Report of Earnings and Financial Statements for theThree Months Ended June 30, 2021 (Consolidated)(Prepared pursuant to Japanese GAAP)
August 5, 2021
Listed company’s name:

Kawasaki Heavy Industries, Ltd.

Listed on:
Stock code:
URL:
Representative:
Contact:
Tel:

1st sections of the TSE, and NSE
7012
https://global.kawasaki.com/
Yasuhiko Hashimoto, President and Chief Executive Officer
Takashi Torii, Group Manager, Corporate Communication Group Department+81 3-3435-2130

Scheduled dates:
Submission of quarterly securities filing:
Supplementary materials to quarterly earnings:
Quarterly earnings presentation:

August 5, 2021
Available
Conducted (for institutional investors, analysts and thepress)(Amounts in millions of yen rounded down to the nearest millions of yen)

1. Consolidated Financial Results for the Three Months ended June 30, 2021
(April 1, 2021 – June 30, 2021)(1) Operating Results
Net sales

Three Months Ended
June 30, 2021
Three Months Ended
June 30, 2020
Note: Comprehensive income(Percentage figures represent changes versus the year-ago period)
Net income attributable
Operating income
Recurring profit
to owners of parent
Millions of%Millions of%Millions of
%
yen
yen
yen

Millions ofyen%

355,63118.3

15,166-

13,126

-

9,869

-

300,602(14.3)(20,661)-(18,931)-(11,771)-

Three months ended June 30, 2021:
Three months ended June 30, 2020:
Earnings per share¥13,412 million¥(13,593) million

Earnings per share– diluted
yen

-%
-%

yen
Three Months Ended
59.08
June 30, 2021
Three Months Ended(70.47)
June 30, 2020
Note: The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 ofMarch 31, 2020) from this consolidated fiscal year, and the figures for the first quarter of the consolidated fiscal
year ended March 2022 are after the application of the accounting standard.

1(2) Financial Condition
Total assets

Net assets

Millions of yen

Millions of yen

Equity ratio%

June 30, 2021

1,953,865

456,187

22.4

March 31, 2021

1,963,276

482,775

23.7

For reference: Shareholders’ equity

June 30, 2021:¥ 438,433 million
March 31, 2021:¥ 465,332 million
Note: The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 ofMarch 31, 2020) from this consolidated fiscal year, and the figures for the first quarter of the consolidated fiscal
year ended March 2022 are after the application of the accounting standard.

2. Dividends

Record date or term

Dividend per share
End of third
End of fiscal
quarter
year
Yen
yen

End of firstquarteryen

End of second
quarter
yen

-

0.00

-

0.00

0.00

20.00

-

10.00

30.00

Year ended
March 31, 2021
Year ending
March 31, 2022
Year ending March 31,
2022 (forecast)

Full year
yen-

Note: Revisions to the most recently announced dividend forecast: Yes
In the Company’s articles of incorporation, the dates of record are set as the last day of the fiscal second quarterand the last day of the fiscal year.

3. Forecast of Consolidated Earnings for the Fiscal Year Ending March 31, 2022
(April 1, 2021 – March 31, 2022)
Net sales

Full year

Millions ofyen
1,530,000%
2.8(Percentage figures indicate change compared with the previous fiscal year)
Profit attributable toEarnings
Operating income
Recurring profit
owners of parent
per share
Millions of%Millions of%Millions of
%
Yen
yen
yen
yen
40,00028,00019,000113.36

Note: Revisions to the most recently announced earnings forecast: Yes
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 ofMarch 31, 2020) from this consolidated fiscal year, and the figures for the first quarter of the consolidated fiscal
year ended March 2022 are after the application of the accounting standard.

2

Notes1) Changes affecting the status of material subsidiaries (scope of consolidation): None2) Accounting procedures specific to preparation of quarterly consolidated financial statements: Yes*For further details, see “2.Consolidated Financial Statements (3)Notes on financial statements(Accounting procedures specific to preparation of quarterly consolidated financial statements)” on
page 14 in the Accompanying Materials.
3) Changes in accounting policies, changes in accounting estimates, and correction of errors(1) Changes in accounting policies in accord with revisions to accounting standards: Yes(2) Changes in accounting policies other than (1): None
(3) Changes in accounting estimates: None
(4) Correction of errors: None
*For further details, see “2.Consolidated Financial Statements (3)Notes on financial statements(Changes in accounting policies)” on page 14 in the Accompanying Materials.
4) Number of shares issued and outstanding (common stock)(1) Number of shares issued as of period-end (including treasury stock)June 30, 2021:
167,080,532 shares
March 31, 2021:
167,080,532 shares(2) Number of shares held in treasury as of period-end
June 30, 2021:
38,681 shares
March 31, 2021:
38,282 shares(3) Average number of shares during respective periods
June 30, 2021:
167,041,976 shares
June 30, 2020:
167,043,805 shares*The quarterly report of earnings and financial statements is exempted from quarterly review
procedures based on the Financial Instruments and Exchange act.
*Appropriate Use of Financial Forecasts and Other Important Matters
Forward-Looking Statements
These materials contain various forward-looking statements and other forecasts regarding performanceand other matters. Such statements are based on information available at the time of their preparation, anddo not mean that the Company promises to achieve these figures. Actual results may differ from thoseexpressed or implied by forward-looking statements due to a range of factors. For assumptions underlying
earnings forecasts and other information regarding the use of such forecasts, refer to “1. Qualitative
Information and Financial Statements (3) Consolidated earnings outlook” on page 10 in the
Accompanying Materials.
How to Obtain Supplementary Briefing Material on Quarterly Financial Results and Details of theQuarterly Financial Results Briefing
The Company plans to conduct a briefing for institutional investors, analysts and the press by conference
call on Thursday August 5, 2021, and to post the briefing material on quarterly financial results to be used
for the briefing on TDnet and the Company’s website simultaneously with the announcement of financial
results.

3

Accompanying Materials – Contents
1. Qualitative Information and Financial Statements

5(1) Consolidated operating results

5(2) Consolidated financial condition

10(3) Consolidated earnings outlook

10

2. Consolidated Financial Statements

11(1) Consolidated balance sheets

11(2) Consolidated statements of income and comprehensive income13(3) Notes on financial statements

14(Notes on the going-concern assumption)

14(Notes on significant changes in the amount of shareholders’ equity)

14(Accounting procedures specific to preparation of quarterly consolidated financial

14

statements)(Changes in accounting policies)

14(Related to consolidated balance sheets)

15(Related to consolidated statements of income)16(Segment information)

17

3. Supplementary Information

19(1) Consolidated cash flow statements (condensed)

19(2) Supplementary information on consolidated earnings forecasts for the fiscal year ending

19

March 31, 2022

4

1. Qualitative Information about Financial Statements(1) Consolidated operating results
The global economy, which has been in decline due to COVID-19, is showing signs of recovery,
due to the progress of vaccination and economic measures mainly in developed countries, including a
recovery in demand for short-haul flights and a recovery in personal consumption such as leisureactivities in Europe, the United States and China. Although the pace of recovery in personal
consumption in Japan has stalled following the reissuance of the state of emergency, business
confidence has improved mainly in the manufacturing sector, and capital investment is expected torecover to the level before the spread of COVID-19.
On the other hand, the future remains uncertain due to concerns over the effects of vaccines onvariants of the virus, rising raw material prices, and the prolonged US-China problem.
In this business environment, the Group’s consolidated orders received during the first quarter ofthis consolidated fiscal year increased mainly due to increases in the Motorcycle & Engine segment,
the Precision Machinery & Robot segment, despite decreases in the Rolling Stock segment and the
Aerospace Systems segment. Net sales decreased in the Aerospace Systems segment and othersegments, but overall sales increased from the same period of the previous fiscal year due to higher
sales in the Motorcycle & Engine segment the Precision Machinery & Robot segment and othersegment. Operating income improved significantly year on year due to improvements in theMotorcycle & Engine segment and the Aerospace Systems segment. Recurring profit improved
significantly due to an improvement in operating income despite deterioration in foreign exchange
gains to losses. Net income attributable to owners of the parent improved significantly due to an
improvement in recurring profit despite an increase in tax expenses.
As a result, the Group’s consolidated orders received increased by ¥55.9 billion year on year to¥304.2 billion, consolidated net sales increased by ¥55.0 billion year on year to ¥355.6 billion,
operating income improved by ¥35.8 billion year on year to ¥15.1 billion, recurring profit improvedby ¥32.0 billion year on year to ¥13.1 billion, and profit attributable to owners of parent improved by¥21.6 billion year on year to ¥9.8 billion.
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29 of March 31, 2020), etc. from the beginning of the first quarter of the current fiscal year. For
more information, see “2. (3) Notes on financial statements (Changes in accounting policies) and(Segment Information)”.

5

First-quarter consolidated operating performance is summarized by segment below.

Segment Information
Segment net sales, operating income, and orders received (billions of yen)Three months ended June 30

2020(A)

2021(B)

Orders received

Change (B – A)Three months ended
June 30

Net

OperatingNet

OperatingNet

Operating

2020

2021

Changesales

incomesales

incomeSales

income(A)(B)(B – A)

Aerospace
Systems

74.6(17.5)

70.0

(5.1)

(4.5)

12.3

45.4

37.4

(7.9)

Rolling Stock

32.3

(1.4)

28.7

(0.8)

(3.5)

0.6

18.7

9.3

(9.4)

72.2

1.1

70.3

(0.3)

(1.9)

(1.5)

56.2

60.9

4.6

45.4

1.3

57.6

5.1

12.2

3.7

50.7

65.1

14.4

Engine

58.9

(5.9)

113.5

14.8

54.5

20.7

58.9

113.5

54.5

Other

16.9

(0.1)

15.2

0.6

(1.7)

0.7

18.0

17.8

(0.2)

－

1.9

－

0.9

－

(0.9)

－

－

－

300.6

(20.6)

355.6

15.1

55.0

35.8

248.2

304.2

55.9

Energy Solution& Marine
Engineering
Precision
Machinery &Robot
Motorcycle &Adjustments
Total

Notes: 1. Net sales include only sales to external customers.
2. The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.
3. From the first quarter of the current consolidated accounting period, the previous reporting segments of“Energy System & Plant Engineering” and “Ship & Offshore Structure” have been integrated into “Energy
Solution & Marine Engineering”. As a result, reportable segments have been changed to “Aerospace Systems”,“Rolling Stock”, “Energy Solution & Marine Engineering”, “Precision Machinery & Robot”, “Motorcycle &Engine”, and “Other”.
Segment information for the first quarter of the previous fiscal year is presented using the new classification
method.

6

Aerospace Systems
Regarding the business environment surrounding the Aerospace Systems segment, demand for
Ministry of Defense in Japan is generally stable despite the tight defense budget. With respect tocommercial aircraft, global passenger demand has been sluggish due to the COVID-19 pandemic, anddemand for commercial aircraft airframes and jet engines has declined. Although demand for shorthaul flights is currently recovering in some regions such as North America, the outlook remains
uncertain due to concerns over the effects of vaccines against the variants of the virus.
Amid such an operating environment, consolidated orders received decreased by ¥7.9 billion year
on year to ¥37.4 billion, mainly due to the impact of the application of revenue recognition accounting
standards for component parts of commercial aircraft jet engines, despite an increase in helicopter andits component parts.
Consolidated net sales decreased by ¥4.5 billion year on year to ¥70.0 billion, mainly due to adecrease in component parts of jet engines for commercial aircraft resulting from the application ofrevenue recognition accounting standards, despite an increase in component parts of airframes forcommercial aircraft.
Operating loss came to ¥5.1 billion, improving ¥12.3 billion year on year, due to an increase in salesof component parts of airframes for commercial aircraft and an improvement in profitability ofcomponent parts of jet engines for commercial aircraft.
Rolling StockRegarding the business environment surrounding the Rolling Stock segment, the effect of the COVID-19
has led to a review railway-related investment plans in Japan, and delays in work processes as well as
postponement and cancellation of biddings overseas.
In the medium and long term, however, relatively stable growth is expected around the world due todevelopment of urban transportation as an environmental protection measure and to ease congestion inlarge cities caused by increasing population concentration, as well as demand for railway infrastructure
following economic development in Asian countries.
Amid such an operating environment, consolidated orders received amounted to ¥9.3 billion, a decline of¥9.4 billion compared to the same period of the previous fiscal year, when the Company received orders
for Shinkansen bullet trains.

Consolidated net sales decreased by ¥3.5 billion year on year to ¥28.7 billion, mainly due to adecrease in sales of railcars for other overseas and domestic markets, despite an increase in sales ofrailcars for the United States.
Operating loss came to ¥0.8 billion, improving ¥0.6 billion despite a decrease in sales, comparedto the same period of the previous fiscal year when the profitability of overseas projects deteriorated
due to the impact of the COVID-19 pandemic.

7

Energy Solution & Marine Engineering
The business environment surrounding the Energy Solution & Marine Engineering segment remains
on a recovery track as the global economy moves from stagnation due to the COVID-19 pandemic tonormalization. Demand for distributed power sources in Japan and overseas and, for energy
infrastructure development in emerging countries, remains strong, while there is ongoing demand forthe replacement of aging facilities for refuse incineration plants. Also, business opportunities on LPG
carriers are gradually increasing. In addition, there is a growing worldwide trend toward achievingcarbon neutrality, and contacts and requests for cooperation are increasing regarding decarbonization
solutions, including hydrogen products of our Company’s strength. On the other hand, there areconcerns that the rapid normalization of the economy will lead to higher raw material prices and higher
transportation costs, which will squeeze earnings.
Amid such an operating environment, consolidated orders received increased by ¥4.6 billion fromthe same period of the previous fiscal year to ¥60.9 billion due to orders received for large-scale
projects such as the improvement of domestic waste disposal facilities.
Consolidated net sales decreased by ¥1.9 billion year on year to ¥70.3 billion, mainly due to adecrease in sales in Ship & Offshore Structure business, despite an increase in sales in the Energy
Solution business.
Operating loss came to ¥0.3 billion, deteriorating ¥1.5 billion year on year, due to changes in the
product mix and other factors.
Precision Machinery & Robot
Regarding the business environment surrounding the Precision Machinery & Robot segment, inthe precision machinery field, demand in the Chinese construction machinery market continued to be
at a high level this fiscal year, and demand in the construction machinery market outside China also
continued to be strong. However, we need to continue to monitor the situation in the Chinese market,
as some construction equipment manufacturers have begun to adjust their inventories based on thesales situation of hydraulic excavators in China. In the robot field, robots for the semiconductor
market, performance is strong due to an increase in capital investment by semiconductor
manufacturing equipment manufacturers, and general-purpose robots performed well mainly in areas
where recovery from the COVID-19 pandemic was rapid.
Amid such an operating environment, consolidated orders received increased by ¥14.4 billion year
on year to ¥65.1 billion, due to an increase in hydraulic equipment for the construction equipment
market and various robots for semiconductors and other applications.
Consolidated net sales increased by ¥12.2 billion year on year, to ¥57.6 billion, due to an increasein hydraulic equipment for the construction equipment market and various robots forsemiconductors.
Operating income increased by ¥3.7 billion year on year to ¥5.1 billion due to sales increase.

8Motorcycle & Engine
The business environment surrounding the Motorcycle & Engine segment continues to be affectedby the COVID-19 pandemic. Demand for off-road models such as four-wheeled vehicles continued to
be strong in the United States, a major market, as in the previous fiscal year, and the European market
also remained strong. At the same time, the outlook for the Southeast Asian market remains uncertain.
The supply of products is also affected by shortages of semiconductors and raw materials anddisruptions in distribution.
Amid such an operating environment, consolidated net sales increased by ¥54.5 billion year on yearto ¥113.5 billion due to an increase in off-road models such as motorcycles and four-wheeled vehicles
for North America and an increase in motorcycles for Europe and Southeast Asia.
Operating income improved by ¥20.7 billion from the same period of the previous fiscal year to¥14.8 billion due to an increase in sales, a weaker yen compared to the same period of the previous
fiscal year, and a reduction in sales promotion expenses, along with other factors.
Other Operations
Consolidated net sales decreased ¥1.7 billion year on year to ¥15.2 billion.
Operating income improved by ¥0.7 billion year on year to ¥0.6 billion.
In the Group Vision 2030, the Group will focus on three fields; “A Safe and Secure RemotelyConnected Society”, “Near-Future Mobility” and “Energy and Environmental Solutions” and willtransform our business structure into a form which promises faster growth in line with environmental
changes. The Group is making steady progress in new businesses, such as the development of surgicalsupport robots and automated PCR testing, the development of delivery robots and unmannedtransport helicopters, and the promotion of hydrogen-related projects.

9(2) Consolidated financial condition(i) Assets
Current assets were ¥1,227.3 billion, ¥58.0 billion decrease from the previous fiscal year due to adecrease in trade receivables and contract assets.
Fixed assets were ¥726.5 billion, ¥48.6 billion increase from the previous fiscal year due to anincrease in investments and other assets.
As a result, total assets were ¥1,953.8 billion, ¥9.4 billion decrease from the previous fiscal year.

(ii) Liabilities
Interest-bearing debt were ¥644.9 billion, ¥51.6 billion increase from the previous fiscal year.
Liabilities were ¥1,497.6 billion, ¥17.1 billion increase from the previous fiscal year due toincreases in interest-bearing debt and other factors.

(iii) Net assets
Net assets were ¥456.1 billion, ¥26.5 billion decrease from the previous fiscal year due todecreases in retained earnings at the beginning of this fiscal year because of the application of
Accounting Standard for Revenue Recognition and other factors.

(3) Consolidated earnings outlook
For the fiscal year ending March 2022, the outlook of consolidated net sales, operating income,recurring profit and net income attributable to owners of parent are expected to increase from theoutlook announced on May 11, to ¥1,530.0 billion, ¥40.0 billion, ¥28.0 billion and ¥19.0 billion,
respectively.
ROIC and ROE are expected to be 3.3% and 4.2%, respectively.
Consolidated orders received are expected to increase by 30.0 billion yen from the previous outlook
to ¥1,510,0 billion due to the expected increase in the Motorcycle & Engine segment.
In this outlook, exchange rates are assumed to be ¥109 to the U.S. dollar and ¥128 to the euro.
For details, please refer to “Revision of the Earnings and Dividend Forecasts for the Fiscal YearEnding March 31, 2022” released today.

Note regarding consolidated earnings outlook
The above earnings outlook is based on information available at the time of preparation, and includes
risks and uncertainties. We therefore discourage making investment decisions depending solely on thisoutlook. Please note that actual earnings may differ materially from this outlook, due to a variety ofimportant factors stemming from changes the external environment and/or the Company’s internal
environment. Important factors that impact actual operating performance include, but are not limited
to, the economic situation surrounding the Company’s scope of business, foreign exchange rates, inparticular the yen/dollar exchange rate, tax codes and other regulatory system-related issues.

102. Consolidated Financial Statements(1) Consolidated balance sheets
Millions of yen
As of
As of
March 31, 2021
June 30, 2021
AssetsCurrent assets
Cash and deposits
Trade receivables
Trade receivables and contract assets
Merchandise and finished products
Work in process
Raw materials and supplies
Other
Allowance for doubtful receivables
Total current assets
Fixed assets
Net property, plant and equipment
Buildings and structures
Other
Total property, plant and equipment
Intangible assets
Investments and other assets
Other
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets
Liabilities
Current liabilities
Trade payables
Electronically recorded obligations - operating
Short-term debt
Income taxes payable
Provision for sales promotion expenses
Accrued bonuses
Provision for product warranties
Provision for losses on construction contracts
Advances received
Contract liability
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term debt
Retirement benefit liability
Provision for the in-service issues of commercial aircraft
jet engines
Other
Total non-current liabilities
Total liabilities

11

126,702460,436
69,223452,848
136,471
43,314(3,589)1,285,407

122,051
410,00966,471
410,871
143,876
77,695(3,636)
1,227,338

172,951
278,308451,259
22,427

170,845
276,020446,866
22,099205,584(1,403)204,180
677,868
1,963,276

258,957(1,396)
257,560
726,526
1,953,865

247,294
107,849
141,579
4,753
7,380
18,23912,55014,263
153,298－
210,345

202,788
112,025
138,279
5,028－
19,347
12,261
12,457－160,078
276,391

917,555

938,658

190,000
199,177
115,456

190,000
195,214
115,610(*1) 5,984(*1) 5,052

52,326562,944
1,480,500

53,141
559,019
1,497,677

Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity

104,484
54,542306,576(136)
465,467

104,484
54,542276,806(137)
435,696

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total net assets and liabilities

1,955
(179)
(931)
(979)
(134)
17,442482,775
1,963,276

1,576
(653)
2,484
(670)
2,736
17,754456,187
1,953,86512

(2) Consolidated statements of income and comprehensive income
Consolidated statements of income
Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Salaries and allowances
Research and development expenses
Other

Total selling, general and administrative expenses
Operating income(loss)
Non-operating income
Interest income
Dividend income
Foreign exchange gain
Other

Total non-operating income
Non-operating expenses
Interest expense
Share of losses of entities accounted for using equity method
Foreign exchange losses
Other

Total non-operating expenses
Recurring profit(loss)
Extraordinary income
Gain on sales of fixed assets
Gain on sales of sales of shares of subsidiaries and associates
Total extraordinary income
Extraordinary loss
Impairment loss
Total extraordinary loss
Income(loss) before income taxes
Income taxes
Net income(loss)
Net income attributable to non-controlling interests
Net income(loss) attributable to owners of parent

As ofJune 30, 2020

As ofJune 30, 2021

300,602278,357
22,244355,631
293,604
62,027

13,458
8,145
21,302
42,906(20,661)

13,966
8,885
24,00846,86015,166

138
119
2,377
1,492
4,128

272
167
－
1,412
1,853

1,030
20
－
1,347
2,398
(18,931)

885
1,049
714
1,244
3,893
13,126(*1)3,236(*2)1,581
4,817(*1) 1,633
－
1,633

－
－
(14,114)(2,366)(11,747)
24(11,771)(*3)7676
14,683
4,332
10,351481
9,869

Consolidated statements of comprehensive income
Millions of yen

Net income(loss)
Other comprehensive income
Net unrealized gains (losses) on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurement of defined benefit plans
Share of other comprehensive income(loss) of associates
accounted for using equity method
Total other comprehensive income(loss)
Comprehensive Income(loss) attributable to:
Owners of parent
Non-controlling interests

13

As of
June 30, 2020

As ofJune 30, 2021

(11,747)

10,351

(352)
3
(285)
400
(1,612)

(394)
(383)
1,796
293
1,749

(1,846)(13,593)(13,459)
(134)

3,060
13,412
12,724688

(3) Notes on financial statements

Notes on the going-concern assumption
Not applicable
Notes on significant changes in the amount of shareholders’ equity
Not applicable
Accounting procedures specific to preparation of quarterly consolidated financial statements(Calculation of tax expense)
The Company calculates tax expense by rationally estimating its effective tax rate after applicationof tax effect accounting to pretax net income for the fiscal year which includes the first quarter underreview, and multiplying quarterly pretax net income by said estimated effective tax rate. If unable touse the estimated effective tax rate, the Company calculates tax expense by multiplying the statutory
effective tax rate by quarterly pretax net income adjusted to reflect material differences other than
temporary differences.
Income taxes are reported inclusive of income tax adjustments.
Changes in accounting policies(Application of Accounting Standards for Revenue Recognition)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29 of March 31, 2020. Hereinafter referred to as “revenue recognition accounting standards”.),
etc. from the beginning of the first quarter of this consolidated fiscal year, and recognizes revenue
at the amount expected to be received in exchange for the promised goods or services when thecontrol of those goods or services is transferred to customers.
As a result of this adoption, a portion of the costs incurred in connection with the civil aviationengine program in which the Company is participating, which was previously recorded in cost of
sales, has been reduced from sales in consideration of payments to customers. As a result, thedevelopment contribution for the civil aviation engine program, which was previously accounted
for in work in process, has been transferred to investments and other assets. In addition, for aftersales services for the civil aviation engine program, although sales and cost of sales were previously
recorded based on information provided by the Company's main partner, revenue is now recognizedbased on fulfillment of performance obligations, and variable compensation and compensation paid
to customers are estimated when revenue is recognized. In addition, the Company changed themethod of accounting for certain types of discounts the Company is willing to pay in accordancewith the ratio of participation in the civil aviation engine program from the method previously
reported based on information provided by the main partner to the method in which the amount ofsuch discounts is estimated as variable compensation at the time of revenue recognition.
Regarding the application of the revenue recognition accounting standard, in accordance with thetransitional treatment prescribed in the proviso of Paragraph 84 of the revenue recognition
accounting standard, the cumulative effect of retroactive application of the new accounting policy
prior to the beginning of the first quarter of this consolidated fiscal year is added to or subtracted
from retained earnings at the beginning of the first quarter of this consolidated fiscal year, and the
new accounting policy is applied from the beginning balance. However, the new accounting policy
has not been retroactively applied to contracts that have been recognized almost all amounts of14

revenue in accordance with the previous treatment prior to the beginning of the first quarter of thisconsolidated fiscal year by applying the method specified in Paragraph 86 of the AccountingStandard for Revenue Recognition. In addition, by applying the method specified in Paragraph 86
and Item (1) of the Accounting Standard for Revenue Recognition, changes in contracts made prior
to the beginning of the first quarter of this consolidated fiscal year are accounted for under the terms
and conditions after reflecting all changes in contracts, and the cumulative effect of such changes
is recorded in the consolidated financial statements for the first quarter of this consolidated fiscal
year. The amount is adjusted to retained earnings at the beginning of the first quarter of thisconsolidated fiscal year.
As a result, net sales and cost of sales decreased by ¥17,095 million and ¥18,121 million,
respectively, and operating income, recurring profit and income before income taxes and minority
interests increased by ¥1,026 million, respectively. The balance of retained earnings at the
beginning of this fiscal year decreased by ¥39,639 million.
Due to the application of revenue recognition accounting standards, notes and accounts
receivable-trade, which were included in current assets in the consolidated balance sheets for theprevious fiscal year, are included in “trade receivables and contract assets” from the first quarter ofthis consolidated fiscal year. Advances received, which were presented as current liabilities in the
consolidated balance sheets for the previous fiscal year, have been presented as contract liabilities
from the first quarter of this consolidated fiscal year, and provisions for sales promotion in current
liabilities have been included in other under current liabilities. The Company has not reclassified
the previous consolidated fiscal year using the new presentation method in accordance with thetransitional treatment prescribed in Paragraph 89-2 of the Accounting Standard for Revenue
Recognition.

(Application of Accounting Standards for Fair Value Measurements)
The Company has applied the “Accounting Standard for Fair Value Measurements” (ASBJ
Statement No. 30 of July 4, 2019. Hereinafter referred to as “Accounting Standard for Fair Value
Measurements”.), etc. from the beginning of the first quarter of this consolidated fiscal year, and inaccordance with the transitional treatment set forth in Paragraph 19 of the Accounting Standard for
Fair Value Measurements and Paragraph 44-2 of the “Accounting Standard for Financial
Instruments ” (ASBJ Statement No. 10 of July 4, 2019), the new accounting policy set forth in the
Accounting Standard for Fair Value Measurements, etc. will be applied in the future. There is no
impact on the quarterly consolidated financial statements.
Related to consolidated balance sheets(*1) Provision for the in-service issues of commercial aircraft jet engines
The Company participates as a risk and revenue sharing partner on the Rolls-Royce Trent 1000
engine program, which has been impacted by the challenge of managing significant in-service issues.
Rolls-Royce continues to work hard to remedy this situation and has made further substantial progresson the implementation of long-term solutions and mitigation of the near-term impact on customers.
The Company has made a provision of the abnormal cost related to in-service issues which theCompany would cover as a member of this program.

15

Related to consolidated statements of income(*1) Gain on sales of fixed assets
Three Months ended June 30, 2020
Proceeds from the sale of housing sites of the Company and subsidiaries.

Three Months ended June 30, 2021
Proceeds from the sale of the land of the Company in Yokkaichi, Japan.

(*2) Gain on sales of sales of shares of subsidiaries and associates
Proceeds from the sale of shares of associates of subsidiaries.

(*3) Impairment loss
Due to a decline in profitability from the assets of the Sakaide Works of the Energy Solution &Marine Engineering segment based on the current market environment.

16

Segment information
1. Three months ended June 30, 2020 (April 1, 2020 – June 30, 2020)(1) Sales and income (loss) by reportable segment
Millions of yen

Aerospace Systems
Rolling stock
Energy Solution & Marine Engineering
Precision Machinery & Robot
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

74,61932,362
72,27345,40358,974
16,969300,602－300,602

1,874
1
5,098
2,549
126
8,381
18,033(18,033)－

76,49332,364
77,372
47,953
59,10025,350318,635(18,033)
300,602(17,518)(1,463)
1,143
1,343(5,944)(153)(22,593)1,931(20,661)

Millions of yen
IncomeAmountIntersegment transactions
2
Corporate expenses*
1,928
Total
1,931
* Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Impairment loss on fixed assets and goodwill by reportable segment
Not applicable172. Three months ended June 30, 2021 (April 1, 2021 – June 30, 2021)(1) Sales and income (loss) by reportable segment
Millions of yen

Aerospace Systems
Rolling stock
Energy Solution & Marine Engineering
Precision Machinery & Robot
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

70,07528,79670,331
57,651
113,539
15,236355,631－355,631

2,333
2
3,463
3,990
138
3,968
13,896(13,896)－

72,40928,79873,794
61,642
113,677
19,204
369,527(13,896)355,631(5,147)
(851)
(358)
5,112
14,851
622
14,230936
15,166

Millions of yen
IncomeAmountIntersegment transactions
77
Corporate expenses*
859
Total
936
* Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Changes in reportable segment
From the first quarter of this consolidated fiscal year, the previous reporting segments of“Energy System & Plant Engineering” and “Ship & Offshore Structure” have been integrated
into “Energy Solution & Marine Engineering”. As a result, reportable segments have beenchanged to “Aerospace Systems” and “Rolling Stock”, “Energy Solution & Marine Engineering”,“Precision Machinery & Robot”, “Motorcycle & Engine”, “Other”.
Segment information for the first quarter of the previous consolidated fiscal year is presented
using the new classification method.
As stated in Changes in Accounting Policies, the Company has applied revenue recognition
accounting standards, etc. from the beginning of the first quarter of this consolidated fiscal year
and has changed the accounting method for revenue recognition. As a result of this change,
compared with the previous method, net sales of the “Aerospace Systems” segment decreased by¥12,311 million, segment loss decreased by ¥1,026 million, and net sales of “Other” decreasedby ¥4,783 million.

(3) Impairment loss on fixed assets and goodwill by reportable segment
In Energy Solution & Marine Engineering segment, an impairment loss on fixed assets wasrecorded. The amount of the impairment loss in the first quarter of this consolidated fiscal year
was ¥76 million.
18

3. Supplementary information(1) Consolidated cash flow statements (condensed)
Millions of yen
Three months ended
June 30, 2020
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash and cash equivalents at end of period

Three months ended
June 30, 2021

(101,107)
2,649
163,834
167,929(42,861)(12,404)
49,809117,064(2) Supplementary information on consolidated earnings forecasts for the fiscal year
ending March 31, 2022(i)

Net sales and operating income (loss)
Billions of yen
Outlook for the year ending March 31, 2022 (fiscal 2021)
Revised forecast
Forecast issued
Change(A)
May 11, 2021 (B)(A – B)

Reportable segment

340.0
150.0

Operatingincome(loss)
(6.0)
3.0

340.0
150.0

Operatingincome(loss)
(8.0)
3.0

320.0

2.5

320.0

250.0

17.0

410.0
60.0

25.0
2.0
(3.5)
40.0

Net sales
Aerospace Systems
Rolling StockEnergy Solution & Marine
Engineering
Precision Machinery &Robot
Motorcycle & Engine
Other
Adjustments
Total

1,530.0

Year ended
March 31, 2021
(Fiscal 2020) (Actual)－－

Operatingincome(loss)
2.0
－

3.5

－

250.0

16.0

380.0
60.0

17.0
2.0
(3.5)
30.0

Net sales

1,500.0

377.7
133.2

Operatingincome(loss)(31.6)
(4.5)

(1.0)

319.5

10.3

－

1.0

240.8

14.0

30.0
－

8.0
－
－
10.0

336.6
80.4
－
1,488.4

11.7
0.4
(5.7)
(5.3)

Net sales

30.0

Net sales(ii) Orders received

Reportable segment

Outlook for the year ending March 31, 2022 (fiscal 2021)
Revised forecast
Forecast issued
Change(A)
May 11, 2021 (B)(A – B)
310.0
310.0
70.0
70.0

Billions of yen
Year ended
March 31, 2021
(Fiscal 2020) (Actual)
329.5
77.0

－
Aerospace Systems
Rolling Stock－Energy Solution & Marine
400.0
400.0
－
Engineering
Precision Machinery &
260.0
260.0
－
Robot
410.0
380.0
Motorcycle & Engine
30.0
60.0
60.0
－
Other
Total
1,510.0
1,480.0
30.0
Note: 1. Assumed exchange rate for the fiscal year ending March 2022: ¥109/USD, ¥128/EUR
2. The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.
3. From the fiscal year ending March 2022, reportable segments have been changed to “Aerospace Systems”,“Rolling Stock”, “Energy Solution & Marine Engineering”, “Precision Machinery & Robot”, “Motorcycle &Engine”, and “Other”. Results for the fiscal year ended March 2021 have been reclassified to the revised
reportable segments.
4. As a change in accounting policies, the Company has adopted accounting standards for revenue recognition,etc. from the beginning of the first quarter under review. For more information, see “2. (3) Notes on financial
statements Changes in accounting policies and Segment Information”.

19

317.1
259.4
336.6
82.5
1,402.4