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Kawasaki, working as one
for the good of the planet

Transportation
Systems

Boeing 787 Dreamliner

Trent 1000(©Rolls-Royce plc 2011)

Civil Aero Engines

Commercial Aircraft
Ninja 250R

Merchant Vessels(Business in China)

Overseas
High-Speed Trains Motorcycles for*Expansion of the joint venture

Nantong COSCO KHI
Ship Engineering Co., Ltd. (NACKS)

efSET® (Environmentally Friendly Super Express Train)

Emerging Countries

Robots for
Semiconductor Production and
New Business Fields
Factory Automationand Mechatronics(Automated cell culture system, etc.)
Automated cell culture system(Auto Culture® )Electro-HydraulicHybrid Systems
KAWASAKI ECO SERVO

Industrial
Equipment
High-speed picking robot
YF03N

NT420

The Kawasaki Heavy Industries, Ltd. (KHI) Group provides products and services suited to the diverse needs of people
around the world through advanced technological capabilities in three principal business sectors: Land, Sea, and Air
Transportation Systems; Energy & Environmental Engineering; and Industrial Equipment. Through such expertise, theKHI Group will pursue greater competitiveness in existing businesses, nurture new products and new businesses, andenter new markets.

Gas turbine co-generation system for
RIKEN Kobe Institute (PUC60x2)

Kawasaki Green Gas Engine

Woody biomass gasification combined heat andpower system

Industrial Gas Turbines
Gas Engines
Integrated Solar Combined Cycle power
generation systems (ISCC)

20MW-class
Gas Turbine “L20A”

Energy & Environmental
Engineering
Aerodynamics

Gas Compression Module

New
Energy-Related
Businesses

Bioethanol production facilities
Waste processing facilities for use at
cement kilns (CKK System)

High-Capacity,
Fully Sealed Ni-MH Batteries

Gigacell®

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

Contents
Consolidated Financial Highlights..............................................................................
An Interview with Satoshi Hasegawa, President ..................................................

3
4

Review of Operations:
The KHI Group at a Glance......................................................................................... 10
Ship & Offshore Structure ......................................................................................... 12
Rolling Stock ................................................................................................................... 14
Aerospace ........................................................................................................................ 16
Gas Turbine & Machinery........................................................................................... 18
Plant & Infrastructure .................................................................................................. 20
Motorcycle & Engine ................................................................................................... 22
Precision Machinery...................................................................................................... 24
Corporate Governance .................................................................................................. 26
Directors, Corporate Auditors, and Executive Officers ..................................... 30
Corporate Social Responsibility .................................................................................. 32
Financial Section:
Six-Year Summary ......................................................................................................... 37
Management’s Discussion & Analysis.................................................................... 38
Consolidated Balance Sheets. ................................................................................... 42
Consolidated Statements of Operations and Comprehensive Income..... 44
Consolidated Statements of Changes in Net Assets........................................ 45
Consolidated Statements of Cash Flows .............................................................. 46
Notes to the Consolidated Financial Statements............................................... 48
Independent Auditors’ Report ................................................................................. 85
Major Consolidated Subsidiaries and Affiliates..................................................... 86
Network............................................................................................................................... 89
Corporate Data ................................................................................................................. 91

Forward-Looking Statements
Figures recorded in the business forecasts are forecasts that reflect the judgment of the Company based on the information available at thetime of release and include risks and uncertainties. Accordingly, the Company cautions investors not to make investment decisions solely on thebasis of these forecasts.
Actual business results may differ materially from these business forecasts due to various important factors resulting from changes in theexternal environment and internal environment. Important factors that may affect actual business results include, but are not limited to,
economic conditions, the yen exchange rate against the U.S. dollar and other currencies, the tax system, and laws and regulations.

2Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31
Thousands of
U.S. dollars

Millions of yen

2011

2010

2009

2011

¥1,226,949¥1,173,473¥1,338,597$14,755,850

Operating income (loss)

42,628(1,316)28,713512,663

Net income (loss)

25,965(10,860)

11,728312,266

Net cash provided by (used for) operating activities

81,92930,178(41,257)

985,315

Capital expenditures

55,33459,27282,450665,472

Earnings per share—basic¥15.5¥(6.5)

¥7.0

$0.18

Earnings per share—diluted

15.3

–

6.9

0.18

Cash dividends

3.0

3.0

3.0

0.03

¥1,354,278¥1,352,439¥1,399,771$16,287,167

297,433

283,053295,246

3,577,065

Orders received during the fiscal year

¥1,270,652¥1,001,290¥1,540,590$15,281,443

Order backlog at fiscal year-end

1,495,349

1,507,057

1,699,163

17,983,752

For the year:
Net sales

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

At year-end:
Total assets
Total net assets
Orders received and outstanding:Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥83.15 to US$1, the approximate rate of exchange at
March 31, 2011.

Net Income (Loss)

Total Net Assets(Billions of yen)

350

40

10

11

1,400

1,000

1,000

07

08

09

10

11

0

07

08

09

10

11

07

08

10

11

200

200
0

600

1,699.2

1,270.6

1,610.8

1,540.6

1,001.2-10.8

50

1,592.7

297.4

600

100

1,495.309

1,400

1,507.008

1,800

1,533.7

07

-20

1,800

1,465.2

0

150

0
-10

200

283.0

25.9

29.8

11.7

1,226.9

1,173.4

1,501.1

1,338.6

1,438.6500

10(Billions of yen)

250

20

35.1

1,000

Order Backlog(Billions of yen)

300

30

295.2

1,500

Orders Received(Billions of yen)

319.0(Billions of yen)

295.4

Net Sales

07

08

09

10

11

0

09

3

An Interview with Satoshi Hasegawa, President

Fiscal 2011, ended March 31, 2011,
marked tremendous improvementin the KHI Group’s business results.
Moving forward, we will continuallystrengthen policies and measures
to "return to a growth path" and"strengthen the businessfoundation for future growth" andto realize "Kawasaki Business
Vision 2020".
In this interview, Satoshi Hasegawa, president of
Kawasaki Heavy Industries, Ltd. (KHI), provides an
overview of fiscal 2011 business results and discusses
the business execution strategies for fiscal 2012, themiddle year of Medium-term Business Plan 2010
(FY2011–2013), MTBP2010, and efforts to achieve"Kawasaki Business Vision 2020".

Q1

First of all, what was the operating
environment like for the KHI Group in fiscal
2011 and how did the Group perform?

The KHI Group achieved higher profit thanA1 initiallyforecast in an operating environment
characterized by persistent uncertainty.
In fiscal 2011, robust growth in emerging countries, suchas China, India, and Brazil, drove the global economy
forward. Developed countries, such as the United States
and those in Europe, also fared well, sustaining gradual
recovery. In Japan, as well, signs of improved exports
and consumer spending indicated that the country was
breaking free from the recession’s hold. But on March 11,
2011, the Great East Japan Earthquake struck, plunging
Japan back into an uncertain economic direction. Whilehigh global economic growth will support the domestic

4

economy overall, the disaster’s impact on supply is aconcern for the short term although restoration demandin the area of devastation will become more noticeable.
In this operating environment, the value of orders
won by the KHI Group in fiscal 2011 on a consolidated
basis rebounded ¥269.3 billion from fiscal 2010 to¥1,270.6 billion, and net sales rose ¥53.4 billion to¥1,226.9 billion. On the profit front, the KHI Group
recorded operating income, bouncing back from an
operating loss in fiscal 2010, with an increase of ¥43.9
billion over the previous fiscal year, to ¥42.6 billion.
Recurring profit* soared ¥34.8 billion to ¥49.1 billion.
The KHI Group returned to a net income position,
posting a ¥36.8 billion turnaround from the previous
fiscal year, to ¥25.9 billion. Although the KHI Group did
not reach its net sales target of ¥1,280.0 billion, as statedBusiness Vision
Kawasaki, working as one for the good of the planet(Enriching lifestyles and helping safeguard the environment: Global Kawasaki)

A company that provides products and services suited to the diverse needs of people around the world through advanced technological capabilities in three principal business sectors: Land, Sea, and Air Transportation Systems, Energy & Environmental Engineering, and Industrial Equipment
Transportation Systems

Energy & Environmental Engineering

Industrial Equipment

Shipbuilding, rolling stock, aircraft, aircraft
engine, ship machinery, motorcycle, etc.

Gigacells, industrial gas turbines, gas engines,
steam turbines, compressors, energy andenvironmental plant engineering, etc.

Industrial plants, tunneling equipment,
hydraulic equipment, robots, construction
machinery, crushers, etc.

Improvement of the global
environment

Reinforcement of the earnings
structure

A company that creates products thatincorporate the ultimate in low
environmental impact technologies
in each business sector

A company that establishes anearnings structure that makes
possible sustainable growthinvestment and provides stableshareholder returns

Quantitative Vision (FY2021)

Ratio of recurring profit to sales

5.0% or higher

A company trusted wherever it does
business around the world

A company that upgrades plants inJapan and actively pursues businessdevelopment overseas

Workplace environment development
A company whose employees havehopes and dreams and work withvigor and enthusiasm

Summary of Financial Results
FY2010FY2011

Change1,001.2

1,270.6

269.3

Net sales

1,173.4

1,226.9

53.4

-1.3

42.6

43.9

-0.1%

3.4%

3.5%

14.2

49.1

34.8

1.2%

4.0%

2.8%

Operating income/loss
Ratio to sales
Recurring profit
Ratio to sales

in MTBP2010, drafted last year, it surpassed the ¥32.0 billion
level set for both operating income and recurring profit.
*Recurring profit is used in accounting standards generally accepted in Japan.
It is the sum of operating income, net interest income (expenses), dividend
income, and other non-operating and recurring income items.

The massive earthquake and tsunami had a limited
impact on the Group’s activities and performance. Key
operations are concentrated in Western Japan, so except
for losses at offices and service points in the Tohoku
region in Northeastern Japan, the KHI Group’s production
facilities, including factories, escaped major damage. Froma performance perspective, the KHI Group's fiscal 2011
profits were only slightly affected. Some sales were pushed
back to fiscal 2012, and the Motorcycle & Engine segment
had to halt production somewhat because of supply chain
disruptions in Japan, but that situation no longer exists.

(Billions of yen)Orders received

Consolidated net sales¥2 trillion

Emphasis on CSR

Global business development
and emphasis on monozukuri(manufacturing)

Net income/loss

-10.8

25.9

36.8

Ratio to sales

-0.9%

2.1%

3.0%

Exchange rate

¥93=US$1¥86=US$1

Consolidated Net Sales and Recurring Profit
Net sales

Net sales(Billions of yen)

RecurringprofitRecurring profit

Global K(FY2007‐FY2011)

MTBP2010(FY2011‐FY2013)(Billions of yen)

1,600

80

1,200

60

800

40

400

20

0

07

08

09
Actual

10

11

13

0

Target5

An Interview with Satoshi Hasegawa, President

Q2
The improvement stems largely from higher
A2 productivity
as well as business expansion
in China and the positive impact of various

implementation of measures such as meticulous risk
management on large-scale projects. The KHI Group is
continually directing its efforts to leverage the resultsof these measures through the Group to reinforce
consolidated profitability.

In fiscal 2011, the appreciation of the yen exceeded
projections, topping the assumed exchange rate of¥90 to the U.S. dollar set at the start of the fiscal year,
but the KHI Group was able to achieve tremendous
improvement in profit despite the challenges caused by
yen appreciation. The list of reasons for improvement ismainly due to the result of four factors: 1) all businesssegments have steadily built up better earnings, primarily
underpinned by enhanced productivity; 2) the Precision
Machinery segment successfully expanded sales ofhydraulic components for construction machinery in
China, while the Plant & Infrastructure segment marked
brisk development through joint operations with China’s
CONCH Group; 3) enhanced responsiveness to exchange
rate fluctuations through a global production structurethat encompasses overseas procurement; and 4) wider

What is the business operating policy for the
Q3 Motorcycle& Engine segment?
This segment will emphasize the establishment
A3 procurementof a global, optimized production andstructure, which will underpin a

How did profits improve so dramatically infiscal 2011?

measures.

Net Sales by Geographical Region in FY2011
Japan
United States
EuropeAsia
Other(Billions of yen)

120.4
224.6

558.1

236.5

Net Sales in Asia
(Billions of yen)
250

224.6
186.0
161.9

174.3
141.5

150

100

50

0

6

07

In the Motorcycle & Engine segment, business structurereforms are yielding steady results. Notably, the segment
recorded an impairment loss of about ¥9.5 billion onproperty, plant and equipment in fiscal 2011, uponassessing the recoverability of related domestic fixed
assets on the basis of a production shift to an overseas
subsidiary. The segment will strive to enhance its costcompetitiveness still further through an optimized
production and procurement structure implemented ona global scale. In addition, it will enter into new markets
such as India, while expanding sales in emerging markets,
such as Brazil and Southeast Asia, where KHI already has
a presence. Through these steps, the Motorcycle &Engine segment will make sure and steady progress
toward returning to a profit position in fiscal 2012.
What are the quantitative targets in fiscal 2012
Q4 and2013?
The Group is heading toward achieving theA4 gottargets in both fiscal years, because the plan
off to a good start in fiscal 2011.

87.1

200

return to operating income for the segment infiscal 2012.

08

09

10

11

As far as business results are concerned, the KHI Groupsecured profits above initial targets for fiscal 2011, the firstyear of MTBP2010, marking a favorable start to the plan.
Consolidated quantitative targets for fiscal 2013,
the final year of MTBP2010, are net sales of ¥1,400.0
billion, operating income of ¥52.0 billion, and recurring
profit of ¥56.0 billion. The current yen–U.S. dollar
exchange rate is hovering in the low 80s, compared withthe assumed exchange rate—¥90 to the U.S. dollar—
used at the time the plan was established in April 2010.
In addition, high prices for materials could rise evenhigher, mainly due to brisk demand in emerging countries.
Given this scenario, I would have to say that fiscal 2013
performance targets are not particularly easy hurdles toclear. Nevertheless, the KHI Group has steadily realized
results from efforts already taken in fiscal 2011, such asmeasures to enhance its ability to increase productivity,
to resist yen appreciation, to capitalize on demand in
emerging countries, and to implement risk management onlarge-scale projects—so the original performance targets
set for fiscal 2013 stand as is.
The performance targets established for fiscal 2012,
the middle year of MTBP2010, are net sales of ¥1,360.0
billion, operating income of ¥50.0 billion, and recurring
profit of ¥52.0 billion with the assumed exchange rate of¥83 to the U.S. dollar. In fiscal 2012, an emphasis will beplaced first on achieving results that surpass those posted infiscal 2011, and this will surely raise confidence in the basic
policy of MTBP2010 — to "return to a growth path."
Management has allocated ¥76.0 billion for capital
investment in fiscal 2012. Spending in the Precision
Machinery segment will be increased to meet brisk demandfor hydraulic components for construction machinery in
China. In addition, funds will be used to reinforce joint
operations with China’s CONCH Group and also earmarked
for production facilities making commercial aircraft engines.
Other efforts include a reorganization of the production
structure and execution of required maintenance andupgrades for the combined factories such as Kobe Works andAkashi Works. By accelerating these activities, the KHI Groupwill expedite achievement of the quantitative targets statedin MTBP 2010.
What is the KHI Group’s policy regarding energy
Q5 Earthquake?
issues in the wake of the Great East JapanThe KHI Group is accelerating its activities in the
A5 Energy& Environmental Engineering businesssector, particularly involving distributed power
generation and renewable energy.

The recent disaster in Japan put the problem of power
shortages here in a spotlight and has prompted an increase
in requests for "in-house power generation systems" and"standby power generation systems" when unexpected power
outages occur. To address increasing demand, the KHI Group’s
first priority will be to boost production of gas turbine and gas
engine power generation systems.

Consolidated Quantitative Targets
FY2011

Net sales

Original Forecast

Actual

1,280.0

1,226.9(Billions of yen)

Reference

FY2013

FY20211,400.0

2,000.0(Target)(Vision)Operating income
Ratio to sales

32.0

42.6

52.0

2.5%

3.4%

3.7%

Recurring profit
Ratio to sales

32.0

49.1

56.0

100.0

2.5%

4.0%

4.0%

5.0%

Before-tax ROIC

5.6%

6.0%

8.5%

Debt-to-equity ratio

1.55

1.48

1.30

Equity ratio

20.8%

21.3%

24.0%

Exchange rate

¥90=US$1¥83=US$1¥90=US$1¥90=US$1

Also, given the direction of Japan’s medium- to long-term
electric power energy strategy, it is quite likely that
distributed power generation and renewable energy as well
as systems with high-efficiency, energy-saving features will
attract more attention than they have in the past. "Kawasaki
Business Vision 2020", which KHI established in 2010,
lists many products related to various distributed power
generation and renewable energy sources, including power
generation gas turbines and gas engines; high-efficiency
co-generation systems; Gigacell®; high-capacity, fully sealed
Ni-MH batteries; gas cooling systems; binary-cycle power
generation systems; biomass power generation; bioethanol
production; micro hydropower generation facilities;
integrated solar combined cycle power generation systems;
and ocean energy systems. The KHI Group will accelerate
efforts to promote and enhance these products and will
also pursue development of new high-efficiency products.
Of note, in promoting widespread use of distributed
power generation and renewable energy options in Japan,
many issues must be addressed at the national and local
level, such as regional city planning and next-generationtransmission networks like a smart grid system. To facilitate
the process, the KHI Group will actively collaborate withindustry, government, and academia.
The right way to address tomorrow’s energy needs
is not to dwell on prevailing problems in Japan after thedisastrous earthquake and tsunami but rather consider what
is best for the environment protection on a global scale.
From this perspective, the KHI Group is already a stepahead with a proposal to realize a "CO2-free hydrogen

7

An Interview with Satoshi Hasegawa, President

society" as a long-term solution to energy-related
issues. This concept hinges on an energy chain linking
hydrogen production, transport, storage, and use. The
KHI Group will strive to apply its wealth of technologies torealizing this concept and steadily develop the products
to support a "CO2-free hydrogen infrastructure".
Consequently, in the medium- to long-term,
demand for KHI products is sure to increase, especially in
the Energy & Environmental Engineering business sector,
and the KHI Group will rapidly pursue activities, such as
R&D aimed at realizing "Kawasaki Business Vision 2020".
Net Sales by Business Sectors
Transportation Systems
Energy & Environmental Engineering
Industrial Equipment
Ratio of recurring profit to sales(Billions of yen)

2,000.0

2,000

1,500

New products and new
businesses (600.0)

1,438.6 1,501.1

1,000

3.4%

1,338.6

1,226.9
1,173.4

4.3%

1,360.0 1,400.0

4.0% 3.8% 4.0%

2.9%

5%

Breakdown ofgrowth inGroup net sales(2010 2021)

1.2%
07

08

09

10

(Actual)111213(Forecast) (Target)

10%

Emerging countries(400.0)Developed countries(310.0)Japan (110.0)
5.0% Products Areas

500

0

Existing businesses(220.0)0%21(Vision)(Years ended/ending March 31)

What activities will the integration of GroupQ6 companies
facilitate?
Shared access to and use of “intellectual
A6 new
assets” will enhance the solutions business inbusinesses and new markets.
In October 2010, Kawasaki Shipbuilding Corporation,
Kawasaki Plant Systems, Ltd., and Kawasaki Precision
Machinery Ltd., were merged into KHI, and theirrespective operations became the pillars of businesssegments Ship & Offshore Structure Company, Plant &Infrastructure Company, and Precision Machinery
Company, respectively. The greatest incentive for
integrating these companies into KHI was to remove thebarriers within the organization and facilitate access to"intellectual assets" specific to each business segment.
"Intellectual assets" possessed by different businesssegments have always been shared and utilized within
the KHI Group, such as expertise in the applicationof fluid dynamics, accumulated through high-speed
wind tunnel tests on aircraft, as well as in the design ofhigh-speed trains and motorcycles. And this processcontinues even after last year’s reunification of theseGroup Companies, through new product and businessdevelopment jointly executed by all business segments
and including such themes as ocean energy and highefficiency propulsion systems.

KHI’s CO2 -free hydrogen concept
The energy chain
from resource-producing
countries to consumer countries

Resource-producing
countries

Consumer countries
Use in processes

Semiconductor and solar cell production,
oil refining and desulfurization, etc.

Power plants
Low-cost hydrogen production
from unused resources (brown coal)

Combined cycle power plants, etc.

Hydrogen trucks
Gasification

CO2-freeHydrogenHydrogenpurification
Electrolysis
High-efficiency CCS

Brown coal

Capture(Carbonanddioxide)
Storage

Hydrogen Production

8

Hydrogencarriers

Energy equipment
Hydrogen gas engines, gas
turbines, boilers, fuel cells, etc.

Liquid hydrogenstorage tanks

Renewable energy

Hydrogen Transport and Storage

Transportation equipment
Hydrogen station, cars, etc.

Hydrogen Use

Looking to the global market, we see rapidly
expanding demand in KHI’s three principal businessdemand sectors —Transportation Systems; Energy &Environmental Engineering; and Industrial Equipment—
especially in emerging markets. For example, heightenedawareness of global environmental issues has encouraged awider embrace of a highly efficient energy value chain andgreater use of rolling stock around the world, and the trend
toward solutions built around entire systems, in addition to
the individual products, is getting stronger. To meet theseneeds, the Group will take advantage of the reunificationof Group Companies to promote access to and use of"intellectual assets" specific to each business sector, andthereby strengthen the solutions business in new businesses
and new markets and underpin the realization of "Kawasaki
Business Vision 2020".
What kind of support has the KHI Group directed
Q7 bytoward
the disaster area and the people affected
the Great East Japan Earthquake?
KHI Group is contributing to reconstruction
A7 Thethrough its business activities.
We would like to express our deepest condolences to all
those affected by the Great East Japan Earthquake of March
11, 2011. Immediately after the disasters, the KHI Groupgot involved in various relief efforts to assist our customers
and business partners in the area of devastation and also
donated money and KHI products to local governments.
Right after the catastrophe, KHI provided a helicopter,
motorcycles, and other machinery to support disaster rescue
and relief operations. Then, with the enormous of debris
left in the wake of the earthquake and tsunami creating ahuge obstacle to reconstruction in the disaster zone, KHI
provided wheel loaders and a crushing machine to local
authorities to expedite the daunting process of debris
removal. The KHI Group, which supports infrastructures,will continue to respond to reconstruction demand in thedisaster zone and to provide range of products needed toprepare for unanticipated disasters anywhere and in any
form. These efforts exemplify the contributions that the KHI
Group makes to society through its business activities.

what would you like to emphasize to KHI’s
Q8 Lastly,
shareholders?
The KHI Group is working to "return to a growth
A8 path"and "strengthen the business foundation
for future growth," and every effort will be madeto realize "Kawasaki Business Vision 2020".

Group Mission:

Kawasaki, working as one for the good of the planet(Enriching lifestyles and helping safeguard theenvironment: Global Kawasaki)
As the middle year of MTBP 2010, fiscal 2012 will be apivotal year for the KHI Group in its efforts to achieve its
management goals for fiscal 2013, that is, to achieve thebusiness performance that surpasses that posted in fiscal
2011, and to ensure that the process of “returning to a
growth path” is on track.
Also, the KHI Group will steadily carry out aggressive R&D
investment and capital investment to “strengthen the businessfoundation for future growth.” Through these initiatives, theKHI Group will do its utmost to achieve the targets stated in“Kawasaki Business Vision 2020” and to realize “Group Mission:
Kawasaki, working as one for the good of the planet (Enriching
lifestyles and helping safeguard the environment: Global
Kawasaki).” So we look forward to the continuing support andcooperation of our shareholders.

9Review of Operations
The KHI Group at a Glance

Composition ofConsolidated Net Sales of FY2011
9.7%

Ship &
Offshore Structure

P. 12
10.7%

Rolling StockP. 14
Aerospace

LNG carriers
LPG carriersContainer ships
VLCCs and other types of tankers
Bulk carriers
High-speed vessels
Submarines
Maritime application equipment
Offshore structures
Electric train cars (including Shinkansen)
Electric and diesel locomotives
Passenger coaches
Integrated transit systems
Monorail cars
Platform screen doors
Gigacell ®(high-capacity, full sealed Ni-MH battery)

16.0%

P-1 patrol aircraft and XC-2 cargo aircraft
Component parts for the Boeing 787, 777, and
767 passenger airplanes
Component parts for the Embraer 170 and 190 jet aircraft
CH-47, OH-1, and BK117 helicopters
MissilesElectronic equipment
Space equipment

16.5%

Jet engines
Small and medium-sized gas turbine generators
Gas turbine co-generation systems
Gas turbines for naval vessels
Steam turbines for marine and industrial applications
Diesel engines and marine propulsion systems
Gas engines
Gas compression modules

P. 16
Gas Turbine &Machinery

Main Products

P. 18
7.3%

Cement, chemical, and other industrial plants
Power plants
Municipal refuse incineration plants
LNG and LPG tanks
Shield machines and tunnel-boring machines
Crushing machines

Plant &
Infrastructure

P. 20
19.1%

Motorcycle &EngineMotorcycles
All-terrain vehicles (ATVs)
Utility vehicles
Personal watercraft
General-purpose gasoline engines

P. 22
11.4%

Precision Machinery

P. 24
10

Hydraulic components (pumps, motors, and valves)
Hydraulic systems for industrial use
Hydraulic marine machinery
Industrial robots

Operating Income(Loss) (Millions of yen)0

Order Backlog

0

400,000

09

10

119,987

50,00098,932100,000

135,664

150,000

11

203,084

234,479

303,757

10

11

100,000
0

3,030

11,656

131,104
11

2,000
0

6,000

200,000

09

10

4,000

8,000

200,000

0

09

6,000

90,000300,000

11

8,000

10,0000

10

10,000120,000

30,00011

12,00009

10

11400,000

Orders Received

09

150,000

60,000

10

9,545

0

300,000

100,000

11

4,000

09

8,281

Orders Received

10

10

11

2,000
0

09

0
-10,000

09

10

11

-20,000-30,000

09

10-4,961

11

50,000

11

3,766

187,58210

09234,479

200,000

09

100,000

226,2280355,517150,000

10-4,000250,000
200,000-2,000

09

8,941

0

11

7,944

50,000196,8760

300,000

100,000

150,071

150,000

400,000

200,000

135,6122,000

100,000

10-27,005

Order Backlog

200,000

202,692

Orders Received

0

4,000

89,01211

5,000

250,000

188,89210

11

203,084

500,000

09

206,7300171,380

100,000

239,177

200,000

10

191,379

300,000

09

107,580

Order Backlog

0200,425

Orders Received

11

195,156

66,26910

09

10,000124,410400,000

09

50,000-2,00015,000200,000

100,000
187,1220219,781

100,000

11

150,000

300,000
200,000

10-4,140Order Backlog

400,000

09-1,00011,070Orders Received

11

0

9,990

16,12810

50,000303,757

500,000

09

78,953071,513100,000-1,013100,000

8,173

200,000

1,550

1,000

Changes in Industry Segments
and Segment Names

8,726

150,000

118,416300,000

Order Backlog

151,893

2,000

Orders Received

126,426

200,000

400,000-958

Sales (Millions of yen)

-10,407

Orders Received/
Order Backlog (Millions of yen)11

Note: Since production in the Motorcycle & Engine segment is carried out mainly in anticipation of demand, figures for orders received and sales are the same, and figures for order backlog are not presented.

009

15,00060,00030,000

10

11

0

09

10

10,000
5,000

11

0

09

10

22,31890,0003,415

20,000Changes in Industry Segments
Effective April 2009:
construction machinery business
unit:
Transferred from the Rolling
Stock segment to the “Other”
segment
Effective April 2010:
crushing machine business unit:
Transferred from the Rolling
Stock segment to the Plant &Infrastructure segment
Industrial Robots business unit:
Transferred from the Consumer
Products & Machinery segmentto the Precision Machinery
segment
Changes in Segment Names
Effective April 2010:
Consumer Products & Machinery(previous)
Motorcycle & Engine (current)
Hydraulic Machinery (previous)
Precision Machinery (current)
Effective April 2009:
Rolling Stock & Construction
Machinery (previous)
Rolling Stock (current)
Effective October 2010:

8,807

120,000
140,328

25,00082,71550,000150,000

117,621100,000

116,845

150,000

Order Backlog

148,955

Orders Received

84,948200,000

Attendant on the spin-off of theconstruction machinery business
unit as a separate company, thechange of industry segmentation
for internal reporting of thecrushing machine business
unit and the Industrial Robots
business unit, and reorganizationof the Shipbuilding segment,
industry segments, and/or
segment names have beenchanged as follows.

Shipbuilding (previous)
Ship & Offshore Structure(current)

11

11

Review of Operations

Ship & Offshore Structure

LNG carrier TAITAR NO. 4

Financial Highlights

Business Results

Net Sales

The difficulties that characterized fiscal 2010 carried over into fiscal 2011,
creating an extremely challenging operating environment for the Ship &Offshore Structure segment. Notably, the newbuilding market didn’t recoverin full scale, the yen remained strong against the won, and the price of steel
materials continued to rise.
In these circumstances, the Ship & Offshore Structure segment posted
orders received worth ¥78.9 billion, soaring ¥62.8 billion year-on-year, as aresult of a substantial increase in newbuilding orders, including one submarineorder, compared with fiscal 2010 results, which stalled at just one newbuilding
order overall.
Sales decreased ¥33.4 billion to ¥118.4 billion, owing to a decline in salesof large vessels from the previous fiscal year.
On the profit front, the segment showed an operating loss of ¥1.0 billion,a ¥2.5 billion reversal from operating income in fiscal 2010, due to an increasein the provision for losses on construction contracts.
In newbuilding activity, the segment delivered 13 vessels: one LNG(liquefied natural gas) carrier, two LPG (liquefied petroleum gas) carriers and
10 bulk carriers.

Years Ended/Ending March 31 (Billions of yen)

151.8

126.4

09

118.4

110.0

11

12
(Forecast*)

10(Actual)Years Ended/Ending March 31 (Billions of yen)

4.0

6%

Operating income (loss)
Ratio of operating income (loss) to sales

1.5

2.0

3%
0%

0.0
-2.0
-4.0

-0.9

09

10
(Actual)

-1.0

-4.0

11

12
(Forecast*)

-3%
-6%

*As of April 28, 201112

We will strengthen our ability to fulfill its leadershiprole in marine transport and achieve sustainablegrowth.
President, Ship & Offshore Structure Company

Nobumitsu Kambayashi

Analysis and Outlook
In fiscal 2011, the Ship & Offshore Structure segment faced
highly daunting issues, particularly lackluster conditionsin the shipping and shipbuilding market as well as yen
appreciation and high material costs. This brought about
an increase in the provision for losses on construction
contracts, which in turn caused the segment to fall into thered. However, the segment successfully attracted orders,
thanks to a temporary upturn in demand, and has thus beenable to sustain the current level of construction volume for a
few years.
In addition, Nantong COSCO KHI Ship Engineering Co.,
Ltd. (NACKS), established by KHI and China Ocean Shipping(Group) Company in 1995 as a 50:50 joint venture, has now
marked its 16th year of operation and has become one of
the leading shipbuilding companies in China. NACKS has
achieved expanded business scale and improved profits dueto the start of full-capacity operations in 2010, underpinnedby the completion of its second expansionary phase,
involving the construction of the second shipbuilding dockin the autumn of 2008, and additional investment thereafter.
KHI has accumulated sophisticated technologies andan extensive track record, especially in building gas carriers
and submarines. The Ship & Offshore Structure segment willcontinue to make the most of this expertise and experience,complemented by a solid reputation earned from customers
around the world for reliable performance, quality anddelivery, and strive to take advantage of its shipyard in
China by expanding production scale and enhancing its
international competitiveness. Through these activities, thecompany will move steadily toward the stated goals of themedium-term business plan and Kawasaki Business Vision
2020.
In addition, amid growing worldwide interest inenergy-saving, environmental load-reducing options andmarine-resource development, KHI has identified three key
issues that the Ship & Offshore Structure segment mustemphasize: 1) orders and construction of LNG carriers, a
shipbuilding sector where KHI has established a position
as a pioneer in Japan and where demand is expected to
grow; 2) differentiation, through the development of newtechnologies and new ship designs featuring its advanced
techniques; and 3) entry into offshore development-related
fields where the KHI Group can join forces for maximum
effect. Successful results will strengthen the Group’s ability
to fulfill its leadership role in marine transport, a criticalpart of the world’s economic infrastructure, and achievesustainable growth in its business.

Bulk carrier STENIA COLOSSUS

Submarine KENRYU

13

Review of Operations

Rolling Stock

N700 Series 7000 Shinkansen

Financial Highlights

Business Results

Net Sales

In fiscal 2011, orders in Japan in the Rolling Stock segment were received
from the Japan Railways Group, primarily for Shinkansen , commuter trains,
locomotives, and other rolling stock, as well as from both public and private
railway companies, for commuter train cars, train cars for new transportation
systems, and other rolling stock. Orders from overseas customers included
new subway car models for the Washington Metropolitan Area Transit
Authority and also for New York City Transit. All told, orders received
amounted to a value of ¥187.1 billion, up ¥120.8 billion from the previous
fiscal year, in which we had few large-scale projects.
Sales declined ¥18.9 billion to ¥131.1 billion, because a slight
improvement in sales of rolling stock to domestic customers was offset by adrop in sales of rolling stock to overseas customers.
Operating income fell ¥0.5 billion to ¥8.1 billion, resulting from lower
sales.

Years Ended/Ending March 31 (Billions of yen)

150.0

135.6

09

150.0

131.1

10

11

12
(Forecast*)(Actual)Years Ended/Ending March 31 (Billions of yen)

15.0

15%

Operating income
Ratio of operating income to sales

10%

10.0

5.0

0.0

11.6

09

8.7

8.1

10

11

(Actual)

5%

7.0
12
(Forecast*)0%*As of April 28, 201114

We are committed to earning an excellent reputation
as a world-leading rolling stock manufacturer by
successfully completing large-scale overseas projects
while strengthening our product line.
President, Rolling Stock Company

Kyohei Matsuoka

Analysis and Outlook
Despite declining profits on projects exported in fiscal 2011,
due to yen appreciation, the Rolling Stock segment wasable to record ¥8.1 billion in operating income because of
successful measures to cut fixed costs and contributions
from projects in Asia, including subway projects in Singapore
and Taiwan now underway.
With targets of ¥7.0 billion and ¥8.0 billion in fiscal
2012 and fiscal 2013, respectively, KHI will consistently
strive to enhance its capabilities in rolling stock design andmanufacturing as well as associated project management.
The segment will also reinforce low-cost rolling stock
development activities already in progress and further
sharpen its competitive edge.
Recent years have brought a pronounced “modal
shift” in developed countries from the use of automobiles
and aircraft as the principal means of transporting freightand passengers to the use of railways, which place a lower
burden on the natural environment. In addition, the numberof new projects for construction of urban and interurban
transport systems in emerging countries is on the rise.
Specific projects include high-speed rail projects in North
America and the new Dedicated Freight Corridor in India.
Accordingly, long-term expansion in demand is expected in
the rolling stock business.
As Japan’s largest manufacturer of rolling stock, KHI
is taking proactive measures to cope with the increasein demand by expanding and upgrading its production
systems, which are located in Hyogo and Harima in Japanand in Lincoln, Nebraska and Yonkers, New York in the
United States.
The Rolling Stock segment has set forth a vision of
becoming a world-class rolling stock systems manufacturer
that takes advantage of world-class technologies and quality
to engage in wide-ranging businesses, from high-speed
trains to light rail transit (LRT).
The company will achieve this vision through productline expansion and enhancement made possible byaggressive new product development, such as efSET ®,(Environmentally Friendly Super Express Train), a new highspeed train for overseas markets, and K-Star Express®, a new
high-speed interurban commuter train for the U.S. market,
and through the reliable execution of large-scale overseas
projects.

Tokyo Metro Series 16000

Xinyi-Songshan Line MRT for
Taipei City Government

15

Review of Operations

Aerospace

XC-2 next-generation cargo aircraft

Financial Highlights

Business Results

Net Sales

Orders received in the Aerospace segment increased ¥35.3 billion fromthe previous fiscal year, to ¥206.7 billion, due to an increase in orders forcomponent parts for the Boeing 777 (B777) and 787 (B787).
Sales also rallied, up ¥7.9 billion to ¥196.8 billion, thanks to higher sales
to Japan’s Ministry of Defense (MOD) and to Boeing for component parts for
the B787.
Despite better sales results, operating income declined ¥0.7 billion to¥3.0 billion, mainly owing to the profit-eroding impact of yen appreciation.

Years Ended/Ending March 31 (Billions of yen)

200.4

09

188.8

196.8

10

11

220.0

12
(Forecast*)(Actual)Years Ended/Ending March 31 (Billions of yen)

10.0

5%

Operating income (loss)
Ratio of operating income(loss) to sales

5.0

0.0

-5.0

8.0
3.7

3.0

10

11

0%

-4.1
09

(Actual)12(Forecast*)*As of April 28, 201116

We will seek to obtain orders for mass productionof the XC-2 succeeding the XP-1, and will also ramp
up production of the Boeing 787.
President, Aerospace Company

Shigeru Murayama

Analysis and Outlook
From a profit perspective, sharp appreciation of the yen
was a major obstacle in fiscal 2011. But cost reduction
efforts and other strategies enabled the segment to achieve
operating income close to the fiscal 2010 level. In fact,orders received in fiscal 2011 were 20% higher in value
terms over fiscal 2010, a sign that business results may trend
upward in fiscal 2012 and beyond.
In the defense aircraft field, KHI delivered the flighttest plane #2 of the XC-2 model to MOD in March 2011.
With this delivery, the company has fulfilled its contractual
obligations for Japan’s largest aircraft development project
started in 2001, to simultaneously develop the XP-1 nextgeneration patrol aircraft and XC-2 next-generation cargo
aircraft. As with the XP-1, which has shifted to the fullscale mass production phase, KHI will seek to obtain orders
for mass production of the recently developed XC-2 infiscal 2012. Budget cuts have been a persistent thorn inMOD’s side, but KHI anticipates increased output, including
production of the new aircraft, and is working to boost
production capacity at the Gifu Works to capitalize on
promising opportunities.
In the commercial aircraft field, economic growthin emerging markets will be a major catalyst generating
brisk demand for passenger and freighter aircraft over the
medium term. On Boeing projects, order and production
rates for the B777 remain favorable, and the first deliveryof the B787 from Boeing to the airlines is expected in thethird quarter of 2011. KHI is a partner corporation in thedevelopment and production of the B787. To support its
position in the B787 program, the company built a new
facility at the Nagoya Works 1 and installed state-of-the-art
equipment, highlighting composite component fabrication.
In addition, the company is preparing for the possibility of a
production increase with various moves, such as hiring moreworkers. The B787 business is expected to make a significant
contribution to segment results one day.
In the helicopter business in Japan, the use ofhelicopters for emergency medical service in remote areas
or on islands, or in the event of road traffic congestion, is
gaining widespread appeal and spurring demand for KHI’s
BK117 helicopter. The company will resourcefully promotesales and strive to capture top share in this market.

BK117 C-2 helicopter

Boeing 787 Dreamliner

17

Review of Operations

Gas Turbine & Machinery

Azimuth thruster Rexpeller®

Financial Highlights

Business Results

Net Sales

Orders in the Gas Turbine & Machinery segment decreased ¥38.6 billion fromthe previous fiscal year to ¥187.5 billion, in contrast to large orders achievedin the previous fiscal year, particularly for component parts for commercial
aircraft jet engine components and gas compression modules.
Sales edged up ¥11.3 billion to ¥202.6 billion, mainly from higher sales ofgas compression modules and diesel generator sets.
Operating income climbed ¥0.6 billion to ¥9.5 billion, due to increased
sales.
In this segment, we are continuing with our R&D activities and furthering
our development of manufacturing systems. In addition, ongoing efforts toimprove productivity and boost sales activity will lay a solid foundation forhigher profitability.

Years Ended/Ending March 31 (Billions of yen)

195.1

09

191.3

202.6

210.0

10

11

12
(Forecast*)(Actual)Years Ended/Ending March 31 (Billions of yen)

15.0

8%

Operating income
Ratio of operating income to sales

6%

10.0

4%
5.0

11.0

8.9

9.5
5.0

0.0

09

10
(Actual)1112(Forecast*)

2%0%*As of April 28, 201118

Our utmost efforts will be directed into products,
especially power generation machinery andequipment, needed for reconstruction in the areas
affected by the Great East Japan Earthquake.
President, Gas Turbine & Machinery Company

Yuichi Asano

Analysis and Outlook
The Gas Turbine & Machinery segment has a wide range of
products for the energy and transportation equipment sector.
Although demand for some of these products is temporarily
weak due to the global recession, KHI has a variety of
products for which markets are expected to grow over the
medium- to long-term.
In the energy sector, co-generation has become anincreasingly popular choice keen to embrace approaches
that promote global environmental protection and energy
conservation. In addition, the recent disasters in Japan are
drawing further attention to the merits of distributed powersources to mitigate the risk of reliance on centralized powersources. Under these circumstances, growing demand for gas
turbine power generators and gas engines can be expected.
As Japan’s largest manufacturer of small to mediumsized gas turbine power generators, KHI plays a significant
role in the standby power generator market with products
crucial to preparing for disasters. KHI intends to expand
its global business by taking advantage of in-housedevelopment capabilities, enabling it to propose totalsolutions covering after-service and maintenance.
KHI developed a gas engine that boasts the world’s
highest electric generating efficiency— 49% — and wasawarded its first order in fiscal 2011. The company plans to
use this opportunity as a seed from which new businesses can
grow. KHI intends to expand this business through market

Kawasaki Green Gas Engine

penetration overseas where natural gas infrastructures are
established, and by addressing heightened demand in Japan,
primarily the reconstruction efforts in the areas devastated by
the Great East Japan Earthquake and tsunami.
Another promising field is oil and gas, where recent
offshore development activity has spurred demand for natural
gas compression modules used on offshore platforms and for
propulsion systems installed on offshore support vessels.
In the transportation equipment sector, demandfor commercial aircraft appears to be recovering after a
temporary downturn. In response, KHI is manufacturing theV2500 engine for the Airbus A320, making preparations formass production of the Trent 1000 engine for the Boeing
787 and pursuing development of the Trent XWB engine for
the Airbus A350XWB.
In the marine field, the downturn in demand is likely tocontinue. Nevertheless, KHI will strengthen the developmentof propulsion systems that make ships more energy efficient,expecting future growth of this market sector.
The Gas Turbine & Machinery segment offers a diverse
range of products over and above those described here,
and we regret that all of our products cannot be mentioned,
but you can rest assured we will continue to improve thereliability of our products serving the land, sea, and air,where our expertise lies and thus meets the expectations of
our stakeholders.

Gas turbine co-generation system
for RIKEN Kobe Institute (PUC60x2)

19

Review of Operations

Plant & Infrastructure

Cement plant for But Son Cement Joint Stock Company

Financial Highlights

Business Results

Net Sales

Orders received in the Plant & Infrastructure segment decreased ¥15.6 billion,to ¥119.9 billion, from the previous fiscal year, when orders received included
an order for a large-scale overseas project, specifically, a fertilizer production
facility for Turkmenistan.
Sales declined ¥18.5 billion to ¥89.0 billion, as the tendency to restrict
capital investment in the wake of the Lehman Brothers bankruptcy led to
fewer orders for large-scale projects.
Operating income increased ¥0.3 billion to ¥8.2 billion, as a positive turnin revenue paralleling favorable progress on projects already under ordercovered the shortfall caused by lower sales.

Years Ended/Ending March 31 (Billions of yen)

124.4

09

107.5

130.0
89.0

10

11

12
(Forecast*)(Actual)Years Ended/Ending March 31 (Billions of yen)

15.0

12%

Operating income
Ratio of operating income to sales

8%

10.0

5.0

0.0

9.9

09

7.9

8.2

10

11

(Actual)11.0

12(Forecast*)

4%0%*As of April 28, 201120

We aim to establish a stable revenue base withthe development of new products, highlighting
the energy and environmental fields. Also, we will
expand joint operations in China.
President, Plant & Infrastructure Company

Toshikazu Hayashi

Analysis and Outlook
The Plant & Infrastructure segment recorded sizable
decreases in orders received and sales during fiscal 2011,
but the business was able to generate satisfactory operating
income. Higher profit is a testament to the success of efforts
to shrink period expenses while executing meticulous
project management and cutting costs.
The challenges that characterized the fiscal 2011
operating environment are likely to persist in fiscal 2012,
particularly the yen’s appreciation against other major
currencies, soaring material costs, and intensifying ordercompetition. However, KHI aims to establish a stable revenue
base by emphasizing steady orders for projects in emerging
countries and for small projects, such as conversions andmaintenance of baseload supply facilities; by expanding its
joint operations in China; and by sharpening its competitiveedge with the development of new products, highlighting
energy and environmental engineering expertise.
In China, KHI is developing joint operations with
the CONCH Group, which includes Anhui Conch Cement
Company Limited, a major cement maker in China and thefourth-largest in the world. Joint operations also include
three companies: Anhui Conch Kawasaki Engineering Co.,
Ltd. (ACK), an engineering firm, Anhui Conch Kawasaki
Energy Conservation Equipment Manufacturing Co.,
Ltd. (CKM), a manufacturing company, and Anhui Conch
Kawasaki Equipment Manufacturing Co., Ltd. (CKE), which

Sakaide LNG Terminal

manufactures and repairs major equipment used at cement
plants. In China, KHI’s efforts at these joint operations arebeing directed toward building a stronger revenue basethrough expansion of their line of products. Also, these joint
operations not only make and market waste heat recovery
power generation systems for cement plants and highefficiency vertical mills, they also handle a waste gasification
system that can be integrated with cement kilns and amembrane sewage treatment system.

SINGAPORE DOWNTOWN LINE STAGE2 C915
φ6.63m Slurry Type Tunnel Boring Machine

21

Review of Operations

Motorcycle & Engine

Ninja ZX-10R

Financial Highlights

Business Results

Net Sales

Sales by the Motorcycle & Engine segment increased ¥31.3 billion from theprevious year, to ¥234.4 billion. Key factors leading to this result were an
increase in sales of motorcycles to North America, on a unit basis, parallelingprogress in the liquidation of excess inventory, and brisk motorcycle sales
expansion in emerging markets, especially Brazil and Southeast Asia.
With regard to profit and loss, although the segment failed to turn aprofit against the backdrop of sharp yen appreciation, fixed cost reductions,and an increase in sales, the loss position was vastly improved, resulting in adecrease of ¥22.0 billion in operating loss from the previous fiscal year, to ¥4.9
billion.
Total worldwide unit sales of motorcycles, ATVs (all-terrain vehicles),utility vehicles, and personal watercraft were 471,000 units, an increase of
74,000 units from the previous fiscal year. By region, sales in Japan declined
by 3,000 units to 14,000 units; sales in North America increased by 38,000
units to 118,000 units; sales in Europe fell by 5,000 units to 67,000 units; andsales in emerging countries and others were up 44,000 units to 272,000 units.

Years Ended/Ending March 31 (Billions of yen)

303.7
203.0

09

234.4

260.0

11

12
(Forecast*)

10(Actual)Years Ended/Ending March 31 (Billions of yen)

30.0

Operating income (loss)

15%

Ratio of operating income (loss) to sales

10%

15.0
0.0

-10.4

5.0

09

10
(Actual)

5%
0%
-5%

-27.0

-15.0
-30.0

-4.9

-10%
11

12
(Forecast*)-15%*As of April 28, 201122

We will achieve a strong business platform for the
future and work toward our goal of returning to asolid profit position in fiscal 2012.
President, Motorcycle & Engine Company

Hiroshi Takata

Analysis and Outlook
Since the collapse of Lehman Brothers in 2008, theMotorcycle & Engine Company has done its utmost
to improve its business structure. Measures have been
implemented to deal with rapidly shrinking market scale inthe developed world, that is, North America and Europe,and the unprecedented surge in yen appreciation.
In fiscal 2011, with markets still shrinking and the yen
still strong, our company aggressively moved forward onreforming its earnings structure through further cost-cutting
and fixed cost reductions. In the core motorcycle business,
our company made headway in the liquidation of excess
inventory in markets of the developed countries, especiallyin North America and Europe, and achieved higher sales
on a unit basis in emerging markets, especially Brazil andSoutheast Asia. Meanwhile, in the general-purpose gasoline
engine business, the launch of new models underpinned anincrease in sales on a unit basis, particularly in the UnitedStates. These events were integral steps on the road toward
an improved business restructure and took the segment to apoint just shy of turning a profit.
Business conditions are likely to remain challenging for
the Motorcycle & Engine segment in fiscal 2012. However,
the introduction of new models and the implementationof effective sales campaigns in markets of the developed
countries, such as North America and Europe, should
buoy sales of motorcycles, ATVs, utility vehicles, andTERYX 750 FI 4x4 SPORT

personal watercraft to at least the fiscal 2011 level on a
combined unit basis. The segment will also emphasize
sales activities in emerging markets, such as Brazil, India,
and Southeast Asia, while applying measures to further
enhance the earnings structure, such as an improvement in
the profit margin ratio based on progress in cost-cutting
and proven results in reducing fixed costs. In addition, thesegment will resourcefully pursue development of cuttingedge technology from a forward-looking perspectivethat anticipates the necessary responses to tomorrow’s
environmental issues.
Through these activities, the Motorcycle & Engine
Company will achieve a strong business platform for the
future and, with the steadfast determination of everyone in
our company, will work steadily toward our goal of returning
to a solid profit position in fiscal 2012.

JET SKI ULTRA 300LX

23

Review of Operations

Precision Machinery

Hydraulic pump forindustrial machinery (left),
High-speed
hydraulic motor (right)

Financial Highlights

Business Results

Net Sales

Orders in the Precision Machinery segment increased ¥64.0 billion from theprevious fiscal year to ¥148.9 billion, thanks in large part to expanded orders
for hydraulic components for the construction machinery market.
Sales jumped ¥57.6 billion, to ¥140.3 billion, owing to an increase in salesof hydraulic components for the construction machinery market and for clean
robots used in the semiconductor industry.
Operating income soared ¥18.9 billion to ¥22.3 billion, reflecting afavorable turn in revenues underpinned by an increase in sales and a boost tooperating capacity.

Years Ended/Ending March 31 (Billions of yen)

117.6

09

170.0

140.3
82.7
10

11

12
(Forecast*)(Actual)Years Ended/Ending March 31 (Billions of yen)

20%

Operating income

30.0

Ratio of operating income to sales

15%

20.0

10%

10.0

8.8
0.0

09

3.4
10

(Actual)

22.3

25.0

11

12
(Forecast*)

5%0%*As of April 28, 201124

In the Hydraulic Machinery business unit, we are making
progress toward the early realization of our business vision for2020. In the Industrial Robots business unit, we will strive toboost our share in the semiconductor industry and increase
our competitive advantage in the automotive industry.
President, Precision Machinery Company Makoto Sonoda

Analysis and Outlook
Kawasaki Precision Machinery Ltd., which is involved in the
Hydraulic Machinery business unit, was reintegrated into
KHI in October 2010. Utilizing this change as a restructuring
opportunity, the Precision Machinery segment wasestablished with two business units, one for the Hydraulic
Machinery business unit and the other for the Industrial
Robots business unit.
Fiscal 2011 was an extremely active year for theHydraulic Machinery business unit, with a focus on theconstruction machinery market, where flourishing demandfor excavators, particularly in China, boosted sales. The Great
East Japan Earthquake had a limited impact on the business,and demand should expand again in fiscal 2012.
To fulfill the customer demand for a stable supply
for products, Hydraulic Machinery business unit has been
establishing to set its No. 1 basic objectives for fiscal 2012 as
to increase its production capacity. In addition to expansion
plans for the Nishi-Kobe Works, a hub facility, efforts will bemade to boost production capacity on a global scale, with
an emphasis on production sites in China.
Other objectives—to establish an earnings structure
for the future and to reinforce the management structure—remain in the spotlight. Projects are already under way todeal with new business creation and expansion of the afterservice business as well as to improve quality and logistics.
Steady implementation of these measures will speed

KHI’s progress toward early realization of a business vision
for 2020 aimed at becoming a manufacturer of top brands
in the global motion control sector, as underscored by thetheme “What Kawasaki Should Be in the Year 2020.”
The Industrial Robots business unit experienced a sharp
drop in demand in the wake of the collapse of Lehman
Brothers. But demand rallied in fiscal 2011, especially for
products for the semiconductor industry, and consolidated
sales rose significantly over fiscal 2010.
In fiscal 2012, demand from the semiconductor
industry is expected to remain high, and demand from theautomotive industry should also grow, with the spotlighton customers in emerging economies. Armed withsophisticated technology proposal capabilities and readyto capitalize on this favorable demand environment, theIndustrial Robots business unit will strive to boost its sharein the semiconductor industry and increase its competitive
advantage in the automotive industry.
In addition, the Industrial Robots business unit will
implement measures to open up new markets with growthpotential, such as the solar panel manufacturing sector andthe food distribution sector.

Hydraulic valves

R-series RS20N

High-speed picking robot YF03N

25

Corporate GovernanceCorporate Governanceindependent auditor as required by the Tokyo Stock Exchange
for all listed companies. To ensure the reliability of financial
reports, the Company appoints internal corporate auditors who
have considerable knowledge of finance and accounting. Theinternal corporate auditors and outside corporate auditors share
information and work to enhance the management oversightfunction. For these reasons, the Company does not appoint
outside directors.
The Board of Directors appoints executive officers to
conduct business operations. The Board of Directors decides thebasic objectives and policies for the execution of operations
under the management plan and promptly issues directives for
implementation to all executive officers. The Executive Officers
Committee ensures that the objectives and policies are
implemented. The Management Committee, which consists ofrepresentative directors and managing executive officers, andthe Board of Directors periodically follow up on the status of
implementation of the management plan. The Company clearly
defines the management responsibility of directors by means of
incentive-based compensation that reflects businessperformance and a one-year term of office for directors.
The Management Committee thoroughly discusses importantmanagement issues and confers with the Board of Directors
concerning prescribed matters. As a rule, the Management
Committee meets three times a month to discuss management
policy, management strategy, important management issues, andother matters from the perspective of the Group as a whole.

Kawasaki Heavy Industries, Ltd. (KHI) has established a corporate
governance system that accommodates the KHI Group’s
operations, with the Board of Directors and auditors playing
central roles in governance, as they continuously work to
improve this system. The basic stance of the KHI Group as awhole regarding corporate governance is to endeavor toincrease the Group’s corporate value through the highly
transparent, efficient, and sound management of its operations
as the Group works to build solid relationships with all of its
stakeholders, including shareholders, customers, employees, andthe community.

Overview of the Corporate Governance System
The Company adopts a statutory auditor system of corporate
governance and has appointed an independent auditor. The
Chairman serves as the presiding officer of the Board of
Directors, which consists of 11 directors (authorized number: 15
directors). The Company has four corporate auditors and has
established a Board of Auditors. In addition to the Board of
Directors, the Company has established a Management
Committee and an Executive Officers Committee, both of which
are composed of representative directors and managing
executive officers, while the Executive Officers Committee also
includes executive officers.
To reinforce the oversight and monitoring function of theBoard of Directors with respect to management overall, theCompany appoints directors who do not have roles in theexecution of operations. Also, with regard to corporate auditors,
to ensure objectivity and neutrality in the management
oversight function, the Company appoints two outside corporate
auditors with no business relationships or other vested interestsin the Company. One of these outside corporate auditors is an

Internal Auditing, Statutory Auditing, andIndependent Auditing
The Auditing Department, an internal auditing unit with a staff
of 13, strives to improve internal control functions by suchmeans as the periodic conducting of audits to confirm whether

Governance Structure of Kawasaki Heavy Industries, Ltd.
Meeting of Shareholders
Resolutions on appointment

Board of Directors
Supervising

Resolutions on appointment
Monitoring

Resolutions on appointment

Board of Auditors

Under the direct control of the president

Auditing Department(internal audits)

Cross-sectional cooperation
Auditing

Business Operation StructureManagement Committee
Major Project Committee
Executive Officers Committee
Head Office/Companies
Affiliated Companies

26

Financial Auditors

Auditing, investigation

operations are executed appropriately in accordance with laws,
regulations, and the Company’s internal rules in all of theGroup’s management activities. Also, the corporate auditors andthe Auditing Department share information on the results andfindings of their respective audits.
Concerning statutory auditing, the corporate auditors
attend meetings of the Board of Directors and the Management
Committee, examine important documents, and examine thestate of business operations and financial assets through periodic
meetings with the representative directors, business audits of
KHI’s divisions, and investigations of subsidiaries. In addition, twooutside corporate auditors ensure the objectivity and neutralityof the management oversight function. The full-time corporate
auditors and outside corporate auditors share information andstrive to enhance the management oversight function.
With regard to independent auditing, the Company
undergoes audits of its financial statements conducted by theCompany’s independent auditor, KPMG AZSA LLC. The corporate
auditors and the Board of Auditors receive an outline of the audit
plan and a report on important audit items from the independent
auditor, and the Board of Auditors explains the Company’s
auditing plan to the independent auditor. The corporate auditors
and the Board of Auditors periodically receive reports on the
results of independent auditing and collaborate with theindependent auditor by exchanging information and opinions.
Also, the corporate auditors take part in the audits performed by
the independent auditor as necessary and receive reports fromthe independent auditor concerning audits as appropriate.

Outside Corporate Auditors
The Company has two outside corporate auditors.
Kenzo Doi, an outside corporate auditor, has no vested
interest in the Company other than a retainer agreement between
the Company and Kobe Kyobashi Law Office, where he serves as arepresentative. Mr. Doi holds shares in the Company through theCompany’s Officers’ Shareholder Association, but he has notacquired the Company’s shares through any other means. The
Company enhances the auditing function by taking advantage of
Mr. Doi’s deep knowledge and diverse experience as an attorney,
and obtaining his fair and independent opinions.
The Company enhances the auditing function by taking
advantage of Michio Oka’s profound knowledge and diverse
experience as a corporate officer, and obtaining his fair andindependent opinions as an outside corporate auditor. Although
in the past Mr. Oka served as a corporate officer of Kawasaki
Kisen Kaisha, Ltd. and its affiliated companies, since there isessentially no capital relationship between Kawasaki Kisen and
the KHI Group, and Kawasaki Kisen accounts for an insignificant
portion of the KHI Group’s net sales, Mr. Oka has no vested
interest in the Company.
In accordance with Article 427, Paragraph 1 of Japan’sCompanies Act, and Article 43 of the Company’s Articles ofIncorporation, the Company has entered into contracts with theoutside corporate auditors that limit the scope of liability of theoutside corporate auditors to ¥10 million or the amountstipulated in Article 425, Paragraph 1 of Japan’s Companies Act(an amount equal to two years’ compensation paid to thecorporate auditors), whichever is higher.

Enhancement of Internal Control Systems
The Company is enhancing its internal control systems as
described below and plans to review internal control systems asnecessary, in light of changes in the environment surrounding
the Company and other considerations.
Internal control systems governing directors and employees
Internal control systems governing the corporate group
Internal control systems to ensure that corporate auditors
conduct audits appropriately

Compensation Paid to Directors andCorporate Auditors
The total amount of compensation, the total amount ofcompensation by type, and the number of corporate officers
eligible for compensation are shown in the table below.

Category

Total amount ofcompensation
Total amount ofby typecompensation(Millions of yen)
(Millions of yen)
Annualcompensation

Number of
eligible
corporate
officers

Directors

575

575

13

Corporate auditors

68

68

2

Outside corporate officers

16

16

2

(excluding outside directors)(excluding outside corporate auditors)

Note: The Company abolished retirement benefits and does not pay bonuses
or offer stock options to directors, corporate auditors, and outside
corporate officers.

Compliance Framework
TIn April 2010, the KHI Group reorganized the compliancecommittees in each business segment into CSR committees andput in place a framework for raising compliance awareness as
part of efforts to enhance overall CSR activities. We are working
to increase compliance awareness throughout the KHI Group by
distributing the Compliance Guidebook to employees andenhancing compliance education using e-learning and othermeans. In addition, we have put in place a mechanism by which
employees can obtain advice discreetly through theestablishment of the Compliance Reporting and Consultation
System as a point of contact with an outside attorney.

27

Corporate GovernanceEnterprise Risk Management System
The KHI Group has established a group-wide enterprise risk
management system to identify risk and to ensure an overalllevel of effectiveness with regard to managing risk. This enables
the Group to effectively deal with critical risks that have an
impact on management, thereby enhancing risk management as
set forth in the Kawasaki Group Management Principles. Under
the enterprise risk management system, from fiscal 2011 the KHI
Group is implementing risk assessment following a risk
management process— screening and evaluating risk, identifying
major risk and determining risk treatment, and formulating,executing, and monitoring risk-hedging policy— to pinpoint any
major risks having a significant impact on business according toan enterprise risk criteria, and is controlling such risks withreasonable and appropriate methods from the perspective ofenterprise management.

Business Risk
(1) Political and Economic Conditions
The KHI Group conducts its business activities not only in Japanbut also elsewhere in North America, Asia, Europe, and otherareas, and is affected by political and economic conditions ineach of these regions. For example, trends in personal
consumption may have an impact on the sales of the Motorcycle& Engine segment, while trends in private-sector capital
investment and public works investment may affect the orders of
the Gas Turbine & Machinery and the Plant & Infrastructure
segments. Moreover, conditions in shipping markets anddemand for passenger air travel may affect the orders and salesof the Ship & Offshore Structure, Aerospace, and Gas Turbine &Machinery segments.
Furthermore, disputes, political turmoil, and other factors
may affect the Company’s overseas projects.
(2) Fluctuations in Foreign Exchange Rates
Overseas sales accounted for 54.5% of consolidated net sales infiscal 2011, and the Group has a substantial volume oftransactions denominated in U.S. dollars, euros, and othercurrencies. With respect to transactions denominated in foreign
currencies, the Group strives to reduce foreign exchange risk by
such means as increasing the proportion of overall costs
denominated in foreign currencies and engages in hedging
techniques such as flexible forward contracts, taking into
account trends in foreign exchange rates. Nevertheless, themajority of the Group’s manufacturing facilities are located inJapan, and sales to overseas markets are subject to foreignexchange fluctuation risk.
(3) Large-Scale Natural Disasters
To minimize losses arising from natural disasters such as
typhoons, earthquakes, floods, and pandemics, the KHI Group28

takes a proactive approach that includes drafting business
continuity plans, establishing emergency contact systems,
performing periodic inspections and training. However, suchfactors as injuries and property damage caused by natural
disasters, as well as slower-than-usual distribution of materials,
could affect the business activities of the KHI Group, especiallyfactory-based production activities. In addition, losses caused bynatural disasters would not be fully covered by casualty
insurance or other means of compensation.
(4) Securing Human Resources
In all workplaces, retirement is creating a shortage of personnel
with excellent capabilities cultivated over many years, whichmight impede the business activities of the KHI Group andhinder its ability to remain competitive. Consequently, the KHI
Group strives to attract top-caliber individuals throughaggressive hiring activities each year and emphasizes the transfer
of technologies and techniques from one generation of
employee to another as well as skill development. Nevertheless,if the KHI Group is unable to retain a sufficient number of
employees, its business results may be adversely affected.
(5) Intellectual Property
The KHI Group strives to ensure appropriate protection of suchintellectual property as utility model rights and patent rights inpossession. However, because intellectual property in possession
is so extensive, the KHI Group might not be able to completely
prevent third parties from infringing upon its intellectual
property rights. In addition, if any products or technologies of
the KHI Group were to infringe upon the intellectual property
rights of other companies and the Group were subsequently
sued for damages, such legal action could have a detrimental
effect on the business results of the Group.
(6) Information Leaks
In the course of business, the KHI Group acquires confidential
information about its business partners as well as confidential
information related to operating activities, such as designs andtechnologies. To safeguard this information, the KHI Group has
established management systems and training programs and has
created information security systems to prevent information
leaks. However, in the event confidential information were toleak out, due to incidents such as computer viruses that attack
the KHI Group’s systems, unauthorized access, or theft, thebusiness results of the KHI Group might be affected.
(7) Laws and Regulations
The Group conducts its business activities in compliance with thelaws, regulations, and other controls in the countries and regions
where it operates. However, if its responses to the revisions to
the laws and regulations are not correctly implemented, the KHI

Group might be assessed fines or penalties for violating the law,which could lead to losses, and lose order opportunities due toadministrative disposition. Moreover, such events may tarnish
the reputation of the KHI Group, which could adversely impact
business results.
(8) Environmental Protection
The KHI Group has many manufacturing facilities, and some
operations use hazardous substances subject to environmental
restrictions. The management of such hazardous substances
requires due diligence and efforts to prevent harmful outflow.
The KHI Group strives to undertake such efforts, andcountermeasures have been formulated to minimize impact
from the diffusion of hazardous substances. Nevertheless, weresuch a situation to occur, the reputation of the KHI Group would
undoubtedly be tarnished and the affected facility would sufferfrom a prompt work stoppage, with the KHI Group potentiallysubject to compensatory damages. Such events could adversely
impact business results.
(9) Order Agreements
For the KHI Group, most projects are for products that are madeonce the orders are received, based on individual agreementswith the customers who have placed the orders. Major projects,
including construction projects with big contract amounts, go
through a thorough internal examination, with risk analysis andpossible risk responses, by the Major Project Committee before
the order agreements are signed. However, if the profitability ofcertain projects deteriorates because unforeseen circumstances,such as changing political or economic circumstances, cause
costs to exceed initial estimates, or costs balloon due to changes
in design or confusion at the production stage, such events
could have an impact on the business results of the KHI Group.

not realized because of failure to meet market needs, or if
commercialization is executed but does not generate sufficient
success, the business results of the KHI Group could be affected.
(12) Country Risk
The KHI Group not only exports products and services but also
carries out production at sites overseas and is involved inconstruction projects, such as plants, in locations overseas.
Smooth execution of operations may be prevented by various
circumstances, including political unrest, trade sanctions,religious or cultural differences, and complex labor relations, in
product destinations and countries and regions where
production and projects are undertaken, and such circumstances
could affect the business results of the KHI Group.
(13) Procurement of Materials
The KHI Group procures raw materials, parts, and equipmentfrom many suppliers. To sustain stable procurement, the KHI
Group relies on careful tracking of market trends, especially for
raw materials and parts, and while striving to ensure that
suppliers adhere to strict quality control, it avoids overuse of any
particular supplier and uses multiple suppliers for requiredmaterials. However, if procurement of specialty raw materials
and parts available through limited suppliers were to stall, thesituation could hinder the production activities of the KHI Group.
In addition, skyrocketing prices on raw materials, parts, andother procured items could affect the business results of the KHI
Group.

(10) Quality Assurance
The KHI Group strives to comply with laws and regulations on
product quality and safety and also strives to enhance productreliability through quality assurance and product and equipment
safety risk assessment. However, if accidents, complaints, orrecalls attributed to product quality were to occur, costs of aconsiderable amount might arise due to compensation forlosses, litigation expenses, and other payments, and this could
have an effect on the business results of the KHI Group.
Furthermore, compensation amounts paid by the Company
would not be fully covered by product liability insurance.
(11) Research and Development
The KHI Group’s research and development (R&D) activities
require a considerable amount of effort in terms of research andfunding. Consequently, if commercialization opportunities arelost owing to delays in the R&D plan, or if commercialization is29

Directors, Corporate Auditors, and Executive Officers

DIRECTORSCORPORATE AUDITORS

Nobuyuki Okazaki
Tatsuyoshi Ogushi
Kenzo Doi**
Michio Oka**
Tadaharu Ohashi
ChairmanSatoshi Hasegawa*President

Masashi Segawa*Senior Executive
Vice President

Mitsutoshi Takao*

Yuichi Asano*Nobumitsu Kambayashi*

Kyohei Matsuoka*

Hiroshi Takata*

Shigeru Murayama*

Toshikazu Hayashi*

Makoto Sonoda*

SeniorVice President

SeniorVice President

SeniorVice President

SeniorVice President

30

SeniorVice President

SeniorVice President

SeniorVice President

SeniorVice President*Representative Director**Outside Auditor

EXECUTIVE OFFICERS

President

Managing Executive Officers

Satoshi Hasegawa

Minoru Makimura
Masahiko Hirohata
Yoshinori Kanehana

Senior Executive Vice President

Masashi Segawa

Senior Vice Presidents

Mitsutoshi Takao
Corporate Business Administration

Yuichi Asano
President
Gas Turbine & Machinery Company

Nobumitsu Kambayashi
President
Ship & Offshore Structure Company

Kyohei Matsuoka
President
Rolling Stock Company

Hiroshi Takata
President
Motorcycle & Engine Company

Shigeru Murayama
President
Aerospace Company

Toshikazu Hayashi
President
Plant & Infrastructure Company

Makoto Sonoda
President
Precision Machinery Company

Executive Officers

Seiji Yamashita
Takeshi Sugawara
Tamaki Miyatake
Shuichi Yamanaka
Shinsuke Tanaka
Masatoshi Yamaguchi
Naomi Sera
Joji Iki
Yoshizumi Hashimoto
Yukio Hayano
Masahiro Ibi
Takafumi Shibahara
Nobuyoshi Kobayashi
Minoru Akioka
Yukinobu Kono
Masafumi Nakagawa
Mitsuo Kadoya
Hiroshi Hidaka
Hideki Sasaki
Atsuhiko Yamanaka
Eiji Inoue
Akio Murakami
Kaoru Kawabe
Kazuo Hida
Makoto Ogawara(As of June 28, 2011)31

Corporate Social Responsibility

The Group Mission of the Kawasaki Heavy Industries, Ltd. (KHI) Group is “Kawasaki, working as one for the good of the planet (Enriching
lifestyles and helping safeguard the environment: Global Kawasaki).”
Each and every employee puts this statement into practice as he or she goes about individually assigned daily business activities. To
this we added a broader view of corporate social responsibility (CSR) and action goals as we seek to realize the Group Mission at everhigher levels.

KHI Group CSR Activity Flow
We used various methods to collect and consolidate social expectations placed upon us; selected from this information CSR issues for the
KHI Group; and sorted data into five themes: 1) value creation through Business; 2) Management; 3) Employees; 4) Environmental activities;
and 5) Social contribution. Assigned divisions self-assess the current status for each entry and draft action plans highlighting efforts tocompensate for shortcomings and reinforce strengths. This PDCA (Plan-Do-Check-Act) cycle is repeated.
In fiscal 2012, we will provide opportunities to talk with stakeholders so that we can ascertain with greater clarity the position that is
specifically required of the KHI Group and the heavy industry sector. We will incorporate open comments made by our stakeholders into
our CSR activities so that we may respond to social expectations even better than we do now.

Generally required of companies
Third-Party Audit
Entries

CSR Requests from
Customers

ISO 26000 Core
ThemesOrganizational governance
Human rights
Labour practices

CSR issues consolidated

Approximately 1,000 entries

The environment
Fair operating practices
Consumer issues

CSR issues identified and sorted for KHI

5 categories, 85 entries

Self-Assessment

Action plans

PDCA
Cycle

Talks with Stakeholders
Specifically required of the KHI Group and the heavy industry sector

32

Community involvement anddevelopment

Mission
Statement

Value
Creation

Realization of theGroup Mission atever higher levels

Group Mission“Kawasaki, working
as one for the goodof the planet”
Originality

ExcellenceGroup management principles
Group code of conduct

Five Themes
We will use our integrated technological expertise to
create values that point the way to the future.

(1)
Business(2)
Management

We will always act with integrity and good faith to merit society’s trust.

(3)
Employees

We will all create a workplace where everyone wants to continue working.

(4)
Environment

We will pursue “manufacturing that makes the Earth smile.”(5)Social contribution We will expand the circle of contribution that links us to society and to the future.

CSR Activity Structure
CSR Cross-Group Organizations

CSR Committee
Corporate CSR Committee
Company CSR Committee
Head Office CSR Committee
CSR Liaison Conference
Compliance Manager Conference
Head Office CSR Planning Group

Corporate Environmental Committee
Human Capital Development Committee
Risk Management Committee
Export Examination Committee
Crisis Management Organization

Social Contribution through KHI Products and Resources
In the event of a major natural disaster, we will certainly extend financial support through charitable donations. But if products andresources can be of use, we provide them as well, as circumstances demand, to support relief and restoration efforts in the disaster area.
We believe this is part of any corporate citizen’s social responsibility.
On March 11, 2011, the Great East Japan Earthquake struck with unprecedented force. Immediately after the catastrophic earthquake
and tsunami, the KHI Group jumped into action with assistance geared to demand in the disaster area, which included a donation of ¥120
million and relief supplies worth approximately ¥100 million. We knew what to do because we had experienced the destruction wroughtby the Great Hanshin Earthquake in 1995 in Kobe, where our headquarters is located.

Motorcycles

Crushing machine

Wheel loaders

Helicopter

Donated so that support teams
could reach people, get to places,
and transport goods over badroads and narrow paths

Donated to crush rubble anddebrisDonated to clear and carry away
rubbleLoaned Company-owned
helicopter to replace local
government-owned craft that wasdestroyed in the disaster

33

Corporate Social Responsibility

2020 Environmental Vision
In 2010, Kawasaki Heavy Industries, Ltd. (KHI) Group established 2020 Environmental Vision: “What Kawasaki Should Be in the Year 2020”
to formulate our environmental aims for the year 2020, under the Group Mission “Kawasaki, working as one for the good of the planet(Enriching lifestyles and helping safeguard the environment: Global Kawasaki)."Taking into account the environmental trends in Japan and abroad, we will pursue the 2020 Environmental Vision on the basis of fourbasic guidelines. These are the “EMS” (“establishment of environmental management systems”), which will provide a foundation for threesocietal realizations, namely, “realization of a low-carbon society,” “realization of a sound material-cycle society,” and “realization of asociety coexisting with nature.” We are committed to working from these guidelines to contribute to the formation of a sustainable society.

Environmental Philosophy
The KHI Group has undertaken business with the advancement of society and the nation through “manufacturing” as our foundation, andhas sought to develop a global enterprise in “key industries related to land, sea, and air.” In doing so, we have worked toward resolution of
global environmental problems by seeking the “realization of a low-carbon society,” the “realization of a sound material-cycle society,” andthe “realization of a society coexisting with nature.” We will contribute to “the sustainable development of society” through businessactivities that are in harmony with the environment and through the KHI Group’s own products and services that show consideration for
the global environment.

Three Points of Entry onto the Path toward Realization of a Sustainable Society

Realization ofa low-carbon society

Realization ofa soundmaterial-cycle society

Contribute to the prevention of global warming by means of products andmanufacturing that use energy without waste(1) We are reducing greenhouse gas emissions in accordance with the national guidelines for 2020.
(2) We are providing customers with products and services that use energy effectively, thereby reducing greenhouse gas emissions
on a global scale.
(3) We are promoting energy conservation in production and distribution processes, further reducing greenhouse gas emissions.

Engage in manufacturing that uses resources without waste in order torecycle and fully utilize limited resources(1) We promote design that makes effective use of resources and seek improved weight reduction, durability, and recyclability in
our products.
(2) We promote 3R activities (limited generation of waste, reuse, and recycling) in production, and have achieved zero waste
emissions in all our plants.
(3) We have completed the proper disposal of all PCB waste and equipment containing PCBs.

Through manufacturing that is in harmony with the global environment

Realization ofa society coexistingwith nature(1) We provide customers with products and services that prevent pollution of the atmosphere and degradation of water quality inorder to promote improvement of the environment and conservation of the ecosystem.
(2) We are reducing the use of chemical substances in our products as well as in our manufacturing activities.
(3) We are cooperating with local forest conservation programs and other such activities to protect the ecosystem.

Building a Foundation for Environmental Management
Building a foundation for environmental management that will realize the 2020 Environmental Vision(1) All of KHI’s consolidated subsidiaries in Japan and abroad have created an EMS and are promoting environmental management
throughout the KHI Group.
(2) We observe environmental laws and regulations and conduct periodic follow-up of compliance status.
(3) We disseminate environmental information inside and outside the Company, and engage in dialogue while conducting environmental
conservation activities.

34

The 7th Environmental Management Activities Plan (FY2011- 2013)
Our 2020 Environmental Vision, which establishes goals for the KHI Group’s environmental management in the year 2020, addresses the“realization of a low-carbon society,” ”realization of a sound material-cycle society,” and “realization of a society coexisting with nature” asnew points of entry for our commitment to realization of the Group Mission through business activities that are in harmony with theenvironment and through the KHI Group’s own products and services that show consideration for the environment.
The 7th Environmental Management Activities Plan (FY2011 - 2013) serves as a starting point for our implementation ofenvironmental management that properly discerns and balances different forms of business. The substance of the plan is divided into four
topics: the realization of a low-carbon society, the realization of a sound material-cycle society, and the realization of a society coexistingwith nature as well as the establishment of EMS to serve as a foundation for environmental management. We maintain company-wide
objectives in all of these, and are taking action accordingly.
Realization of a low-carbon society

We are aiming to achieve our company-wide FY2013 objective for greenhouse gases, which is to reduce the averagebasic unit of emissions (meaning CO2 emissions/sales) for FY2009 -2013 by 10% compared with the level of FY2008.
This objective represents a specific initiative to counter global warming.

Realization of a sound material-cycle society

Our measures to reduce total waste emissions include promoting resource conservation and the 3R movement.

Realization of a society coexisting with nature

We have engaged in measures to reduce chemical substances, environmental contributions through our products andtechnology, and the like.

Establishment of EMS

We have committed ourselves to promoting the establishment of EMS in all consolidated subsidiaries in Japan andoverseas.

Measures to Reach Objectives for Reduction of Greenhouse Gases
We have been pursuing a variety of initiatives to reduce greenhouse gas emissions, which is our highest-priority environmental
management activity.
Company-wide Engagement in CO2 Reduction Activities
In order to realize further reductions in greenhouse gas emissions
from our production activities, it will be necessary to establish an
analytical method for company-wide implementation of reduction
activities. For this purpose, we began reviewing the energy
consumption of all our plants and have been implementing a
project to investigate CO2 emission reduction factors.
We are identifying possible points of improvement according
to the business form adopted by each of KHI’s individual businesssegments, which engage in production across a wide range ofbusiness areas, while also considering CO2 reduction measures thatcan be realized across varying business forms. In this way, we willrealize optimal measures for the Group as a whole.
In fiscal 2011, we turned the Kakogawa Works into a pilot
site, installed automatic energy readers, and began identifying
specific areas for effective CO2 reduction through analysis ofautomatic measuring data.
Promoting Installation of Energy-Saving Equipment
The three-year business plan that runs until fiscal 2013 calls for
efforts to invest in energy-saving equipment, such as lighting
systems, at our factories.
In fiscal 2011, we began switching to metal-halide bulbs forfactory illumination and inverter-type bulbs for office lighting
and started installing energy-saving hydraulic inverters inmachine tools. The upgrades target all factories and approximately
33,000 units overall.
In addition, we are promoting the installation ofphotovoltaic power generation equipment in newly built
structures at factories, and in fiscal 2011, we installed photovoltaic
power generation equipment at the Nagoya Works 1 and the
Akashi Works. At the Nagoya Works 1, we introduced 750kW
photovoltaic power generation equipment, which supplies about
5% of power consumed at this site. At the Akashi Works, we
introduced 100kW equipment, and all power generated is used at
this site. Consequently, we
expect a combined-factory
CO2 reduction effect ofabout 400 tons per year.
This equipment was
installed using financial
assistance provided by the
New Energy Promotion
Photovoltaic power generationequipment installed at Nagoya Works 1
Council.
Forest Conservation Activities and the Use of Green PowerWe are engaging in forest conservation projects that make useof corporate reforestation systems, and we will promote CO2
reduction by absorption in forests. We are taking part incorporate reforestation operations in the prefectures of Hyogo
and Kochi.
Electric power generated from renewable energy resources(wind power, solar power, biomass, etc.) will be included in the
KHI Group’s CO2 reduction amount.
These activities are also intended to raise awareness among our
employees of global warming countermeasures.

35

Financial Section
Six-Year Summary ............................................................................................................. 37
Management’s Discussion & Analysis......................................................................... 38
Consolidated Balance Sheets......................................................................................... 42
Consolidated Statements of Operations and Comprehensive Income ......... 44
Consolidated Statements of Changes in Net Assets ............................................ 45
Consolidated Statements of Cash Flows ................................................................... 46
Notes to the Consolidated Financial Statements .................................................. 48
Independent Auditors’ Report ..................................................................................... 8536

Six-Year Summary
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

Millions of yen

2011

2010

2009

2008

2007

2006

Net sales¥1,226,949¥1,173,473¥1,338,597¥1,501,097¥1,438,619¥1,322,487

Cost of sales

1,037,079

1,023,610

1,146,944

1,262,032

1,213,524

1,148,547

Gross profit

189,870

149,863

191,653

239,065

225,095

173,940

Selling, general and administrative expenses

147,242

151,179

162,940

162,155

155,953

132,145

Operating income (loss)

42,628(1,316)28,71376,91069,142

41,795

Net income (loss)

25,965(10,860)

11,72835,141

29,772

16,467

Capital expenditures

55,33459,27282,45050,53839,26941,724

Depreciation and amortization

50,276

51,42344,33437,45530,27930,551R&D expenses

37,09038,057

38,25636,22833,81927,040¥ 247,992¥ 238,755¥ 165,791¥ 157,741¥ 155,412¥ 113,240

275,780

284,408

284,118

259,927

253,819

246,219

1,354,278

1,352,439

1,399,771

1,378,770

1,357,980

1,284,085

Long-term debt, less current portion

254,447

270,110

181,933

138,766

165,754

157,057

Total net assets

297,433

283,053295,246

319,038

295,378

243,096

Earnings per share —basic¥15.5¥ (6.5)¥7.0¥ 21.1¥ 18.9¥ 11.2

Earnings per share —diluted

15.3

–

6.9

20.6

17.2

9.4

Cash dividends

3.0

3.0

3.0

5.0

5.0

3.0

178.0

169.5

176.8

191.1

178.0

156.1

Number of shares issued (millions)

1,670

1,670

1,670

1,670

1,660

1,558

Number of employees

32,70632,29732,26630,56329,211

28,922

Orders received¥1,270,652¥1,001,290¥1,540,590¥1,610,757¥1,592,688¥1,351,631

Order backlog

1,495,349

1,507,057

1,699,163

1,533,663

1,465,155

1,310,444

Operating results:

Financial position at year-end:
Working capital
Net property, plant and equipment
Total assets

Per share amounts (yen):

Net assets

Other data:

37

Management’s Discussion & Analysis

year increase of ¥43.9 billion, to ¥42.6 billion. The KHI Group also
returned to a net income position, with a ¥36.8 billion turnaroundfrom the previous fiscal year, to ¥25.9 billion.

OVERVIEW
In fiscal 2011, ended March 31, 2011, the Japanese economy
remained plagued by persistently sluggish conditions, and theenvironment in which Kawasaki Heavy Industries, Ltd. (KHI),
operates remained harsh, mainly because the yen appreciatedagainst most foreign currencies and prices for materials soared. In
addition, the Great East Japan Earthquake, which struck on March
11, 2011, deepened an underlying sense of uncertainty over the
direction that the domestic economy would take.
The world economy appears to have sustained gradual
recovery overall despite a slight slowdown in the robust growthof emerging markets. Nevertheless, a hazy economic outlook in
the United States and lingering financial system instability in some
European countries were risks of concern.
In this operating environment, most of the businesssegments of the KHI Group posted favorable results over theprevious fiscal year. The value of orders increased in all segments
except the Gas Turbine & Machinery and the Plant & Infrastructure
segments, and it increased in particular due to large orders for
the Rolling Stock and the Aerospace segments, which led tohigher order value overall. On the other hand, sales fell in somebusiness segments, but rallied in the end, thanks to better resultsfrom the Precision Machinery, the Motorcycle & Engine, the Gas
Turbine & Machinery, and the Aerospace segments. On the profit
front, some business segments came in lower year-on-year, but
the substantially improved loss position for the Motorcycle &Engine segment and the solid increase by the Precision Machinery
segment provided a major boost spurring the KHI Group to atremendous improvement in profits.
Consequently, on a consolidated basis, orders won by the
KHI Group in the fiscal year in review rebounded ¥269.3 billion
from the previous fiscal year to a value of ¥1,270.6 billion, and net
sales rose ¥53.4 billion to ¥1,226.9 billion. Also on a consolidated
basis, the KHI Group recorded operating income, bouncing backfrom an operating loss in the previous fiscal year, with a year-on-

Net Sales
As mentioned above, consolidated net sales rose ¥53.4 billion to¥1,226.9 billion.
The principal factors accounting for this increase werea) a ¥57.6 billion jump in Precision Machinery segment sales,
mainly owing to wider demand for hydraulic components forconstruction machinery and industrial robots for the manufactureof semiconductor production equipment; b) a ¥31.3 billion
improvement in Motorcycle & Engine segment sales, due todemand growth in Asian and other emerging countries and higher
sales in North America, paralleling progress in the liquidation ofexcess inventory; and c) an ¥11.3 billion gain in Gas Turbine &Machinery segment sales, primarily reflecting higher sales of gas
compression modules and diesel generator sets.
Overseas sales reached ¥668.8 billion. By region, sales inNorth America accounted for ¥236.5 billion; sales in Europe were
¥87.1 billion; sales in Asia outside Japan contributed ¥224.6 billion;
and sales in other areas added ¥120.4 billion. The ratio of overseas
sales to consolidated net sales grew 6.6 percentage points, to54.5%, compared with 47.8% in the previous fiscal year.
The following sections provide additional details regarding
consolidated performance by business segment. Please note that
operating income or loss includes intersegment transactions.

Ship & Offshore Structure
The Ship & Offshore Structure segment posted orders received
worth ¥78.9 billion, soaring ¥62.8 billion year-on-year, as a resultof an increase in newbuilding orders, including for 11 bulk carriers
and one submarine, compared with results in the previous fiscal
year, which stalled at just one newbuilding order overall. Sales

Net Sales

Sales by Industry Segment

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

0

07

09

10

11

40

20

16.5

10

Ship & Offshore Structure

Plant & Infrastructure

Rolling Stock

Motorcycle & Engine-10

Aerospace

Precision Machinery

Gas Turbine & Machinery

Other

7.3

-10.8

0

-20

25.9

16.0

11.7

19.1

30

35.1

10.7

1,226.9

1,173.4

1,501.108

1,338.6500

1,438.6

1,000

9.7

11.4

29.8

9.3

1,500

38

RESULTS OF OPERATIONS

07

08

09

10

11

Plant & Infrastructure

decreased ¥33.4 billion to ¥118.4 billion, owing to a decline insales of large vessels from the previous fiscal year. On the profit
front, the segment showed an operating loss of ¥1.0 billion, a ¥2.5
billion reversal from operating income in fiscal 2010, due to anincrease in provision for losses on construction contracts.

Orders received by the Plant & Infrastructure segment in the fiscal
year in review amounted to ¥119.9 billion, down ¥15.6 billion fromthe previous fiscal year, when orders received included a largescale overseas project. Despite sales of various types of plants
to domestic and overseas customers, sales declined ¥18.5 billion
to ¥89.0 billion. Operating income increased ¥0.3 billion to ¥8.2
billion, as a positive turn in revenue paralleling favorable progresson projects already under order covered the shortfall caused bylower sales.

Rolling Stock
Orders received by the Rolling Stock segment in the fiscal year inreview surged ¥120.8 billion from the previous fiscal year, to ¥187.1
billion, underpinned by favorable ordering activity overseas that
included subway cars for the Washington Metropolitan Area Transit
Authority. Sales fell ¥18.9 billion to ¥131.1 billion, mainly becauseof a drop in sales of rolling stock to overseas customers. Operating
income fell ¥0.5 billion to ¥8.1 billion, largely due to lower sales.

Motorcycle & Engine
Sales by the Motorcycle & Engine segment reached ¥234.4 billion
in the fiscal year in review, up ¥31.3 billion from the previous fiscal
year, mainly due to sales expansion in emerging markets. The
segment showed an operating loss of ¥4.9 billion. Despite adverse
circumstances, such as sharp yen appreciation and delayed
market recovery in developed countries, the segment succeededin reducing fixed costs and improved its marginal profit ratio
in addition to realizing an increase in sales, which led to a loss
position that was actually a vast improvement—¥22.0 billion
less—compared with the loss suffered in the previous fiscal year.

Aerospace
Orders received by the Aerospace segment in the fiscal year inreview rebounded ¥35.3 billion from the previous fiscal year to¥206.7 billion, reflecting an increase in orders for component
parts for such passenger aircraft as the Boeing 777 (B777) and
787 (B787). Sales also rallied, up ¥7.9 billion to ¥196.8 billion,
mainly due to higher sales to Japan’s Ministry of Defense (MOD)and to Boeing for component parts for the B787. Despite better
sales results, operating income retreated ¥0.7 billion to ¥3.0
billion, primarily because of the profit-eroding impact of yen
appreciation.

Note: Since production in this segment is carried out mainly in anticipation ofdemand, figures for orders and sales are the same.

Precision Machinery
Orders received by the Precision Machinery segment amounted to¥148.9 billion in the fiscal year in review, jumping ¥64.0 billion overthe previous fiscal year, thanks in large part to expanded orders forhydraulic components for the construction machinery market. Sales
jumped ¥57.6 billion to ¥140.3 billion, owing to the aforementioned
increase in sales of hydraulic components for the construction
machinery market and also because of higher sales of clean robots
used in the semiconductor industry. Operating income soared ¥18.9
billion to ¥22.3 billion, reflecting the favorable turn in revenues
underpinned by sales growth and expanded operating capacity.

Gas Turbine & Machinery
Orders received by the Gas Turbine & Machinery segment in thefiscal year in review came to ¥187.5 billion, down ¥38.6 billion,in contrast to large orders achieved in the previous fiscal year,
particularly for component parts for commercial aircraft jetengine components and gas compression modules. Sales edgedup ¥11.3 billion to ¥202.6 billion, mainly from higher sales of gas
compression modules and diesel generator sets. Operating income
climbed ¥0.6 billion to ¥9.5 billion, due to increased sales.

Net Income (Loss) per Share

Working Capital

Total Assets(Yen)(Billions of yen)(Billions of yen)

25

250

20

1,500

200

11

0

08

09

247.9

238.7

07

10

11

0

1,354.2

10

1,352.4

09

1,399.8

08

1,378.807500

1,358.0

-5

165.8

-6.5

50

157.7

100

0

-10

1,000

150

155.4

7.0

5

15.5

21.1

10

18.9

15

07

08

09

10

11

39

Management’s Discussion & Analysis

overshadowed by b) a ¥9.4 billion decrease in foreign exchange
gains, to ¥1.4 billion, and c) a ¥6.7 billion increase in impairment
losses, to ¥9.9 billion.
The significant improvement in operating income provideda ¥42.4 billion boost in income (loss) before income taxes andminority interests that brought the Company back into the blackat ¥38.5 billion. After deducting minority interests in net incomeof consolidated subsidiaries, the Company posted net income of¥25.9 billion, a ¥36.8 billion turnaround from the net loss recordedin the previous fiscal year. The ratio of net income to net sales
rebounded 3.0 percentage points, to 2.1%, from negative 0.9%.
ROE (calculated using average total shareholders’ equity) also
recovered, moving up 12.9 percentage points, to 9.1%, fromnegative 3.8% in the previous fiscal year.
Capital expenditures in the fiscal year in review amounted to¥55.3 billion, compared with ¥59.2 billion in the previous fiscal year.
R&D expenses were ¥37.0 billion, compared with ¥38.0 billion.

Other
Sales in this segment grew ¥16.1 billion from the previous fiscal
year, to ¥114.0 billion. Profitability improved, substantiated bya ¥3.6 billion turnaround from the operating loss posted in theprevious fiscal year to operating income of ¥2.5 billion in the fiscal
year in review.

Cost, Expenses, and Earnings
Cost of sales increased ¥13.4 billion from the previous fiscal yearto ¥1,037.0 billion. As a result, gross profit was held to a ¥40.0
billion increase, reaching ¥189.8 billion, and the gross profit
margin edged up 2.7 percentage points, to 15.4%, from 12.7% in
the previous fiscal year.
Selling, general and administrative expenses totaled¥147.2 billion, down ¥3.9 billion, largely reflecting a decreasein R&D expenses. With earnings of ¥43.9 billion, the KHI Group
returned to the black with operating income of ¥42.6 billion. The
principal factors supporting this positive turnaround included a)a significant improvement in profitability for the Motorcycle &Engine segment, which was able to increase sales despite sharp
yen appreciation while reducing fixed costs and improving its
marginal profit ratio; and b) a dramatic increase in earnings for
the Precision Machinery segment, largely due to a favorable
trend in profitability through sales growth and increased capacity
utilization. Consequently, the ratio of operating income to net
sales rebounded 3.5 percentage points, from negative 0.1% in theprevious fiscal year to 3.4% in the fiscal year in review.
Other income (expenses) showed net expenses of ¥4.0
billion, compared with net expenses of ¥2.5 billion in the previous
fiscal year. The principal reason for this change was an increasein “other, net,” to ¥10.8 billion, from ¥7.2 billion in the previous
fiscal year. This increase was primarily due to the fact that a) the
absence of certain expenses booked in the previous fiscal year,
namely, restructuring charges and provision for losses on legal
proceedings, at ¥7.6 billion and ¥6.9 billion, respectively, was

FINANCIAL CONDITION
Total assets at March 31, 2011, stood at ¥1,354.2 billion, up ¥1.8
billion from the previous fiscal year. Of this total, current assets
accounted for ¥951.7 billion, up ¥20.0 billion. The upward change isprimarily attributable to increases in deferred tax assets, Receivables:
Trade accompanying the booking of sales, and inventories
associated with work in progress. Investments and intangible andother assets was down ¥9.5 billion from the previous fiscal year, andnet property, plant and equipment was down ¥8.6 billion.
Liabilities decreased ¥12.5 billion to ¥1,056.8 billion. Principal
factors contributing to the change included an increase of ¥15.0
billion in provision for losses on construction contracts anddeclines of ¥18.7 billion in advances from customers and ¥8.6
billion in employees’ retirement and severance benefits.
Current liabilities amounted to ¥703.7 billion, up ¥10.8
billion, while total long-term liabilities reached ¥353.1 billion,
down ¥23.3 billion.

Total Net Assets

Net Assets per Share

Return on Equity(Billions of yen)

(Yen)

(%)

350

200

12
10

300

40

08

3.8

9.1

07

2

-3.8

0

50

50
0

4

11.4

178.0

169.5

176.8

191.1

297.4

283.0

295.2

319.0

295.4

100

100

178.0

6

200

11.1

250

150

8

150

-2

07

08

09

10

11

0

07

08

09

10

11

-4

09

10

11

Net assets rose ¥14.3 billion to ¥297.4 billion, mainly due tothe payment of dividends and the booking of net income.
The ratio of shareholders’ equity to total assets edged up 0.8
percentage point, to 21.3%, from 20.5% at the end of the previous
fiscal year. In addition, the net debt-to-equity ratio improved 10.1
percentage points from the previous fiscal year, moving from
142.3% to 132.1%.

CASH FLOWSNet cash provided by operating activities in fiscal 2011 amounted
to ¥81.9 billion, an increase of ¥51.7 billion over fiscal 2010.
Principal cash inflow items were depreciation and amortization of¥50.2 billion, an increase of ¥15.3 billion in provision for losses on
construction contracts, ¥9.9 billion in loss on impairment of fixed
assets, and an increase of ¥25.1 billion in trade payables. Principal
cash outflow items were an increase of ¥17.7 billion in inventories,
a decrease of ¥15.5 billion in advances from customers, and ¥13.2
billion in cash paid for income taxes.
Net cash used for investing activities came to ¥52.9 billion
in fiscal 2011, down ¥10.3 billion from fiscal 2010. The cash was
mainly used for the acquisition of property, plant and equipment.
Free cash flow, which is the net amount of cash fromoperating and investing activities, showed a net inflow of ¥28.9
billion in fiscal 2011, compared with a net outflow of ¥33.0 billion
in fiscal 2010.
Net cash used for financing activities was ¥18.8 billion in
fiscal 2011, a change of ¥54.7 billion from the net cash provided
by position in fiscal 2010. The cash was used primarily to repay
debt.
As a result, cash and cash equivalents at the end of fiscal
2011 were ¥44.6 billion, up ¥10.4 billion from the previous fiscal
year.

MANAGEMENT OF LIQUIDITY RISK(THE RISK THAT THE COMPANY DEFAULTS)

The Company manages liquidity risk through the timely
preparation and updating of financial plans by the Finance
Department, based on information from each businesssegment. Managing liquidity risk includes diversifying methodsof financing, adjusting financial periods of long- and shortterm debt based on the prevailing financing environment, andsecuring commitment lines (maximum financing amount of¥54.0 billion, same-day availability) and availability of issuingcommercial paper (maximum issuing amount of ¥120.0 billion).

MANAGEMENT INDICATORS
Seeking a level of profitability that meets the expectationsof investors, the Company has adopted before-tax return on
invested capital (ROIC), a management indicator that measures
how efficiently the Company uses its capital. To maximize ROIC,
the Company will strengthen its financial position through efforts
to increase profit and improve the efficiency of invested capital.
The Company uses the following formula to calculate ROIC.
Before-tax ROIC: The ratio of EBIT (earnings before
interest and taxes) to the sum of interest-bearing debt and total
shareholders’ equity. (Shareholders’ equity is defined as net assets
minus minority interests.)
ROIC calculated using this formula grew 5.7 percentage
points, from 0.2% in fiscal 2010 to 6.0% in fiscal 2011.

DIVIDENDS
The Company’s basic dividend policy is to continue to pay stable
cash dividends that are in line with performance, while giving
careful attention to increasing retained earnings to strengthen
and expand the KHI Group’s management base in preparation
for future growth.
The Company’s basic policy regarding cash dividends fromretained earnings is to pay dividends twice annually, an interim
dividend and a year-end dividend. The entities making final
decisions on dividends are the Board of Directors for the interim
dividend and the General Meeting of Shareholders for the yearend dividend.
While this remains the basic dividend policy, with regard to
the dividend for fiscal 2011, upon consideration of the outlook
for business performance, the level of retained earnings, andother factors, the decision was made to pay an annual dividend of¥3 per share (an interim dividend of ¥0 and a year-end dividendof ¥3) for fiscal 2011. Retained earnings after the dividend payout
are appropriated for investments in the Company’s businesses,
the repayment of borrowings, and other uses.
Please note that the Company’s Articles of Incorporation
provides for paying an interim dividend as stipulated in Article
454, Paragraph 5 of Japan’s Companies Act.

41

Consolidated Balance Sheets
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2011 and 2010

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

2011

2011

2010

ASSETS
Current assets:
Cash on hand and in banks (Note 19)¥

47,233¥34,745$568,045

Receivables:
Trade (Note 8)

401,753

400,264

4,831,665

Other

17,526

20,159210,775

Allowance for doubtful receivables(2,829)(2,424)(34,022)416,450

417,999

5,008,418

Merchandise and finished products

50,52856,807

607,672

Work in process

285,977

281,025

3,439,291

Raw materials and supplies

88,81780,392

1,068,154

425,322418,224

5,115,117

Deferred tax assets (Note 18)

35,88725,204

431,593

Other current assets

26,82735,506322,635

Total current assets

951,719

931,678

11,445,808

Land

64,10764,282

770,980

Buildings and structures

321,650

317,684

3,868,310

Machinery and equipment

517,554507,926

6,224,342

Construction in progress

12,651

9,744

152,146915,962

899,636

11,015,778

Accumulated depreciation(640,182)(615,228)(7,699,122)

Net property, plant and equipment

275,780

284,408

3,316,656

50,29153,285604,822

458

515

5,508

Deferred tax assets (Note 18)

47,19351,503

567,564

Goodwill and other intangible assets

19,24920,719231,497

Allowance for doubtful receivables(986)(1,270)(11,858)

Other (Note 8)

10,574

11,601

127,170

Total investments and intangible and other assets

126,779

136,353

1,524,703¥1,354,278¥1,352,439$16,287,167

Inventories:

Property, plant and equipment (Note 8):

Investments and intangible and other assets:
Investments in securities (Notes 6, 7 and 8)
Long-term loans

Total assets

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

42

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

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term debt and current portionof long-term debt (Note 8)
Trade payables (Note 8)
Advances from customers
Income taxes payable (Note 18)
Accrued bonuses
Provision for product warranties
Provision for losses on construction contracts (Note 9)
Provision for restructuring charges
Provision for losses on legal proceedings (Note 29)
Provision for environmental measures
Deferred tax liabilities (Note 18)
Asset retirement obligations
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion (Note 8)
Employees' retirement and severance benefits (Note 10)
Deferred tax liabilities (Note 18)
Provision for environmental measures
Provision for losses on legal proceedings (Note 29)
Asset retirement obligations
Other
Total long-term liabilities

2011

2010

2011

¥ 174,697
319,272
80,816
5,988
15,692
7,288
33,068
1,077
–
499
765
10
64,555¥ 158,799
302,739
99,532
4,833
14,202
6,640
17,991
6,326
5,165
778
859
–
75,059$ 2,100,986
3,839,711
971,93172,014
188,719
87,648397,690
12,952
–
6,001
9,200
120
776,372

703,727

692,923

8,463,344

254,447
80,556
3,990
3,333
5,868
440
4,484

270,110
89,240
2,526
3,713
6,706
–
4,168

3,060,096
968,803
47,98540,08470,571
5,291
53,928353,118

376,463

4,246,758

104,340
54,251
158,615

104,329
54,275
137,689

1,254,840
652,447
1,907,576(30)
317,176(552)
295,741(360)
3,814,503

3,876
(990)
(31,006)(28,120)
8,377

5,305
(162)
(23,803)(18,660)
5,972

46,614(11,906)(372,892)(338,184)
100,746

297,433

283,053

3,577,065¥1,354,278¥1,352,439$16,287,167

Contingent liabilities (Note 11)
Net assets (Note 12):
Shareholders' equity:
Common stock:
Authorized - 3,360,000,000 shares
Issued - 1,670,646,460 shares in 2011
- 1,669,629,122 shares in 2010
Capital surplus
Retained earnings
Treasury stock - 100,288 shares in 2011
- 1,780,388 shares in 2010
Total shareholders' equity
Accumulated other comprehensive income:Net unrealized gains on securities, net of tax
Deferred losses on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

43Consolidated Statements of Operations and Comprehensive Income
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011, 2010 and 2009

Consolidated Statements of Operations

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

2011

2010

2009

2011

¥1,226,949
1,037,079
189,870
147,242
42,628¥1,173,473
1,023,610
149,863
151,179(1,316)¥1,338,597
1,146,944
191,653
162,940
28,713$14,755,850
12,472,387
2,283,463
1,770,800
512,663

2,306

3,615

4,352

27,733

Interest expense
Other, net (Note 15)
Income (loss) before income taxes and minority interests

9,205(4,677)(10,867)
38,595

6,522(5,399)(7,243)(3,821)

8,709(6,658)(11,491)
23,625

110,703(56,247)(130,691)
464,161

Income taxes (Note 18)
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income (loss)(14,340)
3,503
27,758(1,793)¥ 25,965(8,805)2,822–(1,056)¥ (10,860)(16,783)
6,022–(1,136)
11,728(172,459)
42,128333,830(21,564)
312,266

Net sales
Cost of sales (Note 13)
Gross profit
Selling, general and administrative expenses (Note 14)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Equity in income of nonconsolidated
subsidiaries and affiliates¥$

U.S. dollars(Note 1)Yen

Per share amounts (Note 20)
Net income per share - basic
Net income per share - diluted
Cash dividends

¥

15.5
15.3
3.0

¥

(6.5)
–
3.0

¥

7.0
6.9
3.0

$

0.18
0.18
0.03

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

Consolidated Statements of Comprehensive Income
2011
Income before minority interests
Other comprehensive loss:
Net unrealized losses on securities
Deferred losses on hedges
Foreign currency translation adjustments¥

27,758

2010
¥

2011

2009
–

¥

–

$

333,830(1,437)(480)(5,422)

–
–
–

–
–
–

(17,282)(5,772)(65,209)

Total other comprehensive loss
Comprehensive income(2,167)(9,506)
18,252

–
–
–

–
–
–

(26,061)(114,324)
219,506

Comprehensive income attributable to:
Owners of the parent company
Minority interests

16,506
1,746

–
–

–
–

198,508
20,998

Share of other comprehensive loss of associates
accounted for using equity method

44

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

Consolidated Statements of Changes in Net Assets
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011, 2010 and 2009

Millions of yen

Thousands
Shareholders' equity

Balance at March 31, 2008
Net income for the year
Adjustments from translation offoreign currency financial statements
Decrease in net unrealized gains
on securities, net of tax
Treasury stock purchased, net
Cash dividends
Loss on sales of treasury stock
Other
Balance at March 31, 2009
Net loss for the year
Adjustments from translation offoreign currency financial statements
Increase in net unrealized gains
on securities, net of tax
Treasury stock purchased, net
Cash dividends
Loss on sales of treasury stock
Other
Balance at March 31, 2010
Net income for the year
Adjustments from translation offoreign currency financial statements
Decrease in net unrealized gains
on securities, net of tax
Treasury stock purchased, net
Cash dividends
Loss on sales of treasury stock
Conversion of convertible bonds
Other
Balance at March 31, 2011

Accumulated other comprehensive income

Net
Total
unrealized
Foreignaccumulated
othergains (losses) Deferredcurrency
on securities, gains (losses) translation comprehensive Minority
Total
incomenet of tax
on hedges adjustmentsinterests net assets

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders'equity1,669,629–¥104,329–¥54,291 ¥151,401–
11,728¥(460)–¥309,561
11,728¥10,292–¥5,217–¥(11,878)–¥ 3,631
–

–

–

–

–

–

–

–

–

(12,973)(12,973)–(12,973)

–

–

–

–

–

–

(7,152)––(7,152)–(7,152)––––
1,669,629
–

–
–
–
–
¥104,329––––(8,342)
(9)
–
–
(514)
¥54,282 ¥154,273– (10,860)

(8)
–
–
–
¥(468)–(8)(8,342)(9)(514)¥312,416(10,860)––––¥ 3,140––––(5,481)¥ (264)–––––¥(24,851)––––(5,481)¥(21,975)
–

–

–

–

–

–

–

–

–

1,048

1,048

–

1,048

–

–

–

–

–

–

2,165

–

–

2,165

–

2,165

–
–
–
–
1,669,629
–

–
–
–
–
¥104,329––––(5,004)
(7)
–
–
(720)
¥54,275 ¥137,689– 25,965

(107)
–
23
–
¥(552)–(107)(5,004)16(720)¥295,741
25,965––––¥ 5,305
–

–
–
–
102
¥ (162)–––––¥(23,803)
–

–
–
–
102
¥(18,660)
–

–

–

–

–

–

–

–

–

(7,203)(7,203)–(7,203)

–

–

–

–

–

–

(1,429)––(1,429)–(1,429)

–
–
–
1,017
–

–
–
–
11
–

–
–
(0)
(24)
–

–
(5,003)
–
(17)
(19)

(15)
–
1
536
–

(15)
(5,003)
1
506
(19)

–
–
–
–
–

–
–
–
–
(828)

–
–
–
–
–

–
–
–
–
(828)

–
–
–
–
2,405

(15)
(5,003)
1
506
1,558

1,670,646¥104,340¥54,251 ¥158,615¥ (30)¥317,176¥ 3,876¥ (990)¥(31,006)¥(28,120)$(224,413) $ 71,822 $3,404,126¥5,846 ¥319,038– 11,728–(8)–(8,342)–(9)(1,041) (7,036)¥4,805 ¥295,246– (10,860)

–
(107)
–
(5,004)
–
16
1,167
549
¥5,972 ¥283,053–
25,965¥8,377 ¥297,433

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2010

$1,254,708 $652,736 $1,655,911$(6,638)$3,556,717$63,800$ (1,948)$(286,265)

Net income for the year
Adjustments from translation offoreign currency financial statements
Decrease in net unrealized gains
on securities, net of tax––

312,266–

312,266

–

–

–

–

–

312,266

–

–

–

–

–

–

–

(86,627)(86,627)–(86,627)

–

–

–

–

–

(17,186)––(17,186)–(17,186)

Treasury stock purchased, net
Cash dividends
Loss on sales of treasury stock
Conversion of convertible bonds
Other
Balance at March 31, 2011

–
–
–
132
–

–
–
(0)
(289)
–

–
(60,168)
–
(204)
(229)

(180)
–
12
6,446
–

(180)
(60,168)
12
6,085
(229)

–
–
–
–
–

–
–
–
–
(9,958)

–
–
–
–
–

–
–
–
–
(9,958)––––28,924(180)(60,168)
12
6,085
18,737$1,254,840 $652,447 $1,907,576$ (360)$3,814,503$46,614$(11,906)$(372,892)$(338,184) $100,746 $3,577,065

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

45

Consolidated Statements of Cash FlowsKAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2011, 2010 and 2009

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

2011

2010

2009

2011

¥ 38,595¥ (3,821)¥ 23,625$ 464,161

Cash flows from operating activities:
Income (loss) before income taxes and minority interests
Adjustments to reconcile net income (loss) before income taxes andminority interests to net cash provided by (used for) operating
activities:
Depreciation and amortization

50,276

51,42344,334

604,642

Loss on impairment of fixed assets

9,923

3,132

1,399

119,338

Increase (decrease) in employees' retirement and severance benefits(8,159)

9,317

2,315

(98,123)

Increase (decrease) in accrued bonuses

1,489

(38)

(5,335)

17,907

514

(615)

(849)

6,181

Increase (decrease) in allowance for doubtful receivables

794(1,013)

1,162

9,549

Increase (decrease) in provision for losses on construction contracts

15,349(2,916)

12,202

184,594

Increase (decrease) in provision for restructuring charges

Increase (decrease) in provision for product warranties(5,249)6,326–(63,126)

Increase (decrease) in provision for losses on legal proceedings

(837)

4,461

5,165

(10,066)

Increase (decrease) in provision for environmental measures

(658)

510

1,812

(7,913)

Loss on disposal of inventories

1,336

1,992

2,382

16,067(0)(1,739)

(620)

(0)

1,577

32

1,875

18,965

Loss on sales of property, plant and equipment

552

784

164

6,638

Loss on contribution of securities to pension trust

–

–

4,492

–

Equity in income of nonconsolidated subsidiaries and affiliates(9,205)(6,522)(8,709)(110,703)

Interest and dividend income(2,306)(3,615)(4,352)(27,733)

Interest expense

4,677

5,399

6,658

56,247

Trade receivables

14,910(3,792)

5,398

179,314

Inventories(17,775)

56,241(54,709)(213,770)

8,590(2,966)(2,709)103,307

Trade payables

25,114(56,396)(55,077)

302,032

Advances from customers(15,552)(27,179)8,274(187,035)

Other current liabilities(206,325)

Gain on sales of marketable securities and investments in securities
Loss on valuation of securities

Changes in assets and liabilities:
Decrease (increase) in:

Other current assets
Increase (decrease) in:(17,156)

12,165(8,867)

Other, net

1,897

(406)

2,919

22,815

Subtotal

98,696

40,764(17,051)

1,186,963

Cash received for interest and dividends

6,407

7,698

8,926

77,053

Cash paid for interest(4,762)(5,408)(6,481)(57,269)

Cash paid for income taxes(13,245)(12,876)(25,064)(159,290)

Payment of levies(5,167)––(62,142)––(1,587)–

81,92930,178(41,257)

985,315

Cash paid for suspension of activities for participation in MotoGP
Net cash provided by (used for) operating activities46

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

2011

2010

2011

2009

Cash flows from investing activities:
Decrease (increase) in time deposits with maturities over three months(2,138)21

706(25,712)Acquisition of property, plant and equipment(47,408)(61,198)(68,059)(570,150)

616

993

2,903

7,408

Proceeds from sales of property, plant and equipment(4,886)(4,764)(6,400)(58,761)

Proceeds from sales of intangible assets

37

48

15

444

Acquisition of investments in securities

Acquisition of intangible assets

(350)

(123)

(3,043)(4,209)Proceeds from sales of investments in securities

12

1,913

1,796

144

Acquisition of investments in subsidiaries or affiliates–(1,331)(1,241)–

Decrease (increase) in short-term loans

287

518

(33)

3,451

Additions to long-term loans

(40)

(65)

(165)

(481)

Proceeds from collection of long-term loans

102

115

1,475

1,226

Other

826

596

(238)

9,936

(52,942)(63,277)(72,284)(636,704)

Increase (decrease) in short-term debt

(53,670)(21,463)

67,881(645,460)

Proceeds from long-term debt

44,00094,79373,551

529,164

Repayment of long-term debt

(4,836)(31,518)(25,017)(58,159)

Net cash used for investing activities
Cash flows from financing activities:

(14)

(90)

(17)

(168)

Proceeds from stock issuance to minority shareholders

1,209

230

–

14,539Cash dividends paid

(5,000)(5,004)(8,321)(60,132)

Cash dividends paid to minority shareholders

(476)

(741)

(362)

(5,724)

Other

(75)

(296)

(22)

(903)

(18,862)

35,911

107,693(226,843)

367

(89)

(907)

4,413

Net increase (decrease) in cash and cash equivalents

10,492

2,723(6,755)

126,181

Cash and cash equivalents at beginning of year

34,13731,414

38,169410,547¥ 44,629¥ 34,137¥ 31,414$ 536,728¥ 47,233¥ 34,745¥ 31,956$ 568,045

Acquisition of treasury stock

Net cash provided by (used for) financing activities
Effect of exchange rate changes

Cash and cash equivalents at end of year
Supplemental information on cash flows:
Cash and cash equivalents:
Cash on hand and in banks in the balance sheets
Time deposits with maturities over three months
Total (Note 19)(2,604)

(608)

(542)

(31,317)¥ 44,629¥ 34,137¥ 31,414$ 536,728

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

47

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

1. Basis of presenting consolidated financial statements
Kawasaki Heavy Industries, Ltd. (the "Company") and its consolidated domestic subsidiaries maintain their official accounting anddisclosure records in Japanese yen. The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity withaccounting principles generally accepted in Japan (Japanese GAAP), which are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting
principles prevailing in the respective countries of domicile. The accompanying consolidated financial statements have been restructured
and translated into English with some expanded descriptions and the inclusion of consolidated statements of changes in net assets fromthe 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 Financial Instruments and Exchange Law. Some supplementary information
included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in
the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2011, which was ¥83.15 to U.S. $1.00. The translations should not be construed as
representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or
any other rate of exchange.
Effective from the year ended March 31, 2010, the Company has adopted a new implementation guidance, "Guidance on determining a
subsidiary and an affiliate" (Financial Accounting Standard Implementation Guidance No. 22, issued by the Accounting Standards Board ofJapan (ASBJ) on May 13, 2008). This change did not have a material effect on net loss for the year ended March 31, 2010.

2. Significant accounting policies(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant companies over which theCompany has power of control through majority voting rights or the existence of certain other conditions evidencing control (together, the"Companies"). The consolidated financial statements include the accounts of the Company and 96 subsidiaries (97 in the years ended
March 31, 2010 and 2009). The aggregate amount of total assets, net sales, net income and retained earnings of these excluded
subsidiaries would not have had a material effect on the consolidated financial statements if they had been included in the consolidation.
(b) Application of the equity method of accounting
Investments in nonconsolidated subsidiaries and affiliates over which the Company has the ability to exercise significant influence over operating
and financial policies are accounted for by the equity method. For the year ended March 31, 2011, 14 affiliates (14 in 2010 and 12 in 2009) were
accounted for by the equity method. For the year ended March 31, 2011, investments in 14 affiliates (14 in 2010 and 14 in 2009) were stated atcost without applying the equity method of accounting. If the equity method had been applied for these investments, the net income andretained earnings of these excluded subsidiaries and affiliates would not have had a material effect on the consolidated financial statements.
(Adoption of accounting standards related to equity method accounting)
Effective from the fiscal year ended March 31, 2011, the Company and its consolidated subsidiaries have adopted a new accounting
standard, “Accounting Standard for Equity Method of Accounting for Investments” (Statement No. 16, issued by ASBJ on March 10, 2008)
and “Practical Issues on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method” (ASBJ Practical
Issues Task Force (PITF) No. 24, issued by ASBJ on March 10, 2008). The impact of this change on net income was minor.
(c) Consolidated subsidiaries' fiscal year-end
The fiscal year-end of 33 consolidated subsidiaries (31 in 2010 and 28 in 2009) is December 31. These subsidiaries are consolidated as of48

December 31, and significant transactions for the period between December 31 and March 31, the Company’s fiscal year-end, are adjusted
for on consolidation.
(d) Elimination of intercompany transactions and accounts
All significant intercompany transactions and accounts and unrealized intercompany profits are eliminated on consolidation, and the
portion attributable to minority interests is credited to minority interests. In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time theCompany acquired control of the respective subsidiary.
(e) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into Japanese yen at year-end rates. The balance sheets ofconsolidated overseas subsidiaries are translated into Japanese yen at year-end rates, except for shareholders’ equity accounts, which aretranslated at historical rates. The income statements of consolidated overseas subsidiaries are translated at average rates. The Company
and its domestic subsidiaries report foreign currency translation adjustments in net assets.
(f) Appropriations of retained earnings
Appropriations of retained earnings are recorded in the fiscal year in which the proposed appropriations are approved.
(g) Revenue recognition<Sales of products and construction contracts>
Prior to April 1, 2009, sales of products such as ships, rail cars, airplanes, machinery and motorcycles were principally recognized upondelivery. Contract revenue from the construction of plants, machinery, bridges, etc. was principally recognized on a customer acceptancebasis. When prices for components or contract amounts for nearly completed contracts were not finalized, sales and cost of sales were
estimated. The percentage-of-completion method was applied to long-term contracts such as those for ships, airplanes and plants
exceeding ¥3,000 million. The stage of completion was normally determined based on the proportion of costs incurred to date to theestimated total costs of the contract. The completed contract method was applied to long-term contracts not exceeding ¥3,000 million.
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries have adopted a new accounting standard,"Accounting Standard for Construction Contracts” (Statement No. 15, issued by ASBJ on December 27, 2007) and the "Guidance on
Accounting Standard for Construction Contracts” (Financial Accounting Standard Implementation Guidance No. 18, issued by ASBJ on
December 27, 2007). The new accounting standards require that the percentage-of-completion method be applied for construction
contracts commenced on and after April 1, 2009, if the outcome of the construction activity is deemed certain during the course of theactivity. Otherwise, the completed-contract method should be applied. As a result of this change, sales were ¥32,214 million more,
operating loss and loss before income tax and minority interests ¥3,088 million less, and recurring profit ¥3,088 million more for the year
ended March 31, 2010 than the amounts that would have been recorded with the previous standard.
<Service revenues>
Service revenues are recognized when the services are rendered. Services include supervisory and installation services for products such asrail cars, machinery and plants. When the prices of such services are individually determined by the contract and the collectability of therevenue is reasonably assured, the service revenue is recognized on an accrual basis. Otherwise, the service revenue is recognized on acompletion basis.
Sales and cost of sales in finance leases transactions are mainly recognized when the Company receives the lease payments.
(h) Cash and cash equivalents
Cash on hand, readily available deposits and short-term highly liquid and low risk investments with maturities not exceeding three months
at the time of purchase are considered to be cash and cash equivalents in preparing the consolidated statements of cash flows.
(i) Allowance for doubtful receivables
An allowance for possible losses from notes and accounts receivable, loans and other receivables is provided based on past experience andthe Companies' estimates of losses on collection.

49

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES( j) Inventories
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted a new accounting standard,"Accounting Standard for Measurement of Inventories" (Statement No. 9, issued by ASBJ on July 5, 2006), for the measurement of
inventories and stated the inventories at March 31, 2009 at the lower of cost determined principally by the specific identification cost
method, the moving average method and the first-in, first-out method or net realizable value. As a result of this change, operating income
and income before income taxes and minority interests for the year ended March 31, 2009 were ¥4,074 million less than the amounts thatwould have been recorded without the change.
(k) Assets and liabilities arising from derivative transactions
Assets and liabilities arising from derivative transactions are stated at fair value.
(l) Investments in securities
The Company and its consolidated subsidiaries classify securities as (a) debt securities intended to be held to maturity (hereafter, "held-tomaturity debt securities"), (b) equity securities issued by subsidiaries and affiliated companies and (c) all other securities (hereafter, "availablefor-sale securities"). There were no trading securities at March 31, 2011, 2010 or 2009. Held-to-maturity debt securities are stated mainly atamortized cost. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity
method are stated at moving average cost. Available-for-sale securities with available fair market values are stated at fair market value.
Unrealized gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of net assets.
Realized gains and losses on the sale of such securities are computed using moving average cost. Other securities with no available market
value are stated at moving average cost.
If the market value of held-to-maturity debt securities, equity securities issued by nonconsolidated subsidiaries or affiliated companies oravailable-for-sale securities declines significantly, such securities are stated at market value, and the difference between market value andthe carrying amount is recognized as loss in the period of the decline. If the market value of equity securities issued by nonconsolidated
subsidiaries and affiliated companies not subject to the equity method is not readily available, such securities should be written down to
net asset value with a corresponding charge in the statements of income in the event net asset value declines significantly. In these cases,
the market value or the net asset value will be the carrying amount of the securities at the beginning of the next year.
(m) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is mainly computed on a declining balance basis over the estimated useful life of
the asset. Depreciation of buildings acquired after April 1998 in Japan is computed on a straight-line basis over the building’s estimated useful life.
(n) Intangible assets
Amortization of intangible assets, including software for the Company’s own use, is computed by the straight-line method over theestimated useful life of the asset.
Goodwill is amortized on a straight-line basis over the period the Company benefits from its use. If the amount is not significant, it isexpensed when incurred.
(o) Accrued bonuses
Accrued bonuses for employees are provided for based on the estimated amount of payment.
(p) Provision for product warranties
The provision for product warranties is based on past experience and provided separately when it can be reasonably estimated.
(q) Provision for losses on construction contracts
A provision for losses on construction contracts at the fiscal year-end is made when substantial losses are anticipated for the next fiscal year
and beyond and such losses can be reasonably estimated.
(r) Provision for restructuring charges
The provision for restructuring charges is based on the estimated charges for restructuring in the Motorcycle & Engine business in North America.

50

(s) Provision for losses on legal proceedings
The Provision for losses for legal proceedings for which the company is a defendant suit is provided based on estimates of expectedcompensation and other associated expenses.
(t) Provision for environmental measures
The Company reserved an estimated amount to cover expenditures for environmental measures such as the disposal of PCB waste required underthe “Law Concerning Special Measures for Promotion of Appropriate Disposal of PCB (poly chlorinated biphenyl) Waste” and soil improvement.
(u) Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for loss carryforwards and the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and theamounts used for income tax purposes.
(v) Employees’ retirement and severance benefits
Employees who terminate their services with the Company and its consolidated domestic subsidiaries are generally entitled to lump-sum
payments, the amounts of which are determined by reference to basic rates of pay at the time of termination and length of service.
The liabilities and expenses for retirement and severance benefits are determined based on amounts actuarially calculated using certain
assumptions. The Company and its consolidated domestic subsidiaries provide the allowance for employees’ retirement and severance benefits
based on the estimated amounts of projected benefit obligation and the fair value of plan assets (including the retirement benefit trust).
The excess of the projected benefit obligation over liabilities for retirement and severance benefits recorded as of April 1, 2000 (the "nettransition obligation") is being recognized in expenses in equal amounts primarily over 10 years commencing with the year ended March
31, 2001. Actuarial gains and losses and prior service costs are recognized in expenses in equal amounts primarily over 10 years
commencing with the following period and the current period, respectively.
Employees of the Company's overseas consolidated subsidiaries are generally covered by various pension plans accounted for inaccordance with generally accepted accounting principles in the respective country of domicile.
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries have adopted a new accounting standard,"Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)" (Statement No. 19, issued by ASBJ on July 31, 2008). Thischange did not have any effect on net loss for the year ended March 31, 2010.
(w) Hedge accounting
The Company and its consolidated subsidiaries employ deferred hedge accounting. If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Company and its consolidated subsidiaries defer recognition of gain or loss resulting from a change
in the fair value of the derivative financial instrument until the related loss or gain on the hedged item is recognized.
(x) Finance leases
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted a new accounting standard,"Accounting Standard for Lease Transactions" (Statement No. 13, issued by ASBJ on March 30, 2007), and the "Guidance on AccountingStandard for Lease Transactions" (Financial Accounting Standard Implementation Guidance No. 16, issued by ASBJ on March 30, 2007) for
finance leases commencing after March 31, 2008. The new accounting standards require that all finance lease transactions be treated ascapital leases and that the Company and its consolidated subsidiaries capitalize assets under such leases, except for certain immaterial or
short-term finance leases accounted for as operating leases. As permitted, finance leases which commenced prior to April 1, 2008 and havebeen accounted for as operating leases, continue to be accounted for as operating leases, with the disclosure of certain “as if capitalized”
information. This change had no significant effect on net income for the year ended March 31, 2009.
Leased assets under finance leases that transfer ownership of the lease assets to the lessee are amortized by the same method as that used
for property, plant and equipment or intangible assets. Lease assets under finance leases that do not transfer ownership to the lessee areamortized by the straight-line-method over the lease term with zero residual value.

51

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(y) Net income per share
The computations of net income per share shown in the consolidated statements of operations are based upon net income available tocommon stockholders and the weighted average number of shares outstanding during each period. Diluted net income per share iscomputed based on the assumption that all dilutive convertible bonds were converted at the beginning of the year.
(z) Cash dividends
Per share amounts of cash dividends for each period represent dividends declared as applicable to the respective year.
(aa) Accounting changes in methods of depreciation
In the year ended March 31, 2009, the Company and its consolidated domestic subsidiaries reviewed and changed the useful life of certain
machinery and equipment in accordance with a revision of the Tax Law. As a result of this change, operating income and income before
income taxes and minority interests for the year ended March 31, 2009 were ¥1,690 million less than they would have been without thechange.
(bb) Application of Practical Solutions on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted "Practical Solutions on
Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (ASBJ PITF No. 18, May 17, 2006).
This change had no impact on net income for the fiscal year ended March 31, 2009.

3. Changes in accounting policies(a) Application of Accounting Standard for Asset Retirement Obligations
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries have adopted “Accounting Standard for
Asset Retirement Obligations” (Statement No. 18, issued by ASBJ on March 31, 2008) and the “Guidance on Accounting Standard for Asset
Retirement Obligations” (Guidance No. 21, issued by ASBJ on March 31, 2008). As a result of this change, operating income was ¥16 million($192 thousand) less and income before income taxes ¥313 million ($3,764 thousand) less than the amounts that would have beenrecorded without the change.
(b) Application of Accounting Standard for Business Combinations
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries adopted “Accounting Standard for Business
Combinations” (Statement No. 21, issued by ASBJ on December 26, 2008), “Accounting Standard for Consolidated Financial Statements”(Statement No. 22, issued by ASBJ on December 26, 2008), “Amendments to Accounting Standard for Research and Development Costs”(Statement No. 23, issued by ASBJ on December 26, 2008), “Revised Accounting Standard for Business Divestitures” (Statement No. 7,
issued by ASBJ on December 26, 2008), “Revised Accounting Standard for Equity Method of Accounting for Investments” (Statement No.
16, issued by ASBJ on December 26, 2008), and “Revised Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (Guidance No. 10, issued by ASBJ on December 26, 2008).

4. Change in presentation
Effective from the year ended March 31, 2011, the Company and its consolidated subsidiaries adopted the Cabinet Office Ordinance, which
partially amended the regulations on consolidated financial statements (Cabinet Office Ordinance No. 5, March 24, 2009), based on“Accounting Standard for Consolidated Financial Statements” (Statement No. 22, issued by ASBJ on December 26, 2006). As a result, in thefinancial statements for the year ended March 31, 2011, “Income before minority interests” is presented in the consolidated statements ofoperations.

52

5. Additional information(a) Revision of accounting treatment for the liquidation of claims accompanying the application of Accounting Standards
Codification (ASC) Topic 860 Transfers and Servicing
Effective from the year ended March 31, 2011 and accompanying the adoption of ASC Topic 860 Transfers and Servicing, Kawasaki Motors
Corp., U.S.A. and other subsidiaries of the Company in the United States have revised their accounting treatment for the transfers offinancial assets. As a result, the Consolidated Balance Sheets for the fiscal year ended March 31, 2011, includes U.S. $343 million (¥28,520
million) of additional Receivables: Trade and Short-term debt.
Since this change had no substantive impact on cash flow, the impact is excluded from the consolidated statements of cash flow for theyear ended Mach 31, 2011.
(b) Application of Accounting Standard for Presentation of Comprehensive Income
Effective from the fiscal year ended March 31, 2011, the Company and its consolidated subsidiaries have adopted “Accounting Standard for
Presentation of Comprehensive Income” (Statement No. 25, issued by ASBJ on June 30, 2010). However, amounts for “Accumulated othercomprehensive income” and “Total accumulated comprehensive income” in previous fiscal years are currently stated in the amounts for“Valuation difference on available-for-sale securities,” “Deferred gains or losses on hedges” and “Foreign currency translation adjustment.”(c) Application of Disclosures about Fair Value of Investment and Rental Property
Effective from the year ended March, 31 2010, the Company and its consolidated subsidiaries have adopted a new accounting standard,"Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (Statement No. 20, issued by ASBJ on November
28, 2008), and the "Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (the FinanceAccounting Standard Implementation Guidance No. 23, issued by ASBJ on November 28, 2008). With the application of the new
accounting standards, there were no significant investments or rental properties for which the fair value was required to be disclosed forthe year ended March 31, 2010.

6. Securities(a) Book values and market values of held-to-maturity securities with available market values as of March 31, 2011 and 2010 were as
follows:
Millions of yen

Market values not exceeding book values:
Bonds

Thousands of U.S. dollars

Book valueMarket value

2011
Unrealized losses

¥406

¥394

¥(12)

Unrealized losses$(144)

Millions of yen

Market values exceeding book values:
Bonds

Book value

2010
Market value

¥300

¥305

Unrealized gains
¥

5

53

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(b) Acquisition costs and book values (market values) of available-for-sale securities with available market values as of March 31, 2011
and 2010 were as follows:
Millions of yen

Thousands of U.S. dollars

Acquisition cost

Book value

2011
Unrealized gains(losses)¥5,972¥13,606¥7,634

Securities with book values exceeding acquisition costs:
Equity securities

Unrealized gains(losses)$91,809

Other securities:
Equity securities

3,642

2,527

(1,115)(13,409)

Total¥9,614¥16,133¥6,519$78,400

Millions of yen

2010
Acquisition cost

Book value

Unrealized gains(losses)

Securities with book values exceeding acquisition costs:
Equity securities¥6,138¥15,566¥9,428Other securities:
Equity securities

3,421

3,142

(279)

Total

¥9,559¥18,708¥9,149(c) Sales amounts of available-for-sale securities and related realized gains and losses for the years ended March 31, 2011, 2010 and 2009were as follows:
Millions of yen

Sales amounts
Equity securities¥

3

Thousands of U.S. dollars

Gains

Losses

¥

¥

1

(0)

2011

Sales amounts

Gains

Losses

$36

$12

$(0)

Millions of yen

Equity securities

Sales amounts

2010
Gains

Losses¥1,913¥1,793¥(52)

Millions of yen

Equity securities

Sales amounts

2009
Gains

Losses¥1,397

¥ 886

¥(34)

(d) Investments in securities subject to impairment
Impairment loss on investments in securities is recognized when these has been a significant decline in the market value.
Investments in securities for which market value as of the end of the fiscal year, has fallen to below 50% of the acquisition costs are deemed tohave no recovery potential and are to be fully impaired. Investments in securities for which market value has fallen to between 30% and 50%of the acquisition costs are deemed to be partially impaired by an appropriate amount after taking into consideration the likelihood ofrecovery and other factors. In the years ended March 31, 2011 and 2010, the Company recognized a loss from impairment of investments insecurities (available-for-sale equity securities) in the amount of ¥1,577 million ($18,965 thousand) and ¥32 million, respectively.

54

7. Investments in nonconsolidated subsidiaries and affiliates
Investments in nonconsolidated subsidiaries and affiliates as of March 31, 2011 and 2010 were ¥25,649 million ($308,466 thousand) and¥24,835 million, respectively.

8. Short-term debt and long-term debt
Short-term debt and long-term debt as of March 31, 2011 and 2010 comprised the following:
Millions of yen

Thousands of U.S. dollars

2011

2010

2011

Short-term debt, principally bank loans, bearing average interest rates
of 0.78 percent and 0.93 percent as of March 31, 2011 and 2010,
respectively¥114,497¥152,801$1,376,994

Current portion of long-term debt, bearing average interest rates of 0.80
percent and 1.32 percent as of March 31, 2011 and 2010, respectively

59,9585,290

721,082

242

708

2,910

¥174,697¥158,799$2,100,986¥233,277¥214,174$2,805,496

1.52~1.60 percent notes due in 2011

20,00020,000240,5290.81 percent notes due in 2012

10,00010,000120,264

1.84 percent notes due in 2013

10,00010,000120,264

0.72~1.22 percent notes due in 2015

20,00010,000240,5291.06 percent notes due in 2017

10,000–120,2641.00 percent convertible bonds due in 2011

7,038

7,038

84,643

Zero coupon convertible bonds due in 2010

–

477

–

Zero coupon convertible bonds due in 2011

3,445

3,475

41,432887

944

10,667

314,647

276,108

3,784,088(60,200)(5,998)(723,992)¥254,447¥270,110$3,060,096

Short-term debt:

Lease obligations, current
Total short-term debt
Long-term debt:
Loans from banks and other financial institutions, partly secured by
mortgage or other collateral, due from 2009 to 2035, bearing averageinterest rates of 0.90 percent and 0.63 percent as of March 31, 2011 and2010, respectively
Notes and bonds issued by the Company:

Long-term lease obligations

Less portion due within one year
Total long-term debt

As of March 31, 2011, convertible bonds due in 2011 were convertible into shares of common stock at the option of the holder at prices of¥598 ($7.19), and ¥230.3 ($2.76) per share. The conversion prices are subject to adjustments under specified conditions.

55

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2011 and 2010, the following assets were pledged as collateral for short-term debt and long-term debt:
Millions of yen

2011
Receivables: Trade¥40,453

Buildings and Structures

Thousands of U.S. dollars

2011

2010
–

$486,507

4,222

4,482

50,775

6

291

72

Land

¥

Investments in securities

420

300

5,051

Other

13

13

156

Total

¥45,114¥5,086$542,561

Accompanying the adoption of ASC, Topic 860 Transfers and Servicing, Kawasaki Motors Corp., U.S.A. and other subsidiaries of the Company
in the United States have revised their accounting treatment for transfers of financial assets. As a result, assets were pledged as collateral forthe fiscal year ended March 31, 2011 includes ¥40,453 million ($486,507 thousand) of Receivables: Trade. And debts secured by the above
pledged assets were U.S. $343 million (¥28,520 million) of Short-term debt.
In addition to the items shown above, the Company has pledged (on a long-term basis) shares of an affiliate company eliminated from thescope of consolidation in the amount of ¥30 million ($360 thousand).

As of March 31, 2011 and 2010, debt secured by the above pledged assets were as follows:
Millions of yen

2011
Trade payables¥

507

Thousands of U.S. dollars

2011

2010
¥ 34

$

6,097

Short-term and long-term debt

29,033

715

349,164

Total¥29,540¥749$355,261

Millions of yen

Thousands of U.S. dollars

2012¥ 60,200$ 723,992

2013

34,610416,235

2014

68,522824,077

2015

84,973

1,021,925

The aggregate annual maturities of long-term debt as of March 31, 2011 were as follows:Year ending March 31,

2016 and thereafter
Total

66,342

797,859¥314,647$3,784,088

9. Provision for losses on construction contracts
Inventories for construction contracts with anticipated substantial losses and the provision for losses on construction contracts were notoffset. As of March 31, 2011 and 2010, the inventories for the construction contracts for which the provision for losses on construction
contracts was provided were ¥12,493 million ($150,246 thousand) and ¥12,485 million, respectively. These amounts were all included inwork in process.

56

10. Employees' retirement and severance benefits
The liability for employees' retirement and severance benefits included in the long-term liability section of the consolidated balance sheets
as of March 31, 2011 and 2010 consisted of the following:
Millions of yen

Projected benefit obligation

Thousands of U.S. dollars

2011

2010

2011

¥(178,101)¥(183,229)$(2,141,923)

67,005

77,916805,832

Fair value of plan assets
Unrecognized prior service costs(7,199)(9,605)(86,578)

Unrecognized actuarial gains and losses

41,52529,004499,398(3,786)(3,326)(45,532)¥ (80,556)¥ (89,240)$ (968,803)

Prepaid pension cost
Liability for retirement and severance benefits

Retirement and severance benefit expenses in the consolidated statements of operations for the years ended March 31, 2011, 2010 and2009 comprised the following:
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Service costs - benefits earned during the year

¥ 9,338¥ 9,274¥ 8,497$112,303Interest cost on projected benefit obligation

3,821

3,945

4,745

45,953

Expected return on plan assets(1,046)(871)(1,250)(12,579)

Amortization of prior service costs(2,304)(2,265)(2,266)(27,708)

Amortization of actuarial gains and losses

3,849

4,978

(137)

46,289Amortization of net transition obligation–

12,342

12,784–Contribution to the defined contribution pension plans
Retirement and severance benefit expenses

667

614

598

8,021

¥14,325¥28,017¥22,971$172,279

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

Discount rate

2011

2010

2009

mainly 2.0%

mainly 2.0%

mainly 2.0%

3.0 to 3.5%

3.0 to 3.5%

3.0 to 3.5%

Expected rate of return on plan assets(For the Company and consolidated domestic subsidiaries)(For consolidated overseas subsidiaries)

6.64 to 7.75%

5.67 to 7.75%

7.75%

Amortization period for prior service costs

mainly 10 years

mainly 10 years

mainly 10 years

Amortization period for actuarial gains and losses

mainly 10 years

mainly 10 years

mainly 10 years

Amortization period for transition obligation–

mainly 10 years

mainly 10 years

57Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

11. Contingent liabilities
Contingent liabilities as of March 31, 2011 and 2010 were as follows:
Millions of yen

As guarantor of indebtedness of employees, nonconsolidated subsidiaries,
affiliates and others

Thousands of U.S. dollars

2011

2010

2011

¥33,409¥34,409$401,791

12. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, acompany may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares asadditional paid-in capital, which is included in capital surplus. Under the Japanese Corporate Law (“The Law“), if a dividend distribution of
surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of
additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings
reserve is included in retained earnings in the accompanying consolidated balance sheets. Under the Law, legal earnings reserve andadditional paid-in capital can be used to eliminate or reduce a deficit, or capitalized by a resolution of the shareholders' meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital andall legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of
the Company in accordance with Japanese laws and regulations.

13. Cost of sales
The ending balance of inventories was measured at the lower of cost or market, and the gain on the valuation of inventories included in
the cost of sales for the year ended March 31, 2011 was ¥49 million ($589 thousand) and the loss on the valuation of inventories includedin the cost of sales for the year ended March 31 2010 was ¥297 million.
Provision for losses on construction contracts included in the cost of sales for the years ended March 31, 2011 and 2010 were ¥20,948
million ($251,930 thousand) and ¥8,270 million, respectively.

14. Research and development expenses
Research and development expenses included in selling, general and administrative expenses and product costs were as follows:
Millions of yen

Research and development expenses

58

Thousands of U.S. dollars

2011

2010

2009

2011

¥37,090¥38,057¥38,256$446,061

15. "Other, net" in "Other income (expenses)""Other, net" in “other income (expenses)" in the consolidated statements of operations for the years ended March 31, 2011, 2010, and 2009
comprised the following:
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

¥ 1,491¥10,955¥ 10,373$ 17,931

Gain on sales of marketable securities and investments
in securities

0

1,739

620

0

Reversal of provision for environmental measures (a)

–

1,077

–

–

Reversal of allowance for doubtful receivables foraffiliates (b)

–

460

–

–

Foreign exchange gain, net

–

–

594

–

Loss on impairment of fixed assets (d)(9,923)(3,132)(1,399)(119,338)

Loss on valuation of securities(1,577)(32)(1,875)(18,965)

Provision for doubtful receivables of affiliates (e)

(325)

–

–

(3,908)Loss on adjustment for changes of accounting standard
for asset retirement obligations

(291)

–

–

(3,499)Gain on sales of businesses (c)Restructuring charges (f)–(7,648)––Loss on legal proceedings (g)–(6,983)(5,165)–

Loss on environmental measures (h)–(1,489)(1,812)–

Loss on liquidation of subsidiary (i)

–

(399)

–

–

Loss on contribution of securities to the pension trust ( j)––(4,492)–

Loss on suspension of activities for participation inMoto GP
Other, net
Total

–

–

(2,818)–(242)(1,791)(5,517)(2,912)¥(10,867)¥(7,243)¥(11,491)$(130,691)(a) "Reversal of provision for environmental measures" is due to the re-estimation of expenses for the environmental measures.
(b) "Reversal of allowance for doubtful receivables for affiliates" is due to the collection on loans for Shanghai COSCO Kawasaki Heavy
Industries Steel Structure Co., Ltd., an affiliate of the Company.
(c) "Gain on sales of business" is attributable to the transfer of the golf course operation business of Kawasaki Life Corporation, a
consolidated subsidiary of the Company.
(d) Loss on impairment of fixed assets
Because the profitability or market prices of some asset groups declined, the Company and its consolidated subsidiaries reduced thebook value of certain assets to the recoverable amounts. Assets are grouped mainly by units of business. However, significant assets forrent or those which are idle are treated separately. Recoverable amounts were determined by net sales value or value in use, and net
sales value was estimated by appraisal or property tax assessment.
Asset groups for which the Company and its subsidiaries recognized impairment loss for the year ended March 31, 2011 were as follows(the value in use was determined by discounted cash flow applying a discount rate of 4.0%.):Function or status

Location

Type of assets

Operating property

Akashi City, Hyogo

Buildings and structures, machinery and equipment, etc.

Operating property

Chuo-Ku, Kobe

Buildings and structures, machinery and equipment, etc.

59Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

Impairment loss for the year ended March 31, 2011 consisted of the following:
Millions of yen

Thousands of U.S. dollars

Buildings and structures¥3,731$ 44,870

Machinery and equipment

2,300

27,660

Other

3,892

46,808Total¥9,923$119,338

Asset groups for which the Company and its subsidiaries recognized impairment loss for the year ended March 31, 2010 were as follows(the value in use was determined by discounted cash flow applying a discount rate of 5.0%.):Function or status

Location

Type of assets

Operating property

Inami-cho, Kako-gun, Hyogo

Buildings and structures, machinery and equipment, etc.

Operating property

Yokkaichi City, Mie

Buildings and structures, machinery and equipment, etc.

Impairment loss for the year ended March 31, 2010 consisted of the following:
Millions of yen

Buildings and structures¥1,199Machinery and equipment

1,556

Other

377

Total

¥3,132

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

Location

Type of assets

Operating property

Sodegaura City, Chiba

Machinery and equipment, etc.

Impairment loss for the year ended March 31, 2009 consisted of the following:
Millions of yen

Machinery and equipment, etc¥1,399(e) “Provision for doubtful receivables for affiliates” is an allowance for doubtful receivables to Tonfang Kawasaki Air–Conditioning Co.,
Ltd., an affiliate of the Company.
(f) "Restructuring charges” is the sum of the estimated ¥6,327 million for the liquidation of excess inventories in the Motorcycle &Engine business in North America and early retirement expenses of ¥1,321 million of the subsidiaries of the business.
(g) "Loss on damages suit" is a provision for compensation in the event the Company is required to pay monetary damages inconnection with a legal action.
(h) "Loss on environmental measures" is a provision for the disposal of PCB waste in accordance with the "Law Concerning Special
Measures for Promotion of Appropriate Disposal of PCB (polychlorinated biphenyl) Waste" and soil improvement.
(i) "Loss on liquidation of subsidiary" is due to liquidation expenses of Kawasaki Oita Manufacturing Co., Ltd., a consolidated subsidiaryof the Company.
( j) "Loss on contribution of securities to the pension trust" resulted from additional contributions of investment securities to thepension trust.

60

16. Consolidated statement of comprehensive income
Comprehensive income (loss) for the year ended March 31, 2010 was as follows:

Millions of yen

Thousands of U.S. dollars

2010

2010

Attributable to shareholders’ of the parent company
Attributable to minority interests¥(7,545)
2,081$(90,739)
25,027

Total¥(5,464)$(65,712)

Millions of yen

Thousands of U.S. dollars

2010

2010

Net unrealized gains on securities, net of tax
Deterred gains on hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using equity method¥2,216833$26,651
10,018860
431

10,342
5,183

Total

¥4,340$52,194

Other comprehensive income for the year ended March 31, 2010 was as follows:

17. Dividends(a) Dividends paid
Year ended March 31, 2011
Resolution

Kind of shares

June 25, 2010
General Meeting of
the Shareholders

Common stock

Total amount ofdividends paid

Dividends per share

Date of record

Effective date

¥5,003 million($60,168 thousand)¥3.0($0.03)

March 31, 2010

June 28, 2010

Year ended March 31, 2010
Resolution

Kind of shares

Total amount ofdividends paid

June 25, 2009
General Meeting of
the Shareholders

Common stock¥5,004 million

Dividends per share

Date of record

Effective date

¥3.0

March 31, 2009

June 26, 2009(b) Dividend payments for which the record date is the subject fiscal year, but have an effective date in the succeeding consolidated fiscal year
Year ended March 31, 2011
Resolution

Kind of shares

Source of dividends

June 28, 2011
General Meeting of
the Shareholders

Commonstock

Retainedearnings

Total amount ofdividends paid

Dividends per share

Date of record

Effective date

¥3.0($0.03)

March 31, 2011

June 29, 2011

Total amount ofdividends paid

Dividends per share

Date of record

Effective date

¥5,003 million¥3.0

March 31, 2010

June 28, 2010

¥5,011 million($60,264
thousand)Year ended March 31, 2010

Resolution

Kind of shares

Source of dividends

June 25, 2010
General Meeting of
the Shareholders

Commonstock

Retainedearnings

61

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

18. Income taxes
Income taxes in Japan applicable to the Company and its consolidated domestic subsidiaries consist of corporation tax (national tax) andenterprise and inhabitants taxes (local taxes) ,which, in the aggregate, resulted in a statutory tax rate of approximately 40.5 percent foreach of the years ended March 31, 2011 and 2010.
The significant differences between the statutory and effective tax rates for the year ended March 31, 2010 were not disclosed because theCompany posted a loss. The differences for the year ended March 31, 2011 were as follows:
2011
Statutory tax rate

40.5%

Valuation allowance(14.5)

Equity in income of nonconsolidated subsidiaries and affiliates

(9.5)
7.3

Organization restructuring

7.9

Dividend from overseas consolidated subsidiaries

(3.7)

Other

28.0%

Effective tax rateSignificant components of deferred tax assets and liabilities as of March 31, 2011 and 2010 were as follows:
Millions of yen

2011

Thousands of U.S. dollars

2011

2010

Deferred tax assets:
Accrued bonuses
Retirement benefits
Allowance for doubtful receivables

¥

7,049

¥

6,222

$

84,774

43,104

46,401

518,388

675

1,278

8,117

Inventories – elimination of intercompany profits

182

151

2,188

Fixed assets – elimination of intercompany profits

448

399

5,387

Depreciation

6,058

1,851

72,856

Net operating loss carryforwards

6,950

9,917

83,583

Unrealized loss on marketable securities, investments in securities and other

4,224

3,432

50,799Provision for losses on construction contracts

11,301

6,084

135,91128,76034,237345,886

Gross deferred tax assets

108,751

109,972

1,307,889

Less valuation allowance(16,437)(22,949)(197,679)

Total deferred tax assets

92,31487,023

1,110,210

Other

Deferred tax liabilities:
Deferral of gain on sale of fixed assets

5,610

5,601

67,468Net unrealized gain on securities

2,363

3,562

28,418

Other
Total deferred tax liabilities
Net deferred tax assets

62

6,016

4,538

72,352

13,98913,701

168,238¥ 78,325¥ 73,322$ 941,972

19. Cash and cash equivalents
Cash and cash equivalents reconciled to the accounts reported in the consolidated balance sheets in the years ended March 31, 2011, 2010
and 2009 were as follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Cash on hand and in banks¥47,233¥34,745¥31,956$568,045

Time deposits with maturities over three months(2,604)

(608)

(542)

(31,317)

Total¥44,629¥34,137¥31,414$536,728

20. Net income per share
Per share amount for the years ended March 31, 2011, 2010 and 2009 are set forth in the table below. While there were residual securities,
a diluted net income per share for the year ended March 31, 2010 was not disclosed because the Company posted a loss.
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Basic net income per share:
Net income (loss)¥25,965¥(10,860)¥11,728$312,266

Net income (loss) allocated to common stock

25,965(10,860)

11,728312,266

Weighted average number of shares of common stock

1,669

Number of shares in millions

1,668

1,668

Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Net income adjustment

¥ 44

¥–

¥ 77

$ 529

(Interest expenses, etc.)

(44)

(–)

(77)

(529)

Diluted net income per share

Number of shares in millions

28

–

35

(Convertible bonds)

(11)

(–)

(18)

(Zero coupon convertible bonds)

(17)

(–)

(17)

Increase in shares of common stocks

63

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

21. Derivative transactions(a) Outstanding positions and recognized gains and losses at March 31, 2011 were as follows:(Derivative transactions to which the Company did not apply hedge accounting)Millions of yen

Thousands of U.S. dollars

Contract
amountContract amountover 1 year

Fair
value

Gain
(loss)

Gain(loss)¥ 48,551¥–¥1,009¥1,009$12,134

1,247

–

(20)

(20)

(240)

(1,334)(315)(3,789)Currency related contracts:
Foreign exchange contracts:
To sell
To purchase–

Option contracts:
To sell
To purchaseTotal

67,223–64,642–¥181,663

¥–

¥

369

(171)

(2,056)24¥ 503$ 6,049

Fair value is based on prices provided by financial institutions.

(Derivative transactions to which the Company applied hedge accounting)Millions of yen
Subject of hedge

Contract
amountContract amountover 1 year

Fair
value

Deferral hedge accounting:Foreign exchange contracts
To sellReceivables:
Trade¥22,301¥299¥ (636)

To purchase

Trade payables

32,510168(593)

To sellReceivables:
Trade

2,580

–

(20)

To purchase

Trade payables

1,290

–

61

Receivables:
Trade

4,211

–

0

¥62,892¥467¥(1,188)

Option contracts

Alternative method (*)
Foreign exchange contracts
To sell
Total
Fair value is based on prices provided by financial institutions.
(*) For certain trade accounts receivable and payable denominated in foreign currencies for which foreign exchange forward contracts are used to hedge the risk offoreign currency fluctuation, the fair value of the derivative financial instrument is included in the fair value of "Receivables: Trade" and "Trade payables" as hedge items.

64Thousands of U.S. dollars
Subject of hedge

Contract
amountContract amountover 1 year

Fair
value

Receivables:
Trade$268,202$3,596$ (7,649)

Trade payables

390,9812,020(7,131)

Receivables:
Trade31,028–(240)

Trade payables

15,514–

733

Deferral hedge accounting:Foreign exchange contracts
To sell
To purchase
Option contracts
To sell
To purchase
Alternative method
Foreign exchange contracts
To sellReceivables:
Trade50,643–0$756,368$5,616$(14,287)

Subject of hedge

Contract
amountContract amountover 1 year

Fair
value

Short-term debt andlong-term debt

¥30,000¥20,000¥(495)

Total

Millions of yen

Interest related contracts:
Interest swap
Deferral hedge accounting
Received flowing-fixed payment
Special treatment (*)
Received flowing-fixed payment

Long-term debt

15,00015,000–¥45,000¥35,000¥(495)

Fair value is based on prices provided by financial institutions.
(*) As interest rate swaps subject to special treatment for interest rate swaps are accounted for as a single item with the underlying long-term debt, which comprises
the hedged items, the fair value is included in that of the long-term debt.

Thousands of U.S. dollars
Contract
amountContract amountover 1 year

Fair
value

Short-term debt andlong-term debt

$360,794$240,530$(5,953)

Long-term debt

180,396

180,396–$541,190$420,926$(5,953)

Subject of hedge

Interest related contracts:
Interest swap
Deferral hedge accounting
Received flowing-fixed payment
Special treatment
Received flowing-fixed payment

65Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(b) Outstanding positions and recognized gains and losses at March 31, 2010 were as follows:(Derivative transactions to which the Company did not apply hedge accounting)Millions of yen
Contract
amountContract amountover 1 year

Fair
value

Gain
(loss)

Currency related contracts:
Foreign exchange contracts:
To sell
To purchase¥65,247
4,784

¥19
17

¥2,77963¥2,77963

Total¥70,031¥36¥2,842¥2,842

Fair value is based on prices provided by financial institutions.
(Derivative transactions to which the Company applied hedge accounting)Millions of yen
Contract
amountContract amountover 1 year

Receivables:
Trade¥ 80,292¥3,565¥(913)

Trade payables

27,180

1,590

1,106

To sellReceivables:
Trade

8,642

–

(65)

To purchase

Trade payables

Subject of hedge

Fair
value

Deferral hedge accounting:Foreign exchange contracts
To sell
To purchase
Alternative method (*)
Foreign exchange contracts

Total

1,575

–

48

¥117,689¥5,155¥ 176

Fair value is based on prices provided by financial institutions.
(*) For certain accounts trade accounts receivable and payable denominated in foreign currencies for which the foreign exchange forward contracts are used to hedge
the risk of foreign currency fluctuation, the fair value of the derivative financial instrument is included in the fair value of "Receivables: Trade" and "Trade payables"
as hedge items.

Millions of yen
Subject of hedge

Contract
amountContract amountover 1 year

Short-term debt andlong-term debt

¥30,000¥30,000

Fair
value

Interest related contracts:
Interest swap
Deferral hedge accounting
Received flowing-fixed payment
Special treatment (*)
Received flowing-fixed payment

Long-term debt¥(705)

14,24913,000–¥44,249¥43,000¥(705)

Fair value is based on prices provided by financial institutions.
(*) As interest rate swaps subject to special treatment for interest rate swaps are accounted for as a single item with the underlying long-term debt, which comprises
the hedged items, the fair value is included in that of the long-term debt.

6622. Financial Instruments
Effective from the fiscal year ended March 31, 2010, the Company has adopted a revised accounting standard, “Accounting Standard for
Financial Instruments” (Statement No. 10, issued by ASBJ on March 10, 2008) and the “Guidance on Disclosures about Fair Value ofInvestments” (Financial Accounting Standard Implementation Guidance No. 19, issued by ASBJ on March 10, 2008). This change did nothave a material effect on net income (loss) for the fiscal years ended March 31, 2011 and 2010, but mandates more detailed information
disclosure on financial instruments held by the Company than in prior years. Information for the fiscal years ended March 31, 2011 and2010, required pursuant to the aforementioned accounting standards is as follows.
(1) Matters related to the status of financial instruments(a) Policies on the use of financial instruments
The Company meets its long-term operating capital and capital expenditure requirements through bank loans and the issuance ofbonds and meets its short-term operating capital requirements through bank loans and the issuance of short-term bonds (electroniccommercial paper). Temporary surplus funds are managed in the form of financial assets that have a high level of safety. The
Company utilizes derivative instruments to hedge the risks described below and does not engage in speculative transactions as amatter of policy.
(b) Details of financial instruments and risks associated with those instruments
Receivables: Trade are exposed to the credit risk of customers. The Company operates internationally, giving rise to significant
exposure to market risks arising from changes in foreign exchange rates. However, risk is hedged using forward exchange contracts,
etc., against the net position of foreign currency exposure. Investments in securities mainly comprise equity securities of companies
with which the Company conducts business and are held to maintain relationships with such business partners. With such securities,
listed stocks are exposed to market fluctuation risk.
Almost all trade payables are due within one year. A portion of trade payables are denominated in foreign currency—specificallythose related to payment for imported materials, etc.—and are exposed to the risk of foreign currency fluctuation. However, this risk
is mitigated principally by the position of trade payables denominated in foreign currency being less than the position of receivablesin the same currency. Loans payable, bonds payable and lease obligations under finance leases are mainly used to raise operating
capital and carry out capital expenditure and are due in a maximum of nine and a half years from March 31, 2011 (ten and a halfyears from March 31, 2010). A portion of these instruments is exposed to the risk of interest rate fluctuation. However, such risk ishedged using derivatives (interest swaps) as necessary.
Derivatives comprise forward exchange and currency option contracts used to hedge foreign currency fluctuation risk on receivables
and payables in foreign currencies and interest swap contracts to hedge interest rate risk on debt. With regard to hedge accounting,see Note 2, “Significant accounting policies- (w) Hedge accounting.”(c) Risk management system for financial instruments(i) Management of credit risk, including customer default risk
The Company’s sales management functions and those of its consolidated subsidiaries regularly evaluate the financial
circumstances of customers and monitor the due dates and balances by customer to identify and reduce doubtful debts.
With regard to derivative transactions, the Company enters into contracts with highly rated financial institutions to reducecounterparty risk. The amount presented in the balance sheet is the maximum credit risk at the fiscal year end of the financial
instruments that are exposed to credit risk.
(ii) Management of market risk (related to foreign currency exchange rates, interest rates, etc.)
The Company and certain of its consolidated subsidiaries hedge foreign currency fluctuation risk on receivables and payables inforeign currencies using forward exchange contracts, which are categorized by the type of currency and the monthly due date. In
principle, the net position of receivables less payables in foreign currency is hedged with forward exchange contracts. The
Company and certain of its consolidated subsidiaries hedge interest rate risk on debt using interest swap contracts.

67

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESWith regard to investments in securities, the Company reviews its holding policies through periodic analysis of market prices andthe financial condition of the issuers, taking into consideration relationships with business partners.
With regard to derivatives, in accordance with rules for the provision of transaction authorization, the Company’s finance functions
and those of its consolidated subsidiaries manage transactions in accordance with an established set of fundamental policies, suchas those covering limitations on transaction amounts, under the authority of the director in charge of finance. Transactions arereported to the director in charge of finance on a monthly basis. Consolidated subsidiaries manage derivatives in accordance withthe same rules as the Company.
(iii) Management of liquidity risk (risk of the Company being unable to meet payment by due date)
The Company manages liquidity risk through its finance department, maintaining and updating its finance plans based onreports from each business division. Liquidity risk is managed through the diversification of financing methods, and taking into
consideration the financing environment and balancing long- and short-term financing requirements, by securing commitment
lines, etc.
(d) Supplemental information on the fair value of financial instruments
Fair value of financial instruments includes values based on market price and reasonably estimated values when market price is notavailable. However, as variables are inherent in these value calculations, the resulting values may differ if different assumptions areused. With regard to the contract amounts, etc., of the derivatives described below in “(2) Fair values of financial instruments,” theseamounts do not represent the market risk associated with the corresponding derivative transactions themselves.

(2) Fair values of financial instruments
The book values, the fair values and the differences between these values as of March 31, 2011, were as follows (Financial instruments
for which the fair value is extremely difficult to determine are not included, as described in remark 2.):Millions of yen

Thousands of U.S. dollars
Unrealized gains(losses)

Unrealized gains(losses)Book value

Fair value

Cash on hand and in banks¥ 47,233¥ 47,233

Receivables: Trade

401,753

401,625(128)(1,539)Investments in securities

16,54016,527

(13)

(156)

Total assets¥465,526¥465,385¥(141)$ (1,695)

Trade payables

319,272

319,272––

174,455

174,455––

Short-term debt and current portion of long-term debt
(excluding lease obligations)Long-term debt, less current portion(excluding lease obligations)

¥

–

$

–

253,801

255,377

1,576

18,953

Total liabilities¥747,528¥749,104¥1,576$18,953

Derivative transactions (*)¥ (1,660)¥ (1,660)¥$–(*) Derivative financial instruments are presented as net amounts. Negative amounts stated with parentheses ( ) indicates that the net amount is a liability.

68–The book values, fair values and the differences between these values as of March 31, 2010, were as follows (Financial instruments forwhich the fair value is extremely difficult to determine are not included, as described in remark 2.):Millions of yen
Unrealized gains(losses)Book valueMarket value

Cash on hand and in banks¥ 34,745¥ 34,745

Receivables: Trade

400,264

400,130(134)

Investments in securities

19,01019,015

5

Total assets¥ 454,019¥453,890(129)

Trade payables

302,739

302,739–

158,091

158,091–

Short-term debt and current portion of long-term debt
(excluding lease obligations)Long-term debt, less current portion(excluding lease obligations)
Total liabilities
Derivative transactions (*)¥–

269,874

272,099(2,225)¥ 730,704¥ 732,929¥ (2,225)¥¥¥2,313

2,313–(*) Derivative financial instruments are presented as net amounts. Negative amounts stated with parentheses ( ) indicates that the net amount is a liability.

(i) : Methods used to calculate market values of financial instruments and details of securities and derivative instruments<Assets>- Cash on hand and in banks
Cash on hand and in banks is stated at the relevant book value since the settlement periods are short and the fair values aresubstantially the same as the book values.
- Receivables
Receivables are stated at present value computed by applying a discount rate reflecting the settlement period and the credit risk.
- Investments in securities
Equity securities are stated at the fair value, and bonds are stated at market price or the asking price of financial institutions. See Note2(l), “Investments in securities” for the detailed information by classification.
<Liabilities>- Trade payables, short-term debt and current portion of long-term debt
Since the settlement periods of these items are short and their fair values are substantially the same as their book values, the relevantbook values are used.
- Long-term debt, less current portion
The market value of bonds payable is calculated based on trading reference data. The market value of long-term debt is calculated byapplying a discount rate to the total of principal and interest. That discount rate is based on the assumed interest rate if a similar new
loan was entered into.
<Derivatives>
See Note 21, “Derivative Transactions.”69

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(ii) : Financial instruments for which the fair value is extremely difficult to determine
Millions of yen

Unlisted equity securities and investments in partnerships

Thousands of U.S. dollars

2011

2010

2011

¥ 8,102¥ 9,440$ 97,438

Stocks of nonconsolidated subsidiaries and affiliates

7,335

6,670

88,214

Investments in affiliates

18,314

18,165220,252

Total¥33,751¥34,275$405,904

Since no market values are available for these items and since it is extremely difficult to determine their fair values, the items listed in
the table above are not included in investments in securities.

(iii) : Planned redemption amounts after the balance sheet date for monetary receivables and investments in securities with maturity
dates as of March 31, 2011 and 2010 are as follows:
Millions of yen

2011
Within1 yearOver 1 year but
within 5 years

Cash on hand and in banks
Receivables: Trade
Investments in securities-Bonds¥ 47,233
385,662¥–
16,091–

Total¥432,895

Over 5 years but
within 10 years¥

Over
10 years

–
–

¥–
–

300

105

–

¥16,391¥105¥–

Thousands of U.S. dollars

2011
Within1 yearOver 1 year but
within 5 years$

Over 5 years but
within 10 years–
193,518

$

–
–

Over
10 years

Cash on hand and in banks
Receivables: Trade
Investments in securities-Bonds$ 568,045
4,638,148

$–
–

–

3,607

1,262

–

Total

$5,206,193$197,125$1,262$–

Over 5 years but
within 10 years

Over
10 years–
23,430¥––¥––Millions of yen

2010
Within1 yearOver 1 year but
within 5 years

Cash on hand and in banks
Receivables: Trade
Investments in securities-Bonds¥ 34,745
376,835

¥

–

300

–

–

Total

¥411,580¥23,730¥–¥–(iv) : Planned repayment amounts after the balance sheet date for bonds payable, convertible bonds and long-term debt
See Note 8, “Short-Term debt and Long-term debt.”

7023. Finance leases
As discussed in Note 2(x), finance leases commenced prior to April 1, 2008 which do not transfer ownership of the leased assets to thelessee are accounted for as operating leases. Information regarding such leases, as required to be disclosed in Japan, is as follows:(a) Lessee
The original costs of leased assets under non-capitalized finance leases and the related accumulated depreciation and amortization,
assuming it was calculated by the straight-line method over the term of the respective lease, as of March 31, 2011 and 2010 were as
follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2011

Property, plant and equipment¥35,520¥39,053$427,179

Accumulated depreciation(20,072)(19,014)(241,395)

15,44820,039185,784

Intangible assets

543

727

6,530

Accumulated amortization

(416)

(469)

(5,003)258$ 1,527¥

127¥

The present values of future minimum lease payments under non-capitalized finance leases as of March 31, 2011 and 2010 were as follows:
Millions of yen

Current portion
Noncurrent portion
Total

Thousands of U.S. dollars

2011

2010

2011

¥ 4,156¥ 5,413$ 49,981

11,413

16,289137,258¥ 15,569¥21,702$187,239

Lease payments, "as if capitalized" depreciation and amortization and interest expense for non-capitalized finance leases for the years
ended March 31, 2011, 2010 and 2009 were as follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Lease payments¥5,038¥6,033¥6,273$60,589

Depreciation and amortization

4,669

5,642

5,869

56,151

486

590

680

5,844

Interest

71Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(b) Lessor
The original costs of leased assets under finance leases and the related accumulated depreciation and amortization as of March 31, 2011
and 2010 were as follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2011

Property, plant and equipment¥ 1,559¥1,800$18,748

Accumulated depreciation(1,030)(1,023)(12,387)

529

777

6,361

55

60

661

Intangible assets(48)

Accumulated amortization

¥

7

(577)

(45)
¥

15

$

84

The present values of future minimum lease payments to be received under finance leases as of March 31, 2011 and 2010 were as follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2011

Current portion

¥297

¥ 370

$3,571

Noncurrent portion

377

659

4,534

Total

¥674

¥1,029$8,105

Lease payments received, depreciation and amortization and interest on finance leases for the years ended March 31, 2011, 2010 and 2009were as follows:
Millions of yen

Thousands of U.S. dollars

2011

2010

2009

2011

Lease payments received

¥282

¥338

¥402

$3,391

Depreciation and amortization

257

324

335

3,090

Interest

35

55

69

420

24. Operating leases
The present values of future minimum lease payments under operating leases as lessee as of March 31, 2011 and 2010 were as follows:
Millions of yen

Current portion
Noncurrent portion
Total

72

Thousands of U.S. dollars

2011

2010

2011

¥295

¥306

$3,547

–

308

–

¥295

¥614

$3,547

25. Business combination
Year ended March 31, 2011
(Transactions under common control)
Pursuant to resolutions passed by the Board of Directors on September 30, 2009, Kawasaki Shipbuilding Corporation, Kawasaki Precision
Machinery Ltd. (KPM), and Kawasaki Plant Systems, Ltd. (K Plant) were merged with the Company on October 1, 2010.
(a) Name and outline of business of constituent companies, date of business combination, legal form of business combination, name ofcompany after business combination, and outline of transactions including purpose of transactions(i) Name and outline of business of constituent companies
Company surviving in absorption-type merger
Name:

Kawasaki Heavy Industries, Ltd. (KHI)

Outline of business:

Production and sale of ships and vessels, rolling stock, construction machinery, crushers, aircraft, jet engines,
general-purpose gas turbine generators, motors and engines, various types of industrial plant and industrial
equipment, boilers, environmental equipment, steel structures, motorcycles, all-terrain vehicles (ATV), industrial
robots, and various industrial hydraulic productsCompany absorbed in absorption-type merger
Name:

Kawasaki Shipbuilding Corporation

Outline of business:

Design, production, sale and maintenance of ships, naval vessels, marine equipment, other transportationequipment, and accompanying equipment and parts

Name:

Kawasaki Precision Machinery Ltd. (KPM)

Outline of business:

Design, procurement, production, installation, maintenance, and sale of industrial hydraulic products, hydraulicsystems, electronic control equipment and systems, and accompanying devices, parts, and accessories

Name:

Kawasaki Plant Systems, Ltd. (K Plant)

Outline of business:

Design, production, installation, and sale of various types of plant machinery and equipment(ii) Date of business combination
October 1, 2010(iii) Legal form of business combination
The merger was an absorption-type merger whereby the Company (KHI) is the surviving entity and the three subsidiaries weredissolved.
(iv) Name of company after business combination
Kawasaki Heavy Industries, Ltd.
(v) Outline of transactions, including purpose of transactions
Guided by the mission statement it adopted in 2007, the Company is working to create new value that will contribute to a better
environment and brighter future by leveraging its advanced technological capability across a broad range of fields. Creating newvalue involves making existing products smarter through innovation and developing brand new products in totally new fields. To
achieve this, it is essential that KHI work quickly to efficiently integrate and maximize the entire KHI Group’s intellectual assets. For
these reasons, KHI decided to merge Kawasaki Shipbuilding, KPM, and K Plant with the Company to facilitate maximum efficiency inleveraging the Group’s technological assets and human resources while removing any barriers that may have existed under asubsidiary structure.

73

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESIn addition to the pursuit of greater competitiveness in existing businesses, the Kawasaki Business Vision 2020, formulated in April
2010, designates the development of new products and businesses as a key measure for accelerating sustained Group growth. The
Company will use this merger to draw together technological expertise and knowhow across conventional organizational andproduct boundaries to develop new products in the transportation systems, energy and environment, and industrial equipment
sectors. The Company also intends to pursue research and development of core technologies in new business fields, such as CO2-freehydrogen technologies and ocean energy.
By accelerating initiatives aimed at facilitating the Group-wide use and maximization of intellectual assets amassed by KHI Group
companies such as those related to sales expertise, technology, procurement, and human resources, the Company seeks to realize its
Group Mission Statement, “Kawasaki, working as one for the good of the planet (Enriching lifestyles and helping safeguard theenvironment: Global Kawasaki). ”(b) Outline of accounting procedure used
The merger was accounted for as a transaction under common control based on “Accounting Standard for Business Combinations”(Statement No. 21, issued by ASBJ on December 26, 2008) and the associated “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (Guidance No. 10, revised by ASBJ on December 26, 2008).

26. Segment information
The Company reorganized certain of its business which resulted in a change in segment presentation. The disclosure in section (a) below isbased on the segment classification prior to the business reorganization, while sections (e), (f), and (g) are based on the new segmentclassification.
(a) Information by business segment
Business segments of the Company and its consolidated subsidiaries are classified based on an internal company system as follows: 1)
Shipbuilding, 2) Rolling Stock, 3) Aerospace, 4) Gas Turbine & Machinery, 5) Plant & Infrastructure Engineering, 6) Consumer Products &Machinery, 7) Hydraulic Machinery and 8) Other. The Shipbuilding segment manufactures and sells ships, submarines and maritime
application equipment. The Rolling Stock segment produces and sells rolling stock. Products manufactured and sold by the Aerospacesegment include airplanes and helicopters. The Gas Turbine & Machinery segment manufactures and sells gas turbines, airplane engines
and prime movers. Operations within the Plant & Infrastructure Engineering segment include the production and sale of boilers,chemical and cement plants and refuse incineration plants. Products manufactured and sold by the Consumer Products & Machinery
segment include motorcycles, ATVs (All-Terrain Vehicles) and Jet Ski® watercrafts. Operations within the Hydraulic Machinery segment
include the production and sale of hydraulic machines. Operations within the Other segment include the production and sale ofmerchandise, etc. The operations also involve trade, mediation of overseas sales and orders and other activities.

74

Millions of yen

2010

Shipbuilding
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
Hydraulic Machinery
Other
Total
Eliminations and corporate
Consolidated total

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

Total
assetsDepreciation
andamortization

Capitalexpenditures¥ 151,893
167,156
188,892
191,379
90,495
216,990
68,80997,8591,173,473–¥1,173,473¥ 1,565
2,414
2,005
22,765
11,076
3,974
7,320
32,55083,669(83,669)¥–¥ 153,458
169,570
190,897
214,144
101,571
220,964
76,129130,409
1,257,142(83,669)¥1,173,473¥ 151,968
161,811
189,148
207,450
95,294
252,613
69,168130,824
1,258,276(83,487)¥1,174,789¥ 1,490
7,759
1,749
6,694
6,277
(31,649)
6,961
(415)
(1,134)(182)¥ (1,316)¥ 128,948
172,420304,371
215,874
104,851
236,306
57,901
154,655
1,375,326(22,887)¥1,352,439¥ 4,350
3,668
8,192
6,222
975
19,2833,883
3,066
49,6391,784¥51,423¥ 6,693
5,264
9,142
10,278
1,111
17,1052,282
5,554
57,4291,843¥59,272

Millions of yen

2009
External
sales

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

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

Total
assetsDepreciation
andamortization

Capitalexpenditures¥ 1,762
1,368
1,873
18,316
13,853
4,038
8,524
42,142
91,876(91,876)¥–¥ 128,188
187,822202,298
213,472
119,031
340,497
93,443
145,7221,430,473(91,876)¥1,338,597¥ 129,207
176,453
206,476
202,446
110,060
350,640
85,054141,466
1,401,802(91,918)¥1,309,884¥ (1,019)
11,369(4,178)11,026
8,971(10,143)
8,389
4,256
28,671
42¥28,713¥ 139,017
200,482
331,671
203,902113,158
268,01360,430149,478
1,466,151(66,380)¥1,399,771¥ 3,987
5,140
6,659
4,607
1,716
14,9573,729
1,847
42,642
1,692¥44,334¥ 7,116
6,147
20,38010,176
1,270
24,298
10,539
1,174
81,1001,350¥82,450

In October 2008, the Company, Hitachi Construction Machinery Co., Ltd. and TCM Corporation agreed that the three companies would
jointly carry out research and development, that the Company would spin off the construction machinery business and that Hitachi
Construction Machinery Co., Ltd. would invest in the newly established subsidiary spun off from the Company. According to theagreement, because the relationship between the rolling stock business and the construction machinery business had become weakened,
the construction machinery business would be excluded from the Rolling Stock segment and included in the Other segment from the year
ended March 31, 2010. The name of segment was also changed from “Rolling Stock & Construction Machinery” to “Rolling Stock.”As a result of this change, sales for the year ended March 31, 2010 decreased in the Rolling Stock segment by ¥20,625 million (externalsales decreased by ¥22,207 million), and increased in the Other segment by ¥21,622 million (external sales increased by ¥22,207 million).
Operating income for the year ended March 31, 2010 increased in the Rolling Stock segment by ¥3,321 million, and operating loss
increased in the Other segment by ¥3,322 compared to the amounts that would have been recorded with the previous segmentation.
As discussed in Note 2(g), prior to April 2009, the percentage-of-completion method was applied to long-term contracts such as thosefor ships, airplanes and plants exceeding ¥3,000 million. The completed contract method was applied to long-term contracts notexceeding ¥3,000 million. Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries have adopted a
new accounting standard, "Accounting Standard for Construction Contracts” (Statement No. 15, issued by ASBJ on December 27, 2007)
and the “Guidance on Accounting Standard for Construction Contracts” (the Finance Accounting Standard Implementation GuidanceNo. 18, issued by ASBJ on December 27, 2007). The new accounting standards require that the percentage-of-completion method beapplied for construction contracts commenced on an after April 1, 2009, if the outcome of the construction activity is deemed certain
during the course of the activity. Otherwise, the completed-contract method should be applied.

75

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESAs a result of this change, sales for the year ended March 31, 2010 increased in the Shipbuilding segment by ¥15,609 million, in the
Rolling Stock segment by ¥702 million, in the Aerospace segment by ¥5,663 million, in the Gas Turbine & Machinery segment by ¥7,247
million and in the Plant & Infrastructure Engineering segment by ¥2,991 million, and operating income for the year ended March 31,
2010 increased in the Shipbuilding segment by ¥1,374 million, in the Rolling Stock segment by ¥65 million, in the Aerospace segmentby ¥494 million, in the Gas Turbine & Machinery segment by ¥649 million and in the Plant & Infrastructure Engineering segment by¥504 million compared to amounts that would have been recorded with the previous standard.
As discussed in Note 2( j), effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted a
new accounting standard, "Accounting Standard for Measurement of Inventories" (Statement No. 9, issued by ASBJ on July 5, 2006), forthe measurement of inventories and have stated the inventories at March 31, 2009 at the lower of cost determined principally by the
specific identification cost method, the moving average method and the first-in, first-out method or net realizable value. As a result of
this change, operating income for the year ended March 31, 2009 decreased in the Rolling Stock & Construction Machinery segment by¥516 million, in the Gas Turbine & Machinery segment by ¥1,677 million, in the Plant & Infrastructure Engineering segment by ¥29
million, in the Hydraulic Machinery segment by ¥103 million, and in the Other segment by ¥34 million, and operating loss increased in
the Aerospace segment by ¥1,226 million and in the Consumer Products & Machinery segment by ¥486 million compared to amounts
that would have been recorded with the previous standard.
As discussed in Note 2(aa), in the year ended March 31, 2009, the Company and its consolidated domestic subsidiaries reviewed andrevised the useful life of certain machinery and equipment in accordance with a revision of the Tax Law. As a result of this change,
operating income for the year ended March 31, 2009 decreased in the Rolling Stock & Construction Machinery segment by ¥473
million, in the Gas Turbine & Machinery segment by ¥260 million, in the Plant & Infrastructure Engineering segment by ¥53 million, in
the Other segment by ¥48 million, and in the Hydraulic Machinery segment increased by ¥166 million, and operating loss increased in
the Shipbuilding segment by ¥543 million, in the Aerospace segment by ¥271 million and in the Consumer Products & Machinery by¥205 million compared to amounts that would have been recorded with the previous standard.
(b) Information by geographic segment
Millions of yen

2010

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

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

Total
assets¥ 917,366
135,306
66,86542,90911,027
1,173,473–¥1,173,473¥154,200
16,764
1,792
37,842
190
210,788(210,788)¥–¥1,071,566
152,070
68,65780,751
11,217
1,384,261(210,788)¥1,173,473¥1,072,556
160,240
67,80974,676
10,2901,385,571(210,782)¥1,174,789¥ (990)(8,170)
848
6,075
927
(1,310)(6)¥(1,316)¥1,130,537
159,335
47,042
39,3286,871
1,383,113(30,674)¥1,352,439

Millions of yen

2009

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

76

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

Total
assets¥ 974,454
220,856
90,89843,328
9,061
1,338,597–¥1,338,597¥247,020
24,5004,563
41,818251318,152(318,152)¥–¥1,221,474
245,356
95,46185,1469,312
1,656,749(318,152)¥1,338,597¥1,208,067
246,742
94,75380,594
8,945
1,639,101(329,217)¥1,309,884¥13,407(1,386)
708
4,552
367
17,648
11,065¥28,713¥1,169,702
182,269
59,21738,4212,970
1,452,579(52,808)¥1,399,771

North America includes mainly the U.S.A. and Canada. Europe includes mainly the Netherlands, the United Kingdom and Germany. Asia
includes Thailand, Indonesia, the Philippines and Korea. Other areas include mainly Australia and Brazil.
As discussed in Note 2(g), prior to April 1, 2009, sales of products such as ships, rail cars, airplanes, machinery and motorcycles wereprincipally recognized upon delivery. Contract revenue for the construction of plants, machinery, bridges, etc. was principally recognizedon a customer acceptance basis. When prices for components or contract amounts for nearly completed contracts were not finalized,
sales and cost of sales were estimated. The percentage-of-completion method was applied to long-term contracts such as those forships, airplanes and plants exceeding ¥3,000 million. The stage of completion was normally determined based on the proportion of
costs incurred to date to the estimated total costs of the contract. The completed contract method was applied to long-term contracts
not exceeding ¥3,000 million. Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries haveadopted a new accounting standard, "Accounting Standard for Construction Contracts” (Statement No. 15, issued by ASBJ on December
27, 2007) and the "Guidance on Accounting Standard for Construction Contracts” (Financial Accounting Standard Implementation
Guidance No. 18, issued by ASBJ on December 27, 2007). The new accounting standards require that the percentage-of-completion
method shall be applied for the construction contracts commenced on and after April 1, 2009, if the outcome of the construction
activity is deemed certain during the course of the activity. Otherwise the completed-contract method should be applied. As a result of
this change, sales in Japan for the year ended March 31, 2010 were ¥32,214 million more than they would have been without thechange, and operating loss in Japan for the year ended March 31, 2010 was ¥3,088 million less than it would have been without thechange.
As discussed in Note 2( j), effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted a
new accounting standard, "Accounting Standard for Measurement of Inventories" (Statement No. 9, issued by ASBJ on July 5, 2006), forthe measurement of inventories and have stated the inventories at March 31, 2009 at the lower of cost determined principally by the
specific identification cost method, the moving average method and the first-in, first-out method or net realizable value. As a result of
this change, operating income in Japan for the year ended March 31, 2009 was ¥4,074 million less than it would have been without thechange.
As discussed in Note 2(aa), in the year ended March 31, 2009, the Company and its consolidated domestic subsidiaries reviewed andrevised the useful life of certain machinery and equipment in accordance with a revision of the Tax Law. As a result of this change,
operating income in Japan for the year ended March 31, 2009 was ¥1,690 million less than it would have been without the change.
(c) Corporate assets
Included in eliminations and corporate under total assets in (a) and (b) above are corporate assets of ¥114,487 million and ¥96,934
million at March 31, 2010 and 2009 respectively, consisting mainly of surplus funds (cash and time deposits) of the Company andproperty, plant and equipment, and investments, intangible other assets of the Company's head office.
(d) Overseas sales
Overseas sales consists of the total sales of the Company and its consolidated subsidiaries made outside of Japan. Overseas sales
information for the years ended March 31, 2010 and 2009 was as follows:
2010

North America
EuropeAsia
Other areas
Total

2009

Millions of yen%

Millions of yen%

Overseas
sales

Againstnet sales

Overseas
sales

Againstnet sales¥226,859
93,035
141,577
100,124¥561,595

19.3
7.9
12.0
8.6
47.8

¥309,979
116,298
174,310130,051¥730,638

23.1
8.7
13.0
9.7
54.5

North America includes mainly the United States and Canada. Europe includes mainly the United Kingdom, Germany, France, and theNetherlands. Asia includes China, Taiwan, Korea, the Philippines, and Indonesia. Other areas include mainly Panama, Brazil, and Australia.

77Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(e) Overview of reportable segment
The Company’s reportable segments are components of the Company for which separate financial information is available. Thesesegments are subject to periodic reviews by the Company’s Board of Directors to determine as to how to allocate resources and assess
performance. The Company’s operations are divided into internal companies based on product categories. Certain authority isdelegated to each of the internal companies based on which they conduct businesses in Japan and overseas. The Company’s operations
are therefore segmented based on each internal company’s product categories. The Company’s eight reportable segments are the Ship
& Offshore Structure segment, the Rolling Stock segment, the Aerospace segment, the Gas Turbine & Machinery segment, the Plant &Infrastructure segment, the Motorcycle & Engine segment, the Precision Machinery segment, and the Other segment.
In conjunction with its October 2010 organizational restructuring, the Group renamed its Shipbuilding segment the Ship & Offshore
Structure segment.
Main segment businesses are listed below
Business segment

Major products

Ship & Offshore Structure

Construction and sale of ships and other vessels, etc.

Rolling Stock

Production and sale of rolling stock, snow plows, etc.

Aerospace

Production and sale of aircraft, etc.

Gas Turbine & Machinery

Production and sale of jet engines, general-purpose gas turbine generators, prime movers, etc.

Plant & Infrastructure

Production and sale of industrial equipment, boilers, environmental equipment, steel structures,crushers, etc.

Motorcycle & Engine

Production and sale of motorcycles, personal watercraft, all-terrain vehicles (ATV), utility vehicles,
general-purpose gasoline engines, etc.

Precision Machinery

Production and sale of industrial hydraulic products, industrial robots, etc.

Other

Production and sale of construction machinery, commercial activities, sales/order agency andintermediary activities, administration of welfare facilities, etc.

(f) Calculation methods for sales, income (loss), assets, liabilities and other items by reportable segment
Accounting methods applied for the calculation of sales, income (loss), assets, liabilities, and other items by business segment largely
correspond to information presented under “Significant accounting policies.” Segment income is based on operating income.
Intersegment sales or transfers are based on market prices.

78

(g) Sales, income (loss), assets, liabilities, and other items by reportable segment
Year ended March 31, 2011
Millions of yen
Sales
External
sales

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other Operations
Total
Adjustments
Consolidated total¥ 118,416
131,104
196,876
202,692
89,012
234,479
140,328
114,042¥1,226,949–¥1,226,949

Intersegment
sales andtransfers

Other items

Total

Segment
income(loss)

Segment
assets¥ 1,895 ¥ 120,311 ¥ (1,013) ¥ 115,800
2,079
133,183
8,173
151,212
1,811
198,687
3,030
288,495
20,783
223,475
9,545
211,369
12,017101,0298,281
95,115
1,211
235,690(4,961)
216,559
13,277
153,605
22,31899,612
34,340148,382
2,577
159,618¥87,413 ¥1,314,362 ¥47,950 ¥1,337,780(87,413)(87,413)(5,322)
16,498¥– ¥1,226,949 ¥42,628 ¥1,354,278

Depreciation/amortization¥ 4,264
3,634
9,402
6,550
1,554
15,2944,872
2,477¥48,047
2,229¥50,276

Impairment
loss

¥

–
–
–
67
141
9,520
–
195
¥9,923–¥9,923

Investment in Increase inequityproperty, plant
method and equipment
affiliates and intangibles¥13,125
123
–
61
8,603
946
–
2,308
¥25,166–¥25,166¥ 3,183
2,416
7,121
5,659
2,033
11,3409,822
8,017¥49,591
5,743¥55,334

Year ended March 31, 2010
Millions of yen

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other Operations
Total
Adjustments
Consolidated total

Sales

Other items

External
sales

Intersegment
sales andtransfers

Investment in Increase inequityproperty, plant
Depreciation/
method and equipment
amortization
affiliates and intangibles¥ 151,893
150,071
188,892
191,379
107,580
203,084
82,71597,859¥1,173,473–¥1,173,473¥ 1,565
1,755
2,005
22,765
11,122
1,550
10,261
32,551¥83,574(83,574)
¥
–

Total

Segment
income(loss)

Segment
assets¥ 153,458
151,826
190,897
214,144
118,702
204,634
92,976130,410¥1,257,047(83,574)¥1,173,473¥ 1,550
8,726
3,766
8,941
7,944
(27,005)
3,415(1,078)¥ 6,259(7,575)¥(1,316)¥ 128,948
161,648304,371
215,874
115,408
219,150
75,066
154,655¥1,375,120(22,681)¥1,352,439¥ 4,350
3,165
8,192
6,222
1,478
18,4834,683
3,066¥49,639
1,784¥51,423¥13,133
77
–
190
7,719
998
–
2,210
¥24,327–¥24,327¥ 6,693
4,843
9,142
10,278
1,533
16,3353,052
5,553¥57,429
1,843¥59,272

Year ended March 31, 2011
Thousands of U.S. dollars
Sales
External
sales

Ship & Offshore Structure
Rolling Stock
Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
Other Operations
Total
Adjustments
Consolidated total

Intersegment
sales andtransfers

Other items

Total

Segment
income(loss)

Segment
assetsDepreciation/amortization$ 1,424,125 $ 22,790 $ 1,446,915 $ (12,182) $ 1,392,663 $ 51,280
1,576,716
98,292
1,818,544
43,70425,003 1,601,719
2,367,720
21,780 2,389,500
36,4403,469,573 113,072
2,437,666
249,946 2,687,612 114,792
2,542,020
78,773
1,070,499
144,522
1,215,021
99,591
1,143,896
18,6892,819,951
14,564
2,834,515 (59,663)
2,604,437 183,932
1,687,648
159,676 1,847,324 268,406
1,197,979
58,592
1,371,525
412,988 1,784,513
30,992
1,919,643
29,793$14,755,850 $1,051,269 $15,807,119 $ 576,668 $16,088,755 $577,835– (1,051,269) (1,051,269) (64,005)
198,41226,807$14,755,850 $– $14,755,850 $ 512,663 $16,287,167 $604,642

Impairment
loss

$

–
–
–
805
1,695
114,491–
2,347$119,338–$119,338

Investment in Increase inequityproperty, plant
method and equipment
affiliates and intangibles$ 157,847
1,479
–
733
103,463
11,377–27,758$ 302,657–$ 302,657$ 38,280
29,05585,64068,05724,449136,380
118,123
96,420$ 596,404
69,068$ 665,472

79

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(h) Reconciliation and main components of differences between the total for reportable segments and amounts on the consolidated
financial statement
Millions of yen

Net sales
Total for reportable segments
Intersegment transactions
Net sales reported on the consolidated financial statements

Thousands of U.S. dollars

2011

2010

2011

¥1,314,362(87,413)¥1,226,949¥1,257,047(83,574)¥1,173,473$15,807,119(1,051,269)$14,755,850

Millions of yen

IncomeTotal for reportable segments
Intersegment transactions
Corporate expense (*)
Operating income (loss) on the consolidated financial statements

Thousands of U.S. dollars

2011

2010

2011

¥47,950(3)(5,319)¥42,628¥6,2599(7,584)¥(1,316)$576,668(36)(63,969)$512,663(*) Corporate expense mainly comprises general and administrative expense not attributed to reportable segment.
Millions of yen

AssetsTotal for reportable segments
Corporate assets shared by all segments (*)
Intersegment transactions
Total assets on the consolidated financial statements

Thousands of U.S. dollars

2011

2010

2011

¥1,337,780
141,029(124,531)¥1,354,278¥1,375,120
114,487(137,168)¥1,352,439$16,088,755
1,696,078(1,497,666)$16,287,167(*) Corporate assets shared by all segments mainly comprise fix assets not attributed to reportable segments.

Millions of yen

Other items

Year ended March 31,
2011
2010

Year ended March 31,
2011
2010

Year ended March 31,
2011
2010

Total for reportable segments

Adjustments (*)

Amounts reported on the consolidated
financial statements

Depreciation/amortization¥48,047¥49,639¥2,229¥1,784¥50,276¥51,423

Increase in property, plant andequipment and intangibles

49,591

57,429

5,743

1,843

55,33459,272(*) Adjustment is mainly due to fixed assets not attributed to reportable segment.
Thousands of U.S. dollars

Year ended March 31,
2011

Year ended March 31,
2011

Year ended March 31,
2011

Total for reportable segments

Adjustments

Amounts reported on the consolidated
financial statements

Depreciation/amortization$577,835$26,807$604,642

Increase in property, plant andequipment and intangibles

596,404

69,068665,472

Other items(Additional information)
Effective from the year ended March 31, 2011, the Company has adopted the Revised Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information (Statement No. 17, issued by ASBJ and revised on March 27, 2009) and its associated Guidance on the Accounting Standard for Disclosuresabout Segments of an Enterprise and Related Information (Guidance No. 20, issued by ASBJ on March 21, 2008).

80

(i) Related information(i) Information by geographic segment
		 Net sales

Japan
United States
EuropeAsia
Other areas
Total

Millions of yen

Thousands of U.S. dollars

2011

2011

¥ 558,126
236,572
87,162
224,685
120,404$ 6,712,279
2,845,123
1,048,250
2,702,164
1,448,034¥1,226,949$14,755,850

Net sales are based on the clients’ location and classified according to nation or geography.
Property, plant and equipment

Japan
United States
EuropeAsia
Other areas
Total

Millions of yen

Thousands of U.S. dollars

2011

2011

¥241,132
20,611
2,304
10,945788¥275,780$2,899,963
247,877
27,708
131,629
9,479$3,316,656(ii) Information by major clients
Clients

Net sales

Related segments

Ministry of Defense

182,633 million yen($2,196,428 thousand)Ship & Offshore Structure, Aerospace, Gas Turbine & Machinery, etc.

81

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

27. Related parties(a) ASBJ Statement No. 11, “Accounting Standard for Related Party Disclosures” and ASBJ Guidance No. 13, “Guidance on AccountingStandard for Related Party Disclosures,” issued by ASBJ on October 17, 2006, require certain additional related party disclosures effectivefrom the year ended March 31, 2009. Related Party transactions for the years ended March 31, 2011 and 2010 were as follows:Year ended March 31, 2011
Nonconsolidated subsidiaries andaffiliates of the Company
Type
Name
Location
Capital or investment
Business or position
Rate of ownership (%)
Relation of related party
Details of transactions
Amount of transactions
Account
Ending balance

Affiliate of the Company
Commercial Airplane Co., Ltd.
Chiyoda-ku, Tokyo¥10 million ($120 thousand)Sales of transportation machinery
Directly 40%
Order of the Company products
Sales of the Company products¥33,982 million ($408,683 thousand)Receivables: Trade¥13,741 million ($165,255 thousand)Year ended March 31, 2010
Nonconsolidated subsidiaries andaffiliates of the Company

Capital or investment

Affiliate of the Companyy
Commercial Airplane Co., Ltd.
Chiyoda-ku, Tokyo¥10 million

Business or position

Sales of transportation machinery

Rate of ownership (%)

Directly 40%
Order of the Company products
Sales of the Company products¥39,337 million
Receivables: Trade¥14,101 million

Type
Name
Location

Relation of related party
Details of transactions
Amount of transactions
Account
Ending balance

Directors and principle shareholders of
the Company

Director
Tadaharu Ohashi––
Chairperson and Representative
Director of the Company
Administrative Director of Japan Aircraft
Development Corporation (JADC)
Directly 0%
Concurrent Director
Guarantee of indebtedness JADC
¥14,196 million––(b) A summary of the total financial information of all affiliates (14 companies) (14 in 2010) which was the basis for calculating the equity inincome of nonconsolidated affiliates, including that of Nantong COSCO KHI Ship Engineering Co., Ltd., which is a significant affiliate,
for the years ended March 31, 2011 and 2010 were as follows:
Millions of yen

Current assets
Fixed assets
Current liabilities
Long-term liabilities
Net assets
Net sales
Minority interests in net income of consolidated subsidiaries
Total net income

82

Thousands of U.S. dollars

2011

2010

2011

¥106,381
70,227
93,208
12,174
71,225
166,935
25,20019,483¥117,441
74,798116,405
11,59764,237
161,625
20,33215,017$1,279,386
844,582
1,120,962
146,410856,584
2,007,636
303,066
234,311

28. Subsequent events
On June 25, 2010, the following appropriation of nonconsolidated retained earnings was approved at the ordinary meeting of shareholdersof the Company:
Millions of yen

Cash dividends (¥3.0 per share)¥5,003

In accordance with the resolution of Board of Directors as of May 25, 2010, the Company issued notes which are due on June 19, 2015 andJune 21, 2017.
0.722 percent notes due in 2015
Date of issue
Amount of issue
Issue priceRate (%)
Redemption date
Security
Purpose of funds raised
Bond subscription

1.062 percent notes due in 2017

June 21, 2010
¥10,000 million¥100 par value ¥100
Annual rate of interest 0.722% on per value
June 19, 2015
Unsecured
Redemption of bonds
Public offering

June 21, 2010
¥10,000 million¥100 par value ¥100
Annual rate of interest 1.062% on per value
June 21, 2017
Unsecured
Redemption of bonds
Public offering

29. Other matters(a) Quarterly financial information
Millions of yen
Year ended March 31, 2011

1st Quarter

2nd Quarter

3rd Quarter4 th Quarter

Net sales¥277,387¥294,321¥298,831¥356,410

Income (loss) before income taxes and minority interests

10,901

9,811

23,929(6,046)

Net income (loss)

5,883

6,450

15,825(2,193)yen

Net income (loss) per share - basic

¥

3.52

¥

3.86

¥

9.47

¥

(1.31)

Year ended March 31, 2011

1st Quarter

2nd Quarter

3rd Quarter4 th Quarter$3,335,983$3,539,639$3,593,878$4,286,350

Income (loss) before income taxes and minority interests

131,100

117,991

287,781(72,711)Net income (loss)

70,751

77,570190,318(26,373)

Thousands of U.S. dollars

Net sales

U.S. dollars

Net income (loss) per share - basic

$

0.04

$

0.04

$

0.11

$

(0.01)

83

Notes to the Consolidated Financial Statements
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES(b) On June 27, 2006, the Company received a decision from the Japan Fair Trade Commission ordering remediation of unfair bids that theCompany may have committed on construction contracts for waste incineration facilities from 1994 through 1998. The Company
appealed the decision to the Tokyo High Court demanding revocation of the decision, but the Court dismissed the appeal on
September 26, 2008. The Company appealed the judgment to the Supreme Court, but the Court dismissed the appeal on October 6,
2009. The Company also sought an inquiry objecting to an order to pay penalties of ¥5,165 million which the Fair Trade Commission
imposed on March 23, 2007. However, on November 10, 2010, the Fair Trade Commission issued a formal decision ordering theCompany to pay the penalties in full. On January 11, 2011, the Company paid the penalties in full without appealing to the Tokyo High
Court for the annulment of the decision. In addition, the Company made a provision for losses on damages suit in relation to theestimated amount of monetary damages payable arising from suits filed against the Company by contracting parties.
(c) On November 16, 2006, the Company received a judgment from the Kobe District Court requiring reimbursement of ¥530 million
jointly with Hitachi Zosen Corporation and four other companies in a suit brought by citizens of the city claiming that the Company
unfairly bid on a construction contract for a waste incineration facility in Amagasaki City that Hitachi Zosen Corporation was awarded in
1996. On November 29, 2006, the Company appealed the judgment to the Osaka High Court and won the case on November 30, 2007.
On December 7, 2007, citizens of Amagasaki City, the complainants, appealed the judgment to the Supreme Court. The Supreme Court
reversed the Osaka High Court decision and remanded the case back to the Osaka High Court on April 28, 2009. On July 23, 2010, theCompany was ordered by the Osaka High Court to jointly reimburse, along with the other defendants, ¥335 million, an amountcorresponding to 4% of the cost of the facilities (excluding the construction costs). On July 30, 2010, the plaintiffs sought review of thisdecision by filing an appeal with the Supreme Court.
(d) On December 8, 2009, the Company received a judgment from the Nagoya District Court requiring reimbursement of ¥1,215 million
jointly with JFE Engineering Corporation (former NKK) and three other companies in a suit brought by Ichinomiya City claiming that theCompany unfairly bid on a construction contract for a waste incineration facility in Ichinomiya City that JFE Engineering Corporation(former NKK) was awarded in 1994. The Company appealed the judgment to the Nagoya High Court on December 25, 2009. However,on August 27, 2010, the Nagoya District Court upheld its decision and granted the claim against the five defendants, including theCompany. This outcome was finalized since neither the plaintiffs nor the defendants appealed this decision.

84

Independent Auditors’ Report85Major Consolidated Subsidiaries and Affiliates

Name

Paid-in Capital

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

Principal Businesses

China

CNY1,462,200*

50.00

Manufacture and sale of ships

SHIP & OFFSHORE STRUCTURE
Nantong COSCO KHI
Ship Engineering Co., Ltd. †ROLLING STOCK

Alna Yusoki-Yohin Co., Ltd.

Japan

400

100.00

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

Nichijo Manufacturing Co., Ltd.

Japan

120

75.02

Manufacture and sale of snowplows

Kawasaki Rail Car, Inc.

U.S.A.

US$60,600*

100.00Engineering, manufacture, sale, and after-sales
service of rolling stock in the United States

100.00

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

AEROSPACENIPPI Corporation

Japan

6,048

Japan

120

100.00Design and supervision of building construction
work, sale of herbicidal soil, manufacture andsale of rust-resistant packaging materials, andinsurance agency business

Kawasaki Thermal Engineering Co., Ltd.

Japan

1,460

83.59

Manufacture, sale, and installation of general
purpose boilers and air-conditioning equipment

Wuhan Kawasaki Marine Machinery Co., Ltd.

China

1,100

55.00

Manufacture, sale, and after-sales service ofKawasaki-brand azimuth thrusters, side thrusters,
and other machinery

Kawasaki Machine Systems, Ltd.

Japan

796

100.00

Sale and repair of gas turbine generators andindustrial robots

Tonfang Kawasaki
Air-Conditioning Co., Ltd. †China

US$9,673*

50.00

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

Nippi Kosan Co., Ltd.
GAS TURBINE & MACHINERY

86

Name

Location

Paid-in Capital(Millions of yen,unless otherwise noted)

Equity(% ownership by
KHI Group)

Principal Businesses

PLANT & INFRASTRUCTURE
EarthTechnica Co., Ltd.

Japan

1,200

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

Fukae Powtec Corporation

Japan

300

100.00

Manufacture and sale of crushers and related
plantsJP Steel Plantech Co. †

Japan

1,995

24.81

Sale of and engineering services for steelworks
plants and equipment

Shanghai COSCO Kawasaki Heavy Industries
China Steel Structure Co., Ltd. †China

US$29,800*

45.00

Manufacture and sale of steel structures

Anhui Conch Kawasaki
Engineering Co., Ltd. †China

CNY100,000*

50.00

Design, equipment procurement, sales,
installation, technical instruction for trial
operation, and after-service for environmentallyfriendly, energy-efficient equipment

Anhui Conch Kawasaki
Equipment Manufacturing Co., Ltd. †China

CNY148,000*

50.00

Design, production, sales, maintenance, afterservice, and supply of spare parts for cement
plantsChina

CNY60,000*

50.00

Research and development, production,equipment procurement and sales forenvironmentally friendly, energy-efficientequipment

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

US$120,000*

100.00

Manufacture of ATVs, utility vehicles, personal
watercraft, small gasoline engines, and rolling stock

Kawasaki Motors Corp., U.S.A.

U.S.A.

US$165,900*

100.00Distribution of motorcycles, ATVs, utility vehicles,
personal watercraft, and small gasoline engines in
the United States

Kawasaki Motors Finance Corporation

U.S.A.

US$10,000*

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

KM Receivables Corporation

U.S.A.

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

Canadian Kawasaki Motors Inc.

Canada

C$2,000*

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

Kawasaki Motors Europe N.V.

Netherlands

EUR64,093*

100.00Kawasaki Motors Pty. Ltd.

Australia

A$2,000*

100.00P.T. Kawasaki Motor Indonesia

Indonesia

US$40,000*

83.00

Manufacture and distribution of motorcycles inIndonesia

Kawasaki Motors (Phils.) Corporation

Philippines

P101,430*

50.001

Manufacture and distribution of motorcycles in
the Philippines

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

B1,900,000*

100.00

Manufacture and distribution of motorcycles inThailandKHITKAN Co., Ltd.

Thailand

B182,000*

100.00

Manufacture and sale of parts for motorcycles inThailandKawasaki Motores Do Brasil Ltda.

Brazil

R16,742*100.00

Manufacture and sale of motorcycles, ATVs, utility
vehicles, and personal watercraft in Brazil

Anhui Conch Kawasaki Energy Conservation
Equipment Manufacturing Co., Ltd. †MOTORCYCLE & ENGINE

Sole distribution of motorcycles, ATVs, utility
vehicles, personal watercraft, and small gasoline
engines in Europe
Distribution of motorcycles, ATVs, utility vehicles,
and personal watercraft, and small gasoline
engines in Australia

87

Major Consolidated Subsidiaries and Affiliates

Name

Location

Paid-in Capital(Millions of yen,unless otherwise noted)

EquityPrincipal Businesses(% ownership by
KHI Group)

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

U.S.A.

US$5,000*

100.00

Manufacture and sale of hydraulic products

Kawasaki Precision Machinery (U.K.) Ltd.

U.K.

£5,000*100.00

Manufacture and sale of hydraulic products

Flutek, Ltd.

Korea

W1,310**50.38

Manufacture, sale, and repair of hydraulicproducts, marine machinery, and other machinery

Kawasaki Precision Machinery (Suzhou) Ltd.

China

800

100.00Assembly of hydraulic pumps and motors forconstruction machinery

Kawasaki Chunhui Precision Machinery(Zhejiang) Ltd.

China

1,000

54.00

Manufacture and sale of hydraulic pumps forconstruction machinery

Kawasaki Precision Machinery Trading(Shanghai) Co., Ltd.

China

400

100.00

Procurement and sale of hydraulic components
and equipment, technical assistance, and quality
assurance services

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

U.S.A.

US$1,000*

100.00

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

Kawasaki Robotics (UK) Ltd.

U.K.

£917*

100.00

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

Kawasaki Machine Systems Korea, Ltd.

Korea

W1,500**100.00

Sale and after-sales service of industrial robots
and robot systems

Kawasaki Robotics (Tianjin) Co., Ltd.

China

CNY13,174*

100.00

Sale and after-sales service of industrial robots in
China

Kawasaki Trading Co., Ltd.

Japan

600

70.00

Trading

Kawasaki Hydromechanics Corporation

Japan

436

100.00

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

OTHER

Kawasaki Life Corporation

Japan

400

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

KCM Corporation

Japan

4,825

65.99

Design, manufacture, sale, and maintenance ofconstruction machinery

KCMJ Corporation

Japan

300

100.00

Sale and repair of construction machinery

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

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

U.S.A.

US$600*100.00

Responsible for sales and acting as intermediary
in North America for orders of KHI products
and for providing various types of engineering
supportKCMA Corporation

U.S.A.

US$8,000*

100.00

Manufacture and sale of construction machineryin the United States

100.00

Responsible for sales and acting as intermediary
in Brazil and the rest of Latin America for ordersof KHI products and for providing various typesof engineering business services

Kawasaki do Brasil
Industria e Comercio Ltda.

* Monetary unit in thousands** Monetary unit in millions† Affiliate accounted for using equity method

88

Brazil

R1,136*

Partially included in: ● Rolling StockGas Turbine & Machinery
Precision Machinery(As of March 31, 2011)

Network

Kobe Head Office
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, Japan
Phone: 81-78-371-9530
Fax: 81-78-371-9568
Tokyo Head OfficeWorld Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, Japan
Phone: 81-3-3435-2111
Fax: 81-3-3436-3037
Tokyo Office11-1, Minamisuna 2-chome,
Koto-ku, Tokyo 136-8588, Japan
Phone: 81-3-3615-5111
Fax: 81-3-3699-5618
DOMESTIC WORKS
Gifu Works
1, Kawasaki-cho, Kakamigahara,
Gifu 504-8710, Japan
Phone: 81-58-382-5712
Fax: 81-58-382-2981
Nagoya Works 1
3-11, Kusunoki, Yatomi,
Aichi 498-0066, Japan
Phone: 81-567-68-5117
Fax: 81-567-68-5090
Nagoya Works 2
7-4, Kanaoka, Tobishima-mura,Ama-gun, Aichi 490-1445, Japan
Phone: 81-567-55-0800
Fax: 81-567-55-0803

Sakaide Works
1, Kawasaki-cho,
Sakaide, Kagawa 762-8507, Japan
Phone: 81-877-46-1111
Fax: 81-877-46-7006
OVERSEAS OFFICES
Beijing Office
Room No. 2602, China World Tower 1,
China World Trade Center,
No. 1, Jian Guo Men Wai Avenue,
Beijing 100004,
People’s Republic of China
Phone: 86-10-6505-1350
Fax: 86-10-6505-1351
Taipei Office
15th Floor, Fu-key Bldg.,
99 Jen-Ai Road, Section 2,
Taipei, Taiwan
Phone: 886-2-2322-1752
Fax: 886-2-2322-5009
Delhi Office
5th Floor, Meridien Commercial Tower,
8 Windsor Place, Janpath,
New Delhi, 100 001, India
Phone: 91-11-4358-3531
Fax: 91-11-4358-3532
Moscow Office
Office 432 (4F), Entrance 6,
Krasnopresnenskaya nab. 12,123610, Moscow, Russian Federation
Phone: 7-495-258-2115
Fax: 7-495-258-2116
MAJOR SUBSIDIARIES AND AFFILIATES

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

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

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

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

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

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

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

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

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

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

Kakogawa Works
170, Yamanoue Mukohara, Hiraoka-cho,
Kakogawa, Hyogo 675-0112, Japan
Phone: 81-79-427-0292
Fax: 81-79-427-0556
Harima Works
8, Niijima, Harima-cho,Kako-gun, Hyogo 675-0155, Japan
Phone: 81-79-435-2131
Fax: 81-79-435-2132

Houston Branch
333 Clay Street, Suite 4310,
Houston, TX 77002-4109, U.S.A.
Phone: 1-713-654-8981
Fax: 1-713-654-8187
Kawasaki Rail Car, Inc.
29 Wells Avenue, Building #4,
Yonkers, NY 10701, U.S.A.
Phone: 1-914-376-4700
Fax: 1-914-376-4779

Kawasaki Robotics (U.S.A.), Inc.
28140 Lakeview Drive,
Wixom, MI 48393, U.S.A.
Phone: 1-248-446-4100
Fax: 1-248-446-4200
San Jose Office3081 N. 1st Street,
San Jose, CA 95134, U.S.A.
Phone: 1-408-432-0990
Fax: 1-408-432-0996
Kawasaki Motors Corp., U.S.A.
9950 Jeronimo Road,
Irvine, CA 92618, U.S.A.
Phone: 1-949-770-0400
Fax: 1-949-460-5600
Grand Rapids Office5080 36th Street S.E.,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-954-3031
Kawasaki Precision Machinery (U.S.A.), Inc.
3838 Broadmoor Avenue SE,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-975-3100
Fax: 1-616-975-3103
Kawasaki Motors Manufacturing Corp., U.S.A.
6600 Northwest 27th Street,
Lincoln, NE 68524, U.S.A.
Phone: 1-402-476-6600
Fax: 1-402-476-6672
Maryville Plant
28147 Business Highway 71,
Maryville, MO 64468, U.S.A.
Phone: 1-660-582-5829
Fax: 1-660-582-5826
KCMA Corporation
2140 Barrett Park Drive, Suite 101,
Kennesaw, GA 30144, U.S.A.
Phone: 1-770-499-7000
Fax: 1-770-421-6842
Canadian Kawasaki Motors Inc.
101 Thermos Rd.,
Toronto, Ontario, M1L 4W8, Canada
Phone: 1-416-445-7775
Fax: 1-416-445-0391
Kawasaki do Brasil Indústria e Comércio Ltda.
Avenida Paulista, 542-6 Andar,
Bela Vista, 01310-000, São Paulo, S.P., Brazil
Phone: 55-11-3289-2388
Fax: 55-11-3289-2788
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, Westbrook,
Warrington WA5 7ZB, U.K.
Phone: 44-1925-713000
Fax: 44-1925-713001

89

Network

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

Flutek, Ltd.
192-11 Shin Chon-Dong,
Changwon, Kyung Nam, 641-370, Korea
Phone: 82-55-286-5551
Fax: 82-55-286-5553

Kawasaki Robotics G.m.b.H.
29 Sperberweg, 41468 Neuss, Germany
Phone: 49-2131-34260
Fax: 49-2131-3426-22

Kawasaki Motors Enterprise (Thailand) Co., Ltd.
129 Rama 9 Road, Kwaeng Huaykwang,
Khet Huaykwang, Bangkok 10310, Thailand
Phone: 66-2-246-1510
Fax: 66-2-246-1517

Kawasaki Heavy Industries (Europe) B.V.
7th Floor, Riverstaete,
Amsteldijk 166,
1079 LH Amsterdam,
The Netherlands
Phone: 31-20-6446869
Fax: 31-20-6425725
Kawasaki Motors Europe N.V.
Jacobus Spijkerdreef 1-3,
2132 PZ Hoofddorp,
The Netherlands
Phone: 31-23-567-0500
Fax: 31-23-563-9884
U.K. Branch
1 Dukes Meadow,
Millboard Road, Bourne End,
Buckinghamshire SL8 5XF, U.K.
Phone: 44-1628-856600
Fax: 44-1628-856799
Germany Branch
Max-Planck-Strasse 26,
61381 Friedrichsdorf, F.R. Germany
Phone: 49-6172-7340
Fax: 49-6172-734160
France Branch
Parc d’activité de la clef de Saint Pierre,
Rond point de l’Epine des champs,
78996 Elancourt Cedex, France
Phone: 33-1-30-69-0000
Fax: 33-1-30-69-5001

KHI Design & Technical Service Inc.
20F 6788 Ayala Avenue,
Olden Square, 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 City,
Metro Manila 1771, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730
Kawasaki Heavy Industries (Singapore) Pte. Ltd.
6 Battery Road, #23-01,
Singapore 049909
Phone: 65-6225-5133~4
Fax: 65-6224-9029
P.T. Kawasaki Motor Indonesia
JI. Perintis Kemerdekaan, Kelapa Gading,
Jakarta Utara 14250, Indonesia
Phone: 62-21-452-3322
Fax: 62-21-452-3566

Italy Branch
Via Meraviglia 31,
20020 Lainate, Italy
Phone: 39-02-93-28-521
Fax: 39-02-93-28-5284

Kawasaki Heavy Industries Middle East FZE
Dubai Airport Free Zone, Bldg. 6W Block-A,
Office No. 709, P.O. Box 54878, Dubai, U.A.E.
Phone: 971-4-214-6730
Fax: 971-4-214-6729

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

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

Spain Branch
Calle José Agustin Goytisolo,
29-31, 08908 L‘Hopitalet,de Llobregat (Barcelona), Spain
Phone: 34-93-264-26-00
Fax: 34-93-263-53-67

Wuhan Kawasaki Marine Machinery Co., Ltd.
No. 43 Wudong Road,
Qingshan, Wuhan, Hubei,
People’s Republic of China
Phone: 86-27-8641-0132
Fax: 86-27-8641-0136

Benelux Brancht Hofveld 6 C2, 1702 Groot-Bijgaarden,
RPR 0876.824.570-Arroundissement Brussels,
Belgium
Phone: 32-2-481-7820
Fax: 32-2-481-7829

Kawasaki Heavy Industries (H.K.) Ltd.
Room 3710-14, Sun Hong Kai Center,
30 Harbour Road, Wanchai, Hong Kong
Phone: 852-2522-3560
Fax: 852-2845-2905

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

90

Kawasaki Gas Turbine Asia Sdn Bhd
No. 40, Jalan Pemberita U1/49
Temasya Industrial Park, Glenmarie,
40150 Shah Alam, Selangore,
Malaysia
Phone: 60-3-5569-2882
Fax: 60-3-5569-3093

Shanghai COSCO Kawasaki Heavy Industries
Steel Structure Co., Ltd.
5198 Hutai Road, Baoshan District,
Shanghai 201907, People’s Republic of China
Phone: 86-21-5602-8888
Fax: 86-21-5602-5198
Kawasaki Heavy Industries Consulting& Service (Shanghai) Company, Ltd.
10F, Chong Hing Finance Center,
288 Nanjing Road West, Huangpu District,
Shanghai 200003, People’s Republic of China
Phone: 86-21-3366-3200
Fax: 86-21-3366-3205
Kawasaki Trading (Shanghai) Co., Ltd.
10F, Chong Hing Finance Center,
288 Nanjing Road West, Huangpu District,
Shanghai 200003, People’s Republic of China
Phone: 86-21-3366-3700
Fax: 86-21-3366-3701
Anhui Conch Kawasaki Engineering Co., Ltd.
3F, Conch International Conference Center,
1007 South Jiuhua Road, Wuhu, Anhui 241136,
People’s Republic of China
Phone: 86-553-839-8606
Fax: 86-553-839-8676
Anhui Conch Kawasaki Energy Conservation Equipment
Manufacturing Co., Ltd.
1F, Conch International Conference Center,
1007 South Jiuhua Road, Wuhu, Anhui 241136,
People’s Republic of China
Phone: 86-553-839-8015
Fax: 86-553-839-9553
Anhui Conch Kawasaki Equipment Manufacturing Co., Ltd.
Huolonggang town, Yiijiang zone, Wuhu, Anhui 241138,
People’s Republic of China
Phone: 86-553-839-9692
Fax: 86-553-839-9560
Kawasaki Chunhui Precision Machinery (Zhejiang) Ltd.
No. 200 YaSha Road, Shangyu Economic Development Zone,
Shansyu, Zhejiang, 312300,
People’s Republic of China
Phone: 86-575-8215-6999
Fax: 86-575-8215-8699
Kawasaki Precision Machinery Trading (Shanghai) Co., Ltd.
30F, Chong Hing Finance Center 288 Nanjing Road West,
Huangpu District, Shanghai 200003,
People’s Republic of China
Phone: 86-21-3366-3800
Fax: 86-21-3366-3808
Changzhou Kawasaki and Kwang Yang Engine Co., Ltd.
No. 380 Hang Jiang Road, Xinbei District,
Changzhou City, Jiangsu Province,
People’s Republic of China
Phone: 86-519-8308-9001
Fax: 86-519-8308-9029
Kawasaki Robotics (Tianjin) Co., Ltd.
C-1-9, No. 41, 5th Avenue, TEDA,
Tianjin 300457,
People’s Republic of China
Phone: 86-22-5983-1888
Fax: 86-22-5983-1889

Kawasaki Precision Machinery (Suzhou) Ltd.
Yangshan Industrial Park, 9 Guanshan Rd.,
New District, Suzhou, People’s Republic of China
Phone: 86-512-6616-0365
Fax: 86-512-6616-0366
Nantong COSCO KHI Ship Engineering Co., Ltd.
117, Linjiang Road, Nantong City,
Jiangsu Province, People’s Republic of China
Phone: 86-513-8516-8888
Fax: 86-513-8351-4349(As of June 30, 2011)

Corporate Data

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

Incorporated:

1896

Paid-in Capital:¥104,340,099,788

Number of Shares Issued:

1,670,646,460 shares

Number of Shareholders:

147,498

Number of Employees:

32,706

Stock Exchange Listings:

Tokyo, Osaka, Nagoya

Method of Publication of Notices:
http://www.khi.co.jp
The method of publication of notices of the Corporation shallbe made electronically. Provided, if the Corporation is unable
to make an electronic publication of notice due to an accident
or other unavoidable reason, the notice shall be inserted in the
Nihon Keizai Shimbun.

Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, Japan
Handling Office:
The Chuo Mitsui Trust and Banking Company, Limited
Osaka Branch Office
2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan
Independent Auditors:
KPMG AZSA LLC
1-1, Kumoi-dori, 7 chome, Chuo-ku,
Kobe, Hyogo 651-0096, JapanADR Facility:
KHI has a sponsored American Depository Receipt (ADR)
facility. ADRs are traded in the over-the-counter (OTC) market
in the United States under CUSIP number 486359201, with each
ADR representing four ordinary shares.
ADR Depository:
The Bank of New York Mellon
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-866-680-6825
U.S. Toll Free: 888-269-2377(888-BNY-ADRS)
http://adrbnymellon.com

KHI Web Site at: http://www.khi.co.jp(As of March 31, 2011)91

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ISSN 0287 - 1793