Annual Report

2002Founded in 1878, Kawasaki Heavy Industries, Ltd. (KHI), is a leading
global comprehensive manufacturer of transportation equipment andindustrial goods. With a broad technological base that encompasses
land, sea, and air, KHI manufactures ships, rolling stock, aircraft
and jet engines, gas turbine power generators, refuse incinerators,
industrial plants, steel structures, and a wide range of manufacturing
equipment and systems. KHI also produces such world-famous
consumer products as Kawasaki-brand motorcycles and Jet Ski®
watercraft.

Contents
Consolidated Financial Highlights..............................................................1
To Our Shareholders....................................................................................2
Review of Operations ...................................................................................6
Shipbuilding...............................................................................................8
Rolling Stock, Construction Machinery & Crushing Plant ...............10
Aerospace ................................................................................................12
Gas Turbines & Machinery....................................................................14
Plant & Infrastructure Engineering ......................................................16
Consumer Products & Machinery........................................................18
Six-Year Summary.......................................................................................20
Financial Review .........................................................................................21
Consolidated Balance Sheets....................................................................26
Consolidated Statements of Operations .................................................28
Consolidated Statements of Shareholders’ Equity................................29
Consolidated Statements of Cash Flows .................................................30
Notes to the Consolidated Financial Statements...................................32
Directors, Corporate Auditors, and Executive Officers........................46
Major Consolidated Subsidiaries and Affiliates .....................................48
Network ........................................................................................................51
Kawasaki Corporate Data ..........................................................................53

Cover: The new rolling stock plant in Lincoln, NebraskaConsolidated Financial Highlights
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
2002

2001

2000

2002

For the year:
Net sales..................................................................................................... ¥1,144,534¥1,060,479¥1,149,698$8,589,373

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

31,311

4,460

1,251

234,979

Net income (loss) .....................................................................................

6,282(10,320)(18,632)

47,144

Net cash provided by operating activities ............................................

60,7399,236

31,232456,232

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

33,132

32,687

39,685

248,645

Net income (loss) .....................................................................................

¥4.5¥(7.4)¥(13.4)$0.03

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

—

—

—

—

Total assets ............................................................................................... ¥1,255,075¥1,247,472¥1,206,806$9,418,950

167,731

164,081

174,955

1,258,770

Orders received during the fiscal year .................................................. ¥1,034,771¥1,273,686¥1,071,104$7,765,636

Order backlog at fiscal year-end.............................................................

1,320,894

1,072,645

9,309,111

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

At year-end:
Total shareholders’ equity ......................................................................
Orders received and outstanding:
1,240,439

Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥133.25 to $1.00, the approximate rateof exchange at March 31, 2002.

Net Sales

Net Income (Loss)(Billions of yen)(Billions of yen)

1,500

Total Shareholders’ Equity(Billions of yen)
250

30

200

15
1,000

150
0
100
500
-15

0

50

-30
1998 1999

2000

2001 2002

1

0
1998 1999

2000

2001 2002

1998 1999

2000

2001 2002

To Our Shareholders

Based on these management
principles, we are aiming to increase
profitability by creating a businessstructure capable of coping readily
with changes in the business environment and moving onto a sustainable growth path. Under our
medium-term business plan, K21,
we have set a target of a 9% returnon invested capital (ROIC) on a
before-tax basis by the year ending
March 2005. To attain our objectives, we have set the following
specific goals for reforming thestructure of our business activities
under our K21 medium-term busiMasamoto Tazaki,
President and CEO

ness plan:• Sharpening the focus of ourbusiness portfolio,
Management Policies and Initiatives• Transforming our business

The corporate philosophy of themodel to increase earnings

Kawasaki Heavy Industries (KHI)

power, andGroup calls for applying KHI’s
advanced technology to create new• Enhancing the effectivenessof our management systems.

value in products for endeavors

2on the land, at sea, and in the air

Throughout fiscal 2002, ended

and contribute to the development

March 31, 2002, we forcefully im-of society. Our basic management

plemented measures to reform ourprinciples are to enhance customer

earnings structure, including reduc-satisfaction and increase our enter-tions in the costs of our products

prise value by providing our cus-and lowering fixed expenses, and,tomers with excellent products

despite the difficult operating envi-

and services that are differentiatedronment in Japan and overseas, wethrough unique technology andreturned to profitability, thus tak-brand image. By implementing

ing the first major step toward suc-these principles, we respond to

cessful restructuring. Moreover,the expectations of our sharehold-as I will describe in greater detailers, customers, and employees aslater, we made steady progress inwell as the community at large.

implementing the strategic initia-

to ¥1,144.5 billion, mainly owing to

Progress toward the Goals

tives in our medium-term businessincreases in sales of the Aerospaceof the Medium-Term Business Plan

plan and are working toward estab-and Plant & Infrastructure Engineer-

Under our K21 medium-termlishing a base for our operations

ing segments.

business plan, we are steadily

that will generate stable earnings.

Operating income rose ¥26.9 bil-

implementing various measureslion, or 602.0%, over the previous

to attain our objectives, including

Performance in Fiscal 2002

fiscal year, to ¥31.3 billion, as a

the following.

During fiscal 2002, the Japanese

result of a combination of develop-

economy was seriously affected

ments, including the increase in net

Sharpening the Focus

by two developments, namely thesales, favorable movements in theof Our Business Portfolio

recession in the world economy

foreign currency exchange rate, andWe are allocating management

stemming from the slowdown ina lower breakeven point resulting

resources on a priority basis to

the United States and the terrorist

from various measures to reduce

promote the further development

incidents in September 2001. As a

fixed costs. KHI showed net incomeof our core and developing busi-

consequence, exports declined sig-of ¥6.3 billion for the fiscal year, fol-

nesses where we anticipate growth;nificantly and private-sector capitallowing net losses for the previous

these are: Aerospace, Consumer

investment weakened. Moreover,three fiscal years. Free cash flow

Products, Rolling Stock, and Gas

the restraints placed on public

comprised an inflow of ¥32.7 billion

Turbines & Machinery. We areworks spending accompanying theas opposed to an outflow in the

nurturing and strengthening thesegovernment’s structural reform

previous year, due to a substantial

businesses’ contributions to prof-

policies also had an adverse impact

improvement in cash provided byitability. In our other businesses,on the Japanese economy. Owing

operating activities.

namely Shipbuilding and Plant &to this confluence of unfavorable

Our fundamental policy regard-

Infrastructure Engineering, we arefactors, economic conditions ining cash dividends is to pay a sta-

working to implement structural

Japan during the fiscal year were

ble dividend to our shareholders.

reforms to increase efficiency andextremely challenging.

At the same time, to enhance our

improve ROIC. The following para-

Amid this environment, orders

capabilities for future growth, wegraphs describe some of our spe-

received by the KHI Group in fiscal

are also giving due considerationcific initiatives in our various

2002 declined ¥238.9 billion, orto the expansion of our retained

businesses during fiscal 2002,

18.8%, to ¥1,034.8 billion. Factors

earnings. Thus, we regret that wereports on our progress to date,accounting for this decrease includ-

have decided to give first priority

and our policies going forward.

ed the absence of the large-scale

to strengthening our financial posi-order for rolling stock that wastion and continued to suspend theIn the Aerospace business, therecorded in the previous fiscal year

payment of cash dividends related

Japan Defense Agency (JDA) awarded

and selective acceptance of orders

to fiscal 2002. We request that you,us the position of prime contractor

by the Plant & Infrastructure Engi-

our shareholders, examine careful-for developing two next-generation

neering segment. On the otherly our ongoing initiatives and pro-large airplanes—the P-X, the suc-hand, net sales rose ¥84.1 billion,

vide us with your continued

cessor of the P-3C anti-submarine

or 7.9%, over the previous year,

support.

warfare patrol airplane, and C-X

3

Lincoln, Nebraska, to keep pacereforming our shipbuilding opera-with growing demand in the U.S.

tions by setting them up as a whol-market. This new facility went intoly owned subsidiary in Octoberfull-scale operation in April 2002,

2002 and working to transformbeginning with the production ofthem into a business that is man-subway cars for the New York City

aged agilely and efficiently and isTransit Authority. This facility hascapable of responding effectively togiven us important strengths

changing conditions in the operat-

because it is the only plant in theing environment, including fluctua-

United States designed to handle

tions in foreign exchange rates.

the entire process, from car body

Please note that while wetransport aircraft—and, in response,

manufacturing to the final assembly

reached a basic agreement last

we are improving our aircraft de-of rolling stock, and we intend toyear to consolidate our ship-velopment systems. We are also

exploit this fully to expand ourbuilding operations with those

upgrading our aircraft manufactur-

operations in this region.

of Ishikawajima-Harima Heavying facilities with the medium-tolong-term objective of being one

Industries Co., Ltd., both parties
The Gas Turbines & Machineryof the world’s leading aircraftbusiness was successful in de-would be difficult to meet the con-manufacturers.

veloping a 20MW-class gas turbine

ditions necessary for the consum-

electric power generator last year.

mation of the proposed merger

This was added to our lineup of

and rescinded the agreement in

Machinery business is strengthen-products, and, supported by the

September 2001.

ing its development systems torise in demand for distributed power

enhance product competitivenesssources along with the deregula-and aggressively introduce newtion of the electric power industry,neering business is confronting amodels to markets. In addition,

we are drawing on our capabilities

much harsher operating environ-

we began a mutual original equip-

for internal development andment because of stagnation in pri-ment manufacturing (OEM) supply

strengthening this business line

vate-sector capital investment, therelationship for motorcycles with

with gas turbines as the core.

impact of the government’s struc-

The Consumer Products &Suzuki Motor Corporation in Feb-

4

came to the conclusion that it

Our Plant & Infrastructure Engi-

tural reform program, and otherruary 2002 and, going forward, willIn the Shipbuilding business,factors. To respond, we are contin-

expand this relationship. These ini-

where we are implementing struc-uing to streamline our operations,tiatives with Suzuki, which aretural reforms, we are focusing on

including the reexamination of ouraimed at substantially improving

gas carriers, where demand is

production systems to make signifi-

profitability, are scheduled to in-

expanding, and on submarines forcant reductions in the breakevenclude the standardization of parts

use by the JDA. As a consequence,point.

and joint procurement.

we expect to report profits in thisbusiness for the foreseeable future.

Reforms in KHI’s

However, to restructure these oper-

Management Systems

we constructed a new rolling

ations to generate stable earnings

With the objective of strengthening

stock manufacturing plant inin the medium-to-long term, we are

our operating systems, in April

In our Rolling Stock business,

2001 we adopted an internal com-

Board in strategic decision making

Outlook for Fiscal 2003

pany form of organization. We now

and the overall supervision of man-Fiscal 2003 will be an important

have six internal companies: Ship-agement functions to strengthentime for the KHI Group, because

building; Rolling Stock, Construction

our corporate governance structure.

the Company must look to the

Machinery & Crushing Plant; Aero-

future and return to sustainable

space; Gas Turbines & Machinery;

Reflecting ROIC ingrowth. We anticipate that the

Plant & Infrastructure Engineering;

Employee Compensation

operating environment in Japanand Consumer Products & Machin-

Following the introduction of theand overseas will remain challeng-ery. The introduction of internalinternal company system, we

ing for the time being. However,companies has allowed us to grantbelieve our employees will have aduring the current fiscal year, wemore autonomy and flexibility tostronger sense of belonging to theirwill place maximum priority onthese business units, and it allows

respective companies and be moreestablishing a stable earnings basethem to implement speedier man-highly motivated to contribute to

by offering products and services

agement of operations in ways that

improvements in performance. To

differentiated by unique technology

are best suited to their specificthis end, beginning with performanceand brand image, based on our

industrial sectors. The Shipbuildingin fiscal 2003, we will introduce a

policy of “Quality followed byCompany and the hydraulic equip-

system that reflects the ROIC of

Quantity” or quality driving quan-ment division of the Gas Turbinesinternal companies in employeetity. In parallel, we will also make

& Machinery Company, which wecompensation.

constant efforts to strengthen ourjudge to be in urgent need of im-Thus far, under our medium-term

product competitiveness by lower-proved efficiency, are scheduled tobusiness plan, we have stated abe set up as wholly owned consoli-

goal of 5% or more for ROIC after

dated subsidiaries in October 2002.

tax during fiscal 2005. However,

our enterprise value, as I haveWith increased responsibility foraccompanying the introduction ofdescribed, by steadily implement-

their own performances, the newa system to evaluate company per-ing our medium-term businesssubsidiaries will work to substan-formance based on ROIC and toplan, which will position us totially increase the enterprise value

ensure full awareness of its impor-evolve and respond to changes inof the KHI Group by strengthening

tance within KHI, we have shifted

the operating environment. As wetheir competitive positions.

to the use of ROIC on a before-tax

make progress toward our objec-

In parallel with these initiatives,

basis. This is because ROIC before

tives, we look forward to the con-

we are moving forward to actively

tax is currently used as an in-housetinuing advice and support of ourdisclose information regarding

measure; therefore, to avoid any

shareholders.

KHI’s performance and strategies

possible confusion, we have begun

through our investor relations pro-to use before-tax ROIC for externalgram. In addition, we introduced

purposes as well. This does not

the Executive Officer System in fis-

imply any basic change in ourcal 2002 to achieve the swift andquantitative objectives since a 5%

flexible conduct of operations. We

ROIC after tax corresponds to a 9%also reduced the size of the Board

ROIC before tax.

of Directors to 11, with the aim ofincreasing the effectiveness of theing costs and other measures.
We are committed to enhancing

June 27, 2002
5

Masamoto Tazaki
President and CEO

Review of Operations

Introducing a New Business
Segment Framework Basedon an Internal Company
System
KHI introduced a new business segment framework
beginning in fiscal 2002 based on its internal company
system. Our objectives include increasing the transparency of our activities, sharpening the focus of ourbusiness strategies, and enhancing corporate value.

Sales (Millions of yen)
2000

2001

2002

Shipbuilding¥ 91,891 ¥ 78,734 ¥ 92,478
Rolling Stock, Construction Machinery& Crushing Plant
121,463
129,591
121,780
Aerospace

172,322

Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Other
Total

136,343

161,072

153,681
152,307
171,586
245,642
181,174
220,605
277,176
275,903281,207
87,523
106,427
95,806¥1,149,698 ¥1,060,479 ¥1,144,534

Percentage of Net Sales

New Business Segments

8.1%

Shipbuilding

10.6%

Rolling Stock,
Construction Machinery& Crushing Plant

14.1%

Aerospace

15.0%

Gas Turbines& Machinery

19.3%

Plant & Infrastructure
Engineering

24.6%

Consumer Products& Machinery

8.3%

Other

6

Orders Received (Millions of yen)Order Backlog (Millions of yen)
2000

Shipbuilding

¥

2001

2002

64,417 ¥ 117,518 ¥ 106,106

Rolling Stock, Construction Machinery

2000

Shipbuilding

2002

2001

¥ 130,824 ¥ 176,987 ¥ 194,275

Rolling Stock, Construction Machinery& Crushing Plant

139,807

192,884

82,584& Crushing Plant

219,064

296,242

272,642

Aerospace

146,025

161,939

151,641

Aerospace

176,996203,688

195,447

Gas Turbines & Machinery

145,157

167,812

158,662

Gas Turbines & Machinery

188,074

213,228

204,819

Plant & Infrastructure Engineering

209,574

254,330

160,143

Plant & Infrastructure Engineering

327,422403,612

347,496

Consumer Products & Machinery

277,176

275,903281,207

Consumer Products & Machinery

—

—

—

Other

88,948103,300

94,428Other

30,265

27,13725,760¥1,071,104 ¥1,273,686 ¥1,034,771

Total

Total

¥1,072,645 ¥1,320,894 ¥1,240,439

Main Products & Businesses• LNG carriers• LPG carriers• Container ships• VLCCs (Very Large Crude Carriers)and other types of tankers• Bulk carriers• High-speed vessels• Submarines• Maritime application equipment• Electric train cars (including for
Shinkansen bullet trains)• Electric and diesel locomotives• Passenger coaches• Integrated transit systems• Monorail cars
• Platform screen doors• Wheel loaders• Crushing machinery• T-4 intermediate jet trainers• CH-47, OH-1, and BK117 helicopters• Component parts for Boeing 777
and 767 passenger airplanes• Component parts for Embraer 170
regional jet aircraft• Missiles• Electronic equipment• Space equipment• Jet engines• Gas turbines• Small and medium-sized gas turbine
generators• Aero-derived gas turbine engines
for naval vessels• Industrial hydraulic equipment• Steelmaking, cement, chemical, andother industrial plants• Power plants• Municipal refuse incineration plants• Bridges• LNG and LPG tanks• Shield machines and tunnel boringmachines• Motorcycles• ATVs (All-Terrain Vehicles)• Jet Ski® watercraft• General-purpose gasoline engines• Brush cutters• Transmissions• Industrial robots• Hospital respiration and medical
equipment• Trading• Intermediary and introductory
services for sales and orders• Management of employee welfare
facilities

7

Shipbuilding

The core products of the Shipbuilding Company for the foreseeable
future will be LNG carriers for the private sector and submarines for the
JDA. We plan to conduct shipbuilding
and maintenance activities that contribute to the shipping industry andnational defense. Producing thesevessels requires cutting-edge component technologies across the board—
from design and procurement throughmanufacturing. Superior system integration technologies are also fundamental to pull together the diverse
range of component technologies andsuccessfully create the final product.
We have accumulated the required
technologies in abundance and already have a long record of accomplishments in this area.
We will not rest on our accomplishments, however. We will redouble ourefforts to surpass the expectationsof our customers while strengthening the technology we have nurtured
to date.
The world’s shipbuilding market issuffering from overcapacity, and fluctuations in foreign currency exchange
rates are tending to detract fromlong-term stability. To keep profitability on an even keel under these
conditions and respond to the expectations of our customers, in OctoberCompany President Shuichi Tadokoro,
Managing Director

Submarine ISOSHIO

Sales

Orders Received(Millions of yen)

(Millions of yen)Order Backlog(Millions of yen)
200,000

120,000

100,000

100,000

80,000150,000

8
80,00060,000100,000

60,00040,00040,00050,00020,00020,000
0

0

0

2000

2001

2002

2000

2001

2002

2000

2001

2002

2002 the Shipbuilding Company will
form a wholly owned subsidiary of
KHI—Kawasaki Shipbuilding Corporation. Kawasaki Shipbuilding willconduct its operations throughagile and flexible management decision making to react to market conditions more quickly. Selectivity andfocus will be the watchwords in the
allocation of the new company’s
management resources as it works
to enhance its technological capabilities and production efficiency.
Medium-term initiatives include fostering technologies that anticipate
the future, actively employing andnurturing young workers, and making
well-targeted investments in manufacturing facilities and software. In
this way, Kawasaki Shipbuilding will
be set to perform its role in the market, brimming with a vitality that will
carry it well into the next generation.

Business Results

Outlook

The volume of shipbuilding orders

As cases in point, we have recently

declined worldwide due mainly to adeveloped the world’s largest LNG

falloff in shipping markets. Never-carrier—with a massive cargo tanktheless, we moved forward aggre-

capacity of 145,000m3—and a pres-sively with bringing superior

sure build-up type LNG carrier for

proposals to the table, particularly

smaller LNG transportation proj-

for LNG carriers, and winning orders.

ects in Japan.

As a result, orders received during

In addition, at our Sakaide Works,

the fiscal year declined 9.7%, towhich is our principal factory for¥106.1 billion. These included orders

commercial vessels, we are making

for three LNG carriers, two LPG car-capital investments focusing on ourriers, four bulk carriers, and one

LNG carrier production facilities

submarine.

and the installation of large cranes.

Net sales rose 17.4%, to ¥92.5 bil-

The consumption of LNG, which islion, reflecting increased sales of new

drawing attention as a clean source

ships. Operating income amountedof energy, is expanding worldwide,to ¥5.6 billion, a significant improve-and we expect that demand forment from the operating loss of

LNG carriers will remain strong¥1.7 billion for the previous fiscal

in the medium-to-long term. The

year. Factors accounting for thisKawasaki brand is highly regarded

improvement included the increasein this area, and we plan to actively

in net sales, favorable trends infocus our efforts on LNG carriers,

foreign currency exchange rates,

strengthening our product develop-

and the positive impact of cost

ment and production capabilities.

reductions.
A total of fourteen vessels weredelivered during the fiscal year: one
VLCC, three LPG carriers, five container ships, four bulk carriers, andone submarine.

LPG carrier DYNAMIC VISION
9Rolling Stock, Construction Machinery & Crushing Plant

Demand for rolling stock is strong
not only in Asia, where the upgradingof infrastructure is in progress, butalso in the United States. In particular, in the United States, where theautomobile is the principal modeof transportation in urban areas,
railway transport is making a comeback as a means for providing masstransportation while placing a lower
burden on the environment in comparison with the automobile. As aconsequence, investments in upgrading railway networks are becoming
increasingly common. KHI, currently
the largest rolling stock manufacturer
in Japan, is expanding its overseas
rolling stock operations to keep
pace with this growing demand andwith its sights firmly set on becoming a world-leading rolling stock
manufacturer.
In the United States, Kawasaki
kicked off full operations of its cuttingedge rolling stock plant in Lincoln,
Nebraska, in April 2002. This new
production capability appeals tocustomers because it is a full-scale
facility designed to handle the entire
process, from car body manufacturing to final assembly. Looking forward, we will draw on the design
capabilities of our operations inJapan and the production strengthsof our U.S. presence to make a strong

Company President Takehiko Saeki,Managing Director

Wheel loader 95ZV

Sales

Orders Received(Millions of yen)

(Millions of yen)Order Backlog(Millions of yen)
300,000

200,000

150,000

250,000

120,000
150,000

10

200,000
90,000150,000

100,000
60,000100,000
50,00030,00050,000
0

0

0

2000

2001

2002

2000

2001

2002

2000

2001

2002

appeal to customers regarding theexcellence of the Kawasaki brand.
Additionally, as an essential participant in the development of every single Shinkansen bullet train in Japan,
we have been closely involved inhigh-speed rail transport for many
years. We plan to make maximum
use of our technologies in this fieldin implementing high-speed railway
projects overseas.
The other principal products of thecompany are construction machineryand crushing machinery. Both of theseproducts have been impacted byrecessionary conditions and cutbacks in government public works
investment in Japan. KHI is poised
to meet these challenges. In construction machinery, we are further
strengthening the product competitiveness and the efficiency and flexibility of our operations in wheel
loaders, our principal products inthis field. In crushing machinery, inline with increased environmental
awareness, we are shifting our
focus to refuse paper and plastic
fuel production equipment—an areawith good prospects—and otherenvironment-related equipment.

Business Results

Outlook

Orders for rolling stock from domes-

To respond to the demand for rolling

tic customers were strong during

stock in the U.S. market, we con-the fiscal year, but overseas orders

structed a new rolling stock manufac-

showed a marked decline when com-turing facility on the grounds of thepared with the previous fiscal year,

motorcycle production base of

in which we received a large order

Kawasaki Motors Manufacturing

for cars for Taiwan High Speed RailCorp., U.S.A. (KMM), located in

Corporation. As a consequence,

Lincoln, Nebraska. This new plant

total orders dropped 57.2%, to

has state-of-the-art manufacturing¥82.6 billion.

equipment and is the only rolling

Net sales declined 6.0%, to ¥121.8

stock facility in the United States cov-

billion. In rolling stock, sales to over-ering the full process from produc-seas customers rose because of thetion of the car body through final

delivery of subway cars to the New

assembly. We now have a total ofYork City Transit Authority, while

three rolling stock plants world-

domestic sales declined. Sales of con-wide, at the Hyogo Works in Japan;

struction machinery and crushing

Kawasaki Rail Car, Inc., in Yonkers,

machinery were also down, reflecting

New York; and KMM. We aim to use

weak demand in Japan. Operatingthese plants effectively to further

income was influenced by the samedevelop our rolling stock businessfactors and amounted to ¥0.5 billion,

in Japan and overseas.

approximately the same as for theprevious fiscal year.

R143 subway cars for the New York City
Transit Authority

11

Aerospace

The Aerospace Company aims to bein the world’s topflight group of
aerospace companies, focusing especially on three businesses:• Developing the P-X and C-X, acting under the mandate received
from the JDA as the prime contractor for this project,• Joint development and manufacturing programs with The Boeing
Company of the United States,
which is our core activity in thecommercial aircraft field, and• Developing and producing
regional jet aircraft jointly with
Embraer of Brazil.
As the prime contractor for thedevelopment of the P-X and C-X for
the JDA, we are making our firststride toward a major source of earnings. Moreover, this project has generated considerable excitement
because it will provide us with theopportunity to take the leading rolein the development of complete,purely domestic large-scale aircraft.
Foremost right now is to see this project through to a successful end.
With success, KHI will be the obvious
front-runner in the bid for primarycontractorship of the mass production of these aircraft.

Company President Takashi Sugoh,Managing Director

BK117 C-2 type helicopters

Sales

Orders Received(Millions of yen)

(Millions of yen)

200,000

200,000

150,000

150,000

100,000

100,000

Order Backlog(Millions of yen)
250,000

200,000

12

150,000

100,000
50,00050,00050,000

0

0

0

2000

2001

2002

2000

2001

2002

2000

2001

2002

Our second strategic aerospacebusiness, our partnership with Boeing,has experienced a lull because of the
impact of the terrorist attacks in the
United States, but we believe this will
be temporary. The prospects fortremendous growth in the commercial aircraft sector are bright whenviewing it from a long-term perspective. Presently, we are participatingin the joint development and manufacture of B767 and B777 passenger
aircraft with Boeing, both important
projects that will enable us tostrengthen our cost-competitiveness.
Furthermore, we believe our continued partnership with Boeing will
ensure that we will see the prospects
realized.
Finally, within the commercial aircraft business, regional jet aircraft is
the fastest growing sector. For the
Embraer 170 and 195, we are in
charge of the major wing sections,the most vital and fundamental ofaircraft technologies. This projectwill almost certainly enable us tomake major advances in our technological capabilities as an aircraft
manufacturer.

Business Results

OutlookDuring the fiscal year, firm orders

In view of the receipt of the ordercontinued from the JDA, partly due

as prime contractor for develop-

to the receipt of the order as theing the P-X and C-X from the JDA,

prime contractor for the develop-

we are taking initiatives to strength-

ment of the P-X and C-X. Contrarily,

en our development systems and,orders for the production of com-from a medium-to-long-term per-ponents for Boeing aircraft declined

spective, upgrading our aircraft

as a result of the terrorist attacks

manufacturing facilities. In addi-

in the United States. Consequently,

tion, we established a company

total orders for the fiscal year werein Brazil where we will begin final

down 6.4%, to ¥151.6 billion.

assembly of major wing sections

Net sales rose 18.1%, to ¥161.1

for the Embraer 195 next year. We

billion, supported by sales to thehave also signed a memorandum

JDA and the commercial sector,of understanding regarding techno-with most of the latter consisting oflogical development for the Boeing

sales to Boeing. Operating income

Sonic Cruiser aircraft. Looking for-rocketed 70.9%, to ¥13.9 billion,

ward, we will continue to work to

because of favorable movements

fly with the world’s leading compa-

in the yen exchange rate and othernies in the aerospace industry, everfactors.

increasing our technological capabilities in both defense and commercial sectors and expanding thescale of our business activities.

13

Embraer 170 regional jet aircraftGas Turbines & Machinery

The Gas Turbines & Machinery
Company provides a diverse rangeof products, including jet engines,
industrial and marine gas turbines,
diesel engines and other machinery
for ships, and hydraulic machinery.
Among these, we are particularly
focused on, as a rapidly growing
area, industrial gas turbine generators that can be used as distributed power sources.
Gas turbine power generators havebeen recognized as a rapidly growing
business in the long term in Japanand overseas due to its environmental friendliness and high heatefficiency. As a pioneer of industrial
gas turbines in Japan, we have abroad lineup of solely developed gas
turbine generators, taking advantage
of our high technology, long experience, and high market share. We
intend to wield the experience wehave accumulated thus far to expand
our position in the market, especiallyin cogeneration products and combined cycle generators used as distributed power sources by leveraging
our know-how in jet engines and gas
turbine power plants. We will also differentiate ourselves from our competitors by providing superior
after-sales services. In order toaccomplish this, we are committed tostrengthening our sales and service
capabilities even more.

Company President Kengo Yamashita,
Managing Director

Marine steam turbine (UA-type)

Sales

Orders Received(Millions of yen)

(Millions of yen)

200,000

200,000

150,000

150,000

100,000

100,000

Order Backlog(Millions of yen)
250,000

200,000

14

150,000

100,000
50,00050,00050,000

0

0

0

2000

2001

2002

2000

2001

2002

2000

2001

2002

In other product areas, jet engines
have been temporarily affected by
the terrorist attacks in the UnitedStates but remain a growing sector
in the long term. Sales of stream turbines for LNG carriers are expanding
as demand for LNG carriers grow. We
will continue to strengthen our position in this area.
In mature sectors, we must adopt a
different tack: strengthening our competitiveness and rationalizing andenhancing the efficiency of our operations. Evidencing this strategy, in fiscal 2002 we concluded alliances with
Mitsui Engineering & Shipbuilding
Co., Ltd., in the area of diesel engines
for ships and with Kayaba Industry
Co., Ltd., in the field of hydraulicmachinery. In addition, the industrial
hydraulic equipment division will bemade a fully owned subsidiary of
KHI—Kawasaki Precision MachineryCo., Ltd.—in October 2002, a move toenhance efficiency in management.
We will continue to actively develop
overseas markets as well.

Business Results

Outlook

Orders received during the fiscal

We completed the first PUC180—ayear for steam turbines and diesel

new cogeneration system using ourengines for ships and industrial gas

proprietary L20A 20MW-class gas

turbine power generators remained

turbine power generator—at ourfirm, but orders for commercial jet

Akashi Works, and it went into oper-

aircraft engine components foration in November 2001. The L20A

overseas partners dropped sub-combines our industrial gas turbine

stantially because of the impact oftechnology development capabili-

the terrorist attacks in the United

ties with our sophisticated compo-

States. Total orders received werenent technologies for jet aircraft

5.5% below the previous year andengines. The resulting high-perfor-

amounted to ¥158.7 billion.

mance gas turbine system has theSales, however, rose 12.7%, tohighest class of heat efficiency in¥171.6 billion, because of increased

the world. We will continue todeliveries of steam turbine enginesdevelop these business activities,

for LNG carriers, small and medium-with gas turbines as their core, as

sized gas turbine power generators,

the deregulation of the electricand equipment for a natural gas

power industry and other develop-

compression module. Accompanying

ments bring an expansion inthis increase in sales, operating

demand for distributed powerincome rose 27.0%, to ¥5.4 billion.

sources.

15

PUC180 cogeneration system

Plant & Infrastructure Engineering

Over the past fiscal year, stagnationin private-sector capital investment
in Japan, the implementation of
structural reform measures by theJapanese government, and a slowdown in the world economy were
the hurdles facing KHI’s Plant &Infrastructure Engineering Company.
We tackled these challenges withefforts aimed at internal structuralreform—reviewing our production
systems and staff requirements andmoving forward with thoroughgoingprofit management in our projects—
following our medium-term businessplan. The efforts are meeting withsuccess, as profitability improved toapproximate breakeven. We will continue down this path by working toincrease our ROIC and accelerating
further transformations in our business structure.
First, in the environmental plant
field—where firm demand is expected supported by growing worldwide
awareness of environmental issues—
we plan to expand our business activities aggressively. In this field, every
indication points toward new products and new business areas related
to waste processing and recycling
emerging. Together with such new
approaches as PFI financing schemes,Company President Takuya Maeda,
Managing Director

Flue gas desulfurization plant for Chubu Electric Power Co., Inc.

Sales

Orders Received(Millions of yen)

(Millions of yen)Order Backlog(Millions of yen)
500,000

300,000

250,000

250,000

200,000

400,000

16
200,000
300,000

150,000
150,000

200,000

100,000
100,000
50,000100,000

50,000

0

0

0

2000

2001

2002

2000

2001

2002

2000

2001

2002

it is increasingly clear that strengthening our technological capabilities
and broadening the scope of ourbusiness activities can but bear fruit.
Next, in the plant engineering field,
we are continuing to focus on energyrelated products, where strong growthis expected. In the area of industrial
plants, where latent demand exists
for upgrading the infrastructure ofdeveloping countries, we are watching carefully for signs of market
recovery, in particular in our fieldsof strength—cement, steelmaking,and chemical plants.
Our steel structure business, however, is not enjoying such brightprospects. In fact, it is confronting adifficult environment characterized
by reduced public works spending
and stagnant private-sector capital
investment. To improve performance, we are working to increase
efficiency and concentrate resourcesin high-value-added sectors. In linewith this strategy, we closed twoplants in fiscal 2001 and plan to close
another in fiscal 2004, consolidating
the former activities of these plants
into our Harima Works.

Business Results

Outlook

Although orders during the fiscal

At present, in the area of thermal

year for our power plant division,

power generation, CCPPs are al-including one for a combined cycle

ready in wide use around the world

power plant (CCPP) from Brazil,

as power sources because they use

remained strong, orders for munici-

natural gas as an energy source,

pal refuse incineration plants suf-

which makes possible a reduction

fered a marked decline. In total,in the operational burden on theorders were down 37.0%, to ¥160.1

environment and an increase inbillion.

heat efficiency. Additionally, a large

Net sales, however, rose 21.8%,

number of power plants using

to ¥220.6 billion, boosted by an

CCPPs are under construction inincrease in revenues from thethe United States, where there are

retrofitting of municipal refuse

concerns about power shortages,

incineration plants to reduce dioxin

and in Southeast Asia.

emissions and other plant projects

One new order we received dur-in Japan and overseas. Overall,

ing the fiscal year was from Brazil

profitability improved, as the oper-

for a power plant to relieve chronic

ating loss of the previous fiscal

power shortages accompanying theyear shrank 95.7%, to ¥0.6 billion.

country’s economic growth, and,since demand for power-generating
facilities is expected to grow in theyears ahead, we are concentrating
our efforts in CCPPs and other such
facilities.

17

Power generation plant with environmentallyfriendly boiler (Kawasaki Advanced Clean
Combustion) for Japan Paperboard Industries
Co., Ltd.

Consumer Products & Machinery

The United States and Europe areboth key markets for large-size
motorcycles, which are the principal
product of the Consumer Products &Machinery Company. In the UnitedStates, demand for motorcycles and
ATVs has continued to expand steadily, even after the terrorist attacks. In
Europe, demand for motorcycles isholding firm after having been stagnant for a few years, in part becauseof the weakening of the euro. Our
principal issue in this area was toreduce excess inventories, but during
fiscal 2002 we took a number of measures and we believe our pipeline
inventories will be back to appropriate levels in the next few quarters.
In the ongoing development of thesebusiness activities, we will make optimal use of our product development
capabilities as a driving force to propel us toward further growth.
To this end, our capital expenditures will target hardware and software in our product development
departments over the next three
years. We expect the resulting enhancement of our development
capabilities will enable us to broaden
our lineup by reducing the lengthof the product development cycle.
Our plans call for continuously introducing new models that willappeal to riders not only in thehigh-performance superbike market
segment, where the Kawasaki brandis best known, but also in the cruiser,
sports, and off-road markets as well.

Company President Shinichi Morita,
Managing Director

PRAIRIE 650

Sales

Orders R(Millions of yen)

(Millions o

300,000

300,000

250,000

250,000

200,000

200,000

150,000

150,000

100,000

100,000

50,00050,000

18

0

0

2000

2001

2002

2000

In another move to improve ourdevelopment capabilities, in August
2001 we reached a basic agreement
to form a strategic alliance with
Suzuki in the fields of motorcycles
and ATVs. Based on this agreement,
Kawasaki and Suzuki began to supply
each other with motorcycles on an
OEM basis in February 2002. We
plan to increase the number of models that we supply each other on an
OEM basis and undertake joint product development and component
standardization. By deepening our
relationship with Suzuki, both companies are aiming to increase costcompetitiveness and bolster
profitability.
Another product of the company,
industrial robots, will also see management resources committed to it.
In addition to painting and welding
robots, which are the principal product lines of this sector, the company
is targeting other growth areas. In
particular, it is developing manufacturing processes for semiconductors
and flat panel displays as a potential
second principal product line.

Business Results

Outlook

Sales of motorcycles, ATVs, andIndicative of our commitment to

MULE™ utility vehicles in the

excellence, we are moving forward

United States as well as sales ofat full speed to develop racing

motorcycles in Japan and the rest

machines for full-scale entry intoof Asia continued to be firm; how-the MotoGP class in the 2003 FIM

ever, motorcycle sales in Europe(Fédération Internationale dedropped significantly. As a conse-

Motocyclisme) world road racequence, overall sales of this seg-championship. The model being

ment increased 1.9%, to ¥281.2

developed is the Ninja ZX-RR, abillion. Operating income declined

combat-ready powerhouse with a

20.0%, to ¥5.2 billion, despite favor-

four-stroke, parallel four-cylinder

able exchange rate trends, owing

DOHC (Dual Over-Head Cams) engine.

to a drop in sales in Europe and

The current 2002 season will be

increased sales promotion expens-a preparatory period for full-scale

es in Europe and the United States

entry in the FIM championship. We

mainly to reduce excess pipeline

plan to make spot entries from theinventories.

last part of the season and makeour machine a powerful contender.

19

ZZ-R1200

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

Millions of yen
2002

2001

2000

1999

1998

1997

¥1,060,479¥1,149,698¥1,202,189¥1,297,212¥1,224,259

Operating results:
Net sales.......................................................... ¥1,144,534
Cost of sales....................................................

977,875

924,522

1,008,860

1,045,143

1,114,693

1,041,697

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

166,659

135,957

140,838

157,046

182,519

182,562

administrative expenses ...........................

135,348

131,497

139,587

135,380

131,440

120,351

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

31,311

4,460

1,251

21,66651,07962,211

Net income (loss)...........................................

6,282(10,320)(18,632)(6,132)

18,556

22,572

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

33,132

32,687

39,68542,14335,03036,992

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

31,99833,30335,081

34,60732,416

31,245R&D expenses.................................................

16,54917,54819,905

18,61517,80017,400Working capital .............................................. ¥ 150,114¥ 148,577¥ 188,403¥ 161,712¥ 162,084¥ 150,759

Selling, general and

Financial position at year-end:
Net property, plant and equipment.............

241,517

241,893245,278

244,866

242,435

233,196

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

1,255,075

1,247,472

1,206,806

1,204,857

1,222,906

1,303,168

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

248,170

270,605

264,048

208,763

198,135

197,130

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

167,731

164,081

174,955

199,637

209,040

197,161¥

4.5¥ (7.4)¥ (13.4)¥ (4.4)¥ 13.3¥ 16.4

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

—

—

—

6.0

6.0

7.0

Shareholders’ equity .....................................

120.6

118.0

125.8

143.6

150.3

141.9

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

1,391

1,391

1,391

1,391

1,391

1,389

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

28,93629,162

29,772

26,486

26,102

24,211

Orders received .............................................

1,034,771

1,273,686

1,071,104

N.A.

N.A.

N.A.

Order backlog.................................................

1,240,439

1,320,894

1,072,645

N.A.

N.A.

N.A.

Per share amounts ( yen):
Net income (loss)...........................................

Other data:

The Company began to disclose its orders received and outstanding on a consolidated basis in fiscal 2000.

20

Financial Review

OVERVIEW

On the other hand, consolidated net

RESULTS OF OPERATIONS

During fiscal 2002, ended March 31,

sales rose ¥84.1 billion, or 7.9%, to

Net Sales

2002, the Japanese economy was seri-¥1,144.5 billion, supported especially

As mentioned previously, the Group’s

ously affected by a range of factors andby increased net sales in the Aerospaceconsolidated net sales in fiscal 2002

showed weak performance throughout

and Plant & Infrastructure Engineering

increased ¥84.1 billion, or 7.9%, over

the year. These factors included thesegments. Turning to profitability, con-fiscal 2001, to ¥1,144.5 billion. The

worldwide slowdown set off by thesolidated operating income rose ¥26.9

Aerospace and Plant & Infrastructure

deceleration in the U.S. economy, thebillion, or 602.0%, to ¥31.3 billion,

Engineering segments made particular-

detrimental impact of the terrorist inci-owing to the combination of thely large contributions to the expansion

dents in September 2001, a substantial

increase in net sales, favorable trends

in net sales. Total overseas sales rose

decline in exports, a downturn in pri-in the exchange rate of the yen with

¥63.7 billion, or 14.7%, to ¥496.0 billion,

vate-sector capital investment, andother currencies, a reduction in the

supported especially by sales in the

restraints placed on public works

Group’s breakeven point through theUnited States. The ratio of overseas

spending accompanying the promotion

lowering of fixed expenses, and othersales to overall net sales increased 2.6of structural reforms by the Japanesedevelopments. As a result of the report-

percentage points, to 43.3%.

government.

ing of a gain on sales of property, plant

Amid these economic conditions,and equipment of ¥6.5 billion, write-

Kawasaki Heavy Industries, Ltd. (thedowns of securities amounting to ¥3.9

performance by business segment.

“Company”), and its consolidated sub-billion, and others, net income amount-

Operating income or loss includes

sidiaries (collectively, the “Group”)

ed to ¥6.3 billion, a significant improve-intersegment transactions.

implemented aggressive marketing

ment as compared with a net loss ofactivities, but orders received on a con-¥10.3 billion for fiscal 2001, the first

Shipbuilding

solidated basis declined ¥238.9 billion,

profit in four fiscal years.

The volume of shipbuilding orders

The following paragraphs summarize

or 18.8%, to ¥1,034.8 billion. Factors

Regarding financial position, as adeclined worldwide due mainly to aaccounting for this decrease included

result of a substantial rise in net cash

falloff in shipping markets in fiscal

the absence of the large-scale orderprovided by operating activities, free

2002. Despite these difficult operating

for rolling stock that was recorded in

cash flow increased, and the Groupconditions, orders were received forthe previous fiscal year and selective

used this additional liquidity to repay

three LNG carriers, two LPG carriers,

acceptance of orders by the Plant &interest-bearing debt and improve its

four bulk carriers, and one submarine.

Infrastructure Engineering segment.

debt-to-equity ratio.

Orders received declined ¥11.4 billion,

Net Sales

Sales by Segment (FY2002)

Net Income (Loss)(Billions of yen)(Billions of yen)
20

1,500

15
1,200

10
5

900

0
600

21

-5
-10

300
-15
-20

0

1998

1999

2000

2001

1998

2002
Shipbuilding
Rolling Stock, Construction
Machinery & Crushing Plant
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Others

1999

2000

2001

2002

or 9.7%, to ¥106.1 billion.

capital investment, orders for crushing

6.4%, to ¥151.6 billion. Principal orders

Sales in this segment rose ¥13.7 bil-machinery and construction machineryfrom the defense sector included CH-47

lion, or 17.4%, to ¥92.5 billion, as sales

were stagnant, thus bringing a decline

large transport helicopters, OH-1 lightof new ships increased. The percentage

in total orders for the fiscal year.

observation helicopters, and anti-tankof total Group sales accounted for by

Sales in this segment were down

missiles. Orders from the commercial

this segment rose 0.7 percentage point,¥7.8 billion, or 6.0%, to ¥121.8 billion.

sector included component parts forto 8.1%. The combination of favorable

Although the Group delivered subway

Boeing 777 and 767 aircraft, component

exchange rates and the positive impact

cars overseas for the New York City

parts for the Embraer 170 regional jetof efforts to lower costs of products

Transit Authority and other customers,

aircraft from Brazil’s Embraer, BK117

enabled this segment to report operat-

the decline in sales of rolling stock inhelicopters, and space development-

ing income of ¥5.6 billion, comparedJapan and the weakness in demand for

related equipment.

with an operating loss of ¥1.7 billion incrushing machinery and construction

the previous fiscal year.

machinery led to an overall decline.

¥161.1 billion, due to increased sales

Sales rose ¥24.7 billion, or 18.1%, to

The percentage of total Group sales

to the JDA and the commercial sector,

Rolling Stock, Construction Machinery

accounted for by this segment

mainly to Boeing. The percentage of& Crushing Plant

decreased 1.6 percentage points, toGroup sales accounted for by this seg-

Orders won by this segment in fiscal

10.6%. Operating income increased

ment increased 1.2 percentage points,

2002 declined ¥110.3 billion, or 57.2%,¥0.2 billion, or 76.8%, to ¥0.5 billion.

to 14.1%. Operating income rose ¥5.8

to ¥82.6 billion. Although orders forbillion, or 70.9%, to ¥13.9 billion,

rolling stock in the domestic market,

Aerospacebecause of the favorable impact ofincluding those for the Tohoku andOrders in the domestic market were

exchange rate trends and other factors.

Akita Shinkansen bullet trains, werestrong, as the segment received thestrong during the fiscal year, orders

mandate from the JDA to be the prime

Gas Turbines & Machineryfrom overseas declined sharply fromcontractor for developing the P-X andAlthough orders for marine steam tur-the previous fiscal year when the seg-

C-X; however, overseas, orders frombines and diesel engines for ships as

ment received a major order for bullet

Boeing experienced a temporary lull

well as industrial gas turbine power

trains from Taiwan. Moreover, as a result

because of the impact of the terrorist

generators remained strong, ordersof decreased demand in the public sec-

attacks in the United States. As a result,for component parts for commercial jet

tor and the slump in private-sector

total orders declined ¥10.3 billion, or

aircraft engines declined substantiallyfollowing the terrorist attacks in the

Net Income (Loss) per Share

Working Capital(Yen)(Billions of yen)

Total Assets(Billions of yen)
1,500

200

15
12

1,200

9
150
6

900

3
100

0

22

600

-3
-6

50
300

-9
-12

0

0

-15

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

United States. Overall, orders fell ¥9.2

processing system. Overseas ordersconsequence, overall sales of this seg-billion, or 5.5%, to ¥158.7 billion.

included a CCPP for Brazil, a steelmak-

ment increased ¥5.3 billion, or 1.9%, toing plant for China, heat recovery¥281.2 billion. This segment accounted

above the previous fiscal year, tosteam generators for the United States,for 24.6% of Group sales, a decline of¥171.6 billion, because of increased

and a liquefied ethylene production

1.4 percentage points from the previ-

deliveries of steam turbine engines forplant for Taiwan.

ous fiscal year. Operating income

Sales rose ¥19.3 billion, or 12.7%,

LNG carriers, small and medium-sized

Sales expanded ¥39.4 billion, or

declined ¥1.3 billion, or 20.0%, to ¥5.2

gas turbine power generators, and equip-

21.8%, to ¥220.6 billion, due tobillion, despite favorable exchange rate

ment for a natural gas compression

increased sales related to industrial

trends, owing to a drop in sales in Europe

module. Sales of this segment account-plants in Japan and overseas, such as

and increased sales promotion expenses

ed for 15.0% of Group sales, an increase

those for plant modifications to reducein Europe and the United States mainlyof 0.6 percentage point from the previ-and eliminate dioxin emissions into reduce excess pipeline inventories.

ous year. Operating income rose ¥1.2

municipal refuse incineration plants.

billion, or 27.0%, to ¥5.4 billion, accom-

Sales of this segment accounted for

Otherpanying the increase in sales.

19.3% of Group sales, 2.2 percentage

Orders in this segment declined ¥8.9

points higher than in the previous fis-billion, or 8.6%, to ¥94.4 billion. Sales

Plant & Infrastructure Engineering

cal year. Despite the difficulties in thefell ¥10.6 billion, or 10.0%, to ¥95.8 bil-

Total orders for this segment wereoperating environment, as a result oflion. This segment accounted for 8.3%

¥94.2 billion, or 37.0%, lower than forvarious measures to lower the seg-of Group sales, representing a decline

the previous year and amounted toment’s breakeven point, the operatingof 1.7 percentage points from the previ-¥160.1 billion. Although the power

loss of this segment declined 95.7%, or

ous fiscal year. Operating income, how-plant divisions reported firm orders,¥14.0 billion, to ¥0.6 billion.

ever, rose ¥0.3 billion, or 17.6%, to ¥1.7

orders for municipal refuse incinera-

billion.

tion plants declined substantially, thus

Consumer Products & Machinerybringing lower orders overall. Major

Sales of motorcycles, ATVs, and MULE™

orders from domestic customers

utility vehicles in the United States as

included the Kobe Airport Bridge, gasi-

well as sales of motorcycles in Japanfying melting refuse incineration sys-and the rest of Asia continued to beJapantems for municipal governments, andfirm; however, motorcycle sales in

Sales in Japan expanded ¥44.5 billion,

a “Recycling Plaza” bulky waste

Europe dropped significantly. As aor 5.4%, to ¥868.8 billion, during theperformance by geographic segment.

Total Shareholders’ Equity

Total Shareholders’ Equity per Share

(Billions of yen)

(Yen)

Return on Equity
(%)
10

200

250

The following paragraphs summarize

9.1

8
6

200

150

3.8

4
2

150
100

0

23

-2

100

(3.0)
-4
50
-6

50

(6.1)

-8
-10

0

0

1998

1999

2000

2001

2002

(9.9)

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

fiscal year due mainly to increased

fiscal year. Operating income also

rate of approximately 41.9%. This was

sales by the Company. Operating

declined ¥0.02 billion, or 24.7%, to ¥0.07

due to items which will never be treat-income expanded ¥28.2 billion, or

billion. Australia is the major country ined as expenses and other adjustment

891.3%, to ¥31.4 billion, also due tothis segment.

items. (Please refer to No. 12 of the

improved operating income in the
Company because of favorable trends

Costs, Expenses, and Earnings

in the exchange rate of the yen against

Cost of sales rose 5.8%, to ¥977.9 bil-

As a result of these various factors,

other currencies and measures imple-

lion. Because this increase was smaller

net income for fiscal 2002 amounted tomented to enhance profitability.

than the rise in net sales, the Group’s¥6.3 billion, compared with a net loss

gross profit margin expanded 1.8 per-of ¥10.3 billion in fiscal 2001. The net

centage points, to 14.6%.

income margin to net sales therefore

North America
Sales in North America rose ¥28.4 bil-

24

Notes to the Consolidated Financial

Selling, general and administrative

Statements as shown on page 39.)

moved from minus 1.0% in fiscal 2001

lion, or 16.2%, to ¥204.5 billion, and(SG&A) expenses were up 2.9%, toto 0.5% for fiscal 2002. ROE improved

operating income increased ¥1.8 bil-

¥135.3 billion, and the ratio of SG&A

from minus 6.1% in fiscal 2001 to 3.8%

lion, or 56.6%, to ¥5.1 billion, primarily

expenses to net sales fell 0.6 percent-in fiscal 2002.

owing to a gain in the performance of aage point, to 11.8%. This decline wasrolling stock manufacturing subsidiary.

the result of the positive impact ofFinancial Condition

lower fixed costs. As a consequence,

Based on its policy of sharpening theEuropeoperating income expanded ¥26.9 bil-

focus of its business portfolio, theSales in Europe increased ¥8.5 billion,

lion, or 602.0%, to ¥31.3 billion, and theGroup has sold nonperforming assets

or 22.1%, over the previous year, tooperating income margin rose 2.3 per-with the aim of raising ROIC and has¥47.1 billion, because of an increasecentage points, to 2.7%.

worked to make improvements in its

in the number of consolidated sub-Other income (expenses) for fiscal

balance sheet. In addition, accompany-

sidiaries accompanying a realignment

2002 amounted to expenses of ¥15.3 bil-ing the improvement in its free cashof the Group’s consumer products

lion, down ¥7.5 billion from the previ-

flow, the Group has also used sparesales companies. However, as a result

ous fiscal year. The principal reason for

cash to pay back a portion of its inter-of measures to lower pipeline invento-

this improvement was the absence of a

est-bearing debt with the aim ofries to optimal levels, the operating

provision for losses on construction

strengthening its financial position. As

loss in this geographic segment

contracts and expenses for making

a consequence, the Group’s current

increased to ¥3.3 billion, comparedstructural improvements, which wereratio declined 0.3 percentage point, towith an operating loss of ¥0.9 billion

recorded in fiscal 2001. A portion of the

119.9%; the debt-to-equity ratio fell 11.3

in the previous fiscal year.

decline in expenses was offset by thepercentage points, to 292.9%; and the

movement from a net foreign exchange

equity ratio increased 0.2 percentage

Asiagain position in the previous fiscal year

point, to 13.4%. Therefore, although the

Supported by steady performances

to a foreign exchange loss position inGroup’s current ratio moved only

from subsidiaries that manufacture andfiscal 2002. As a consequence, income

slightly, the stability of its capital posi-sell motorcycles in Southeast Asia,

before income taxes and minority inter-tion showed some improvement.

sales grew ¥2.7 billion, or 15.2%, toests moved from a loss of ¥18.4 billion¥20.5 billion, while operating incomein the previous fiscal year to income ofbillion, or 0.6%, to ¥1,255.1 billion.

increased ¥0.6 billion over the previous¥16.0 billion in fiscal 2002.

Current assets increased ¥18.4 billion,

fiscal year, to ¥0.7 billion.

The ratio of the provision for income

Total assets of the Group rose ¥7.6

to ¥902.7 billion. The increase in cur-taxes, after taking account of tax

rent assets was primarily due to a rise

Other Areas

effects, to income before income taxes

in cash on hand and in banks of ¥14.3

Sales decreased ¥0.2 billion, or 4.2%, toand minority interests was 57.8%, sub-billion, a decrease in trade receivables¥3.7 billion, as compared to the previous

stantially higher than the statutory tax

of ¥28.1 billion, and a gain in inventories

of ¥25.7 billion. The rise in cash onpart of shareholders’ equity after the

cash flows described in the following

hand and in banks is explained subse-

deduction of deferred taxes.

paragraphs.

quently in the discussion of cash flows.

The Group made total capital invest-

Net cash provided by operating

On the other hand, net property, plant

ments (including investments in intan-

activities increased ¥51.6 billion, toand equipment declined ¥0.4 billion, togible assets) of ¥33.1 billion during fiscal¥60.8 billion. The reasons for the sub-¥241.5 billion, mainly because of depre-

2002. These investments were primarily

stantial rise in operating cash inflow

ciation. Investments in securities fellin the Consumer Products & Machinery

in fiscal 2002 were: (1) the substantial¥9.9 billion from the previous fiscal

and Rolling Stock, Construction

improvement in profitability, as repre-

year-end, to ¥81.2 billion, primarily

Machinery & Crushing Plant, and Gas

sented by the movement from a net

because of reductions in book value

Turbines & Machinery segments. The

loss in fiscal 2001 to net income in fis-to reflect market prices.

ratio of these capital investments to net

cal 2002, (2) the shift from a decline in

On the other hand, liabilities rose

cash provided by operating activities

items not accompanied by cash out-

¥3.4 billion, or 0.3%, to ¥1,082.2 billion.

was 54.5% for fiscal 2002. Capital in-flows to an increase in such items,

Current liabilities increased ¥16.8 bil-vestments were made primarily to facil-

including the reserve for retirement

lion, to ¥752.6 billion. Interest-bearing

itate the introduction of new models

benefits, accrued bonuses, and theliabilities, both short- and long-term,and products as well as for rationaliz-provision for doubtful accounts, anddeclined ¥7.8 billion, to ¥491.3 billion.

ing production and reducing labor(3) progress toward the collection of

The principal factor accounting for the

inputs. In particular, the Group invest-

accounts receivable, which resulted inincrease in current liabilities was high-ed a total of ¥12.9 billion in the Consumera change from a net outflow position in

er short-term interest-bearing liabili-

Products & Machinery segment tofiscal 2001 to a net inflow position inties. Long-term liabilities dropped ¥13.4

introduce new motorcycle models,

fiscal 2002. Please note that a portion

billion, to ¥329.6 billion. This was pri-rationalize operations, and expand pro-of the increase in cash inflows was off-

marily because the Group adopted aduction capacity for ATVs at one of its

set by a decline in cash inflows fromstrategy of promoting the repayment of

manufacturing subsidiaries in theincreases in advances received.

outstanding debt, which led to a large

United States.

decline in long-term interest-bearing

Net cash flows from investing activities amounted to a net cash outflow of

liabilities. Note that a portion of thisCash Flows¥28.1 billion, up ¥7.4 billion as com-decline was offset by an increase in the

During fiscal 2002, net cash provided

pared to the previous year. This wasreserve for employees’ retirement andby operating activities provided themainly due to acquisitions of securities.

severance benefits.

basic financial resources needed for

Net cash flows from financing activi-

conducting operating activities and forties amounted to a net cash outflow ofof ¥3.7 billion, or 2.2%, to ¥167.7 billion.

capital investment. Free cash flow,¥18.6 billion in fiscal 2002, compared

The principal factors accounting forwhich is the sum of net cash provided

with a net cash inflow of ¥3.6 billion inthis increase were: (1) the increase inby operating activities and net cash

fiscal 2001. This was primarily because

consolidated retained earnings accom-used in investing activities, was posi-

the Group made a net increase in its

panying the Group’s return to prof-

tive, at ¥32.7 billion. A portion of thisfunding from interest-bearing liabilities

itability and (2) a decline in the foreign

free cash flow was used to repay part ofin fiscal 2001; however, it made net

currency translation adjustments item

the Group’s interest-bearing liabilities.

repayments of interest-bearing liabili-

within shareholders’ equity. This rise in

As a result of these and other factors,

ties in fiscal 2002.

shareholders’ equity was partially off-cash and cash equivalents at the end of

set by a decline in net unrealized gains

the fiscal year showed an increase ofon securities. Please note that net unre-¥14.6 billion, to ¥89.8 billion. This

alized gains on securities are shown as

increase was the net outcome of the

Shareholders’ equity posted a gain

25

Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of March 31, 2002 and 2001

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

ASSETS

2002

2001

2002

Current assets:
Cash on hand and in banks....................................................................................... ¥91,344¥

77,048$ 685,508

Receivables (Note 5):
Trade........................................................................................................................

389,987

418,064

2,926,732

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

12,821

12,942

96,217

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

(5,893)(5,076)(44,225)

396,915425,930

2,978,724

Inventories (Notes 3 and 5) ......................................................................................

372,269

346,567

2,793,764

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

16,994

14,922

127,535

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

25,14919,830188,735

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

902,671884,297

6,774,266

81,222

91,154

609,546

Investments and long-term loans:
Investments in securities (Notes 4 and 6) ..............................................................
Long-term loans..........................................................................................................

3,965

4,882

29,756

Other (Note 5) ............................................................................................................

15,361

15,355

115,279

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

(5,150)(4,173)(38,649)

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

95,398107,218

715,932

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

54,11653,018406,124

Buildings......................................................................................................................

251,165

248,3881,884,916

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

460,128452,840

3,453,118

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

8,744

3,572

65,621

774,153

757,818

5,809,779

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

(532,636)(515,925)(3,997,268)

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

241,517

241,893

1,812,511

4,917

4,924

36,901

Property, plant and equipment (Note 5):

Intangible and other assets:
Deferred tax assets (Note 12) ...................................................................................
26

Intangible and other assets.......................................................................................

10,5729,140

79,340

15,48914,064116,241

Total assets................................................................................................................. ¥1,255,075¥1,247,472$9,418,950

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

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

LIABILITIES AND SHAREHOLDERS’ EQUITY

2002

2001

2002

Current liabilities:
Short-term borrowings and current portion¥ 228,462$1,824,488

Trade payables ...........................................................................................................

of long-term debt (Note 5) ...................................................................................... ¥ 243,113
325,664

326,257

2,444,008

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

111,423

104,194

836,195

Accrued income taxes (Note 12)..............................................................................

3,347

3,393

25,118

Accrued expenses ......................................................................................................

18,954

15,583

142,244

Provision for product warranty ...............................................................................

2,479

1,551

18,604

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

80

6,571

600

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

321

457

2,409

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

47,17649,252354,041

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

752,557

735,720

5,647,707

Long-term debt, less current portion (Note 5).......................................................

248,170

270,605

1,862,439

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

66,77056,331

501,088

1,042

1,388

7,820

Long-term liabilities:

Directors’ and statutory auditors’ retirement
and severance benefits............................................................................................
Deferred tax liabilities (Note 12)..............................................................................

4,338

4,654

32,555

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

9,284

10,02569,674

Total long-term liabilities ......................................................................................

329,604

343,0032,473,576

5,183

4,668

38,897

Issued—1,390,595,964 shares ...............................................................................

81,42781,427611,084

Capital surplus ...........................................................................................................

24,682

24,682

185,231

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

64,11058,452

481,126

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

5,925

13,091

44,466

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

(8,407)(13,571)(63,092)

Treasury stock............................................................................................................

(6)

—

(45)

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

167,731

164,081

1,258,770

Total liabilities and shareholders’ equity ........................................................... ¥1,255,075¥1,247,472$9,418,950

Contingent liabilities (Note 8)
Minority interests..............................................................................................................
Shareholders’ equity (Note 9):
Common stock:
Authorized—3,360,000,000 shares

27

Consolidated Statements of Operations
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the three years ended March 31, 2002, 2001 and 2000

Thousands of
U.S. dollars(Note 1)Millions of yen
2002

Net sales .................................................................................................... ¥1,144,534

2001

2000

2002

¥1,060,479¥1,149,698$8,589,373

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

977,875

924,522

1,008,860

7,338,649

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

166,659

135,957

140,838

1,250,724

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

135,348

131,497

139,587

1,015,745

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

31,311

4,460

1,251

234,979

4,798

4,480

4,274

36,008subsidiaries and affiliates..............................................................

379(1,586)

(654)

2,844

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

(12,146)(12,779)(11,782)(91,152)

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

(8,348)(12,981)(15,819)(62,649)

15,994(18,406)(22,730)

120,030

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

(6,114)(5,609)(5,899)(45,884)

Deferred .............................................................................................

(3,131)

13,3099,466(23,497)

Other income (expenses):
Interest and dividend income.........................................................
Equity in income (loss) of unconsolidated

Income (loss) before income taxes
and minority interests ...............................................................
Income taxes (Note 12):

Minority interests in net loss (income)of consolidated subsidiaries ...............................................................

(467)

386

531

Net income (loss) ..................................................................................... ¥6,282¥ (10,320)¥ (18,632)(3,505)$47,144

U.S. dollars(Note 1)Yen

Per share amounts (Note 2(v)):
Net income (loss) .............................................................................

¥4.5¥(7.4)¥(13.4)$0.03)Net income—diluted ........................................................................

4.4

—

—

0.03)

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

—

—

—

—

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

28

Consolidated Statements of Shareholders’ Equity
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the three years ended March 31, 2002, 2001 and 2000

Thousands

Balance at March 31, 1999 ......................................................
Net loss for the year ........................................................
Increase in retained earnings arising fromnewly consolidated subsidiaries......................................
Increase in retained earnings arising from affiliates
newly accounted for by the equity method .................
Decrease due to companies ceasing to be affiliates
accounted for by the equity method...........................
Decrease due to merger of unconsolidated
subsidiaries with consolidated subsidiary.................
Adjustment for changes of interests in affiliates
accounted for by the equity method...........................
Cash dividends .................................................................
Bonuses to directors and statutory auditors...............
Balance at March 31, 2000 ......................................................
Net loss for the year ........................................................
Adjustment for changes of interests in affiliates
accounted for by the equity method...........................
Adjustments from translation of foreign currency
financial statements .............................................................
Adoption of new accounting standard
for financial instruments...............................................
Treasury stock..................................................................
Bonuses to directors and statutory auditors...............
Balance at March 31, 2001 ......................................................
Net income for the year ..................................................
Adjustment for changes of interests in affiliates
accounted for by the equity method...........................
Adjustments from translation of foreign currency
financial statements .............................................................
Decrease in net unrealized gains on securities ...........
Treasury stock..................................................................
Bonuses to directors and statutory auditors...............
Balance at March 31, 2002 ....................................................

Millions of yen

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

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

—

—

—

2,677

—

—

—

—

—

—

Net
unrealized
gains onsecurities

Foreigncurrencytranslation Treasury
adjustments
stock

¥

¥

—
—

—
—

¥—
—

—

—

—

34

—

—

—

—

(3,996)

—

—

—

—

—

(357)

—

—

—

—
—
—
1,390,596————
81,427————
24,682—(64)(4,172)(172)
68,846(10,320)

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—

—

—

(17)

—

—

—

—

—

—

—

—

(13,571)————
1,390,596————
81,427————
24,682———(57)
58,452
6,282

13,091——
13,091————(13,571)
—

—
—
—
—
—

—

—

—

(575)

—

—

—

—
—
—
—
1,390,596————¥81,427————¥24,682———(49)¥64,110—(7,166)——¥ 5,925

5,164
—
—
—
¥(8,407)

—
—
(6)
—
¥ (6)

$ 98,242 $(101,846)
—
—

$ —
—

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2001.................................................................................. $ 611,084
Net income for the year..............................................................................
—
Adjustment for changes of interests in affiliates
accounted for by the equity method ......................................................
—
Adjustments from translation of foreign currency
financial statements ...................................................................................
—
Decrease in net unrealized gains on securities .......................................
—
Treasury stock.............................................................................................
—
Bonuses to directors and statutory auditors ..........................................
—
Balance at March 31, 2002................................................................................ $611,084$ 185,231—$ 438,664
47,144—(4,315)————$185,231

—
—
—
(367)
$481,126

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

—

—

—

—
38,754(53,776)—————$44,466 $ (63,092)

—
—
(45)
—
$(45)

29

Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the three years ended March 31, 2002, 2001 and 2000

Thousands of
U.S. dollars(Note 1)Millions of yen
2002

2001

2000

2002

¥(18,406)¥(22,730)$120,030

Cash flows from operating activities:
Income (loss) before income taxes and minority interests....................... ¥15,994
Adjustments to reconcile net income (loss) before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization..................................................................

31,99833,30335,081

240,135

Provision for (reversal of) retirement and severance benefits ................

10,182

(634)

3,479

76,413

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

3,479(3,995)(3,419)26,109Gain on sale of fixed assets .......................................................................

(5,047)——(37,876)

Provision for (reversal of) losses on construction contracts ...............

(6,517)

6,190(4,111)(48,908)

Write-downs of securities and others ......................................................

3,904

5,714

3,031

29,298

Write-downs of investment in subsidiaries and affiliates ......................

649

—

—

4,871

Provision for (reversal of) allowance for doubtful accounts ................

1,794(1,380)4,765

13,463

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

(4,798)(4,480)(4,274)(36,008)

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

12,146

12,77911,782

91,152Gain on sale of marketable & investments securities ............................

(109)(4,975)

(266)

(818)

38,986(11,850)

3,583

292,578

Inventories ........................................................................................... (18,809)

Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables................................................................................
Other current assets...........................................................................

(23,480)

21,447(141,156)(3,972)(441)(5,615)(29,809)(9,972)

9,092(2,911)

74,837

Increase (decrease) in:
Trade payables ....................................................................................
Advances received ..............................................................................

6,970

17,384

5,972

52,308Other current liabilities......................................................................

(3,583)

1,977

38(26,889)

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

(111)

520

1,151

(833)

Subtotal ....................................................................................................

73,184

17,31847,003549,223

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

4,730

5,447

4,122

35,497

Cash paid for interest ..................................................................................... (11,401)(11,636)(11,270)(85,561)

Cash paid for income taxes............................................................................

(5,720)(1,893)(8,623)(42,927)

Net cash provided by operating activities...................................................

60,793

9,236

31,232456,232(Continues to next page)30

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

2002

2001

2002

2000

Cash flows from investing activities:
289

—

—

2,019

Acquisition of property, plant and equipment............................................ (31,406)

Decrease in time deposit due more than three months ............................

(32,967)(37,513)(235,692)

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

10,677——80,128Acquisition of intangible assets ....................................................................

(2,904)——(21,794)

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

133

—

—

998

Acquisition of investment in securities........................................................

(6,595)——(49,493)

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

205

10,673—

1,538

Decrease in short-term loans receivable .....................................................

368

1,415

—

2,762

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

(2,086)(1,693)(5,866)(15,655)

Proceeds from collection of long-term loans receivable ...........................

3,157

3,241

—

23,692subsidiaries’ stock ........................................................................................

—(2,375)——

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

93

973

(3,200)698

Net cash used for investing activities........................................................... (28,089)(20,733)(46,579)(210,799)

1,497(4,643)

6,281

Payment for purchase of newly consolidated

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

837

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

12,93940,84088,368

97,103

Repayment of long-term debt ........................................................................ (32,303)(38,689)(39,719)(242,424)

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

(5)

(9)

(4,203)(38)

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

(56)

(56)

(64)

(420)

Net cash provided by (used for) financing activities ................................. (18,588)

3,583

39,739(139,498)

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

449

966

(1,408)3,370

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

14,565(6,948)22,984

109,305

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

75,21282,16054,837564,443

—

—

4,339

—

Cash and cash equivalents at end of year ........................................................... ¥89,777¥ 75,212¥ 82,160$673,748¥ 77,048¥ 85,782$685,508(1,567)(1,836)(3,622)(11,760)

Total.......................................................................................................... ¥89,777¥ 75,212¥ 82,160$673,748

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

Supplemental information on cash flows:
Cash and cash equivalents:

31

Cash on hand and in banks in the balance sheet.................................... ¥91,344
Time deposits with maturities over three months .................................

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

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

32

1. Basis of presenting
consolidated
financial statements

Kawasaki Heavy Industries, Ltd. (the “Company”) and its consolidated domestic subsidiaries maintain theiraccounts and records in accordance with the provisions set forth in the Japanese Commercial Code and the
Securities and Exchange Law and in conformity with accounting principles and practices generally accepted inJapan (“Japanese GAAP”). The accounts of overseas consolidated subsidiaries are based on their accounting
records maintained in conformity with generally accepted accounting principles and practices prevailing in therespective countries of domicile. Certain accounting principles and practices generally accepted in Japan are
different from International Accounting Standards and standards in other countries in certain respects as toapplication and disclosure requirements. Accordingly, the accompanying financial statements are intended foruse by those who are informed about Japanese accounting principles and practices.
The accompanying financial statements have been restructured and translated into English (with some
expanded descriptions and the inclusion of statements of shareholders’ equity) from the consolidated financial
statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Securities and Exchange Law. Some supplementary
information included in the statutory Japanese language consolidated financial statements, but not required forfair presentation, is not presented in the accompanying financial statements.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of thereader, using the prevailing exchange rate at March 31, 2002, which was ¥133.25 to US$1.00. The conveniencetranslations 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, over which the Company has power of control through majority voting right or existence of certain conditions evidencing control by the Company. Investments in non-consolidated subsidiaries and affiliates, overwhich the Company has the ability to exercise significant influence over operating and financial policies of theinvestees, are accounted for on the equity method.
The consolidated financial statements include the accounts of the Company and 105 (105 in 2001 and 112
in 2000) subsidiaries.
For the year ended March 31, 2002, 2 (4 in 2001 and 2000) subsidiaries are excluded from the consolidation.
The amounts of total assets, net sales, net income and retained earnings of these excluded subsidiaries, in theaggregate, would not have had a material effect on the consolidated financial statements.
( b) Application of the equity method of accounting
For the year ended March 31, 2002, 17 (18 in 2001 and 20 in 2000) affiliates are accounted for by the equity
method.
For the year ended March 31, 2002, investments in 2 (4 in 2001 and 2000) unconsolidated subsidiaries and13 (12 in 2001 and 14 in 2000) affiliates, respectively, are stated at cost without applying the equity methodof accounting. If the equity method had been applied for these investments, the amounts of net income andretained earnings of these excluded subsidiaries and affiliates would not have had a material effect on the
consolidated financial statements.
(c) Consolidated subsidiaries’ fiscal year-ends
Fiscal year-ends of 31 (32 in 2001 and 29 in 2000) consolidated subsidiaries end on December 31. The Company
consolidates such subsidiaries’ financial statements as of each subsidiary’s latest year-end. Unusual significant
transactions for the period between each subsidiary’s year-end and the Company’s year-end are adjusted on
consolidation.
(d) Elimination of inter-company transactions and accounts
All significant inter-company transactions and accounts and unrealized inter-company profits are eliminatedon consolidation, and the portion thereof 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 control of the respective subsidiaries.
When the excess of cost over equity is considered significant, it is amortized to income by the straight-line
method over five years. Otherwise, it is charged to income in the year of acquisition or the year newly included
in consolidation.

(e) Foreign currency translation
Short-term receivables and payables denominated in foreign currencies are translated into Japanese yen at the
year-end rates. Prior to April 1, 2000, long-term receivables and payable denominated in foreign currencies weretranslated at historical rates.
Effective April 1, 2000, the Company and its consolidated subsidiaries adopted the revised accounting standard for foreign currency translation, “Opinion Concerning Revision of Accounting Standard for Foreign
Currency Translation”, issued by the Business Accounting Deliberation Council on October 22, 1999 (the“Revised Accounting Standard”). Under the Revised Accounting Standard, long-term receivables and payables
denominated in foreign currencies are also translated into Japanese yen at the year-end rate.
The effect on the consolidated statement of operations of adopting the Revised Accounting Standard was
immaterial.
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rate
except for shareholders’ equity accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates except for transactions with the Company, which
are translated at the rates used by the Company.
Due to the adoption of the Revised Accounting Standard, the Company and its domestic subsidiaries reportforeign currency translation adjustments in shareholders’ equity (and minority interests).
(f ) Appropriations of retained earnings
Appropriations of retained earnings are recorded in the fiscal year when the proposed appropriations areapproved.
(g ) Revenue recognition
Sales are principally recognized at the time of completion of the contracts. However, the percentage-of-completion
method is applied to long-term contracts exceeding ¥5,000 million.
( h) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits and short-term
highly liquid investments with maturities not exceeding three months at the time of purchase are considered
to be cash and cash equivalents.
(i) Allowance for doubtful receivables
Effective April 1, 2000, the Company and its consolidated domestic subsidiaries adopted the new Japanese
accounting standard for financial instruments (“Opinion Concerning Establishment of Accounting Standard for
Financial Instruments” issued by the Business Accounting Deliberation Council on January 22, 1999).
Upon applying the new accounting standard, possible losses from notes and accounts receivable, loans andother receivables are provided for based on past experience rate and the Companies’ estimates of losses oncollection.
As a result of adopting the new accounting standard for financial instruments, loss before income taxes andminority interests in 2001 increased ¥2,983 million compared with the amounts which would have been recognized under the previous method of accounting.
( j) Inventories
Inventories are stated at cost, as determined principally by the specific identification cost method, the first-in,
first-out method or the moving-average method.
( k) Assets and liabilities arising from derivative transactions
Assets and liabilities arising from derivative transactions are stated at fair value.
( l) Investments in securities
Prior to April 1, 2000, securities of the Company and its consolidated subsidiaries were stated at moving-average
cost.
Effective April 1, 2000, the Company and its consolidated domestic subsidiaries adopted the new Japanese
accounting standard for financial instruments (“Opinion Concerning Establishment of Accounting Standard for
Financial Instruments” issued by the Business Accounting Deliberation Council on January 22, 1999).
Upon applying the new accounting standard, the Company and its consolidated domestic subsidiaries examined the intent of holding each security and classified those securities as (a) debt securities intended to be held
to maturity (hereafter, “held-to-maturity debt securities”), (b) equity securities issued by subsidiaries and affiliated companies and (c) for all other securities that are not classified in the above categories (hereafter, “available-for-sale securities”). There were no trading securities at March 31, 2001 and 2002.

33

34

Held-to-maturity debt securities are stated mainly at amortized cost. Equity securities issued by subsidiaries andaffiliated companies which are not consolidated or accounted for using the equity method are stated at movingaverage cost. Available-for-sale securities with available fair market values are stated at fair market value. Unrealized
gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of shareholders’ equity. Realized gains and losses on 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 unconsolidated subsidiaries
and affiliated companies and available-for-sale securities, declines significantly, such securities are stated at fairmarket value and the difference between fair market value and the carrying amount is recognized as loss in the
period of the decline. If the fair market value of equity securities issued by unconsolidated subsidiaries and affiliated companies not on the equity method is not readily available, such securities should be written down to
net asset value with a corresponding charge in the statement of operations in the event net asset value declines
significantly. In these cases, such fair market value or the net asset value will be the carrying amount of the
securities at the beginning of the next year.
As a result of adopting the new accounting standard for financial instruments, loss before income taxes andminority interests in 2001 increased ¥2,731 million compared with the amounts which would have been recognized under the previous method of accounting.
(m) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed principally by the declining-balancemethod over estimated useful lives.
(n) Intangible assets
Amortization of intangible assets is computed by the straight-line method.
(o) Provision for product warranty
Expected future product warranty costs are provided for ships and consumer products.
(p) Provision for losses on construction contracts
Provision for losses on uncompleted construction contracts at the fiscal year-end is made when substantial losses are anticipated for the next fiscal year and later and such losses can be reasonably estimated.
(Change in accounting policy)
Effective for the year ended March 31, 2001, the Company changed its accounting policy for the provision forlosses on uncompleted construction contracts. Previously, it was applied only for the subsidiary in the UnitedStates based on U.S. GAAP.
The Company made this change in accounting policy following the preparation of its Medium-Term Business
Plan in November 2000 and as a result of a review of construction contracts at the end of the year, which led tothe judgment that factors of losses on construction contracts are increasing. In view of these circumstances,
this change was deemed prudent to increase the soundness of the Company’s financial position and substantially better reflect profitability.
As a result of this change, loss before income taxes and minority interests in 2001 increased ¥6,190 million
compared with the amounts which would have been recognized under the previous method of accounting.
(q) Bond issue expenses
Bond issue expenses are charged to income as incurred.
(r) Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
(s) Retirement and severance benefits
Employees who terminate their services with the Company and its domestic consolidated subsidiaries are generally entitled to lump-sum payments, the amounts of which are determined by reference to their current basic
rates of pay and length of service. At March 31, 2000, the Company and its domestic consolidated subsidiaries
provided for 40 percent of the amount which would be required to be paid if all eligible employees voluntarily
terminated their services at the balance sheet date.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted the new accounting
standard, “Opinion on Setting Accounting Standard for Employees’ Severance and Pension Benefits”, issued

by the Business Accounting Deliberation Council on June 16, 1998 (the “New Accounting Standard”). Under the
New Accounting Standard, the liabilities and expenses for retirement and severance benefits are determinedbased on the amounts actuarially calculated using certain assumptions. The Company and its domestic consolidated subsidiaries provided allowance for employees’ retirement and severance benefits at March 31, 2001
based on the estimated amounts of projected benefit obligation at that date.
The excess of the projected benefit obligation over the liabilities for retirement and severance benefits
recorded as of April 1, 2000 (the “net transition obligation”) amounted to ¥130,928 million, which will be recognized in expenses in equal amounts primarily over 10 years commencing with the year ended March 31, 2001.
Actuarial gains and losses are recognized in expenses in equal amounts over the average of the estimatedremaining service lives of the employees commencing with the following period. As a result of the adoptionof the New Accounting Standard, in the year ended March 31, 2001, retirement and severance benefit expenses increased by ¥2,935 million, operating income decreased by ¥1,215 million and loss before income taxes
and minority interests increased by ¥2,793 million compared with what would have been recorded under theprevious accounting standard.
Employees of the Company’s overseas consolidated subsidiaries are generally covered by various pension
plans, accounted for in accordance with generally accepted accounting principles in the country of incorporation.
The Company and its domestic consolidated subsidiaries provide for retirement and severance benefits for
directors and statutory auditors principally at 50 percent of the amount required if they retired at the balance
sheet date.
(t) Hedge accounting
The Company and its consolidated subsidiaries employ deferred hedge accounting. If financial instruments areused as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer recognition of gains or losses resulting from changes in fair value of financial instruments until the related losses orgains on the hedged items are recognized.
(u) Finance leases
For the Company and its domestic consolidated subsidiaries, finance leases which do not transfer ownershipand do not have bargain purchase provisions are accounted for in the same manner as operating leases inaccordance with Japanese GAAP.
(v) Per share amounts of net income (loss) and cash dividends
The computations of per share amounts of net income (loss) shown in the consolidated statements of operations are based upon the weighted average number of issued shares outstanding during each period.
Diluted income per share, is computed based on the assumption that all dilutive convertible bonds were converted at the beginning of the year.
Per share amounts of cash dividends for each period represent dividends declared as applicable to therespective year.
(w) Reclassifications
Certain prior year amounts have been reclassified to conform to 2002 presentation. These changes had no
impact on previously reported results of operations or shareholders’ equity.

3. Inventories

Inventories as of March 31, 2002 and 2001 are comprised as follows:
Millions of yen
2002
2001

Finished products ........................................................................................................... ¥ 61,928
Work in process .............................................................................................................. 272,100
Raw materials and supplies...........................................................................................
38,241
Total.................................................................................................................. ¥372,269¥ 50,747
259,053
36,767¥346,567

Thousands of
U.S. dollars
2002$ 464,751
2,042,026
286,987$2,793,764

35

4. Securities(a) Acquisition costs, book values (fair value) of investments in securities with available fair values as of March
31, 2002 and 2001 are as follows:
Millions of yen
2002
Acquisition cost
Book values

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

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

Difference

Thousands of
U.S. dollars
2002
Difference¥21,403
21,403¥37,41237,412¥16,009
16,009$120,143
120,143

21,70695¥43,204

16,263
81¥53,756(5,443)(14)¥10,552(40,848)(105)$ 79,190

Millions of yen
2001
Acquisition cost
Book values

Difference¥35,61395
35,708¥63,087
95
63,182¥27,474—
27,474

10,417¥46,125

5,942¥69,124(4,475)¥22,999(b) Book values of investments in securities with no available fair values as of March 31, 2002 and 2001 are as follows:
Millions of yen
2002
2001
Book values
Book values

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

36

¥

25

¥

20

Thousands of
U.S. dollars
2002Book values

$

188

6,181
5,352
¥11,533

6,164
448¥6,612

46,38740,165$86,552

¥

¥ 19
3,167
¥3,186$68
25,816$25,884

93,440¥ 3,449

5. Short-term borrowings and long-term
debt

Short-term borrowings and long-term debt as of March 31, 2002 and 2001 are comprised as follows:
Millions of yen
2002
2001

Short-term borrowings:
Short-term debt, principally bank loans and commercial paper...................... ¥206,147
Current portion of long-term debt........................................................................
36,966
Total short-term debt......................................................................................... ¥243,113
Long-term debt:
Loans from banks and other financial institutions, partly securedby mortgage or other collateral, due from 2002 to 2035,
bearing interest ranging from 0.50 percent to 8.1 percent
and from 0.495 percent to 12.0 percent as of March 31, 2002
and 2001, respectively.......................................................................................... ¥104,770
2.55 percent notes due 2001 ..................................................................................
—
1.00 percent notes due 2002 ..................................................................................
10,0001.05–2.00 percent notes due 2003 .........................................................................
20,0001.94 percent notes due 2004 ..................................................................................
20,0001.50–1.67 percent notes due 2005 .........................................................................
20,0001.87 percent notes due 2006 ..................................................................................
10,0002.00 percent notes due 2007 ..................................................................................
10,0002.51–2.775 percent notes due 2008 .......................................................................
20,0002.33 percent notes due 2009 ..................................................................................
10,0000.80 percent convertible bonds due 2001............................................................
—
0.65–0.90 percent convertible bonds due 2003...................................................
19,0790.75 percent convertible bonds due 2005............................................................
9,609
1.10 percent convertible bonds due 2006............................................................
17,1180.90 percent convertible bonds due 2008............................................................
7,521
1.00 percent convertible bonds due 2011............................................................
7,039
285,136
Less portion due within one year .........................................................................
(36,966)
Total long-term debt........................................................................................... ¥248,170

Thousands of
U.S. dollars
2002¥196,535
31,927¥228,462$1,547,070
277,418$1,824,488¥101,635
10,00010,00020,00020,00020,00010,00010,00020,00010,0008,573
19,0799,609
17,118
8,926
7,592
302,532(31,927)¥270,605$ 786,265—
75,047150,094
150,094
150,094
75,04775,047150,094
75,047—
143,182
72,113
128,464
56,44352,8262,139,857(277,418)$1,862,439

The convertible bonds due 2002 through 2011 as of March 31, 2002 were convertible into 136,177,843 sharesof common stock at the option of the holders at prices of ¥459 ($3.44) or ¥598 ($4.49) per share. The conversion
prices are subject to adjustments under specified conditions.
As of March 31, 2002 and 2001, the following assets were pledged as collateral for short-term borrowing andlong-term debt:
Millions of yen
2002
2001

Trade receivables ................................................................................................................ ¥ 481
Inventories............................................................................................................................ 11,651
Land.......................................................................................................................................
5,830
Buildings ...............................................................................................................................
6,485
Machinery and equipment .................................................................................................
357
Other .....................................................................................................................................
288
Total ...................................................................................................................... ¥25,092¥ 556
12,301
5,845
6,551
400
154
¥25,807

Thousands of
U.S. dollars
2002

$

3,610
87,43743,752
48,6682,679
2,162$188,308

As of March 31, 2002 and 2001, debt secured by the above pledged assets was as follows:
Millions of yen
2002
2001

Trade payables .................................................................................................................... ¥99
Short-term and long-term debt .......................................................................................... 26,527
Total ...................................................................................................................... ¥26,626¥
53
23,780¥23,833

Thousands of
U.S. dollars
2002

$
743
199,077$199,820

37

The aggregate annual maturities of long-term debt as of March 31, 2002 are as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars¥ 36,966
46,20947,93439,899114,128¥285,136$ 277,418
346,784
359,730
299,430
856,495$2,139,857

2003 .....................................................................................................................................................
2004 .....................................................................................................................................................
2005 .....................................................................................................................................................
2006 .....................................................................................................................................................
2007 and thereafter ...........................................................................................................................
Total ........................................................................................................................................

6. Investments inunconsolidated
subsidiaries andaffiliates

Investments in unconsolidated subsidiaries and affiliates as of March 31, 2002 and 2001 are as follows:

7. Employees’
retirement andseverance benefits

The liability for employees’ retirement and severance benefits included in the liability section of the consolidated balance sheet as of March 31, 2002 and 2001 consist of the following:

Millions of yen
2002
2001

Investments in securities.................................................................................................... ¥15,908¥15,399

Millions of yen
2002
2001

Projected benefit obligation .......................................................................................... ¥192,451
Unrecognized prior service costs.................................................................................
2,518
Unrecognized actuarial differences..............................................................................
(20,058)
Less fair value of pension assets ..................................................................................
(5,096)
Less unrecognized net transition obligation............................................................... (103,439)
Prepaid pension cost......................................................................................................
394
Liability for retirement and severance benefits...................................................... ¥ 66,770¥180,860—(4,090)(4,182)(116,497)
240¥ 56,331

Thousands of
U.S. dollars
2002$119,384

Thousands of
U.S. dollars
2002$1,444,285
18,897(150,529)(38,244)(776,278)
2,957$ 501,088

Retirement and severance benefit expenses in the consolidated statements of operations for the years ended
March 31, 2002 and 2001 are comprised as follows:
Millions of yen
2002
2001

Service costs—benefits earned during the year.............................................................. ¥ 9,443
Interest cost on projected benefit obligation ..................................................................
6,167
Expected return on plan assets .........................................................................................
(379)
Amortization of actuarial differences ...............................................................................
407
Amortization of net transition obligation......................................................................... 13,059
Special additional retirement allowance ..........................................................................
—
Retirement and severance benefit expenses ............................................................... ¥28,697¥ 8,700
6,532
(304)
—
14,431
1,687¥31,046

Thousands of
U.S. dollars
2002$ 70,867
46,281(2,844)
3,054
98,004—$215,362

The discount rate and the rate of expected return on plan assets are primarily 3.5 and 8.5 percent, respectively. The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally toeach service year using the estimated number of total service years. Actuarial gains and losses are recognizedin expenses in equal amounts over 10 to 15 years commencing with the following period. Past service costs
are recognized as an expense in equal amounts for 10 years.

8. Contingent liabilities

Contingent liabilities as of March 31, 2002 and 2001 are as follows:
Millions of yen
2002
2001

38

As drawer of trade notes discounted................................................................................ ¥ 874
As endorser of trade notes.................................................................................................
30
As guarantor of indebtedness of employees, unconsolidated
subsidiaries and affiliates, and others ............................................................................ 38,805

¥

916
34

38,854

Thousands of
U.S. dollars
2002

$

6,559
225

291,220

9. Shareholders’ equity(a) Capital surplus
The Commercial Code of Japan had provided that the entire issue price of new shares must be credited to common stock, provided that, by resolution of the Board of Directors, up to one-half of such issue price may becredited to capital surplus so long as the common stock was equal to at least the aggregate par value of theshares issued.
Effective October 1, 2001, the Commercial Code was amended to eliminate par value common stock resulting
in all common stock being recorded with no par value.
( b) Dividends
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated
financial statements of the Company in accordance with the Commercial Code of Japan.
(c) Restrictions on dividends
Under the terms of indentures for certain notes and convertible bonds due through 2006, cumulative cash dividend payments by the Company are not to exceed an amount equivalent to accumulated net income of theCompany earned during the years such securities are outstanding plus ¥10,000 million (for certain indentures¥10,100 million).

10. Research anddevelopment
expenses

Research and development expenses are as follows:

2002

Research and development expenses .......................................................... ¥16,549

11. Other income(expenses):other, net

Millions of yen
2001

2000

Thousands of
U.S. dollars
2002¥17,548¥19,905$124,195

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

2002

Gain on sales of marketable securities
and investments in securities.................................................................... ¥ 109
Gain (loss) on sales of property, plant and equipment ...........................
6,543
Foreign exchange gain (loss), net ............................................................... (4,371)
Write-downs of securities and others ........................................................ (3,904)
Amortization of net transition obligationof retirement and severance benefits.......................................................
(205)
Provision for losses on construction contracts........................................
—
Expenses for making structural improvements ........................................
—
Gain on cancellation of the shipbuilding contracts..................................
—
Prior-period retirement allowances............................................................
—
Other, net ....................................................................................................... (6,520)
Total................................................................................................ ¥(8,348)

Millions of yen
2001

2000

¥ 4,975—
3,097(5,714)¥266—(7,774)(3,917)(1,578)(6,190)(3,470)——(4,101)¥(12,981)

—
—
—
2,053
(2,744)(3,703)¥(15,819)

Thousands of
U.S. dollars
2002

$

818
49,103(32,803)(29,298)(1,538)————(48,931)$(62,649)

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

12. Income taxes

Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax (national tax) and enterprise tax and inhabitants taxes (local taxes) which, in the aggregate, result innormal statutory tax rates of approximately 41.9 percent for the years ended March 31, 2002 and 2001.
The following table summarizes the significant differences between the statutory tax rate and effective tax
rate in the consolidated financial statements for the year ended March 31, 2002:
Statutory tax rate ...................................................................................................................................................................... 41.9%
Unrecognized for tax effects of intercompany profits ..................................................................................................... 4.6%
Non-deductible expenses .................................................................................................................................................... 2.0%
Dividends received from subsidiaries ............................................................................................................................... 5.3%
Other ...................................................................................................................................................................................... 4.0%
Effective tax rate ...................................................................................................................................................................... 57.8%

39Significant components of deferred tax assets and liabilities as of March 31, 2002 and 2001 are as follows:
Millions of yen
2002
2001

Deferred tax assets:
Excess bonuses accrued................................................................................................. ¥ 5,749
Retirement benefits .........................................................................................................
6,202
Estimated loss on uncompleted contracts...................................................................
—
Allowance for doubtful receivables ..............................................................................
3,441
Fixed assets—inter-company profits ............................................................................
1,013
Depreciation .....................................................................................................................
1,099
Net operating loss carryforwards.................................................................................. 13,013
Write-down of marketable securities, investments
in securities and others ................................................................................................
2,145
Other .................................................................................................................................
9,333
Gross deferred tax assets ........................................................................................... 41,995
Less valuation allowance............................................................................................
(9,081)
Total deferred tax assets ............................................................................................ 32,914
Deferred tax liabilities:
Deferral of gain on sale of fixed assets .........................................................................
4,160
Net unrealized gain on securities ..................................................................................
4,426
Unrealized gain on uncompleted contracts .................................................................
2,651
Other .................................................................................................................................
4,425
Total deferred tax liabilities ....................................................................................... 15,662
Net deferred tax assets ........................................................................................... ¥17,252

13. Derivativetransactions

Thousands of
U.S. dollars
2002¥ 2,574
10,289
2,759
2,786
1,128
1,014
11,150$ 43,144
46,544—25,824
7,602
8,248
97,658904
7,620
40,224(8,084)32,14016,09870,041
315,159(68,150)
247,009

3,985
9,637
—
3,783
17,405¥14,735

31,21933,21519,89533,208
117,537$129,472

Since the Company and its consolidated subsidiaries operate internationally and have a substantial volume ofexport and import transactions, they enter into foreign currency exchange and option transactions in order tomanage risk of fluctuations in exchange rates in relation to foreign currency denominated assets, liabilities andfuture transactions.
The Company and its consolidated subsidiaries also enter into interest swap and option transactions to hedge
against future fluctuations in interest rates on borrowings, primarily to fix, cap or collar interest rates on variable rate debt.
The Company and its consolidated subsidiaries’ purpose for purchasing derivatives is to hedge against risksof fluctuations in currency exchange rates and interest rates rather to than be exposed to such risks throughdealing or speculation.
For derivative transactions that meet the conditions for hedge accounting based on the standards foraccounting for financial instruments (“Opinion Concerning Establishment of Accounting Standard for Financial
Instruments” issued by the Business Accounting Deliberation Council on January 22, 1999), the Company and its
consolidated subsidiaries apply hedge accounting principles.
In order to minimize credit risk, the Company and its consolidated subsidiaries use only highly-rated international financial institutions as counterparty to derivative transactions.
The Company and its consolidated subsidiaries have established policies that restrict the use 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, 2002 are as follows:

Contract
amount40

Currency related contracts:
Foreign exchange contracts:
To sell ...................................................................................................... ¥65,291
To purchase............................................................................................
7,982
Total.............................................................................................................
Interest rate related contracts:
Option contracts
Collar purchase...................................................................................... ¥10,000

Millions of yen
Marketvalue
Gain (loss)¥69,022
8,078

¥

(65)

¥(3,73196¥(3,635)¥ (65)

Thousands of
U.S. dollars
Gain (loss)$(28,000)
720$(27,280)

$

(488)

(b) Outstanding positions and recognized gains and losses at March 31, 2001 are as follows:
Contract amountCurrency related contracts:
Foreign exchange contracts:
To sell ...................................................................................................................
To purchase .........................................................................................................
Total ..........................................................................................................................
Interest rate related contracts:
Option contracts:
Collar purchase ...................................................................................................

14. Finance leases

Millions of yen
Market value

Gain (loss)¥84,977
7,364¥90,558
7,787¥(5,581)423¥(5,158)¥10,000¥¥ (115)(116)

Finance lease information, as required to be disclosed in Japan, for the respective years is as follows:(a) As lessee
The original cost of leased assets under non-capitalized finance leases and accumulated depreciation, assuming
it is calculated on the straight-line method over lease terms, as of March 31, 2002 and 2001 are as follows:
Millions of yen
2002
2001

Thousands of
U.S. dollars
2002

Property, plant and equipment.......................................................................................... ¥15,232
Accumulated depreciation .................................................................................................
(7,626)¥ 7,606¥15,324(7,333)¥ 7,991$114,312(57,231)$ 57,081

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

¥

$

939
(430)
509

725
(340)
¥ 385

7,047
(3,227)$ 3,820

The present values of future minimum lease payments under non-capitalized finance leases as of March 31,
2002 and 2001 are as follows:
Millions of yen
2002
2001

Current portion ........................................................................................................................ ¥2,911
Non-current portion ................................................................................................................ 5,405
Total .............................................................................................................................. ¥8,316¥2,825
5,722¥8,547

Thousands of
U.S. dollars
2002$21,846
40,563$62,409

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

2002

Lease payments ..................................................................................................... ¥3,659
Depreciation and amortization............................................................................ 3,419
Interest....................................................................................................................
224

Millions of yen
2001

2000

Thousands of
U.S. dollars
2002¥3,5043,243
232¥3,076
2,862
230$27,460
25,6591,681(b) As lessor
The original cost of leased assets under finance leases and accumulated depreciation, as of March 31, 2002 and2001 are as follows:
Millions of yen
2002
2001

Property, plant and equipment.............................................................................................. ¥1,435
Accumulated depreciation .....................................................................................................
(775)
¥ 660

¥1,335(706)¥ 629

Thousands of
U.S. dollars
2002$10,769(5,816)$ 4,953

The present values of future minimum lease payments to be received under finance leases as of March 31,
2002 and 2001 are as follows:
Millions of yen
2002
2001

Current portion .............................................................................................................................. ¥196
Non-current portion....................................................................................................................... 497
Total................................................................................................................................. ¥693

¥202
471
¥673

Thousands of
U.S. dollars
2002$1,471
3,730$5,20141

Lease payments received, depreciation and amortization and interest on finance leases are as follows:
Millions of yen
2002
2001
2000

Lease payments received .............................................................................................. ¥251
Depreciation and amortization ..................................................................................... 208
Interest .............................................................................................................................
35

15. Operating leases

¥223
181
37

¥218
147
38

Current portion .............................................................................................................................. ¥ 51
Non-current portion....................................................................................................................... 142
Total......................................................................................................................................... ¥193

¥ 48
131
¥179

Thousands of
U.S. dollars
2002

$ 383
1,066
$1,449Industry segments of the Company and its consolidated subsidiaries in prior years were classified into
Transportation Equipment, Aerospace, Industrial Equipment, Consumer Products and Other.
In April 2001, the Company introduced an internal company system and created six in-house companies: theShipbuilding, Rolling Stock, Aerospace, Gas Turbines & Machinery, Plant & Infrastructure Engineering, andConsumer Products & Machinery companies.
Effective the year ended March 31, 2002, industry segments of the Company and its consolidated subsidiaries
are classified based on its internal company system: 1) Shipbuilding, 2) Rolling Stock, Construction Machinery &Crushing Plant, 3) Aerospace, 4) Gas Turbines & Machinery, 5) Plant & Infrastructure Engineering, 6) Consumer
Products & Machinery, and 7) Other. Previously reported data have been restated accordingly.
The 1) Shipbuilding segment manufactures and sells ships, submarines and maritime application equipment.
Operations within the 2) Rolling Stock, Construction Machinery & Crushing Plant segment include the production and sale of rolling stock, construction machines and crushing plant. Products manufactured and sold by the3) Aerospace segment include airplanes and helicopters. The 4) Gas Turbines & Machinery segment manufactures and sells gas turbines, airplane engines, prime movers and hydraulic components. Operations within the5) Plant & Infrastructure Engineering segment include the production and sale of boilers, chemical and steelmaking plants, refuse incineration plants and steel bridges. Products manufactured and sold by the 6) Consumer
Products & Machinery segment include motorcycles, ATVs (All-Terrain Vehicles) and Jet Ski® watercraft.
Operations within the 7) Other segment include the production and sale of hospital respiration & medical
equipment. The operations involve trade, mediation of overseas sales and orders and other activities.
(a) Information by industry segment

External
sales

42$1,884
1,561
263

The present values of future minimum lease payments under operating leases as of March 31, 2002 and 2001 are
as follows:
Millions of yen
2002
2001

16. Segment
information

Thousands of
U.S. dollars
2002

Shipbuilding .......................................... ¥ 92,478
Rolling Stock, Construction
Machinery & Crushing Plant .............
121,780
Aerospace..............................................
161,072
Gas Turbines & Machinery .................
171,586
Plant & Infrastructure Engineering ....
220,605
Consumer Products & Machinery......
281,207
Other ......................................................
95,806
Total ................................................... 1,144,534
Eliminations ..........................................
—
Consolidated total............................ ¥1,144,534

Intersegment
sales

Millions of yen
2002
OperatingOperatingexpenses
income (loss)

Total
sales

¥ 1,289¥

93,767

3,756
2,021
28,072
14,7683,590
39,96393,459(93,459)¥—

125,536
163,093
199,658
235,373284,797
135,769
1,237,993(93,459)¥1,144,534

¥

Total
assetsDepreciation
and amortization

Capitalexpenditures

88,212¥ 5,555¥

88,688¥ 1,941¥ 1,462

125,071
149,229
194,218
236,010279,615
134,081
1,206,436(93,213)¥1,113,223

465
13,864
5,440
(637)
5,182
1,688
31,557(246)¥31,311

141,332
150,934
170,755
237,688
267,797
120,146
1,177,340
77,735¥1,255,075

2,898
3,425
4,255
2,665
11,553
2,873
29,6102,388¥31,998

6,925
2,571
4,598
815
12,874
2,593
31,8381,294¥33,132External
sales

Shipbuilding ..........................................
Rolling Stock, Construction
Machinery & Crushing Plant .............
Aerospace..............................................
Gas Turbines & Machinery .................
Plant & Infrastructure Engineering ....
Consumer Products & Machinery......
Other ......................................................
Total ...................................................
Eliminations ..........................................
Consolidated total............................

¥

Total
sales

78,734¥ 1,104¥

129,591
136,343
152,307
181,174
275,903
106,427
1,060,479—¥1,060,479

1,975
2,602
26,711
26,9103,374
35,047
97,723(97,723)¥—

131,566
138,945
179,018
208,084
279,277
141,474
1,158,202(97,723)¥1,060,479

External
sales

Shipbuilding ..........................................
Rolling Stock, Construction
Machinery & Crushing Plant .............
Aerospace..............................................
Gas Turbines & Machinery .................
Plant & Infrastructure Engineering ....
Consumer Products & Machinery......
Other ......................................................
Total ...................................................
Eliminations ..........................................
Consolidated total............................

Intersegment
sales

¥

Millions of yen
2001
OperatingOperatingexpenses
income (loss)

Intersegment
sales

79,838¥Total
assetsDepreciation
and amortization

Capitalexpenditures

81,569¥ (1,731)¥

98,536¥ 2,079¥ 1,211

131,303130,832
174,733
222,730
272,799
140,039
1,154,005(97,986)¥1,056,019

263
8,113
4,285
(14,646)
6,478
1,435
4,197
263
¥ 4,460

143,054
145,769
170,220238,275
259,885
122,808
1,178,547
68,925¥1,247,472

3,200
3,627
4,478
3,631
11,3052,854
31,1742,129¥33,303

3,137
3,015
4,528
1,429
14,1101,806
29,236
3,451¥32,687

Total
assetsDepreciation
and amortization

Capitalexpenditures

Total
sales

Millions of yen
2000
OperatingOperatingexpenses
income (loss)

91,891¥ 1,270¥

93,161¥ 100,850¥ (7,689)¥

87,008¥ 2,248¥ 1,711

121,463
172,322
153,681245,642
277,176
87,523
1,149,698—¥1,149,698

2,790
808
33,331
13,925
1,985
44,07398,182(98,182)¥—

124,253
173,130
187,012259,567
279,161
131,596
1,247,880(98,182)¥1,149,698

125,096
163,200
183,503
274,973
269,322
129,7211,246,665(98,218)¥1,148,447

(843)
9,930
3,509
(15,406)
9,839
1,875
1,215
36
¥ 1,251

129,515
153,097
163,981
246,695
224,915
196,255
1,201,466
5,340¥1,206,806

3,302
3,591
4,396
4,401
11,095
6,261
35,294(213)¥35,081

3,504
4,473
6,116
1,751
16,485
5,661
39,701(16)¥39,685

Total
assetsDepreciation
and amortization

Capitalexpenditures

External
sales

Shipbuilding .......................................... $ 694,019
Rolling Stock, Construction
Machinery & Crushing Plant .............
913,921
Aerospace.............................................. 1,208,795
Gas Turbines & Machinery ................. 1,287,700
Plant & Infrastructure Engineering .... 1,655,573
Consumer Products & Machinery...... 2,110,371
Other ......................................................
718,994
Total ................................................... 8,589,373
Eliminations ..........................................
—
Consolidated total............................ $8,589,373

Intersegment
sales

$

Total
sales

Thousands of U.S. dollars
2002
OperatingOperatingexpenses
income (loss)

9,674$ 703,693$ 662,004$ 41,689$ 665,576$ 14,567$ 10,972

28,18815,167
210,672
110,829
26,942299,910
701,382(701,382)$—

942,109
1,223,962
1,498,372
1,766,402
2,137,313
1,018,904
9,290,755(701,382)$8,589,373

938,619
1,119,917
1,457,546
1,771,182
2,098,424
1,006,236
9,053,928(699,534)$8,354,394

3,490
104,045
40,826(4,780)38,88912,668236,827(1,848)$234,979

1,060,653
1,132,713
1,281,463
1,783,775
2,009,734
901,659
8,835,573
583,377$9,418,950

21,74925,70331,93220,00086,702
21,561
222,214
17,921$240,135

51,97019,29434,507
6,116
96,615
19,460238,934
9,711$248,645(b) Information by geographic area
Segment information by geographic area, as required to be disclosed in Japan, for the respective years
is as follows:

External
sales

Japan..................................................... ¥ 868,759
North America .....................................
204,510Europe ..................................................
47,101
Asia .......................................................
20,495
Other areas ..........................................
3,669
Total.................................................. 1,144,534
Eliminations and corporate ...............
—
Consolidated total .......................... ¥1,444,534

Intersegment
sales

Millions of yen
2002
Total
Operatingsales
expenses

Operatingincome (loss)

Total
assets¥186,659
12,933
3,849
10,106133
213,680(213,680)¥—¥1,055,418 ¥1,024,035
217,443
212,346
50,95054,29030,601
29,9373,802
3,735
1,358,214
1,324,343(213,680)(211,120)¥1,144,534 ¥1,113,223¥31,383
5,097(3,340)664
67
33,871(2,560)¥31,311¥1,012,986
148,41238,57021,064
1,966
1,222,998
32,077¥1,255,075

43

Japan.....................................................
North America .....................................
Europe ..................................................
Asia .......................................................
Other areas ..........................................
Total..................................................
Eliminations and corporate ...............
Consolidated total ..........................

Japan.....................................................
North America .....................................
Europe ..................................................
Asia .......................................................
Other areas ..........................................
Total..................................................
Eliminations and corporate ...............
Consolidated total ..........................

External
sales

Intersegment
sales¥ 824,213
176,071
38,573
17,791
3,831
1,060,479—¥1,060,479¥171,516
9,076
3,232
5,323
165
189,312(189,312)¥—

External
sales

Intersegment
sales¥ 929,110
160,436
39,554
16,321
4,277
1,149,698—¥1,149,698¥148,766
11,288
4,515
4,009
128
168,706(168,706)¥—

External
sales

Millions of yen
2001
Total
Operatingsales
expenses¥ 995,729
185,147
41,805
23,114
3,996
1,249,791(189,312)¥1,060,479

Millions of yen
2000
Total
Operatingsales
expenses¥1,077,876
171,724
44,06920,3304,405
1,318,404(168,706)¥1,149,698¥1,082,344
167,977
43,231
21,927
4,318
1,319,797(171,350)¥1,148,447

Thousands of U.S. dollars
2002
Total
Operatingsales
expenses

Intersegment
sales

Japan..................................................... $6,519,767
North America ..................................... 1,534,784
Europe ..................................................
353,478
Asia .......................................................
153,809
Other areas ..........................................
27,535
Total.................................................. 8,589,373
Eliminations and corporate ..............
—
Consolidated total .......................... $8,589,373¥ 992,563
181,893
42,722
23,076
3,907
1,244,161(188,142)¥1,056,019$1,400,818 $ 7,920,585 $7,685,065
97,058
1,631,842
1,593,591
28,886382,364
407,430
75,842
229,651
224,668
998
28,53328,0301,603,602
10,192,975
9,938,784(1,603,602)(1,603,602) (1,584,390)$— $ 8,589,373 $8,354,394

Operatingincome (loss)

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

Operatingincome (loss)

Total
assets¥(4,468)
3,747
838(1,597)87(1,393)
2,644¥ 1,251¥1,046,115
105,322
24,496
16,675
1,894
1,194,502
12,304¥1,206,806

Operatingincome (loss)

Total
assets$235,520
38,251(25,066)
4,983
503
254,191(19,212)$234,979$7,602,146
1,113,786
289,456
158,079
14,7549,178,221
240,729$9,418,950(c) Corporate assets
Included in eliminations and corporate in (a) and (b) above under total assets are corporate assets of ¥155,580
million ($1,167,579 thousand), ¥80,928 million and ¥106,738 million at March 31, 2002, 2001 and 2000, respectively, which are mainly comprised of cash and time deposits of the Company and property, plant, equipment andintangible 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 ofJapan. Overseas sales information, as required to be disclosed in Japan, for the respective years is as follows:
Millionsof yen%Millionsof yenOverseassales% against
net sales

North America................................. ¥272,066
Europe ..............................................
62,139Asia ...................................................
95,832Other areas ......................................
65,988
Total ............................................. ¥496,025

23.8%
5.4%
8.4%
5.7%
43.3%

2002

44

%

Millionsof yenOverseassales% against
net sales¥233,976
62,81576,80958,759¥432,359

22.1%
5.9%
7.2%
5.5%
40.7%

2001

%

Thousands of
U.S. dollars
2002

Overseassales% against
net sales

Overseassales¥221,272
93,98475,05871,191¥461,505

19.2%
8.2%
6.5%
6.2%
40.1%

$2,041,771
466,334
719,189495,220$3,722,514

2000

Report of Independent Public Accountants

To the Shareholders and the Board of Directors of Kawasaki Heavy Industries, Ltd.:We have audited the accompanying consolidated balance sheets of Kawasaki Heavy Industries, Ltd. (a Japanese corporation) and subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of operations, shareholders’ equity and cash flows for eachof the three years in the period ended March 31, 2002, expressed in Japanese yen. Our audits were made in accordance with generally
accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Kawasaki Heavy
Industries, Ltd. and subsidiaries as of March 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for eachof the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in Japan (Note 1) which,except for the change in the method of segmentation referred to in Note 16, effective for the year ended March 31, 2002, and except for thechange in the method of accounting for revenue referred in Note 2 ( p), effective for the year ended March 31, 2001, with which we concur,
were applied on a consistent basis.
As explained in Notes 2.(e), (l), (s), in the year ended March 31, 2001, Kawasaki Heavy Industries, Ltd. and subsidiaries prospectively adopted new Japanese accounting standards for foreign currency translation, financial instruments and retirement and severance benefits.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated from Japanese yenon the basis set forth in Note 1.

Asahi & Co.
Kobe, Japan
June 27, 200245

Directors, Corporate Auditors, and Executive Officers

President and CEO Masamoto Tazaki, Executive Vice President Yoshiro Inoue, Executive Vice President Tadashi Nishimura46

DIRECTORS AND CORPORATE AUDITORSEXECUTIVE OFFICERSDIRECTORS
President and CEO

CORPORATE AUDITORS

Senior Executive Officers

Tsunemitsu Nishio

Shiroh Ikeda

Masamoto Tazaki*

Yoshitsugu Wada

Masakazu Sato

Mitsugi Maeda

Executive Vice Presidents
Yoshiro Inoue*
Overall administration of planningand control
Tadashi Nishimura*
Overall administration of marketingand sales

Hiroshi Kawamoto

Executive Officers
Toshio Atsuta
Yousuke Fujii
Isao Shindo
Yoshimitsu Kurosaki
Shoji Aoki

Managing Directors
Takashi Sugoh*
President
Aerospace Company

Akiji Nakamura
Takashi Yoshino
Akira Matsuzaki
Tadaharu Ohashi

Takehiko Saeki*
President
Rolling Stock, Construction Machinery& Crushing Plant Company

Chikashi Motoyama
Nobuichi Kozai
Shigeru Hamada

Takuya Maeda*
President
Plant & Infrastructure Engineering
Company

Shuji Mihara
Chikahiro Ono
Mitsuaki Ikeda

Shuichi Tadokoro*
President
Shipbuilding Company
Kengo Yamashita*
President
Gas Turbines & Machinery Company

Masatoshi Tsurutani
Jiro Noguchi
Masaru Tomiie
Norio Tanaka
Tomokazu Taniguchi

Shinichi Morita*
President
Consumer Products & Machinery
Company
47

Mikihiko Nakayama
General Manager
Corporate Technology Division
Masatoshi Terasaki
Senior Manager
Corporate Planning Department(As of June 27, 2002)* Representative Director

Major Consolidated Subsidiaries and Affiliates

Name

Location

Paid-in Capital

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

Principal Businesses

SHIPBUILDING
Nangtong Cosco KHI Ship Engineering Co., Ltd.†

China

US$80,000*

50.00

140

100.00

Manufacture and sale of ships

ROLLING STOCK, CONSTRUCTION MACHINERY & CRUSHING PLANT
Kawasaki Rolling Stock Engineering Co., Ltd.

Japan

Manufacture and repair of parts and components
for rolling stock; design of rolling stock

Kawasaki Industrial Co., Ltd.

Japan

125

98.71

Construction of arcades; manufacture andinspection of high-pressure containers; maintenance and repair of rolling stock

Kawasaki Rail Car, Inc.

U.S.A.

US$60,600*

100.00(owned by KMM)

Kawasaki Machine Systems, Ltd.

Japan

343

100.00★❊Nichijo Manufacturing Co., Ltd.

Engineering, manufacture, sale, and after-sales
service of rolling stock in the United States
Sale and repair of construction machinery,gas turbine generators, and industrial robots

Japan

120

50.04

Manufacture and sale of snow removal
equipment

Kawasaki Construction Machinery Corp.

U.S.A.

US$8,000*of America

100.00(owned by KMC)

Manufacture and sale of construction
machinery in the United States

AEROSPACE
Kawasaki Helicopter System Ltd.

Japan

200

100.00Transportation of passengers or cargo by helicopter; maintenance and repair of helicoptersand flight training services; research, design,and construction of heliports

Advanced Technology Institute

Japan

8,697

19.43

of Commuter-Helicopter Ltd.†NIPPI Corporation†

Research and development of basic
technology for commuter helicopters

Japan

6,048

25.70

Japan

1,460

83.06

Manufacture and sale of aircraft parts

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

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

Kawasaki Precision Machinery (U.K.) Limited

U.K.

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

China

1,100

55.00

Manufacture and sale of hydraulic products
Manufacture, sale, and after-sales serviceof Kawasaki-brand azimuth thrusters, sidethrusters, and other machinery

PLANT & INFRASTRUCTURE ENGINEERING
Kawasaki Construction Co., Ltd.

Japan

350

100.00Japan Gas Turbine K.K.†

Japan

1,500

40.00

Installation of steel structures
Sale, assembly, site engineering support, repair,testing, pilot operation, installation, and arrangement of power generation equipment as well as
related service-based businesses

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

48

China

US$14,900*

40.00

Manufacture and sale of steel structures

Name

Location

Paid-in Capital

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

Principal Businesses

CONSUMER PRODUCTS & MACHINERY
Kawasaki Motors Corporation Japan

Japan

560

100.00Distribution of motorcycles and Jet Ski® watercraft in Japan

Kawasaki Metal Industries, Ltd.

Japan

350

100.00

Manufacture, processing, and assembly of various
steel products

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

U.S.A.

US$70,000*

100.00●

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

Kawasaki Motors Finance Corporation

U.S.A.

US$10,000*

100.00(owned by KMC)

KM Receivables Corporation

U.S.A.

US$100100.00(owned by KMFC)

Canadian Kawasaki Motors Inc.

Canada

C$2,000*

100.00Inventory financing for dealers of Kawasaki
Motors Corp., U.S.A.
Management of account receivables of Kawasaki
Motors Finance Corporation
Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in Canada

Kawasaki Motors Europe N.V.

Netherlands

A14,093*

100.00Sole distribution of motorcycles, ATVs, Jet Ski®
watercraft, and small gasoline engines in Europe

Kawasaki Motors (U.K.) Ltd.

U.K.

£2,000*100.00(owned by KMEU)

Kawasaki Motoren G.m.b.H.

Germany

A6,288*100.00(owned by KMEU)

Kawasaki Motors France S.A.

FranceA1,247*100.00(owned by KMEU)

Kawasaki Motors Italy S.p.A.

Italy

A2,064*100.00(owned by KMEU)

Kawasaki Motors Pty. Ltd.

Australia

A$2,000*

100.00Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in the United Kingdom
Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in Germany
Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in France
Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in Italy
Distribution of motorcycles, ATVs, and Jet Ski®
watercraft in Australia

P.T. Kawasaki Motor Indonesia

Indonesia

US$10,000*

51.00

Manufacture and distribution of motorcycles
in Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

P101,430*

50.001

Manufacture and distribution of motorcycles

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

B1,900,000*

92.63

Manufacture and distribution of motorcycles

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

U.S.A.

US$1,000*

100.00in the Philippinesin Thailand(owned by KMC)

Kawasaki Robotics (UK) Ltd.

U.K.

£917*

100.00(owned by KMEU)

Kawasaki Machine Systems Korea, Ltd.

Korea

W1,500**100.00

Sale and after-sales service of industrial robots
in the United States
Sale and after-sales service of industrial robots
in the U.K. and Ireland
Sale and after-sales service of industrial robots
and robot systems

49

Name

Location

Paid-in Capital

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

Principal Businesses

OTHER
Kawasaki Safety Service Industries, Ltd.

Japan

1,708

72.02

Manufacture, sale, and installation of hospital
respiration, fire-extinguishing, and medical
equipment

Kawasaki Hydromechanics Corporation

Japan

436

100.00

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

Kawasaki Setsubi Kogyo Co., Ltd.†

Japan

1,581

33.62

Design and installation of air-conditioning,heating/cooling, water supply/disposal, andsanitary facilities

Kawaju Shoji Co., Ltd.

Japan

600

70.00

Trading

Kawaju Real Estate Co., Ltd.

Japan

320

100.00Administration of Company welfare facilities;

Kawasaki Kosan Co., Ltd.

Japan

300

100.00real estate sales, leasing, and construction
Insurance representation, real estate leasing,administration and maintenance, leasing, andprovision of loans
Kawasaki Foods Co., Ltd.

Japan

160

100.00Food supply to Company facilities, operationof dining facilities

Kawaju Tomakomai Kanko Kaihatsu Co., Ltd.

Japan

300

100.00Uji Kanko Co., Ltd.

Japan

240

100.00Management of a golf course
Management of a golf course

Kawasaki do Brasil Indústria e Comércio Ltda.

Brazil

R1,136*100.00

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

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

U.S.A.

US$600*100.00

Product sales, mediation of orders, and provisionof various engineering support services in North
America

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, andAfrica; provision of order intermediation services(As of March 31, 2002)* Monetary unit in thousands** Monetary unit in millions†
Affiliate accounted for using equity method
KMM: Kawasaki Motors Manufacturing Corp., U.S.A.
KMC: Kawasaki Motors Corp., U.S.A.
KMFC: Kawasaki Motors Finance Corporation
KMEU: Kawasaki Motors Europe N.V.
Partially included in:● Rolling Stock, Construction Machinery & Crushing Plant★ Gas Turbines & Machinery❊ Consumer Products & Machinery50

Network(As of August 1, 2002)

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

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

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

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

Houston Branch
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.
28059 Center Oaks Court,
Wixom, MI 48393, U.S.A.
Phone: 1-248-305-7610
Fax: 1-248-305-7618

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

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

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

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

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

Jakarta Office
14th Floor, Skyline Bldg.,
Jl. M.H. Thamrin 9,
Jakarta 10340, Indonesia
Phone: 62-21-314-0737
Fax: 62-21-314-1049

Grand Rapids Office

Kawasaki do Brasil Indústria e Comércio Ltda.
Avenida Paulista, 542-6 Andar,
Bela Vista, 01310-000, São Paulo, S.P., Brazil
Phone: 55-11-289-2388
Fax: 55-11-289-2788

Kawasaki Aeronáutica do Brasil
Indústria Ltda.
Estrada Municipal de São Roque, km 05,
Prédio n° 8.000, Município Gavião Peixoto,São Paulo, Brazil
Phone: 55-11-289-2388
Fax: 55-11-289-2788

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

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

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

Kawasaki Heavy Industries G.m.b.H.

5080 36th Street S.E.,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-954-3031

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

Green River Insurance Company

Kawasaki Gas Turbine Europe G.m.b.H.

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

Max-Planck-Strasse 21A,
61381 Friedrichsdorf, Germany
Phone: 49-6172-7363-0
Fax: 49-6172-736355

Kawasaki Motors Finance Corporation

Kawasaki Robotics G.m.b.H.

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

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

Kawasaki Heavy Industries (Europe) B.V.

KM Receivables Corporation

7th Floor, Riverstaete,
Amsteldijk 166,
1079 LH Amsterdam,
The Netherlands
Phone: 31-20-6446869
Fax: 31-20-6425725

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

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

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

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

Canadian Kawasaki Motors Inc.
25 Lesmill Road, Don Mills,
Toronto, ON M3B 2T3, Canada
Phone: 1-416-445-7775
Fax: 1-416-445-0391

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

Kawasaki Motors Europe N.V.
Diamantlaan 14,2132 WV Hoofddorp,
The Netherlands
Phone: 31-2356-70500
Fax: 31-2356-39884

Kawasaki Motors Europe N.V.
U.K. Branch
1 Dukes Meadow,
Millboard Road, Bourne End,
Buckinghamshire SL8 5XF, U.K.
Phone: 44-1628-856600
Fax: 44-1628-856799

Kawasaki Motors Europe N.V.
Niederlassung Deutschland
Max-Planck-Strasse 26,
61381 Friedrichsdorf, Germany
Phone: 49-6172-7340
Fax: 49-6172-734160

51

Kawasaki Motors Europe N.V.
Succursale Française
Parc d’Activites de la Clef de Saint Pierre,
Point de l’Epine des Champs Bat 1,
78990 Elancourt Cedex, France
Phone: 33-1-30-69-0000
Fax: 33-1-30-69-5001

Kawasaki Motors Europe N.V.
Filiale Italiana
Via Anna Kuliscioff,
35-20152 Milano, Italy
Phone: 39-02-41-2821
Fax: 39-02-48-37-0616

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

KHI (Dalian) Computer Technology Co., Ltd.
Building Foreign Specialist of
the Dalian Maritime University,
Ling Shui Qiao, Dalian,
People’s Republic of China
Phone: 86-411-472-7507
Fax: 86-411-472-7459

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

Kawasaki Heavy Industries (H.K.) Ltd.
Rooms 4211–16, Sun Hong Kai Centre,
30 Harbour Road, Wanchai, Hong Kong
Phone: 852-2522-3560
Fax: 852-2845-2905

Kawasaki Motors Enterprise (Thailand) Co., Ltd.
119/10 Moo 4 Tambon Pluak Daeng,
Amphur Pluak Daeng, Rayong 21140, Thailand
Phone: 66-38-955-040~58
Fax: 66-38-955-059

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

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

Kawasaki Heavy Industries (Singapore) Pte. Ltd.
6 Battery Road, #18-04,
Singapore 049909
Phone: 65-62255133~4
Fax: 65-62249029

P.T. Kawasaki Motor Indonesia

52

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

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

Tiesse Robot S.p.A.

DOMESTIC WORKS

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

Noda Works

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

Nantong Cosco KHI Ship Engineering Co., Ltd.
117, Linjiang Road, Nantong City,
Jiangsu Province, People’s Republic of China
Phone: 86-513-350-0666
Fax: 86-513-351-4349

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

Glory Kawasaki Motors Co., Ltd.
221/1 Rama IX Road, Huay Kwang,
Bangkok 10320, Thailand
Phone: 66-2-643-0813
Fax: 66-2-247-7924

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

Kawasaki Motors Holding (Malaysia) Sdn. Bhd.
Lots 6 & 8, Jalan Segambutpusat,
Segambut, 51200,
Kuala Lumpur, Malaysia
Phone: 60-3-6251-2591
Fax: 60-3-6251-2688

Kawasaki Motors Service Co., Ltd.
129 Rama IX Road, Kwaeng Huaykwang,
Khet Huaykwang, Bangkok 10320, Thailand
Phone: 66-2-246-1510

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

118, Futatsuzuka, Noda,
Chiba 278-8585, Japan
Phone: 81-4-7124-1121
Fax: 81-4-7124-7645

Yachiyo Works
1780 Kamikoya, Yachiyo,
Chiba 276-0022, Japan
Phone: 81-47-483-1111
Fax: 81-47-482-3227

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

Nagoya Works 1
3-11, Oaza Kusunoki, Yatomi-cho,Ama-gun, 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: 81-5675-5-0800
Fax: 81-5675-5-0803

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

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

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

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

Akashi Works
1-1, Kawasaki-cho, Akashi,
Hyogo 673-8666, Japan
Phone: 81-78-921-1301
Fax: 81-78-913-1366

Banshu Works
2680, Oka, Inami-cho,Kako-gun, Hyogo 675-1113, Japan
Phone: 81-794-95-1211
Fax: 81-794-95-1226

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

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

Kawasaki Corporate Data
(As of March 31, 2002)

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

Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, Japan
Handling Office:
The Chuo Mitsui Trust and Banking Company, Limited
Osaka Branch Office
2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan
Independent Auditors:
Asahi & Co.
Kobe Crystal Tower, 1-3,
Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, Japan

Paid-in Capital: ¥81,426,590,792
Number of Shares Outstanding: 1,390,595,964 shares
Number of Shareholders: 128,560

ADR Facility:
KHI has a sponsored American Depository Receipt (ADR) facility.
ADRs are traded in the over-the-counter (OTC) market in the UnitedStates under CUSIP number 486 359 20 1 with each ADR representing
four ordinary shares.

Number of Employees: 28,936
Stock Exchange Listings:
Tokyo, Osaka, Nagoya, Fukuoka, Sapporo
Newspapers in Which Public Notices Are Made:
The Nihon Keizai Shimbun
The Kobe Shimbun

ADR Depository:
The Bank of New York
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-212-815-2042
U.S. Toll Free: 888-269-2377(888-BNY-ADRS)
http://www.bankofny.com/adr
KHI Web Site at: http://www.khi.co.jp

53

This annual report is printed on recycled paper.

Printed in Japan
ISSN 0287 - 1793