.

19

Oil-Fired Boiler
Built for Kishu Paper, this specialized heavy-oil boiler is thefirst of its kind to feature KHI’s proprietary low-NOx
combustion system, which uses a split combustion
chamber to allow gases to be more completely burnt off,
thereby reducing NOx emissions.

Fukushima City Recycling Plaza
This system enables the recycling of steel and aluminum asreusable materials by shredding and screening bulky
noncombustible waste. The plaza also has facilities torecycle steel and aluminum cans, and to promote the city’s
recycling activities.

Main Products
Aero-derived gas-turbine engines fornaval vessels; Diesel engines
Bridges; LNG and LPG tanks; Penstocks;
Watergates; Steel frames
Airport facilities
Shield machines and tunnel boringmachines
Crushing machinery
Industrial hydraulic equipment
Wheel loaders and road rollers
Industrial robots

20

Machinery & Steel Structures

Medium-sized gas turbine generators

KHI is one of Japan’s leading suppliers of steel structures such as bridges and storage tanks for LNG or LPG.
These structures often form part of key pieces of Japan’s transport and industrial infrastructure. Examples ofcivil engineering projects in which KHI has been a major participant include the drilling of the Eurotunnel
under the Straits of Dover, the construction of Kansai International Airport near Osaka, and the building of
the world’s longest single-span suspension bridge across the Akashi Straits, which separate the island of
Shikoku from mainland Japan. During fiscal 1999, KHI received orders for an LNG tank from a Japanese gas
supplier, and for steel stacks and penstocks from electric power companies. On the sales side, the division
recognized sales of bridges, as well as the H-IIA rocket launch complex for the National Space Development
Agency of Japan.
KHI also manufactures a wide variety of machinery. These include prime movers, such as gas turbines, steam
turbines and diesel engines for marine and industrial use. In addition, KHI makes many different kinds of airpowered machines, ranging from centrifugal compressors to compression modules. The Company also boasts
a leading position in Japan in the manufacture of machines designed for crushing and pulverization. During
fiscal 1999, KHI received orders for ship engines from both domestic and foreign customers, and also madedelivery of a variety of such products.
As part of the April 1999 corporate reorganization, the prime mover and crushing machine businesses are now
managed in the same group as steel structures. Incorporating stronger marketing functions, the neworganization is designed to boost the effectiveness of new product development activities and to promote thecost-competitiveness of KHI’s businesses in all three of these areas.
In terms of mass-manufactured industrial products, KHI makes a wide range of specialized machinery. As well
as being one of the world’s top-ranking suppliers of hydraulic machinery, KHI is Japan’s leading manufacturerof small- and medium-sized gas turbine generators. Under the Kawasaki brand name, the Company also
markets industrial robots for welding, assembly and handling functions, as well as construction machinery,
notably wheel loaders and road rollers.
Demand in the Japanese mass-produced industrial machinery sector was particularly depressed during fiscal
1999 due to the prolonged recession and a downturn in private-sector capital investment. To overcome
domestic market problems, KHI is streamlining operations. However, the key to success in this sector remains
the globalization of the Company’s operations, notably through a greater shift towards overseas
manufacturing.
Currently, KHI’s principal overseas production base is Kawasaki Precision Machinery (UK) Ltd., a manufacturerof hydraulic machinery based in Plymouth, England. In addition, the Company has local manufacturing andsales operations for industrial robots and construction machinery in the United States. Future expansion plans
revolve around the greater use of overseas sales and manufacturing bases, especially those currently being
used for motorcycles and related consumer products.

Annual Report 99

Kurushima Kaikyo Bridge
This is one of a series of bridges linking the Japanese
mainland and the island of Shikoku. Spanning theKurushima Straits, it is the world’s only suspension bridgewith three continuous spans. KHI was involved with theconstruction of the main towers and the supporting girders.

21

Gyratory Crusher
Ordered by De Beers for delivery to Orapa Mine in
Botswana, this gyratory crusher is used to do primarydiamond crushing. It has a world-beating processing
capacity of 3,000-4,000 tons of ore per hour.

Kawasaki F-Series Industrial Robots
Recipient of a “Good Design Award” from the Japanese
Ministry of International Trade and Industry in 1998, theKawasaki F-series of industrial robots is the first in theworld with a modular arm construction, which facilitatesvarious configurations to suit different user applications.

KV10DA Road Roller
The 10-ton KV10DA road roller features an engine speciallydesigned to reduce exhaust gases, and can operate on
slopes inclined at up to 25 o.

Composites of Consolidated Sales
Analysis of Operations and Financial Position

parent company

Ships
Rolling Stock22

Consumer Products

T RA N SP O RT A TIO N E QU I PM ENT(Billions of yen)

I N D U S T R I A L E Q U I P ME N T

Aerospace

Plant Engineering
Machinery& Steel StructuresOTHER

AEROSPACEjapanoverseas

Kawaju Kobe Support Co., Ltd.
Kawaju Marine Engineering Co., Ltd.
KHI JPS Co., Ltd.
Kawasaki Rolling Stock Engineering Co., Ltd.
Kawasaki Industrial Co., Ltd.
K-GES Co., Ltd.
Kawasaki Motors Corporation Japan
Union Precision Die Co., Ltd.
Ishihara Dockyard Co., Ltd.

Kawasaki Rail Car, Inc.
Kawasaki Motors Corp., U.S.A.
Kawasaki Motors (UK) Ltd.
Kawasaki Motoren GmbH
Kawasaki Motors Pty. Ltd.
Green River Insurance Company
P.T. Kawasaki Motor Indonesia
Kawasaki Motors Netherlands N.V.
Kawasaki Motors Manufacturing Corp., U.S.A.
Canadian Kawasaki Motors Inc.
Kawasaki Motors Finance Corporation
Kawasaki Engines Europe N.V.
Kawasaki Motors (Phils.) Corporation
Kawasaki Motors Enterprise (Thailand) Co., Ltd.
KM Receivables Corporation

Kawaju Gifu Engineering Co., Ltd.
Kawasaki Helicopter System Ltd.
Kawaju Gifu Manufacturing Co., Ltd.
Kawasaki Akashi Engineering Co., Ltd.

Kawasaki Gasturbine Technologies Co., Ltd.
Kawasaki Prime Mover Engineering Co., Ltd.
Kawasaki Gas Turbine Research Center
Kawasaki Thermal Engineering Co., Ltd.
Osaka Power Engineering Co., Ltd.
Kawasaki Engineering Co., Ltd.
Kawasaki Environmental Plant Engineering Co., Ltd.
Kawaju Yachiyo Engineering Ltd.
Kawasaki Plant Assistance & Service Co., Ltd.
Kawasaki Construction Co., Ltd.
Kawasaki Inspection Service Co., Ltd.
Kawaju Harima Tech Inc.

Kawaju Shoji Co., Ltd.
Kawaju Real Estate Co., Ltd.
Kawasaki Kosan Co., Ltd.
Kawasaki Foods Co., Ltd.
Kawaju Techno Service Corporation
Uji Kanko Co., Ltd.
Kawaju Tomakomai Kanko Kaihatsu Co., Ltd.

Kawasaki Hydraulic Co., Ltd.
Nichijo Manufacturing Co., Ltd.
Kawasaki Construction Machinery, Tohoku Ltd.
Kawasaki Construction Machinery, Nishi-Nihon Ltd.
Kawasaki Construction Machinery, Kanto Ltd.
Kawasaki Construction Machinery, Chubu Ltd.
Kawasaki Construction Machinery, Kinki Ltd.
Kawasaki Construction Machinery, Kyushu Ltd.
Kawasaki Safety Service Industries, Ltd.
Kawasaki Hydromechanics Corporation
Kawasaki Metal Industries, Ltd.
Kawajyu Steel Works & Engineering Co., Ltd.

Kawasaki Precision Machinery (UK) Limited
Kawasaki Construction Machinery Corp. of America
Kawasaki Robotics (U.S.A.), Inc.

Kawasaki Heavy Industries (Europe) B.V.
Kawasaki Heavy Industries (H.K.) Ltd.
Kawasaki Heavy Industries (U.S.A.), Inc.

23

Financial Review

24With the economy hit by sluggish consumer spending and a downturnin capital investment, Japan’s GDP contracted during the fiscal year
ended March 31, 1999 (fiscal 1999). Together with difficult conditionsin Asian markets, this caused KHI’s total consolidated net sales to fall
7.3%, to ¥1,202.2 billion ($9,973 million). As a result of lower net
sales and higher selling, general and administrative (SGA) expenses,
operating income dropped 57.6% to ¥21.7 billion ($180 million), andKHI posted a net loss for the year of ¥6.1 billion ($51 million). The
total cash dividend remained unchanged, at ¥6.00 ($0.05) per share.

Net Sales
Net sales declined for the first time in six years, with all of KHI’s
business segments posting decreases in sales revenues.
Sales in the Transportation Equipment segment amounted to ¥454.1
billion ($3,767 million), a fall of 3.9%. This was principally due to a
decline in the number of large ships recognized in sales comparedwith the previous year. Significant manufacturing disruption on major
U.S. rolling stock contracts caused the profitability of rolling stock
operations to fall, leading to a 95.0% slump in operating income to¥0.5 billion ($4 million).

year. Operating income for the segment declined 10.5% to ¥18.4
billion ($152 million).
Sales in the Industrial Equipment segment were also down sharply on
the previous year, slipping 10.2% to ¥436.0 billion ($ 3,617 million).
In Japan, sales of custom-ordered capital goods and mass-produced
industrial machinery both declined, while exports to Asian markets
also suffered. Operating income for the segment plunged 96.1% to¥0.7 billion ($6 million).
Sales in the Other segment amounted to ¥83.5 billion ($692 million), a
fall of 0.6%. Operating income rose 7.8% to ¥2.2 billion ($18 million).

Geographical Breakdown
Sales in Japan declined 11.1% to ¥982.9 billion ($8,153 million),while operating income fell 42.3% to ¥27.3 billion ($226 million),
both figures reflecting lower parent company revenues and profits.
In North America, sales were boosted by higher revenues fromconsumer products and rolling stock, and rose 22.0% to ¥155.6 billion($1,291 million). However, due to deteriorating profitability on rollingstock, an operating loss of ¥5.3 billion ($44 million) was recorded.

Due to lower sales to the Japan Defense Agency compared with fiscal
1998, when the Company delivered the prototypes of the OH-1 lightobservation helicopter, sales in the Aerospace segment totaled¥228.6 billion ($1,896 million), a decline of 10.5% over the previous

A good performance by consumer products in Europe helped boost sales
in that region by 25.4%, to ¥46.3 billion ($384 million). At ¥1.3 billion($11 million), operating income was on par with the previous year.

Net sales

Net income

Net income per share

Working capital(Billions of yen)(Billions of yen)

(Yen)

(Billions of yen)

Sales in Asia were adversely affected by the continuing economic
downturn in the region. Lower sales of motorcycles and otherproducts caused sales to slide 44.1% to ¥12.9 billion ($ 107 million).
Operating income also fell precipitously, and the region recorded an
operating loss of ¥0.9 billion ($7 million).
At ¥4.5 billion ($38 million), sales in Other Areas were slightly aheadof the year before. Operating income was marginally lower at ¥47
million ($389 thousand).

Overseas Sales
Owing to a rise in sales of overseas consolidated subsidiaries, total
overseas sales rose ¥23.1 billion, or 5.2%, to ¥471.1 billion ($3,908
million). This accounted for 39.2% of total sales, compared with apercentage of 34.5% in fiscal 1998. The breakdown of this sales
figure between the four overseas regions was: North America ¥231.2
billion ($1 , 9 1 8 million), up 2 9 . 0%; Europe ¥8 7 . 7 billion ($7 2 7million), up 31.3%; Asia ¥70.8 billion ($588 million), down 28.7%;
and Other Areas ¥81.5 billion ($676 million), down 20.6%.

Sales and Income Ratios
The ratio of cost of sales to net sales rose 1.0 percentage point,
from 85.9% to 86.9%. The ratio of SGA expenses to net sales rose
1.2 percentage points, from 10.1% to 11.3%. Accordingly, the ratioof operating income to net sales fell 2.1 percentage points, from
3.9% to 1.8%.

Cash FlowsNet cash provided by operating activities decreased 53.7% to ¥20.2
billion ($ 168 million). Net cash used for investing activities declined
2.9% to ¥42.6 billion ($353 million). Net cash provided by financing
activities amounted to ¥2.3 billion ($19 million). Cash on hand and inbanks therefore decreased by ¥21.0 billion ($174 million), to ¥55.3
billion ($459 million) at the fiscal 1999 year-end.

25

Financial Condition
The fall in cash on hand and in banks and a slight decrease ininventories led to a 1.5% decline in total assets, to ¥1,204.9 billion( $9 , 9 9 5 million). Total current assets fell 2 . 6% to ¥8 8 4 . 4 b i l l i o n($7,336 million). A 3.2% fall in current liabilities to ¥722.7 billion($5,995 million), due mainly to decreases in trade payables, advancesfrom customers and accrued expenses, more than offset the 5.5%
increase in long-term liabilities. Consequently, total liabilities
declined 0 . 9% to ¥9 9 8 . 9 billi on ($8,287 million). D ue to theconsolidated net loss of ¥6.1 billion ($51 million), which caused a
9.1% fall in retained earnings to ¥93.5 billion ($776 million) following
the payment of cash dividends worth ¥8 . 3 billion ($69 m i l l i o n ) ,shareholders’ equity dropped 4.5% to ¥199.6 billion ($1,656 million).
The shareholders’ equity ratio fell 0.5 percentage points to 16.6%.

Total assets

Total shareholders’ equity

Total shareholders’ equity
per share

Return on equity(Billions of yen)(Billions of yen)

(Yen)

(%)

Year 2000 Problem Compliance
Compliance Status
POLICYKHI recognizes that full Year 2000 compliance is essential to ensure that all operations run smoothly
and that customers can rest assured that business is continuing as usual from January 2000 onwards.
With this in mind, assessing compliance and taking necessary countermeasures have been accorded
top management priority. KHI’s Year 2000 compliance program covers the entire Company, including
all affiliates and subsidiaries, and is targeted at KHI-manufactured products, internal information andcomputer systems, manufacturing systems and other capital equipment.

COUNTERMEASURE
PROGRAM:ORGANIZATION

KHI set up working groups across the company in 1996 to tackle the possible problems inherent in its
computer systems. Company business division began tackling Year 2000-related problems in KHI’s
products, manufacturing systems and capital equipment in 1998. To speed up countermeasuresfurther, a comprehensive Company-wide series of progress committees was formed in January 1999.
Business division heads are directly responsible for implementing countermeasure programs. The
Executive Vice Presidents are responsible for assessing and encouraging progress, with final
responsibility for the project resting with the President.

COUNTERMEASURE
PROGRAM:PROGRESS

Machine code rewriting, software alterations, and compliance testing of individual systems were all
virtually complete as of the end of March 1999. To ensure that KHI’s entire operations are compliant,
the Company is also conducting general tests on a series of systems covering both upstream anddownstream functions. These tests are scheduled to be completed by the end of September 1999.

26

Each individual business division is responsible for investigating and testing the Year 2 0 0 0compliance of each of its products. Having assessed the situation, they are making a report to theircustomers, and implementing and then testing any necessary improvements. This work is scheduled
to be completed by the end of September 1999.
With production systems and other capital equipment, KHI is making the relevant inquiries to the
manufacturers concerned. Improvement and testing of all manufacturing process management
systems, control systems, other production equipment, and laboratory equipment is scheduled to becompleted by the end of September 1999.

COMPLIANCE
EXPENDITURE

The total cost of all compliance testing and countermeasure implementation directly related to theYear 2000 problem, principally associated with the correction of software and machine code, isforecast to amount to about ¥1.2 billion ($10 million). As of the fiscal 1999 year-end, actual spending
had reached approximately ¥1.0 billion ($8 million). Management judges that compliance cansuccessfully be achieved with current personnel, and that the problem will not significantly affectbusiness operations or performance.

CONTINGENCY PLANNING

While KHI is confident that its thorough program of countermeasure implementation and compliancetesting should prevent any problems from occurring after January 1, 2000, such a program cannot
provide total assurance that operations will be problem-free, owing to the uncertain nature of theYear 2000 problem. To prepare for unforeseen problems, each area of the Company is drawing up
contingency and crisis management plans covering possible failures in KHI’s computer systems,
products, manufacturing systems and capital equipment. These are scheduled to be completed by
October 1999, and are designed to ensure that if problems do arise, KHI can tackle and resolve issues
swiftly in conjunction with its business partners, suppliers and customers.

Six-Year Summary
Kawasaki Heavy Industries, Ltd. and consolidated subsidiaries
Years ended March 31
Millions of yen

1999

1998

1997

1996

1995

1994

Net sales¥1,202,189¥1,297,212¥1,224,259¥1,086,244¥1,070,444¥1,070,257

Cost of sales

Operating results:
1,045,143

1,114,693

1,041,697

928,126

912,432

919,092

Gross profit
Selling, general and administrative
expenses
Operating income
Net income (loss)

157,046

182,519

182,562

158,118

158,012151,165

135,380
21,666(6,132)

131,440
51,07918,556

120,351
62,211
22,572

111,362
46,756
16,462

110,41347,59910,216

109,800
41,365
17,122

Capital expenditure
Depreciation and amortization
R & D expenses

40,42834,607
18,60042,92832,416
17,80035,13031,245
17,40039,31930,823
17,30033,72930,89917,00059,84230,652
17,300¥ 161,712
244,866
1,204,857
208,763
199,637¥ 162,084
242,435
1,222,906
198,135
209,040¥ 150,759
233,196
1,303,168
197,130
197,161¥ 127,644
231,615
1,252,371
204,801
162,984¥ 106,458
227,173
1,191,664
184,535
152,991

¥

¥

¥

¥

¥

¥

¥

Financial position at year-end:
Working capital
Net property, plant and equipment
Total assets
Long-term debt, less current portion
Total shareholders’ equity
Per share amounts (yen):
Net income (loss)
Cash dividends
Shareholders’ equity
Other data:
Number of shares issued (millions)
Number of employees

27

(4.4)
6.0
143.6

13.3
6.0
150.3

16.4
7.0
141.9

12.2
5.5
120.7

7.6
5.0
113.3

68,998227,213
1,239,137
155,904
148,253

12.8
5.0
110.2

1,391
26,486

1,391
26,102

1,389
24,211

1,350
24,401

1,350
24,266

1,345
23,913

950,312

1,007,695

958,477

1,028,903

939,899924,264

Non-consolidated data:
Orders received

Supplementary Information on Non-Consolidated Results
Years ended March 31

Ships(Billions of yen)

95

28

Major Orders

Major Components of Sales• 4 VLCCs (Very Large Crude-oil
Carriers)• LNG carrier• Container ship

• 3 LPG carriers• Heavy cargo ship

• 2 pure car carriers
96

97

98

99

Sales

115.8

69.5 100.6 154.5 124.9

Exports

72.4

60.0

Orders83.8 119.3

49.0

59.4

60.2

56.3 120.9

86.5• Bulk carrier• Submarine• Deep submergence rescue vehicle

Order
Backlog 201.9 269.1 243.5 213.7 168.0

Rolling Stock(Billions of yen)

Sales

95

96

97

98

99

49.7

57.3

68.0

57.1

57.3

Exports

2.5

0.3

1.3

6.7

15.9

Orders

53.1

72.0

62.0

77.0

85.0

Order
Backlog 55.0

71.6

67.2

87.5 111.5

Aerospace(Billions of yen)

Major Orders

Major Components of Sales• 266 cars for JR Group, including
119 Shinkansen cars

• 209 cars for JR Group, including
70 Shinkansen cars

• 337 cars for other domestic
railways• 112 cars for other domestic
railways• 212 subway cars for New York City• 136 bi-level passenger coaches for
the United States

Major Orders

Major Components of Sales• T-4 intermediate jet trainers• T-4 intermediate jet trainers• CH-47J large transport helicopters• CH-47J large transport helicopters• OH-1 light observation helicopters• EP-3 ELINT (electronic intelligence)99• Anti-tank missiles• Helicopter engines

Sales

185.7 171.8 194.9 252.3

22.8

Exports

22.5

81.1

• Component parts for the Boeing
767 and 777• Gas turbine engines for naval
vessels• BK117 helicopters• Component parts for the Boeing
767 and 777

95

96

23.4

97

43.4

98

63.2

Orders 206.5 198.5 212.8 223.9 217.4
Order
Backlog 291.6 324.9 349.7 322.9 308.6• Component parts for V2500,
RB211/Trent and PW4000 turbofan engines• Component parts for V2500,
RB211/Trent and PW4000 turbofan engines

Machinery, Environment &Power Plants(Billions of yen)

95

96

97

98

99

Sales

141.0 200.1 192.4 163.4 150.6

Exports

25.4

13.5

34.3

14.6

31.7

Major Orders

Major Components of Sales• Cogeneration power plant from adomestic steel manufacturer• Municipal refuse incineration
plants and plant modifications fordioxin reduction• Municipal refuse incineration
plants and plant modifications fordioxin reduction• Marine diesel engines fromdomestic and overseas customers

Orders 178.3 165.4 164.1 171.7 145.3
Order
Backlog 323.6 288.9 262.6 269.7 262.6• Recycling Plaza• Ash handling equipment for adomestic electric power company• Power generation facilities for an
oil chemical company• Natural gas compression modules
for India and Malaysia• Marine gas / steam turbines anddiesel engines for domestic andoverseas customers

Plant Engineering &Steel Structures

Major Orders• Cattle-feed additive production plantfrom the United States• Food additive production plant fromthe United States(Billions of yen)

95

96

97

98

99

Sales

170.5 166.7 195.1 172.4 156.2

Exports

35.5

31.4

46.6

47.5

17.6

Orders 150.2 181.1 165.5 116.7 126.9
Order
Backlog 288.0 315.7 288.5 234.6 204.9• Zinc galvanizing plants from Taiwan
and Kenya• LNG tank for a domestic gas supplier• Steel stacks and penstocks fromdomestic electric power companies• Large-diameter tunnel boringmachines for the Tokai-Hokuriku
Highway• Bridges

Consumer Products &Machinery(Billions of yen)

95
Sales

96

97

98

99

263.0 283.6 292.0 300.5 291.2

Exports 146.8 164.4 171.1 187.2 197.6
Orders268.0 282.6 297.8 297.5 289.2

Order
Backlog 74.5

73.4

79.4

76.0

74.4

• Building / steel pipe structures• Container cranes

Major Components of Sales• Steelmaking plant to a domestic steel
manufacturer• Cement plant to Indonesia• H-IIA rocket launch complex to the
National Space Development Agency• Building / steel pipe structures• Watergates• Shield machines

Though exports of motorcycles to Asian countries were weak, motorcycle
sales in European and North American markets and exports of all-terrain
vehicles (ATVs) to the United States were strong during the year. Massproduced industrial machinery such as hydraulic machinery, construction
machinery and industrial robots decreased due to a decline in private-sector
capital investment in Japan caused by the prolonged recession.

29

ISSN 0287-1793
Printed in Japan