Annual Report 2010
Year ended March 31, 2010

Founded in 1878, Kawasaki Heavy Industries, Ltd. (KHI), is a leading global comprehensive manufacturer of transportation 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 andjet engines, gas turbine power generators, environmental and industrial plants, and a wide range ofmanufacturing equipment and systems. KHI also produces such world-famous consumer products as
Kawasaki-brand motorcycles and personal watercraft.

Contents
Consolidated Financial Highlights
To Our Shareholders
An Interview with Satoshi Hasegawa, President
Review of Operations:
The KHI Group at a Glance
Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Motorcycle & Engine
Precision Machinery
Corporate GovernanceDirectors, Corporate Auditors, and Executive Officers
Corporate Social Responsibility
Financial Section:
Six-Year Summary
Management’s Discussion & Analysis
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditors’ Report
Major Consolidated Subsidiaries and Affiliates
Network
Corporate Data

01
02
04
10
12
14
16
18
20
22
24
26
28
30
35
36
42
44
45
46
48
79
80
83
85

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

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

Thousands of
U.S. dollars

Millions of yen
2010

2009

2008

2010

¥1,338,597¥1,501,097$12,612,564

For the year:
Net sales ................................................................................................... ¥1,173,473
Operating income (loss).............................................................................

(1,316 )28,71376,910(14,144)

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

(10,860 )

11,72835,141(116,723)

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

30,178(41,257)

75,766324,355

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

59,27282,45050,538637,059

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

¥(6.5 )

¥7.0

¥21.1

$(0.06)

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

–

6.9

20.6

–

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

3.0

3.0

5.0

0.03

Total assets................................................................................................ ¥1,352,439
Total net assets..........................................................................................
283,053¥1,399,771¥1,378,770$14,536,102

295,246

319,038

3,042,272¥1,540,590¥1,610,757$10,761,930

1,699,163

1,533,663

16,197,947

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

At year-end:

Orders received and outstanding:
Orders received during the fiscal year ....................................................... ¥1,001,290
Order backlog at fiscal year-end ................................................................ 1,507,057

400
-10
0

600

100
50

200

0

06 07 08 09 10

1,699.2

1,507.0

1,465.2

600

200

0

06 07 08 09 10

1,000

1,310.4

1,000

1,400

1,001.2

283.0

319.0

295.4
243.1

295.2

35.1

29.8

1,400

1,610.8

1,800

150

-20

06 07 08 09 10

1,800

200

-10.8

0

(Billions of yen)

250

11.7

10

Order backlog(Billions of yen)

300

20

16.5

1,338.6

1,501.130

1,173.4800

1,438.6

1,200

Orders received(Billions of yen)

350

40

1,322.5

1,600

Total Net Assets

1,540.6(Billions of yen)

1,592.7

Net Income (Loss)(Billions of yen)

1,351.6

Net Sales

1,533.7

Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥93.04 to US$1, the approximate rate ofexchange at March 31, 2010.

0

06 07 08 09 10

06 07 08 09 10

Consolidated Financial Highlights

01

To Our Shareholders

Returning to a growth path andlaying the foundation for future growth
Operating Environment and Business Overview
Fiscal 2010, ended March 31, 2010, was a transition period thatmarked the bottoming out of the deep worldwide recession andsubsequent gradual progress toward recovery. However, thedegree of recovery has varied according to country and region.
Compared with robust growth in developing countries such as
China, India, and Brazil, recovery in developed countries has
been sluggish. In addition, uncertainties such as the financial
problems emerging in some European countries remain.
Under these circumstances, the Kawasaki Heavy Industries (KHI)Group faced continued adversity in its business operations andexperienced sharp declines in revenues and earnings from someof its businesses engaged in mass production, as a result of asudden decline in the markets of developed countries. The
situation necessitated a review of the policies and measures set
forth in the previous Global K medium-term business plan. Even
businesses engaged in custom manufacturing, which havemaintained relatively stable revenues, have experienced a slump
in orders for new projects, particularly the Shipbuilding segment.
Accordingly, the KHI Group’s businesses have not yet reached
the stage of full-scale recovery.
As a result, in fiscal 2010 orders won by the KHI Group on aconsolidated basis fell ¥539.3 billion, or 35.0%, from theprevious fiscal year, to ¥1,001.2 billion. Consolidated net sales
declined ¥165.1 billion, or 12.3%, to ¥1,173.4 billion. Operating
income decreased ¥30.0 billion, resulting in an operating loss of¥1.3 billion, while net income was down ¥22.6 billion, resulting
in a net loss of ¥10.8 billion.
Our basic dividend policy is to continue to pay stable cash dividends
that are in line with our performance, while giving careful attention
to increasing retained earnings to strengthen and expand

02 To Our Shareholders

the KHI Group’s management base in preparation for our future

Integration of Group Companies

growth. While this remains the basic dividend policy, with regard
to the dividend for fiscal 2010, upon consideration of the

Kawasaki Shipbuilding Corporation, Kawasaki Precision

outlook for business performance, the level of retained earnings,

Machinery Ltd., and Kawasaki Plant Systems, Ltd. are operating

and other factors, we proposed a cash dividend payment of ¥3.0

companies responsible for the KHI Group’s core businesses. Eachper share, which was approved by our shareholders.

of these companies has built a powerful business base throughexpeditious decision making as an independent organization.

Establishment of a New Medium-TermBusiness Plan to Prepare for Sustained Growth

On October 1, 2010, these companies will be integrated with
Kawasaki Heavy Industries, Ltd. We will take advantage of theintegration to reinforce the knowledge management of these

The KHI Group established the Medium-Term Business Plancompanies, including technological knowledge, human(FY2011–2013), MTBP2010, which covers the years from fiscal

resources, and other assets. We will also implement various

2011 to fiscal 2013. The principal goals of MTBP2010 are themeasures to accelerate growth under the new businessreturn to a growth path through rebuilding of the earnings

structure, including reinforcement of the Energy &structure and investment for sustained growth into the future.

Environmental Engineering business sector and promotion ofhigh added value in existing products.

Group Mission:
Kawasaki, working as one for the good of the planet

To Our Shareholders(Enriching lifestyles and helping safeguard the environment:
Global Kawasaki)

The continued support and cooperation of our shareholders are
essential to the KHI Group’s efforts to achieve sustained growth

At the time of preparation of MTBP2010, we conceived

into the future. To earn this support, we will continue toKawasaki Business Vision 2020—Strategic Moves toward thereinforce corporate governance and enhance our internal control

Future as a vision for the KHI Group, to realize our Groupsystems and strive to meet the expectations of our shareholders

mission of meeting the needs of society by around 2030. We

through effective corporate social responsibility.

thus devised MTBP2010 as a concrete action plan to not onlyrebuild our earnings structure but to also return to a growthJune 2010

path—realizing our mission of solving the problems of future

Satoshi Hasegawa

generations, through key technologies and innovations.

President

The KHI Group will implement initiatives to ensure a better
environment and a brighter future for generations to come, evenas we address the issue of returning to a growth path in theseharsh economic conditions.
Note: For details about MTBP2010, please refer to the president’s interview inthis report.

To Our Shareholders

03

An Interview with Satoshi Hasegawa, President

The KHI Group will steadily implement the policies
and measures set forth in MTBP2010 in order toachieve Kawasaki Business Vision 2020
focus on the Shipbuilding, Plant &Infrastructure Engineering, and Precision
Machinery segments, expanding the
Rolling Stock segment’s business in North
America, and establishing manufacturingand marketing systems for motorcycles inSoutheast Asia for the Motorcycle &Engine segment, we achieved record-highrecurring profit* for two consecutive
years: ¥49.1 billion in fiscal 2007 and¥64.0 billion in fiscal 2008. We have also
dramatically improved our financial
position by reducing interest-bearing debt
from ¥491.3 billion (debt-to-equity ratioof 293%) in fiscal 2002 to ¥276.4 billion
in fiscal 2008 (debt-to-equity ratio of87%) and have actively engaged incapital investment.
We interviewed Mr. Satoshi Hasegawa, president of Kawasaki
Heavy Industries, Ltd. (KHI). Mr. Hasegawa provided an overview
of the previous Global K medium-term business plan, and* 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.

discussed Kawasaki Business Vision 2020 and MTBP2010, theaction plan to achieve the vision.

At the same time, however, we acknowledge that our risk
management with regard to the break-even point was

Q1 Which aspects of the previous Global K medium-termbusiness plan received the greatest emphasis?

inadequate during the favorable period of global economic
growth and yen weakness that continued until the first half offiscal 2009. In business segments in which fixed costs came toexceed appropriate levels as sales increased, primarily businesses

In the previous Global K medium-term business plan, we set

engaged in mass production, we experienced major delays inforth the following basic policies for the KHI Group—“Emphasizing

responding to the worldwide recession that began in the second

quality over quantity,” “Selectively focusing resources on

half of fiscal 2009. From now on, we must engage in manage-

strategic businesses,” and “Strengthening non-pricement that reflects keen awareness of the break-even point andcompetitiveness”—to become a globally recognized enterprise,business operations geared toward ensuring a rapid response to

and have sought to increase profitability on the basis of thesechanges in the business environment.

policies. As a result, by expanding businesses in China, with a

04

An Interview with Satoshi Hasegawa, President

Under the Global K plan, we also achieved solid results fromnew product and new technology development linked to future

Net Sales by Business Sectors

growth, including large aircraft (the XP-1 and XC-2), aircraft
manufacturing using composite materials (B787), Gigacell®, theTrent 1000 engine, biomass, the MDX, small-scale hydropower,

New products and new
businesses (600.0)(Billions of yen)Transportation Systems

Existing businesses(220.0)

Energy & Environmental Engineering
2,000.0

Industrial Equipment

2,000

10%

Ratio of recurring profit to sales

and the reheat cycle plant.

Developing countries(400.0)1,500 1,438.6

Nevertheless, we were unable to achieve significant growth in

1,501.1

Developed countries(310.0)1,400.0

1,338.6

1,280.0

Japan (110.0)

1,173.4

the Energy & Environmental Engineering business sector,

Products Areas
1,000

which the KHI Group has positioned as a fifth business pillar,
and we must reinforce effective incubation initiatives in thisbusiness sector.

5%
Breakdown ofgrowth inGroup net sales(2010 2021)

5.0%

4.3%
3.4%

4.0%

2.9%

2.5%

500

1.2%

As a result of rapid deterioration in business performance,0interest-bearing debt reached ¥428.9 billion and the debt-to-

07

08

09

10

(Actual)11(Forecast)

13(Target)21(Vision)0%(Years ended March 31)

equity ratio exceeded 150% at the end of fiscal 2010. Improvement of the financial position is an urgent issue.

Quantitative Vision (FY2021)

Q2 What is the vision set forth in Kawasaki Business

Consolidated net sales¥2 trillion

Vision 2020, the premise for MTBP2010?

Ratio of recurring profit to sales

5.0% or higher

In Kawasaki Business Vision 2020, we aim to become a company
that provides products and services suited to the diverse needsof people around the world through advanced technological
Background to and Key Features of the Medium-Term Business Plan

Immediate Issues● Deterioration of business performance in businesses
engaged in mass production due to market contraction● Decrease in new orders in businesses engaged incustom manufacturing

Medium-Term Business Plan
(FY2011-2013)
FY2011

Actionplan
FY2013Return to a growth path
Strengthen business foundation in preparation for future growthBusiness Environment Paradigm Shift● Advancing multipolarity in the global economy due togrowth in developing countries● Worldwide increase in concern about the global
environment

Formulate new products
and new business concepts

Kawasaki Business
Vision 2020

Anticipate societal needs
by around 2030

FY2021

FY2031

Sustain a growth pathAchieve the Group mission

An Interview with Satoshi Hasegawa, President

05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 inthree principal business sectors: Land, Sea, and Air Transportation Systems, Energy & Environmental Engineering, and Industrial Equipment
Transportation Systems
Shipbuilding, rolling stock, aircraft, aircraft
engine, ship machinery, motorcycle, etc.

Improvement of the global
environment
A company that creates products thatincorporate the ultimate in low
environmental impact technologies ineach business sector

Energy & Environmental Engineering
Gigacells, industrial gas turbines, gas engines,
steam turbines, compressors, energy andenvironmental plant engineering, etc.

Reinforcement of the earnings
structure
A company that establishes anearnings structure that makes
possible sustainable growthinvestment and provides stableshareholder returns

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

Global business development andemphasis on monozukuri(manufacturing)
A company that upgrades plants inJapan and actively pursues businessdevelopment overseas

Emphasis on CSR
A company trusted wherever it does
business around the world
Workplace environment development
A company whose employees havehopes and dreams and work withvigor and enthusiasm

capabilities in three principal business sectors—Land, Sea, andproducts and businesses to realize a low-carbon society, an effort

Air Transportation Systems, Energy & Environmental Engineering,in which we intend to take a long-term perspective that extends

and Industrial Equipment—to achieve the Group Mission:

beyond 2020 and anticipate societal needs by around 2030.

Kawasaki, working as one for the good of the planet (Enriching
lifestyles and helping safeguard the environment: Global Kawasaki).
Our quantitative vision for fiscal 2021 is to achieve consolidated
net sales of ¥2 trillion and a ratio of recurring profit to sales of

Q3 Could you describe the basic strategy within
Kawasaki Business Vision 2020?

5.0% or higher. Compared to fiscal 2010, this represents anincrease in net sales of ¥820.0 billion, consisting of ¥220.0

There are two key features of the basic strategy. The first isbillion from existing products and ¥600.0 billion from new

reinforcement of initiatives in the Energy & Environmental

products. By geographical region, we forecast increases ofEngineering business sector, a focus of international concern.

¥400.0 billion from developing countries, ¥310.0 billion from

We are implementing concrete CO2 reduction measures,developed countries, and ¥110.0 billion from Japan.

including the development of new and more efficient gas
turbines derived from existing models, the development of

We have set an average annual base for capital investment offacilities that use waste heat, and the enhancement of our line

¥60.0 billion. In addition to steadily making capital investmentsof natural energy products through means including thefor new projects, we plan to proceed with capital investments incommercialization of facilities that use biomass. Furthermore, weoverseas facilities in line with overseas sales expansion. We will

will conduct research and development to help realize a society

expand R&D investment to the level of ¥60.0 billion per year onthat uses CO2-free hydrogen in the manufacture, transport, oraverage, with the aim of developing numerous new products.

utilization of products.

An area of particular emphasis will be initiatives to develop

06

An Interview with Satoshi Hasegawa, President

KHI’s CO2-free hydrogen concept
Resource-producing
countries
Natural energy

Consumer countries

The energy chain from resource-producing
countries to consumer countries

Use in processes

Electrolysis

Semiconductor and solar cell production,
oil refining and desulfurization, etc.
Liquid hydrogen lorries

Transportationequipment

Gasification

CO2-freehydrogenBrown coalHydrogen purification

High-efficiency CCS(Carbon dioxide Captureand Storage)
CO2 sequestration,
concentration, and storage

Liquid hydrogen storage tanks

Hydrogen carriers

Hydrogen cars, etc.

Energy equipment

Pipeline
Injection

CO2 emission source
CO2

Hydrogen Production
Low-cost production of hydrogen from unused
resources (brown coal) in resource-producing countries
High-efficiency CO2 sequestration, transition to
CO2-free hydrogen

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

Current KHI products

Hydrogen Transportand Storage
Optimized transportation andstorage of hydrogen

Hydrogen Use
Efficient use of hydrogen that
does not generate CO2

Note: Visuals are for illustration purposes only.

Furthermore, in the Transportation Systems business sector,

developing and providing products and services adapted to thean area in which the KHI Group has an advantage, we willneeds of each market.

reinforce our proposals for an environment-friendly society bytaking full advantage of a key strength of the KHI Group: an

At the same time, we will utilize the talents of global human resources,

extensive line of products that help reduce environmental

increase cooperative relationships with overseas business partners,

burden even in existing business fields. These proposals

and otherwise strengthen our ties with people around the world.

include high-speed trains, which are expected to calculate on
universal prevalence, and eco-friendly large commercial aircraftthat have lighter fuselages for improved fuel consumption
efficiency and engines with sharply reduced CO2 emissions,NOx emissions, and noise.

Q4 What are the objectives and issues in
MTBP2010—the action plan for the first three yearsof the Kawasaki Business Vision 2020?

The second key feature of the basic strategy is the reinforcement

We have set forth two major objectives in MTBP2010. The firstof business development in markets around the world, with anobjective is to rebuild the earnings structure and return to aemphasis on developing countries, in addition to our long-growth path. Our approach to this differs for businesses engaged inestablished businesses targeting developed countries. Diversifica-mass production and for businesses engaged in custom manu-tion and multipolarity are advancing in the world’s markets, andfacturing. For businesses engaged in mass production, we must

it is imperative that we respond to the needs of globalization.

implement fixed cost reductions and lower the break-even point
in response to changes in the business environment, as well asWith this in mind, we will win the trust of our customers andmaintain inventory levels optimized to market fluctuations. In

the community by demonstrating deep understanding of theparticular, we have made attaining profitability in the Motorcycle

history and culture of each individual country and region, and by& Engine segment our most important priority. At the same time,

An Interview with Satoshi Hasegawa, President

07businesses engaged in custom manufacturing that have stableorder backlogs will be required to support the KHI Group’s
earnings structure during the term of MTBP2010—and we will
make every effort to improve the profitability of large-scale
projects and promptly respond to foreseeable risks.

Key Policies and Measures
1) Reinforcement and nurturing of businesses that will constitute thefuture earnings structure
The business units and headquarters collaborate in the nurturing and reinforcementof new products and businesses, taking a perspective that extends to 2030.
Put in place mechanisms to create linkage from R&D to commercialization.
Engage in M&A to acquire new businesses and strengthen existing businesses.

Also, to improve profitability across all KHI Group products, wewill incorporate the design-to-cost principle from the development
and estimate stage to increase the accuracy of estimated costs,
improve cash flow through the reinforcement of profitability, andimprove the financial position by reducing interest-bearing debt.

2) Acceleration of global business development
Engage in product development and market development that take into accountthe individual market characteristics of China, India, Brazil, and other developing
countries in addition to developed countries.
In response to overseas business expansion, develop an optimal business structure
at the global level through means including the upgrading and expansion ofoverseas production.

3) Group-wide sharing and utilization of intellectual assets

The second objective in MTBP2010 is to strengthen our business

Put in place mechanisms to promote group-wide sharing and utilization of
intellectual assets such as technology and marketing information.

foundation in preparation for future sustained growth. We will

Efficiently and rapidly merge intellectual assets held by individual companies
through the reintegration of four Group companies.

continue to focus efforts on R&D to nurture new products andnew businesses and upgrade existing products, and we will
accelerate global business development.
With vigorous growth in China, India, Brazil, and other developing countries expecting to spur greater demand for energy andtransportation, the KHI Group plans to expand global production

Expand R&D investment at business units and headquarters and reinforce theupgrading existing products and the development of new products.
At the Corporate Technology Division, engage in anticipatory research into coretechnologies for future businesses and reinforce R&D of basic technologies sharedthroughout the Group.
The Corporate Technology Division supports technology development at thebusiness units and cross-implements technologies within the Group.

5) Strengthen monozukuri capabilities

and engineering bases through alliances with local companies,

Pursue optimization of all development, design, procurement, and manufacturing
processes and implement radical cost reduction and productivity improvement.

M&A, and a number of other business activities.

Headquarters provides priority support for model businesses, focusing on
procurement, manufacturing, and logistics, and cross-implements results within theGroup.

In the developed countries of North America and Europe, we will
respond to increased demand for aircraft, as well as demand forrolling stock that is expected due to a pronounced modal shift inthese countries.

6) Effective utilization of plants and business sites
Responding to changes in the business environment, restructure the plants andbusiness sites, focusing on plant complexes where multiple business units are located.

7) Development of human resources and the workplace environment
Implement policies and measures to reinforce management capabilities, businessexecution capabilities, and autonomy and develop global human resources.

We believe that it is essential to continuously strengthen theDevelop a balanced performance-based compensation system and personnel
systems that increase employee motivation and the desire to develop skills.

business foundation to secure the KHI Group’s sustained growth

Create a workplace culture of putting safety first and implement policies that place
importance on work-life balance and diversity.

into the future even as we undertake the rebuilding of ourearnings structure under the current harsh economic conditions.
We look forward to the understanding and support of our
stakeholders for the goals we have set forth in MTBP2010.

Quantitative Targets and Plan
Consolidated quantitative targets for fiscal 2013, the final yearof MTBP2010, are net sales of ¥1,400.0 billion, operating
income of ¥52.0 billion, recurring profit of ¥56.0 billion, andbefore-tax ROIC of 8.5%. The level of these targets represent a

084) Strengthen technological capabilities

An Interview with Satoshi Hasegawa, President

8) The practice of environmental management
Establish the seventh Environmental Management Activities Plan and reducegreenhouse gas and waste emissions in business activities.

9) IT strategy and systems development
Strengthen the capability at headquarters to formulate and implement a Group
information strategy and develop and reinforce systems at information departments
throughout the Group.

10) Implementation of group-wide risk management
In addition to risk management implemented at the business units, strengthen
systematic management of critical risks from a group-wide perspective.

11) Qualitative improvement of headquarters departments
Enhance specialized skills and implement initiatives to increase the corporate value
from the medium-term and long-term perspective of total optimization.

targets in MTBP2010, and by extension, the objectives set forthin Kawasaki Business Vision 2020. The management andemployees will make every effort to return to a growth path andstrengthen the business foundation in preparation for future
growth, further increase the medium- to long-term growthpotential of the KHI Group, and accomplish the Group Mission:
Kawasaki, working as one for the good of the planet (Enriching
lifestyles and helping safeguard the environment: Global
Kawasaki). We look forward to the continuing support andcooperation of our shareholders.

Consolidated Quantitative Targets
return to the growth path we set in Global K. We have estab-(Billions of yen)lished ¥58.0 billion as the average annual allocation for capital

FY2010investment and will steadily implement new project-related(actual)

FY2011(forecast)

FY2013

1,173.4

1,280.0

1,400.0(target)Reference
FY2021(vision)2,000.0

investments and upgrade key facilities. We have establishedNet sales¥42.0 billion as the average annual allocation for R&D invest-

Operatingincome(Ratio to sales)

-1.3

32.0

52.0

-0.1%

2.5%

3.7%

Recurring profit(Ratio to sales)

14.2

32.0

56.0

100.0

1.2%

2.5%

4.0%

5.0%

Before-tax
ROIC

0.2%

5.6%

8.5%

Debt-toequity ratio

1.55

1.55

1.30

Equity ratio

20.4%

20.8%

24.0%

Exchange
rate
assumption–¥90=US$1¥90=US$1

ment and will focus on R&D to foster new products and new
businesses. With regard to the number of employees, we
anticipate a workforce of 33,000 employees at the end of fiscal
2013. Although it is necessary to adjust employment in accordance with changes in business performance, we aim to secure
key personnel and develop human resources.

Key Policies and Measures in MTBP2010
To realize the goals set in MTBP2010, we have established 11
key policies and measures common to all KHI Group companies¥90=US$1

with the aim of demonstrating synergies as the KHI Group, while
the individual business segments implement policies and measures.

Management Resource Allocation Plan

Details of these policies and measures are shown in the table on
page 08. By steadily implementing these policies and measures,
we intend to achieve the quantitative targets in MTBP2010 andlink that success to the sustained growth envisioned in Kawasaki
Business Vision 2020.

I consider the current fiscal year to be an important starting
point for the realization of the basic objectives and quantitative

Reference

FY2011–FY2013

FY2011–
FY202170.3/year

58.0/year

60.0/year

36.6/year

42.0/year

60.0/year

FY2010
year-end

FY2013
year-end

FY2021year-end

32,29733,00035,000average (actual)

Capitalinvestment(purchase order basis)

Q5 Do you have a concluding message for KHI’s shareholders?

(Billions of yen)

FY2007–FY2010

R&D
investment(actual)No. ofemployees(plan)(plan)(vision)(vision)An Interview with Satoshi Hasegawa, President

09Review of Operations
The KHI Group at a Glance
Composition ofConsolidated Net Sales of FY2010

Main Products

Shipbuilding

12.9%• LNG carriers• LPG carriers• Container ships• VLCCs and other types of tankers• Bulk carriers• High-speed vessels• Submarines• Maritime application equipment

Rolling Stock

14.2%• Electric train cars (including for Shinkansenbullet trains)• Electric and diesel locomotives• Passenger coaches• Integrated transit systems• Monorail cars
• Platform screen doors• Gigacell®

Aerospace

16.1%• CH-47, OH-1, and BK117 helicopters• Component parts for the Boeing 787,777 and
767 passenger airplanes• Component parts for the Embraer 170 and 190
jet aircraft• Missiles• Electronic equipment• Space equipment

Gas Turbines & Machinery

16.3%• Jet engines• Small and medium-sized gas turbine generators• Gas turbine cogeneration systems• Gas turbines for naval vessels• Steam turbines for marine and industrial
applications• Diesel engines and marine propulsion systems• Gas engines• Gas compression modules

Plant & Infrastructure Engineering

Motorcycle & Engine

Precision Machinery

10 Review of Operations

7.7%

18.4%

5.8%

• Cement, chemical, and other industrial plants• Power plants• Municipal refuse incineration plants• LNG and LPG tanks• Shield machines and tunnel-boring machines• Crushing machines• Motorcycles• ATVs• Utility vehicles• Personal watercraft• General-purpose gasoline engines• Industrial hydraulic products• Industrial robots

4,00050,000

08

09

07

08

1,490
7,759

11,369

7,173

8,804

167,156

13,170-4,178

1,749

10,876

09

10

10

06

10

11,026

13,39208

09

Changes in Industry Segments

10

construction machinery business unit:

06

07

10,000Effective April 2010:

06

07

08

09

0
-5,000-10,000

09

10-40,000

10

06

07

08

09

-31,649-20,000

10

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.

08

09

10

Effective April 2009:
Rolling Stock & Construction
Machinery (previous)
Rolling Stock (current)

6,961

8,389

9,117
6,062

Consumer Products & Machinery(previous)

Hydraulic Machinery (previous)

0

06

07

08

09

10

06

Motorcycle & Engine (current)
⇒

07

4,000
2,000

0

06

6,000

4,224

40,00068,80960,00084,9198,000

84,02880,00066,64971,042

84,143

10,00020,0000Industrial Robots business unit:
Transferred from the Consumer
Products & Machinery segment to thePrecision Machinery segment

Effective April 2010:
100,000

46,26020,00050,18140,000Transferred from the Rolling Stocksegment to the Plant & Infrastructure
Engineering segment⇒

60,00072,91880,000Order Backlog

92,335100,000

Orders Received

crushing machine business unit:

Changes in Segment Names-10,143

0216,990433,96308

Effective April 2009:
Transferred from the Rolling Stocksegment to the “Other” segment

20,0000

Attendant on the spin-off of theconstruction machinery business unit
as a separate company and thechange of industry segmentation forinternal reporting of the crushingmachine business unit and theIndustrial Robots business unit,
industry segments and segment
names have been changed as follows.

15,000

5,000

09

07

Changes in Industry Segments
and Segment Names

6,694

09

9,837

191,379

8,000

40,000100,000

10

08

6,277

08

336,459

216,990

336,459

433,963366,960

403,702

07

06

200,000

07

8,971

07

200,000

300,000

10⇒

06-2,248151,893

126.426
195,156

185,486

183,309

161,431

06

10

06

12,0000400,000

0-6,0004,000

500,000

100,00000

100,000

09

10,8390908

19,67008

3,000

13,400218,533

10

90,495

124,767

83,649150,22107

Orders Received

400,000

200,00008

0

06

300,000

09

6,000

50,000150,0000

500,000

9,000

105,178

Order Backlog

106,046

40,00097,332120,000

100,000

10

160,000

80,00007

142,547

Orders Received

09

07

16,000164,506

08

06-3,00006

150,000

226,22807

227,42206

6,000

12,0000

10

10

15,000366,960

200,000

204,847

0

8,000

10

200,000

188,068

150,000

09

Order Backlog

300,000

10,000-2,431

Orders Received

09

09

27,563

08355,517450,000

07

08

188,89206

171,380

239,177

202,506

0

08

0

07

300,000

100,000

07

2,000

06

200,000

255,613229,257

100,000

186,454

168,306

77,166

Order Backlog

06

4,000

0

10

-3,00012,00050,000300,000
200,000

10

200,425

Orders Received

09

100,000

237,349

08

264,604

07

09

14,000122,062400,000

06

183,2540

269,120

100,000

203,165

300,000

08

200,000
150,000

400,00007-1,70806

171,739

Order Backlog

0

9,701

10

184,283

Orders Received

09

1,000

-2,000269,108

08

2,000-1,0000500,000

200,000

108,849

40,000109,697

16,12871,51307

251,33106

80,000403,702600,000

135,600

0

128,323

150,000

120,000

141,397

300,000

3,253

3,000

160,000-1,019Order Backlog

6,804

Orders Received

Operating Income (Loss) (Millions of yen)

-8,494450,000

Sales (Millions of yen)

19,900Orders Received/
Order Backlog (Millions of yen)

07

08

09

10

Precision Machinery (current)

Review of Operations

11

Review of Operations

Shipbuilding
Business Results

Kawasaki Advanced Reheat Steam Turbine System, SEA-Arrow

The worldwide recession that began in 2008 caused dramatic(Sharp Entrance Angle bow as an Arrow), Kawasaki RBS-F

deterioration of conditions in the marine freight market, and(Rudder Bulb System with Fins), and Kawasaki OLP (Overlapping

recovery in the newbuilding market, including price recovery,

Propeller) System. We will continue to engage in technology

remains a distant prospect. In these circumstances, in fiscal

development that draws on leading-edge technologies.

2010, the Shipbuilding segment experienced a sharp decline inorders for new vessels. Total orders received decreased by ¥55.4

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

billion year-on-year, or 77.4%, to ¥16.1 billion. Because of thewhich Kawasaki Shipbuilding Corporation established as a joint

increase in large vessels, sales surged by ¥25.5 billion, or

venture with China Ocean Shipping (Group) Company, has now

20.1%, from the previous fiscal year, to ¥151.8 billion.

marked its 15th year of operations since its founding and has

Reflecting the increase in sales and improved profitability due tobecome one of the leading shipbuilding companies in China. In

lower material costs, operating income was ¥1.4 billion, an

2008, NACKS completed its second expansionary phase,

improvement of ¥2.5 billion from the operating loss of ¥1.0

involving the construction of the second shipbuilding dock andbillion in the previous fiscal year.

augmentation of its fabrication, assembly, and painting
facilities. This expansion has considerably increased NACKS’s

In newbuilding activity, the segment delivered a total of 14

shipbuilding capacity and further boosted its competitive

vessels: three LNG (liquefied natural gas) carriers, one LPG

advantage.

(liquefied petroleum gas) carrier, one VLCC (very large crude oil
carrier), eight bulk carriers, and one submarine.

Kawasaki Shipbuilding Corporation and its group of companies,
including NACKS, will continue to strive for sustained business

Outlookdevelopment by enhancing technologies related to ship design,

Kawasaki Shipbuilding Corporation, which is the core company

manufacturing, and quality assurance to reinforce their ability toof this segment, has an extensive track record in building gas

compete globally in terms of both quality and costs.

carriers and submarines, which require advanced design andconstruction technologies. The vessels built at the company’s
Kobe and Sakaide shipyards continue to win high marks from
customers for their performance and quality. Following thedelivery in 1981 of the first LNG carrier built in Japan, we haveestablished a position as a pioneer in this field. We offer awide-ranging lineup of LNG carriers, extending from small
carriers with cargo tank capacities of 19,000m3 to newly
developed large carriers with capacities of 177,000m3. We havealso developed, and offer in our lineup, a pressure build-up type
LNG carrier for short-distance and small-volume transportation.
To satisfy customer needs for energy saving and environmentalload mitigation, we have completed development of the

12 Review of Operations

2020 Vision
One of the world’s leading shipbuilding groups and an enterprise that plays a key role in marine transport, a critical part of the world’s economic
infrastructure, and contributes to solving global environmental issues through energy conservation, low environmental impact products, and othermeasures

Net Sales
Upper row: Operation in China(equity-method affiliate)

230

Steady increase in seaborne cargo movement volume due to sustained global economic
growthYears Ended March 31 (Billions of yen)

63.1

60.4

10

(Actual)Seek further growth of the business operation in China while maintaining the quality ofthe operation in Japan

Business plan

126.4 151.8
09

140

130.0

73.0
120.0

110.0

11

21

13

(Forecast)(Vision)(Target)Years Ended March 31 (Billions of yen)

3.0

-1.0

4%

2.0
1.5

1.0
0.0

6%

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

2.0

2%
0

-0.9
09

10

11

0%

Business plan

(Forecast)Business Vision for 2020

13

(Target)Key Points in the Medium-Term Business Plan
Profits until FY2012 are assured owing to an order backlog of almost two years.
Securing orders from 2012 onward is a key task. KHI will await market recovery while
implementing an operating slowdown and fixed cost reductions.
Maintain stable operations in FY2013 benefiting from our Chinese business.

-2%(Actual)Note: The figures for operating income (loss) for FY09 and FY10 have been calculated in accordance with new accounting standards applied in FY11. Accordingly, theydiffer from the figures in the actual operating results.

LNG carrier TAITAR NO. 2
Submarine UNRYU

Review of Operations

13

Review of Operations

Rolling StockBusiness Results

operation as a fully integrated rolling stock production facility in

In fiscal 2010, orders were received in Japan from the Japan

2002, where we have completed construction of a new facility

Railways Group for commuter train cars, locomotives, and otherthat has doubled production capacity. In Japan, along with therolling stock, as well as from both public and private railway“mother factory” Hyogo Works, the Harima Works

companies for commuter train cars, train cars for new

manufactures a portion of Kawasaki’s rolling stock.

transportation systems, and other rolling stock. Orders fromoverseas customers included subway cars for Singapore LandIn new product development, to satisfy demand for high-speed

Transport Authority. Orders received amounted to ¥77.1 billion,

trains in North America and Vietnam, KHI has completed basic

down ¥187.4 billion, or 70.8%, from the previous fiscal year,

engineering of efSET® (Environmentally Friendly Super Express

when the Company obtained orders for large-scale projects.

Train), a new high-speed train that will achieve the service

Despite increases in sales of rolling stock to the Japan Railways

speed of 350km/h. This innovative train will draw on theGroup and overseas customers, sales declined ¥19.3 billion, or

technologies that Kawasaki has developed through the design

10.4%, to ¥167.1 billion, due to factors including the transfer

of a number of Shinkansen train series and feature improvedof the construction machinery business unit to the “Other”

passenger comfort and lower impact on the surrounding

segment. Operating income fell ¥3.6 billion, or 31.8%, to ¥7.7

environment. Also, we have completed development of thebillion, as a result of a decline in the profitability of export

SWIMO®—a next-generation light rail vehicle (LRV) thatprojects due to appreciation of the yen.

incorporates Gigacell®; high-capacity, sealed nickel hydrogenbatteries—and we are now developing LRVs for North America.

Outlook

We are also proceeding with the development of K-Star Express,

Recent years have brought a pronounced “modal shift” inpassenger trains designed for the purpose of achieving greater

developed countries from the use of automobiles and aircraft as

speeds than those of existing railways and replacing aging trains

the principal means of transporting freight and passengers to

in North America.

the use of railways, which place a lower burden on the naturalenvironment. In addition, the number of new projects for

The Rolling Stock Company has set forth a vision of becoming a

construction of urban and interurban transport systems inworld-class rolling stock systems manufacturer that takes

developing countries is on the rise. Specific projects include

advantage of world-class technologies and quality to engage inhigh-speed rail projects in North America and Vietnam and thewide-ranging businesses, from high-speed trains to light rail

new Dedicated Freight Corridor in India. Accordingly, long-termtransit (LRT). The company will achieve this vision throughexpansion in demand is expected in the rolling stock business.

product line expansion and enhancement made possible by
new product development, and through the reliable execution

As Japan’s largest manufacturer of rolling stock, KHI is taking
proactive measures to cope with the increase in demand by
expanding and upgrading its production systems, which arelocated in Hyogo and Harima in Japan and in Lincoln, Nebraska
and Yonkers, New York in the United States. Of special note is
the segment’s Lincoln plant, which originally went into

14 Review of Operationsof large-scale overseas projects.

2020 Vision
To become a global rolling stock systems manufacturer that takes advantage of its world-class technologies and quality to engage in a broad
spectrum of businesses that range from high speed rail (HSR) to light rail transit (LRT)Net Sales
300
Years Ended March 31 (Billions of yen)

135.6

150.0

145.0

Develop businesses such as HSR, systems projects, and LRT in expanding markets
worldwide

160.0

Expand Gigacells® business in the railway and renewable energy sectors

Business plan

09

10

(Actual)11(Forecast)

21

13(Vision)(Target)Years Ended March 31 (Billions of yen)

20.0

Operating income
Ratio of operating
income to sales

15.0
10.0

11.6

10%

5.0

8.0

8.0

Execute major overseas projects successfully
Establish a foundation for increasing profit

Business plan

0.0

Key Points in the Medium-Term Business Plan
Almost all sales during the medium-term business plan have been secured

5%
8.7

Business Vision for 2020

0%
09

10

(Actual)11(Forecast)

13(Target)Note: The figures for net sales and operating income for FY09 and FY10 have been calculated in accordance with new business segments (excluding the construction
machinery and crushing machine business units) and new accounting standards applied in FY11. Accordingly, they differ from the figures in the actual operating
results.

E5 Series Shinkansen
M-8 railcar for the Metro-North Railroad in the United States

Review of Operations

15

Review of Operations

Aerospace
Business Results

operation of a new facility on the south side of the Nagoya

Orders received in the Aerospace segment decreased ¥67.8

Works 1.

billion, or 28.3%, from the previous fiscal year to ¥171.3 billion,
due to factors including a decline in orders for aircraft forIn the Aerospace business, as defense and commercial aircraftJapan’s Ministry of Defense (MOD) and for component parts fordevelopment projects progress, capital expenditures,the Boeing 777 (B777). Sales fell ¥11.5 billion, or 5.8%, todevelopment expenses, and other up-front investments will

¥188.8 billion, as a result of lower sales to the MOD. Despite

precede revenues for some time. Nevertheless, KHI is committed

the sales decline, the profit situation improved by ¥5.9 billion,

to reinforce its long-term business foundation and ensurefrom an operating loss in the previous fiscal year to operating

sustained growth by successfully executing these projects andincome of ¥1.7 billion, owing to factors including a review of

putting in place a production structure for defense andthe timing of expense recognition attendant on a change in thecommercial aircraft.

Boeing 787 (B787) development schedule.

Outlook
The MOD has been simultaneously developing the large-scale
XP-1 and XC-2 aircraft since 2001, in Japan’s largest aircraft
development project. KHI has acted as the core company forthe project, spearheading development of these aircraft. We
delivered to the MOD on schedule the static test plane andflight test plane of the XP-1 next-generation patrol aircraft, andare shifting to the full-scale mass production phase. We
completed a successful first flight of the XC-2 next-generation
cargo aircraft in January 2010 and delivered the flight test plane#1 in March. We plan to deliver test plane #2 in fiscal 2011 andanticipate an early decision for mass production.
In the commercial aircraft field, Boeing completed a successful
first flight of the cutting-edge B787 Dreamliner passenger
aircraft in December 2009 and aims to commence delivery tocustomers in the fourth quarter of calendar year 2010. KHI is apartner corporation in the development and production of theB787 Dreamliner and is responsible for the forward section of
the composite one-piece fuselage, which is the first of its kind
to be used in commercial aircraft, as well as other key
components. To prepare for a future production increase, inMarch 2010 KHI completed construction and commenced

16 Review of Operations

2020 Vision
A leader in Japan’s aerospace industry and an aircraft manufacturer with solid international competitiveness in terms of quality, cost, and delivery
speed

Net Sales

Business Vision for 2020
300

Years Ended March 31 (Billions of yen)200.4 188.8

215.0

Develop the commercial aircraft sector and grow it into a ¥300.0 billion business240.0

Enter the global market as a systems integrator

Business plan

09

10

11

(Forecast)(Actual)21

13(Vision)(Target)Years Ended March 31 (Billions of yen)

10.0

Operating income (loss)
7.0
Ratio of operating
income (loss) to sales
Business plan

5.0

0.0

3.7

Key Points in the Medium-Term Business Plan
Defense: Securing of stable orders for XP-1/XC-2 projects etc.

5%

Commercial: Supporting mass production of the Boeing 787 and improving productivity

-4.1
09

-5.0

4.0

10%

0%
10

(Actual)11(Forecast)

13(Target)-5%Note: The figures for operating income (loss) for FY09 and FY10 have been calculated in accordance with new accounting standards applied in FY11. Accordingly, theydiffer from the figures in the actual operating results.

XC-2 next-generation cargo aircraft

Boeing 787 Dreamliner

Review of Operations

17

Review of Operations

Gas Turbines & Machinery
Business Results

An in-house power generation system driven by a 5MW-class

Total orders in the Gas Turbines & Machinery segment

Kawasaki Green Gas Engine began operation in January of thisdecreased ¥129.3 billion, or 36.4%, from the previous fiscal

year at the Kobe Works. The system delivers stable

year, to ¥226.2 billion, due to decreases in orders for commer-

performance, the world’s highest electric generating efficiency

cial aircraft engine components, for which large orders were(48.5%), and the world’s lowest NOx emissions, echoing thereceived in the previous fiscal year, and for marine propulsion

8MW-class’s power generating capacity. Future plans for using

systems. Sales fell ¥3.8 billion yen, or 1.9%, to ¥191.3 billion,

this new system call for development of the gas engine

due to lower sales of diesel engines and other products, despitebusiness, targeting overseas markets where natural gas

an increase in sales of gas turbines and steam turbines for land.

infrastructure is available, by publicizing the Kawasaki Green

Operating income fell ¥4.3 billion, or 39.3%, to ¥6.6 billion, as

Gas Engine to customers and further improving performance.

a result of the impact of yen appreciation.
Also, in the oil and gas sector, KHI has extensive experience as a

Outlookworld-leading manufacturer of natural gas compression

The Gas Turbines & Machinery segment has a wide range ofmodules for offshore platforms. Along with the rise in demand

products for the energy and transportation equipment sector.

for natural gas, needs for these gas compression modules are

Although demand for some of these products is temporarily

increasing as a key component for gas field development.

weak due to the global recession, KHI has a variety of products
for which markets are expected to grow over the medium to

In the transportation equipment sector, regardless of along term. For this reason, this segment is continuing R&D,

temporary slump in demand for commercial aircraft, KHI has

development of manufacturing systems and strengthening

completed preparations for mass production of the Trent 1000,

operations, with a view to future market expansion while

a new engine designed to power the Boeing 787, and isappropriately responding to the current slump in demand.

proceeding with development of the Trent XWB, a new engine
for the Airbus A350XWB.

In the energy sector, concerns over global environmental
protection, energy conservation and deregulation of the electric

In the field of marine propulsion systems, KHI is working topower industry can be expected to bring increased demand for

improve manufacturing efficiency and is converting to in-housegas turbine generators and gas engines, which offer high total

production of key materials in order to expand the scope of its

thermal efficiency and environment-friendliness.

business, which currently centers on merchant ships and ferries,
by expanding operations related to oil and natural gas

As Japan’s largest manufacturer of small to medium-sized gas
turbine power generators, KHI intends to expand its global
business by taking advantage of in-house development
capabilities, enabling it to propose total solutions covering
after-service and maintenance.

18 Review of Operations

development, a market in which demand is increasing.

2020 Vision
An equipment and system manufacturer that doing business globally in the transport equipment and energy & environmental engineering sectors

Net Sales

Business Vision for 2020
450

Years Ended March 31 (Billions of yen)

195.1 191.3

0910(Actual)210.0

Business scale expansion primarily on civil aero engines and energy & environmental
engineering sectors

230.0

Business plan

11

(Forecast)

21

13(Vision)(Target)Years Ended March 31 (Billions of yen)
Operating income
Ratio of operating
income to sales

15.0

10.0

11.0
8.9

Key Points in the Medium-Term Business Plan
6%

Net sales stable
4%

10.0
8.0

Business plan

5.0

Despite an increase of R&D investment for civil aero engines, financial stability to be
maintained through productivity improvement

2%

0.0

0%
09

10

(Actual)11(Forecast)

13(Target)Note: The figures for operating income for FY09 and FY10 have been calculated in accordance with new accounting standards applied in FY11. Accordingly, they differ
from the figures in the actual operating results.

Trent 1000 intermediate pressure compressor module

Kawasaki Green Gas Engine

Review of Operations

19

Review of Operations

Plant & Infrastructure Engineering
Business Results

used at cement plants. These joint companies have expanded

Despite the impact of capital investment restraint accompanying

their line of products, and not only deal in waste heat recovery

the worldwide recession, orders received in the year underpower generation systems for cement plants but also inreview increased ¥41.1 billion, or 49.2%, from the previous

high-efficiency vertical mills, a waste gasification system that

fiscal year, to ¥124.7 billion, due in part to an order for a

can be integrated with cement kilns to facilitate municipal

large-scale overseas project (a fertilizer production facility for

waste treatment, and a membrane sewage treatment system.

Turkmenistan). Sales declined ¥14.7 billion, or 14.0%, to ¥90.4
billion, as a result of lower sales from large-scale overseas

The KHI Group has positioned the Energy and Environmental

projects, among other factors. Reflecting the decrease in sales,

Engineering business as a developing business in Kawasaki

operating income declined ¥2.7 billion, or 30.0%, to ¥6.2

Business Vision 2020. For this segment, KHI will strive to achieve

billion.

its 2020 vision of being “A distinctive plant engineering
enterprise that provides products and technologies that can

Outlook

contribute to global environment protection and CO2 reduction,

This business segment encompasses the operations of Kawasaki

with a focus on energy conservation, resource conservation,

Plant Systems, Ltd. (K Plant)—which undertakes projects toand resource recycling” by responding to economic growth insupply energy-related, industrial infrastructure, mechatronics,

Asia and reinforcing competitiveness through new products,

and environmental preservation systems and equipment—andwith a focus on energy and environmental engineering. We will

the operations of the parent company’s Industrial Facilities andalso secure technological superiority over competitors andTunneling Equipment Division, which mainly focuses on LNG

provide high-quality products by offering new products andtanks and various other storage tanks, along with shield

new technologies that meet the needs of markets andmachines and tunnel-boring machines. This segment iscustomers and by improving existing products and technologies.

aggressively working to further develop its business activities
based on the sophisticated technologies it has accumulated
through years of research.
K Plant has made special efforts to establish joint operations in
China with the Anhui Conch Group, which includes Anhui
Conch Cement Company Limited, China’s largest cement makerand the fourth-largest cement maker in the world. The joint
operations also include Anhui Conch Kawasaki Engineering Co.,
Ltd. (ACK), as the engineering firm, and Anhui Conch Kawasaki
Energy Conservation Equipment Manufacturing Co., Ltd.
(CKM), as the manufacturer of pH boiler parts, which areemployed in waste heat power plants, and Anhui Conch
Kawasaki Equipment Manufacturing Co., Ltd. (CKE), which wasestablished in 2009 to manufacture and repair major equipment

20 Review of Operations

2020 Vision
A distinctive plant engineering enterprise that provides products and technologies that can contribute to global environment protection and CO2
reduction, with a focus on energy conservation, resource conservation, and resource recycling

Net Sales
Upper row: Operation in China(equity-method affiliate)70

Years Ended March 31 (Billions of yen)250
31.5 32.0

38.0

124.4 107.5

110.0

09

10

(Actual)Initiatives for growth in Asia and reinforcement of competitiveness by means of new
products, with a focus on energy and environmental engineering

40.0

Business plan

11

(Forecast)

140.0
21

13

(Vision)(Target)Years Ended March 31 (Billions of yen)
Operating income
Ratio of operating
income to sales

15.0

10.0

Business Vision for 2020

9.9

9.0

7.9
5.0

6.0

10%
8%

Reliable execution of large overseas projects

6%

Orders for new municipal waste treatment facility business4%

Business plan2%
0.0

Key Points in the Medium-Term Business Plan

Steady efforts to win orders for small projects

0%
09

10

(Actual)11(Forecast)

13(Target)Note: The figures for net sales and operating income for FY09 and FY10 have been calculated in accordance with new business segments and new accounting standards
applied in FY11. Accordingly, they differ from the figures in the actual operating results.

2,300t/d cement plant to Lafarge Ciments' Tetouan
Tetouaan factory in Morocco

Sakaide LNG Terminal

Review of Operations

21

Review of Operations

Motorcycle & Engine
Business Results

VERSYS, which has won favor among a wide range ofSales from the Motorcycle & Engine segment for the year

customers for its ability to cope with any number of street

under review fell ¥119.5 billion, or 35.5%, from the previous

riding situations. Kawasaki also introduced two new

fiscal year, to ¥216.9 billion. An increase in sales ofsmall-displacement models in the 125cc class, for which

motorcycles to Asia was offset by a decrease in sales todemand is high in Europe and Japan: the dual-purpose
KLX125 and the motard-style D-TRACKER 125. Regarding
utility vehicles, Kawasaki made minor changes to the Teryx
750 series of recreational utility vehicles and introduced the
MULE 610 XC, which offers improved off-road performance,in the MULE utility-oriented vehicle series.

North America and Europe, and sales of industrial robots also
declined. With regard to profit and loss, notwithstanding an
increase in the marginal profit ratio and fixed cost
reductions, the decline in sales, coupled with the impact of
yen appreciation, resulted in an increase of ¥10.1 billion in
operating loss, from ¥21.5 billion in the previous fiscal year,to ¥31.6 billion.
Total worldwide unit sales of motorcycles, ATVs (all-terrain
vehicles), utility vehicles, and personal watercraft were397,000 units, a decrease of 126,000 units, or 24.1%, fromthe previous fiscal year. By region, sales in Japan declined by
2,000 units, or 10.5%, to 17,000 units; sales in North
America fell by 117,000 units, or 59.4%, to 80,000 units;

Outlook
Regarding fiscal 2011 unit sales of motorcycles, ATVs, utility
vehicles, and personal watercraft, we project an increase in
North America and Southeast Asia and flat sales in Europe.
Amid projections for continued adversity in the businessenvironment, we will work to increase sales in Asia and Brazil,
enter the market in India, and enhance development ofadvanced environmental technologies. At the same time, wewill implement measures to improve the earnings structure,sales in Europe decreased by 25,000 units, or 25.8%, tosuch as inventory adjustment and lowering the break-even

72,000 units; and sales in other regions increased by 18,000

point through fixed cost reduction and improvement of theunits, or 8.6%, to 228,000 units.

marginal profit ratio.

New Models

The name of this segment has been changed from thePrincipal new models introduced in fiscal 2010 were as

Consumer Products & Machinery segment to the Motorcycle &follows.

Engine segment, and the Industrial Robots business unit has
been transferred to the Precision Machinery segment in fiscal

In the motorcycle line, Kawasaki implemented a modelchange of the 1400 GTR sport tourer to further increase
touring capability and improve environmental performance.
Kawasaki also completed a full model change of the Z1000
large-displacement sport model, which is highly popular in
Europe for its striking design. With regard to mid-displacement
models, Kawasaki implemented a styling change for the

22 Review of Operations

2011.

2020 Vision
A world-class personal vehicle and engine manufacturer focused on motorcycles that leverages further penetration of Fun to ride, supported byadvanced environmental technologies

Net Sales

Business Vision for 2020

Years Ended March 31 (Billions of yen)

303.7
260.0

300

290.0

Reinforcement of the earnings structure of businesses in developed countries
Growth of the motorcycle business for developing countries

203.0
Business plan

09

10

11

(Forecast)(Actual)21

13(Vision)(Target)Years Ended March 31 (Billions of yen)

20.0

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

10.0
0.0
-10.0

8.0

0 Business plan
09

10

-10.4

-20.0
-30.0

10%

11

(Forecast)

13(Target)

5%
0%
-5%
-10%

-27.0

Key Points in the Medium-Term Business Plan
Improved profitability through rigorous break-even point management
Recovery in production and wholesale unit sales through rapid inventory level adjustment in developed countries
Expansion of sales of products for developing countries-15%(Actual)Note: The figures for net sales and operating income (loss) for FY09 and FY10 have been calculated in accordance with new business segments and new accounting
standards applied in FY11. Accordingly, they differ from the figures in the actual operating results.

1400 GTRJET SKI ULTRA 260X

Review of Operations

23

Review of Operations

Precision Machinery
Business Results
Orders in the Precision Machinery segment declined ¥13.1
billion, or 15.6%, from the previous fiscal year, to ¥71.0 billion,
mainly because of a drop in orders from the construction
machinery industry. Sales for the fiscal year fell ¥16.1 billion, or
19.0%, to ¥68.8 billion, as a result of a decrease in sales to theconstruction machinery industry. Operating income fell ¥1.4
billion, or 17.0%, to ¥6.9 billion, reflecting the sales decline.

OutlookThe name of this segment has been changed from the Hydraulic
Machinery segment to the Precision Machinery segment in fiscal
2011. The new segment consists of the Hydraulic Machinery
business unit and the Industrial Robots business unit.
With regard to the market environment for the hydraulicmachinery business unit, the core construction machinery
market saw a sharp decline in demand until the middle of 2009,
owing to the impact of the worldwide financial crisis that began
in the autumn of 2008. However, market conditions indeveloping countries, notably China, began to recover in thesecond half of the fiscal year, and a clear recovery trend hastaken hold since the end of last year. Conditions were severe in
the marine machinery market as well, where a slack period for
new vessel deals and delivery postponements occurred
frequently. However, the cancellation situation at emerging
shipyards in South Korea and China has begun to stabilize. In
the industrial equipment market, capital investment-related
demand in Japan for injection molding machines, machine
tools, and other equipment remains slack.
Kawasaki Precision Machinery Ltd. (KPM), the core company inthe new Precision Machinery segment, has set forth a businessvision for 2020 of being a manufacturer of top brands in the
global motion control sector. The company aims to provide
customers around the world with drive and control systems andengineering and services centered on fluid power technologies,
with high performance and state-of-the-art quality offered atcompetitive prices and delivered in a timely manner. In fiscal
2011, as the first step toward the realization of this businessvision, KPM has set a basic objective of “Focusing on the

24 Review of Operations

reinforcement of business profitability and the development
and reinforcement of a business foundation for future growth,and building a more flexible and robust business structure
unaffected by demand fluctuation or peaks and valleys in thebusiness cycle.”
Specifically, KPM will sharply reduce inventories, markedly
increase productivity, establish world-class quality, andreinforce business profitability by increasing the performanceand quality of key components while lowering their costs andincreasing after-service sales.
Concerning the development and strengthening of a businessfoundation for future growth, KPM will increase its
competitive advantage in the excavator market (through thedevelopment and introduction of a high-efficiency, low-noisepump/motor and the Electro-Hydraulic Hybrid Motor),increasing sales in Asia of marine machinery and industrial
equipment products, and further developing the business in
China, the most important market for KPM now and in theforeseeable future.
With regard to the market environment for the Industrial
Robots business unit, on the whole, a full-scale recovery indemand is taking shape. Although market conditions remainchallenging for products for the automotive industry indeveloped countries, there has been a noticeable recovery inthe market for products for the semiconductor industry.
The Robot Division, the organization responsible for the
Industrial Robots business unit, has set forth a business vision
for 2020 of being a robot manufacturer that has established aposition as a top provider of quality and total solutions in theautomotive, semiconductor, and solar panel manufacturingsectors, opening up new market sectors with latent
automation needs.
To achieve this vision, the division will meet increased demand
for robots for the semiconductor industry and steadily
implement measures to open up new markets.

2020 Vision
Industrial Hydraulic Products
A manufacturer of top brands in the global
motion control sector that provides customers
around the world with drive and control
systems, engineering, and services centeredon hydraulics technologies

Net Sales

260

Years Ended March 31 (Billions of yen)

117.6

09

82.7

10

(Actual)

11

21

13

(Forecast)(Vision)(Target)Operating income

Ratio of operating
income to sales

15.0
10.0

11.0

8.8

5.0

Pursuit of synergies in precision processing,electronic control, and other areas

Business Vision for 2020

Business plan

Years Ended March 31 (Billions of yen)

20.0

Combining of these businesses into asingle segment beginning in FY2011

Building up position as No. 1 hydraulic equipment manufacturer for construction
machinery

130.0

110.0

Industrial Robots
A robot manufacturer that has established aposition as a top provider of quality and totalsolutions in the automotive, semiconductor, andsolar panel manufacturing sectors and opens up
new market sectors with latent automation needs

8.0

8%
6%
4%

Business plan

3.4

10%

2%

0.0

Business expansion due to recovery in the automotive market, increased use for
manufacturing lines in other industries, and other factors

Key Points in the Medium-Term Business Plan
Increased hydraulic equipment sales to developing countries
Increased demand for robots for semiconductor production. Steady implementation of
measures to develop new market sectors

0%
09

10

(Actual)11(Forecast)

13(Target)Note: The figures for net sales and operating income for FY09 and FY10 have been calculated in accordance with new business segments and new accounting standards
applied in FY11. Accordingly, they differ from the figures in the actual operating results.

Valves for construction machinery
Electro-hydraulic steering gear

RS20N

Review of Operations

25

Corporate GovernanceCorporate Governance
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 thissystem. The basic stance of the KHI Group as a whole regarding
corporate governance is to endeavor to increase the Group’s
corporate value through the highly transparent, efficient, andsound management of its operations as the Group works tobuild solid relationships with all of its stakeholders, including
shareholders, customers, employees, and the 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 12 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 a Group Executive Officer Committee, both of which arecomposed of representative directors and managers responsible
for major subsidiaries, while the Group Executive Officer
Committee also includes executive officers.
To reinforce the oversight and monitoring function of the Boardof Directors with respect to management overall, the Company
appoints directors who do not have roles in the execution ofoperations. With regard to corporate auditors, to ensure
objectivity and neutrality in the management oversight function,
the Company appoints two outside corporate auditors with nobusiness relationships or other vested interests in the Company.
To ensure the reliability of financial reports, the Company
appoints internal corporate auditors who have considerable
knowledge of finance and accounting. The internal corporate
auditors and outside corporate auditors share information andwork to enhance the management oversight function. For thesereasons, the company does not appoint outside directors.
The Board of Directors appoints executive officers to conductbusiness operations.
The Board of Directors decides the basic objectives and policies
for the execution of operations under the management plan andpromptly issues directives for implementation to all executive
officers. The Group Executive Officer Committee ensures thatthe objectives and policies are implemented. The Management
Committee, which consists of representative directors andmanagers responsible for major subsidiaries, and the Board of

26 Corporate GovernanceDirectors periodically follow up on the status of implementationof the management plan. The Company clearly defines the
management responsibility of directors by means of incentivebased compensation that reflects business performance 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,and other matters from the perspective of the Group as a whole.

Internal Auditing, Statutory Auditing, andIndependent Auditing
The Auditing Department, an internal auditing unit with a staffof 10, strives to improve internal control functions by suchmeans as the periodic conducting of audits to confirm whether
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 have monthly meetings and share
information on the results and findings 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 and audits of KHI’s
divisions and subsidiaries. In addition, two outside corporate
auditors ensure the objectivity and neutrality of the management
oversight function. The full-time corporate auditors and outside
corporate auditors share information and strive to enhance themanagement oversight function.
With regard to independent auditing, the Company undergoes
audits of its financial statements conducted by the Company’s
independent auditor, KPMG AZSA & Co. 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 (twice a year) receive
reports on the results of independent auditing and collaborate
with the independent auditor by exchanging information andopinions. Also, the corporate auditors take part in the audits
performed by the independent auditor as necessary and receive
reports from the independent auditor concerning audits asappropriate.

Outside Corporate Auditors
The Company has two outside corporate auditors.
Kenzo Doi, an outside corporate auditor, has no vested interestin the Company other than a retainer agreement between the
Company and Kobe Kyobashi Law Office, where he serves as arepresentative. The Company enhances the auditing function bytaking 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 the JapaneseCorporate Law, 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 the Japanese Corporate
Law (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 and Corporate Auditors
The total amount of compensation, the total amount of compensation by type, and the number of corporate officers eligible forcompensation are shown in the table below.

Category

Total amount ofcompensation by type(Millions of yen)

Total amount ofcompensation(Millions of yen)

Number of eligible
corporate officers

Annual compensation

Directors (excluding outside directors)

575

575

13

Corporate auditors(excluding outside corporate auditors)

61

61

3

Outside corporate officers

13

13

3

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

Enterprise of Risk Management System
To ensure a uniform level of risk management throughout the Group, the KHI Group has established a group-wide risk enterprisemanagement system, which identifies and deals with critical risks that have a material impact on management, thereby enhancing risk
management as set forth in the Kawasaki Group Management Principles.

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

Corporate Governance27

Directors, Corporate Auditors, and Executive Officers
CORPORATE AUDITORSDIRECTORS

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

Tadaharu Ohashi
ChairmanSatoshi Hasegawa*President

Shuji Mihara*

Masashi Segawa*Senior Executive Vice President

Senior Executive Vice President

Mitsutoshi Takao*

Yuichi Asano*Nobumitsu Kambayashi†

Senior Vice President

Senior Vice President

Senior Vice President

Kyohei Matsuoka*

Hiroshi Takata*

Shigeru Murayama*

Senior Vice President

Senior Vice President

Senior Vice President*Representative Director
Toshikazu Hayashi†

Makoto Sonoda†

Director

Director

28 Directors, Corporate Auditors, and Executive Officers**Outside Auditor
Part-time†

EXECUTIVE OFFICERS
President

Executive Officers

Satoshi Hasegawa

Toru Yamaguchi
Sosuke Kinouchi

Senior Executive Vice Presidents

Shuji Mihara
Masashi Segawa

Seiji Yamashita
Takeshi Sugawara
Takeshi Watanabe
Yasuo Murata

Senior Vice Presidents

Mitsutoshi Takao
Senior Manager
Corporate Planning Division

Minoru Makimura
Tamaki Miyatake
Shuichi Yamanaka

Yuichi Asano

Masahiko Hirohata

President
Gas Turbines & Machinery Company

Shinsuke Tanaka

Kyohei Matsuoka

Masatoshi Yamaguchi

President
Rolling Stock Company

Naomi Sera

Hiroshi Takata
President
Motorcycle & Engine Company

Shigeru Murayama
President
Aerospace Company

Joji Iki
Yoshizumi Hashimoto
Yukio Hayano
Masahiro Ibi
Takafumi Shibahara
Yoshinori Kanehana
Nobuyoshi Kobayashi
Minoru Akioka
Yukinobu Kono
Masafumi Nakagawa(As of June 25, 2010)

Directors, Corporate Auditors, and Executive Officers

29Corporate Social Responsibility

Value Creation

Group Mission“Kawasaki, working

Group management principles

as one for the goodGroup code of conductof the planet”
Originality

Excellence

Mission Statement

The Kawasaki Group has defined its role and mission in society in the Group Mission, “Kawasaki, working as one for the goodof the planet” (Enriching lifestyles and helping safeguard the environment: Global Kawasaki), and we are engaging in the
cumulative effort to realize that mission.
The world is always undergoing rapid change in such areas as societies, economies, and the environment, and that is why thecontribution demanded of the Kawasaki Group is also constantly changing its appearance.
Making effective use of the integrated technological expertise Kawasaki has accumulated to the present, we will propose
businesses, products, and services that further address the issues that are borne out of change.
The Kawasaki Group’s CSR is not defined solely by the improvement of its business. We are committed to the ongoing effort toconduct sound, transparent management, to ensure compliance, and to further make proactive provisions for risk. As we
pursue business in this spirit, we will strive to build a future with all points of contact with society, specifically our customers,
local and international communities, our employees, our shareholders, and other stakeholders.
Through the CSR activities shown in the table at the right, we will ascertain the changes taking place in the world, and in orderto respond appropriately to society’s needs, we will engage in activities and efforts to realize innovations that are useful tosociety. In so doing, we will continue to enhance the value of the Kawasaki Group.

Companywide Crosscutting CSR Organization in the Kawasaki Group
Corporate CSR Committee

Human Capital Development Committee

Compliance Manager Conference

Risk Management Committee

CSR Manager Conference

Export Examination Committee

Corporate Environmental Committee

Crisis Management Organization

30 Corporate Social Responsibility

Fundamental Approach
The Kawasaki Group’s CSR is our continuous effort to realize the Group Mission at ever higher levels.
We consider the future of human society and the global environment to be situated on the sameline of extension as the increase of value in the Kawasaki brand, and in that light we promote thefollowing five themes.

Realization of theGroup Mission atever higher levels

Five Themes(1) We will use our integrated technological expertise to create values that point the way to the future.
(2) We will always act with integrity and good faith to merit society’s trust.
(3) We will all create a workplace where everyone wants to continue working.
(4) We will pursue “manufacturing that makes the Earth smile.”(5) We will expand the circle of contribution that links us to society and to the future.

Individual Fields and What Kawasaki Aims to Be
Individual Field
CSR Overall(1) Business

Envisioned Aim
We will realize the Group Mission (Kawasaki’s duty to society) at ever higher levels.

Product development

We will make use of the integrated expertise of the Group to develop products that have advanced
functionality and high quality from our advanced technological abilities.

Product responsibility

We will provide products and services that are reliable and safe from our customers’ perspective.

Customer satisfaction

We will fulfill our customers’ needs with products and services that are impressive as well as exciting.

Corporate governancePursuing sound, transparent management we will realize the independent operation of eachbusiness division and the application of the combined strengths of the Group.

Compliance

We will build an organization that is open and self-regulating in order to establish a corporate
culture with credibility.

Risk management

We will discern major risks that threaten the achievement of our business goals and create a systemcapable of providing the most appropriate response.

Information security

We will institute rigid information security measures and maintain the safety and security of our
information.

Information disclosureand IR activities

We will disseminate corporate information in the appropriate manner and at the appropriate time,
while further improving the substance of disclosure.

Business partners

Coexisting with our business partners and sustaining equitable partnerships with them, we will also
encourage their cooperation with CSR activities.

Safety and health

We will create a safe, pleasant work environment where employees can thrive in good physical andmental health.

Human resource
development

We will provide consistent fostering and strengthening of our employees, and enhance their humanvalue to the maximum extent.

Human rights

We will respect the diversity of our employees and aim to create a workplace that accepts theirvarious values and abilities and makes use of them.

Labor

We will endeavor to create a workplace that provides motivation and satisfaction in fair and impartial
working conditions.

(4) Environment

Global environment

We aim to realize a low-carbon society, a recycling society, and a society coexisting with nature.

(5) Social contribution

Local communities andJapanese society

We will coexist and cooperate with local communities and help foster the coming generations thatwill develop and handle future dream technologies.

International community

We will respect the cultures of the various countries of the world and contribute to their prosperity
by fostering their technology and human resources.

(2) Management(3) Employees

Corporate Social Responsibility

31

2020 Environmental Vision
In 2003, Kawasaki Heavy Industries, Ltd. (KHI) Group establishedits 2010 Environmental Vision: “What Kawasaki Should Be in theYear 2010” to seek improvement in environmental management. Now we have established our new 2020 Environmental
Vision: “What Kawasaki Should Be in the Year 2020” toformulate our environmental aims for the year 2020, under theGroup Mission “Kawasaki, working as one for the good of theplanet.” (Enriching lifestyles and helping safeguard the environment: Global Kawasaki)

Taking into account the environmental trends in Japan andabroad, we will pursue the 2020 Environmental Vision on thebasis of four basic guidelines. These are the “EMS”(“establishment of environmental management systems”), which
will provide a foundation for three societal realizations, namely,“realization of a low-carbon society,” “realization of a soundmaterial-cycle society,” and “realization of a society coexistingwith nature.” We are committed to working from theseguidelines 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, and hassought 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 “realization of a low-carbon society,” “realization of sound material-cycle society,” and “realization of a society
coexisting with nature.” We will contribute to “the sustainable development of society” through business activities that are in harmony with theenvironment 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 of a low-carbon society
Contribute to the prevention of global warming by means of
products and manufacturing that use energy without waste(1) We are reducing greenhouse gas emissions in accordance with the nationalguidelines 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.

Realization of a sound material-cycle society

Realization of a society coexisting with nature

We engage in manufacturing that uses resources without waste
in order to recycle and fully utilize limited resources.

Through manufacturing that is in harmony with the global environment,
we are contributing to minimization of environmental impact
and conservation of the ecosystem.

(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.

(1) We provide customers with products and services that prevent pollution of theatmosphere and degradation of water quality in order 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 statuses.
(3) We disseminate environmental information inside and outside the Company, and engage in dialogue while conducting environmental conservation activities.

32 Corporate Social Responsibility

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,” ”realizationof a sound material-cycle society,” and “realization of a society
coexisting with nature” as new points of entry for our commitment to realization of the Group Mission through businessactivities that are in harmony with the environment and throughthe KHI Group’s own products and services that show consideration for the environment.

The 7th Environmental Management Activities Plan (FY20112013) 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, therealization of a sound material-cycle society, and the realizationof a society coexisting with nature as well as establishment of
EMS to serve as a foundation for environmental management.
We have set companywide objectives in all of these, and aretaking action accordingly.

Realization of a low-carbon society

We are aiming to achieve our companywide FY2013 objective for greenhouse gases, which is to reduce theaverage basic unit of emissions (meaning CO 2 emissions/sales) for FY2009-2013 by 10% compared with thelevel 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 coexistingwith nature

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

Establishment of EMS

We have committed ourselves to promoting the establishment of EMS in all consolidated subsidiaries in Japanand overseas.

Measures to Reach Objectives for Reduction ofGreenhouse Gases
We have been pursuing a variety of initiatives to reduce greenhouse gas
emissions, which is our highest-priority environmental management
activity.
Companywide Engagement in CO2 Reduction Activities
In order to realize further reductions in greenhouse gas emissions fromour production activities, it will be necessary to establish an analyticalmethod for companywide implementation of reduction activities. For thispurpose, we began reviewing the energy consumption of all our plants
and have been implementing a project to investigate CO 2 emission
reduction factors.
We are identifying possible points of improvement according to thebusiness form adopted by each of KHI’s individual business segments,
which engage in production across a wide range of business areas, while
also considering CO 2 reduction measures that can be realized acrossvarying business forms. In this way, we will realize optimal measures for
the Group as a whole.

Promoting the introduction of photovoltaic systems
We are positively considering and advancing capital investments that
reduce greenhouse gas emissions froma companywide perspective. We aremaking a practice of installing thephotovoltaic power generationequipment in newly built plants, andwe are scheduled to introduce 750kW
equipment in our Nagoya Works 1 in
FY2011.

The photovoltaic power generationequipment installed at the KPM (Kawasaki
Precision Machinery Ltd.) main plant

Determine the credit of emissions from KHI Group products,
technology, and the like
Initiate a clean development mechanism (CDM) project using KHI Group
products and technology, and determine the credit of emissions that
accompanied reductions in CO 2 from our products and technology.
Forest conservation activities and the use of green power(1) We are engaging in forest conservation projects that make use ofafforestation and corporate forest restoration systems abroad, and wewill promote CO 2 reduction by absorption in forests.
(2) Electric power generated from renewable energy resources (windpower, solar power, biomass, etc.) will be included in the KHI Group’s
CO 2 reduction amount.
These activities are also intended to raise awareness among our
employees of global warning countermeasures.

Corporate Social Responsibility

33

Financial Section

Contents
Six-Year Summary
Management’s Discussion & Analysis
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditors’ Report

34 Contents

35
36
42
44
45
46
48
79

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

Millions of yen
2010

2009

2008

2007

2006

2005

Net sales ................................................................. ¥1,173,473¥1,338,597¥1,501,097¥1,438,619¥1,322,487¥1,241,592

Cost of sales ........................................................... 1,023,610

1,146,944

1,262,032

1,213,524

1,148,547

1,088,219

Operating results:

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

149,863

191,653

239,065

225,095

173,940

153,373

Selling, general and administrative expenses ...........

151,179

162,940

162,155

155,953

132,145

128,629

Operating income (loss) ..........................................

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

41,79524,744

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

(10,860)

11,72835,141

29,772

16,467

11,479

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

59,27282,45050,53839,26941,72429,692

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

51,42344,33437,45530,27930,551

31,555R&D expenses .........................................................

38,057

38,25636,22833,81927,04013,183

Working capital ...................................................... ¥ 238,755¥ 165,791¥ 157,741¥ 155,412¥ 113,240¥ 138,523

284,408

284,118

259,927

253,819

246,219

243,166

Total assets ............................................................. 1,352,439

1,399,771

1,378,770

1,357,980

1,284,085

1,194,473

Financial position at year-end:
Net property, plant and equipment .........................
Long-term debt, less current portion .......................

270,110

181,933

138,766

165,754

157,057

207,279

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

283,053295,246

319,038

295,378

243,096

206,156

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

¥ (6.5)

¥

¥

¥

¥

¥

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

-

6.9

20.6

17.2

9.4

6.8

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

3.0

3.0

5.0

5.0

3.0

2.5

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

169.5

176.8

191.1

178.0

156.1

142.8

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

1,670

1,670

1,670

1,660

1,558

1,443

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

32,29732,26630,56329,211

28,922

28,682

Orders received ....................................................... ¥1,001,290¥1,540,590¥1,610,757¥1,592,688¥1,351,631¥1,301,845

Order backlog ......................................................... 1,507,057

1,699,163

1,533,663

1,465,155

1,310,444

1,254,409

Per share amounts (yen):
7.0

21.1

18.9

11.2

7.9

Other data:

Six-Year Summary

35

Management’s Discussion & Analysis
OVERVIEWRESULTS OF OPERATIONS

During fiscal 2010, ended March 31, 2010, the Japanese

Net Sales

economy began to show signs of recovery owing to an increase

As mentioned, consolidated net sales decreased ¥165.1 billion,

in external demand from developing countries and the bottomingor 12.3%, to ¥1,173.4 billion.

out of domestic demand.
The principal factors accounting for this decline were a) a
Nevertheless, the economic situation remained adverse, as

decrease of ¥14.7 billion in the sale of the Plant & Infrastructure

appreciation of the yen against the U.S. dollar prolonged theEngineering segment, as a result of lower sales of large-scale

slump in capital investment and improvement in employment

projects for overseas customers; b) a decline of ¥119.5 billion inand personal consumption failed to materialize.

the Consumer Products & Machinery segment owing to lower
sales of motorcycles to North America and Europe, coupled withIn the world economy, although there were signs of growth inlower sales of industrial robots; and c) a decrease of ¥16.1 billion

some developing countries, recovery in North America andin the Hydraulic Machinery segment, due to factors including

Europe was sluggish. Under these business circumstances, thedemand decline for hydraulic components for construction

Kawasaki Heavy Industries (KHI) Group faced continued adversity

machinery in Japan, North America, and Europe, despite in Asia

in its business operation at each business segment, and orders

and other developing countries, where demand is robust.

declined in every segment except Plant & Infrastructure
Engineering segment. Sales also declined in nearly all segments,

Overseas sales were down ¥169.0 billion, or 23.1%, to ¥561.5

especially the Consumer Products & Machinery segment. Profits

billion. By region, sales in North America declined ¥83.1 billion,

declined in all segments except the Aerospace and Shipbuilding

or 26.8%, to ¥226.8 billion; sales in Europe fell ¥23.3 billion, orsegments owing to strong impact from the appreciation of the

20.0%, to ¥93.0 billion; sales in Asia outside Japan decreased

yen and a decline in business in North America and Europe. As a

¥32.7 billion, or 18.8%, to ¥141.5 billion; and sales in otherresult, consolidated orders fell ¥539.3 billion from the previous

areas declined ¥29.9 billion, or 23.0%, to ¥100.1 billion. The

fiscal year, or 35.0%, to ¥1,001.2 billion, and consolidated net

ratio of overseas sales to consolidated net sales dropped 6.7

sales declined ¥165.1 billion, or 12.3%, to ¥1,173.4 billion.

percentage points, to 47.8%, compared with 54.5% in theConsolidated operating income or loss fell ¥30.0 billion,

previous fiscal year.

resulting in an operating loss of ¥1.3 billion, while net income orloss was down ¥22.6 billion, resulting in a net loss of ¥10.8

The following sections provide additional details regarding

billion.

performance by business segment. Operating income or loss
includes intersegment transactions.
Net Sales

Sales by Industry Segment

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

12.9

10
0

400

0

06 07 08 09 10

36 Management’s Discussion & Analysis

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

-10

29.8

-10.8

16.3

20

11.7

800

16.1

7.7

30

35.1

40

18.4
1,173.4

1,501.1

8.6

14.2
1,338.6

1,438.6

1,322.5

1,200

5.8

16.5

1,600

-20

06 07 08 09 10

Shipbuilding

Despite the sales decline, the profit situation improved by ¥5.9

On a consolidated basis, total orders received decreased ¥55.4

billion, from an operating loss in the previous fiscal year tobillion from the previous fiscal year, or 77.4%, to ¥16.1 billion,

operating income of ¥1.7 billion, owing to factors including aowing to a sharp decline in orders for new vessels. Sales rose

review of the timing of expense recognition attendant on a

¥25.5 billion, or 20.1%, to ¥151.8 billion, because of thechange in the Boeing 787 development schedule.

increase in sales of large vessels. Operating income was ¥1.4
billion, an improvement of ¥2.5 billion from the operating loss of

Gas Turbines & Machinery¥1.0 billion in the previous fiscal year, reflecting the increase in

On a consolidated basis, orders received in the Gas Turbines &sales and improved profitability due to lower material costs.

Machinery segment decreased ¥129.3 billion from the previous
fiscal year, or 36.4%, to ¥226.2 billion, due to decreases in

Rolling Stockorders for commercial aircraft engine components, for which

Although orders were received during fiscal 2010, including anlarge orders were received in the previous fiscal year, and fororder for subway cars for Singapore Land Transport Authority,marine propulsion systems. Sales fell ¥3.8 billion, or 1.9%, toconsolidated orders received amounted to ¥77.1 billion, down

¥191.3 billion, due to lower sales of diesel engines and other¥187.4 billion, or 70.8%, from the previous fiscal year, when the

products, despite an increase in sales of gas turbines and steam

Company obtained orders for large-scale projects. Despiteturbines for land. Operating income fell ¥4.3 billion, or 39.3%,

increases in sales of rolling stock to the Japan Railways Groupto ¥6.6 billion, as a result of the impact of yen appreciation.

and overseas customers, sales declined ¥19.3 billion, or 10.4%,
to ¥167.1 billion, due to factors including the transfer of the

Plant & Infrastructure Engineering

construction machinery business unit to the “Other” segment.

Consolidated orders received rose ¥41.1 billion, or 49.2%, fromOperating income fell ¥3.6 billion, or 31.8%, to ¥7.7 billion, as a

the previous fiscal year, to ¥124.7 billion, due in part to an orderresult of a decline in the profitability of export projects due tofor a fertilizer production facility. Sales declined ¥14.7 billion, orappreciation of the yen.

14.0%, to ¥90.4 billion, as a result of lower sales of large-scale
overseas plants. Reflecting the decrease in sales, operating

Aerospaceincome declined ¥2.7 billion, or 30.0%, to ¥6.2 billion.

On a consolidated basis, orders received in the Aerospacesegment decreased ¥67.8 billion from the previous fiscal year, or
28.3%, to ¥171.3 billion, due to factors including a decline inorders for aircraft for Japan’s Ministry of Defense (MOD) and forcomponent parts for the Boeing 777. Sales fell ¥11.5 billion, or
5.8%, to ¥188.8 billion, as a result of lower sales to the MOD.

Net Income (Loss) per Share

Working Capital

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

100

165.8

157.7

155.4
113.2

0

-6.5

5

150

7.0

10

1,000

1,399.8

1,352.4

1,378.8

1,358.0

1,284.1

200

11.2

15

21.1

18.9
11.2

20

1,500

238.7

250

25

500

50

-5
-10

0

06 07 08 09 10

0

06 07 08 09 10

06 07 08 09 10

Management’s Discussion & Analysis

37Consumer Products & Machinery

Japan

Sales in the Consumer Products & Machinery segment fell

Sales in Japan decreased ¥57.1 billion from the previous fiscal¥119.5 billion, or 35.5%, from the previous fiscal year, toyear, or 5.9%, to ¥917.3 billion, mainly because of a decline in¥216.9 billion. Contributing factors included a drop in sales tosales in the Consumer Products & Machinery segment. Profitabil-

North America and Europe, and a decline in sales of industrial

ity deteriorated ¥14.4 billion, from an operating income ofrobots. With regard to profit and loss, notwithstanding an¥13.4 billion in the previous fiscal year to an operating loss ofincrease in the marginal profit ratio and fixed cost reductions,¥0.9 billion, principally due to a decline in sales.

the decline in sales, coupled with the impact of yen appreciation,
resulted in an increase of ¥10.1 billion in operating loss, from

North America¥21.5 billion in the previous fiscal year, to ¥31.6 billion.

Sales in North America were down ¥85.6 billion, or 38.7%, to¥135.3 billion, as a consequence of lower sales of motorcycles

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

and other products. Operating loss increased ¥6.8 billion to ¥8.1
billion.

Hydraulic Machinery
Consolidated orders in the Hydraulic Machinery segment

Europedeclined ¥13.1 billion, or 15.6%, from the previous fiscal year, toSales in Europe decreased ¥24.0 billion, or 26.4%, to ¥66.8¥71.0 billion, mainly because of a drop in orders from thebillion, also because of factors including lower sales of motor-

construction machinery industry. Sales fell ¥16.1 billion, or

cycles and other products. Operating income rose ¥0.1 billion, or

19.0%, to ¥68.8 billion, as a result of a decrease in sales to the

19.8%, to ¥0.8 billion.

construction machinery industry. Operating income fell ¥1.4
billion, or 17.0%, to ¥6.9 billion, reflecting the sales decline.

Asia
Sales in Asia outside Japan fell ¥0.4 billion, or 1.0%, to ¥42.9

Otherbillion, and operating income rose ¥1.5 billion, or 33.5%, toSales declined ¥5.7 billion, or 5.5%, to ¥97.8 billion. Profitability¥6.0 billion.

deteriorated ¥4.7 billion, from an operating income of ¥4.3
billion in the previous fiscal year to an operating loss of ¥0.4

Other Areas

billion, reflecting factors including the transfer of segments for

Sales in other areas increased ¥2.0 billion, or 21.7%, to ¥11.0

construction machinery business unit.

billion, and operating income rose ¥0.6 billion, or 152.6%, to¥0.9 billion.

The following sections summarize performance by geographic
segment.

Total Net Assets

Net Assets per Share

Return on Equity(Billions of yen)

(Yen)

(%)

6

0

50

50

-2
-4

0

06 07 08 09 10

38 Management’s Discussion & Analysis

3.8

2

-3.8

150

0

11.4

8

4

100

100

11.1

10

169.5

191.1

176.8

178.0

150

156.1

295.2

283.0

243.1

250

319.0

295.4

300

200

12

200

7.3

350

06 07 08 09 10

06 07 08 09 10

Cost, Expenses, and Earnings¥3.8 billion. After the deduction of minority interests in net

The cost of sales decreased 10.8%, to ¥1,023.6 billion. The rateincome of consolidated subsidiaries, net income for the fiscalof decrease in the cost of sales was 1.5 percentage points lower

year decreased ¥22.6 billion from the previous fiscal year,

than the 12.3% drop in net sales. As a result, gross profit

resulting in a net loss of ¥10.8 billion. The ratio of net income to

declined ¥41.8 billion, or 21.8%, to ¥149.8 billion, and thenet sales declined 1.8 percentage points, from 0.9% in the

gross profit margin fell 1.6 percentage points, to 12.7%,

previous fiscal year to negative 0.9%. ROE (calculated using

compared with 14.3% in the previous fiscal year.

average total shareholders’ equity) decreased 7.6 percentage
points, from 3.8% in the previous fiscal year to negative 3.8%.

Selling, general and administrative expenses declined ¥11.8
billion year on year, or 7.2%, to ¥151.1 billion, primarily owing

Capital expenditures for the fiscal year under review were ¥59.2

to a decrease in capital expenditures. Operating income

billion, compared with ¥82.5 billion in the previous fiscal year.

decreased ¥30.0 billion, resulting in an operating loss of ¥1.3

R&D expenses were ¥38.0 billion, compared with ¥38.2 billion

billion. The principal factors accounting for this decreasein the previous fiscal year.

included a) the impact of the decline in sales of motorcycles to
North America and Europe on operating loss, which exceeded
the effects of such initiatives as an increase in the marginal profit

FINANCIAL CONDITION

ratio and fixed cost reductions in the Consumer Products &Machinery segment; b) the impact of yen appreciation on the

Total assets at the end of the fiscal year were ¥1,352.4 billion,

Rolling Stock, Gas Turbines & Machinery, and Consumer

down ¥47.3 billion, or 3.4%, from the previous fiscal year. Of

Products & Machinery segments; and c) lower sales in the Plant

this total, current assets were ¥931.6 billion, down ¥64.1 billion,& Infrastructure Engineering and Hydraulic Machinery segments.

or 6.4%, from the previous fiscal year. The decrease is primarily

As a consequence, the ratio of operating income to net sales fell

attributable to lower inventories, reflecting an increase in sales

2.3 percentage points, from 2.1% in the previous year toof large vessels and a contraction of channel inventories in thenegative 0.1%.

Consumer Products & Machinery segment. Investments,
intangible and other assets rose ¥16.5 billion from the previous

In the results for other income (expenses), the Company

fiscal year, owing to factors including an increase in deferred tax

recorded expenses of ¥2.5 billion, compared with expenses ofassets, while net property, plant and equipment increased ¥0.3

¥5.1 billion in the previous fiscal year. The principal reason forbillion from the previous fiscal year.

the change was a decrease of expenses in “other, net,” to ¥7.2
billion from ¥11.5 billion in the previous fiscal year. The main

Liabilities decreased ¥35.1 billion, or 3.2%, to ¥1,069.3 billion.

factors influencing this outcome were a) the recording of ¥7.6

Principal factors contributing to the change were an increase ofbillion in restructuring charges in the fiscal year under review, as¥39.6 billion, or 10.2%, in interest-bearing debt, such as debt

well as increases in certain other expense items. However, a)

and bonds payable, which was offset by a decrease of ¥55.7

above was offset by b) a change in the loss (gain) on contribu-

billion, or 15.5%, in trade payables, and a decrease of ¥26.2

tion of securities to the pension trust, from a loss of ¥4.5 billion

billion, or 20.9%, in advances from customers.

in the previous fiscal year to zero; c) a change in the loss on
valuation of securities, from ¥1.9 billion in the previous fiscal

Current liabilities decreased ¥137.1 billion, or 16.5%, to ¥692.9

year to zero; and d) an increase in gain on sales of marketablebillion, while long-term liabilities increased ¥101.9 billion, orand investment securities, from ¥0.6 billion in the previous fiscal

37.1%, to ¥376.4 billion.

year to ¥1.7 billion.
Net assets declined ¥12.2 billion, or 4.1%, to ¥283.0 billion. The
Income (loss) before income taxes and minority interests declined

principal reason for the change was a decrease in retained earnings.

¥27.4 billion from the previous fiscal year, primarily due to the
sharp deterioration in operating income, and the Company
recorded a loss before income taxes and minority interests ofManagement’s Discussion & Analysis

39

The ratio of shareholders’ equity to total assets fell 0.3 percent-

Net cash provided by financing activities was ¥35.9 billion, aage point, from 20.7% at the end of the previous fiscal year to

decrease of ¥71.8 billion from the previous fiscal year. The

20.5%. In addition, the net debt-to-equity ratio rose fromchange is mainly attributable to an increase in debt.

122.9% at the previous fiscal year-end to 142.3% at the end of
the fiscal year under review.

As a result of these cash flows, cash and cash equivalents at theend of fiscal 2010 were ¥34.1 billion, ¥2.7 billion higher than in

MANAGEMENT INDICATORS

the previous fiscal year.

The Company’s objective is to earn profits that not only meetbut exceed the expectations of investors. The management

DIVIDENDS

indicator we have adopted is before-tax return on invested
capital (ROIC), which measures how efficiently the Company

Our basic dividend policy is to continue to pay stable cash

uses its capital. To maximize ROIC, the Company will strengthen

dividends that are in line with our performance, while giving

its financial position through efforts to increase profit andcareful attention to increasing retained earnings to strengthen

improve the efficiency of invested capital. The Company uses theand expand the KHI Group’s management base in preparation

following formula to calculate ROIC.

for our future growth.

Before-tax ROIC: the ratio of EBIT (earnings before interest and

The Company’s basic policy regarding cash dividends fromtaxes) to the sum of interest-bearing debt and total shareholders’retained earnings is to pay dividends twice annually, an interim

equity. (Shareholders’ equity is defined as net assets minus

dividend and a year-end dividend. The entity making final

minority interests.)

decisions on dividends is the Board of Directors for the interim
dividend and the General Meeting of Shareholders for the

ROIC calculated using this formula decreased by 4.2 percentage

year-end dividend.

points, from 4.5% in the previous fiscal year to 0.2%.
While this remains the basic dividend policy, with regard to thedividend for fiscal 2010, upon consideration of the outlook for

CASH FLOWS

business performance, the level of retained earnings, and otherfactors, the decision was made to pay an annual dividend of ¥3

For fiscal 2010, net cash provided by operating activities was

per share (an interim dividend of ¥0 and a year-end dividend of¥30.1 billion, an increase of ¥71.4 billion from the previous fiscal¥3). Retained earnings after the dividend payout are appropri-year. Principal cash inflow items were a decrease in inventories of

ated for investments in the Company’s businesses, the¥56.2 billion and depreciation and amortization of ¥51.4 billion,

repayment of borrowings, and other uses.

while principal cash outflow items were a decrease in trade
payables of ¥56.3 billion, a decrease in advances from customersof ¥27.1 billion, and cash paid for income taxes of ¥12.8 billion.
Net cash used for investing activities was ¥63.2 billion, adecrease of ¥9.0 billion from the previous fiscal year. The cash
was mainly used for the acquisition of property, plant andequipment.
Free cash flow, which is the net amount of cash from operating
and investing activities, amounted to an outflow of ¥33.0 billion,
compared with an outflow of ¥113.5 billion in the previous fiscal
year.

40 Management’s Discussion & Analysis

Note: The Company’s Articles of Incorporation provide for paying aninterim dividend as stipulated in Article 454, Paragraph 5 of theJapanese Corporate Law.

BUSINESS RISK

(4) Government Regulations
The Group conducts its business activities in compliance with theExternal factors that may have an effect on the KHI Group’s

laws, regulations, and other controls in the countries and regions

performance and financial position include the following.

where it operates. The Group’s operations may be affected byunforeseen changes in such controls or the application of new(1) Political and Economic Conditions

controls.

The KHI Group conducts its business activities not only in Japanbut also elsewhere in Asia, North America, 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
Turbines & Machinery and the Plant & Infrastructure Engineering
segments. Moreover, demand for passenger air travel andconditions in shipping markets may affect the Aerospace,
Shipbuilding, and other 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 47.8% of consolidated net sales infiscal 2010, and the Group has a substantial volume of transactions denominated in U.S. dollars, euros, and other currencies.
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 inforeign currencies and engages in hedging techniques such as
flexible forward contracts, taking into account trends in foreignexchange rates. Nevertheless, the majority of the Group’s
manufacturing facilities are located in Japan, and sales tooverseas markets are subject to foreign exchange fluctuation
risk.
(3) Fluctuations in Prices of Raw Materials
Since the Group has many projects that require considerable
time from the receipt of orders to final delivery, fluctuations in
the prices of steel and other raw materials during the course of
projects may have an impact on profitability. Accordingly, theGroup is exposed to the risk of raw material price fluctuations.

Management’s Discussion & Analysis

41

Consolidated Balance Sheets
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2010 and 2009

Thousands of
U.S. dollars(Note 1)Millions of yen
2010

2009

2010

ASSETS
Current assets:
Cash on hand and in banks (Note 16) ..............................................................

¥

34,745¥31,956$373,441

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

400,264

402,342

4,302,063

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

20,15919,406

216,670

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

(2,424)(3,112)(26,053)

417,999

418,636

4,492,680

Inventories:
Merchandise and finished products................................................................

56,807

69,609610,565

Work in process .............................................................................................

281,025

325,579

3,020,475

Raw materials and supplies ............................................................................

80,392

81,253864,058

418,224

476,441

4,495,098

Deferred tax assets (Note 14)

25,20433,232

270,895

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

35,50635,532

381,622

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

931,678995,797

10,013,736

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

64,28264,287

690,907

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

317,684

302,033

3,414,488

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

507,926

494,938

5,459,222

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

9,744

19,573

104,729

899,636

880,8319,669,346

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

(615,228)(596,713)(6,612,511)

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

284,408

284,118

3,056,835

53,28545,852572,710

Property, plant and equipment (Note 6):

Investments, intangible and other assets:
Investments in securities (Notes 3 and 4) ..........................................................
Long-term loans...............................................................................................

515

560

5,535

Deferred tax assets (Note 14) ...........................................................................

51,50342,773

553,557

Goodwill and other intangible assets (Note 5) ..................................................

20,71919,574

222,689

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

(1,270)(1,187)(13,650)

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

11,601

12,284

124,690

Total investments, intangible and other assets ..................................................

136,353

119,856

1,465,531

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

¥1,352,439¥1,399,771$ 14,536,102

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

42 Consolidated Balance SheetsThousands of
U.S. dollars(Note 1)Millions of yen
2010

2009

2010

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term debt and current portionof long-term debt (Note 6).............................................................................
Trade payables (Note 6)....................................................................................
Advances from customers ................................................................................
Income taxes payable (Note 14) .......................................................................
Accrued bonuses .............................................................................................
Provision for product warranties.......................................................................
Provision for losses on construction contracts (Note 7) .....................................
Provision for restructuring charges ...................................................................
Provision for losses on damages suit (Note 26) .................................................
Provision for environmental measures ..............................................................
Deferred tax liabilities (Note 14) .......................................................................
Other current liabilities.....................................................................................
Total current liabilities ......................................................................................

¥ 158,799
302,739
99,532
4,833
14,202
6,640
17,991
6,326
5,165
778
859
75,059692,923¥ 207,355
358,478
125,763
8,710
14,242
7,638
20,931
7,411
932
78,546
830,006$ 1,706,782
3,253,858
1,069,776
51,945
152,644
71,367
193,368
67,99255,5138,361
9,232
806,7447,447,582

Long-term liabilities:
Long-term debt, less current portion (Note 6)...................................................
Employees' retirement and severance benefits (Note 8) ....................................
Deferred tax liabilities (Note 14) .......................................................................
Provision for environmental measures ..............................................................
Provision for losses on damages suit (Note 26) .................................................
Other...............................................................................................................
Total long-term liabilities ..................................................................................

270,110
89,240
2,526
3,713
6,706
4,168
376,463

181,933
79,969
2,938
3,981
5,698
274,519

2,903,159
959,157
27,14939,90772,07644,8004,046,248

104,329
54,275
137,689

104,329
54,282
154,273

1,121,334
583,351
1,479,890

(552)
5,305
(162)
(23,803)
5,972
283,053

(468)
3,140
(264)
(24,851)
4,805
295,246(5,932)57,018(1,741)(255,836)
64,1883,042,272¥1,352,439¥1,399,771$14,536,102

Contingent liabilities (Note 9)
Net assets (Note 10):
Common stock:
Authorized - 3,360,000,000 shares
Issued - 1,669,629,122 shares in 2010
- 1,669,629,122 shares in 2009...........................................................
Capital surplus .................................................................................................
Retained earnings ...........................................................................................
Treasury stock - 1,780,388 shares in 2010
- 1,394,288 shares in 2009 .......................................................
Net unrealized gains on securities, net of tax....................................................
Gains / losses on hedging items ........................................................................
Foreign currency translation adjustments .........................................................
Minority interests .............................................................................................
Total net assets ................................................................................................
Total liabilities and net assets..................................................................................

Consolidated Balance Sheets43

Consolidated Statements of Operations
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2010, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen
2010

2009

2008

2010

Net sales ..................................................................................

¥1,173,473¥1,338,597¥1,501,097$ 12,612,564

Cost of sales (Note 11).............................................................

1,023,610

1,146,944

1,262,032

11,001,827

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

149,863

191,653

239,065

1,610,737

Selling, general and administrative expenses (Note 12).............

151,179

162,940

162,155

1,624,881

Operating income (loss) ...................................................

(1,316)28,71376,910(14,144)

3,615

4,352

5,005

38,854

subsidiaries and affiliates................................................

6,522

8,709

7,642

70,098Interest expense...............................................................

(5,399)(6,658)(7,980)(58,028)

Other, net (Note 13).........................................................

(7,243)(11,491)(23,522)(77,848)(3,821)

23,62558,055(41,068)

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

(8,805)(16,783)(23,271)(94,636)

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

2,822

6,022

1,260

30,331Other income (expenses):
Interest and dividend income ...........................................
Equity in income of nonconsolidated

Income (loss) before income taxes andminority interests .....................................................
Income taxes (Note 14)

Minority interests in net income of(1,056)consolidated subsidiaries........................................................
Net income (loss) .............................................................

¥(10,860)(1,136)¥

11,728(903)¥

35,141(11,350)$(116,723)

U.S. dollars(Note 1)Yen

Per share amounts (Note 18)
Earnings per share - basic.................................................

¥

(6.5)

¥

7.0

¥

21.1

$

(0.06)

Earnings per share - diluted..............................................

-

6.9

20.6

-

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

3.0

3.0

5.0

0.03

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

44 Consolidated Statements of Operations

Consolidated Statements of Changes in Net Assets
KAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2010, 2009 and 2008

Thousands

Millions of yen

Number ofshares ofcommonstock

Commonstock

Capitalsurplus

Balance at March 31, 2007 ..................................................................................

1,659,626¥103,188

Net income for the year.................................................................................

--

Adjustments from translation of foreign currency financial statements ..........

-

Decrease in net unrealized gains on securities, net of tax ...............................

Net
unrealized
gains onsecurities,
net of tax

Gains/
losses on
hedgingitems

Foreigncurrencytranslation
adjustments

Minority
interests

Retainedearnings

Treasurystock¥53,179¥125,799¥ (55)¥19,342¥(1,608)¥ (9,417)¥ 4,950-

35,141

-

-

-

-

-

-

-

-

-

-

-

(2,461)

-

-

-

-

-

-

(9,050)---Treasury stock purchased, net ........................................................................

-

-

-

-

(410)

-

-

-

-

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

-

-

-

(8,298)

-

-

-

-

-

Loss on sales of treasury stock........................................................................

-

-

(1)

-

-

-

-

-

-

Conversion of convertible bonds....................................................................

10,003

1,141

1,113

-

-

-

-

-

-

Other (Note 15) ...........................................................................................

-

-

-

(1,241)

5

-

6,825

-

896

Balance at March 31, 2008 ..................................................................................

1,669,629¥104,329¥54,291¥151,401¥(460)¥10,292¥ 5,217¥(11,878)¥ 5,846

Net income for the year.................................................................................

-

-

-

11,728

-

-

-

-

-

Adjustments from translation of foreign currency financial statements ..........

-

-

-

-

-

-

-

(12,973)-

Decrease in net unrealized gains on securities, net of tax ...............................

-

-

-

-

-

(7,152)---

Treasury stock purchased, net ........................................................................

-

-

-

-

(8)

-

-

-

-

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

-

-

-

(8,342)

-

-

-

-

-

Loss on sales of treasury stock........................................................................

-

-

(9)

-

-

-

-

-

-

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

-

-

-

(514)

-

-

(5,481)-(1,041)

Balance at March 31, 2009 ..................................................................................

1,669,629¥104,329¥54,282¥154,273¥(468)¥ 3,140¥ (264)¥(24,851)¥ 4,805

Net loss for the year.......................................................................................

-

-

-

(10,860)

-

-

-

-

-

Adjustments from translation of foreign currency financial statements ..........

-

-

-

-

-

-

-

1,048

-

Increase in net unrealized gains on securities, net of tax.................................

-

-

-

-

-

2,165

-

-

-

Treasury stock purchased, net ........................................................................

-

-

-

-

(84)

-

-

-

-

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

-

-

-

(5,004)

-

-

-

-

-

Loss on sales of treasury stock........................................................................

-

-

(7)

-

-

-

-

-

-

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

-

-

-

(720)

-

-

102

-

1,167

Balance at March 31, 2010................................................................................

1,669,629¥104,329¥54,275¥137,689¥(552)¥ 5,305¥ (162)¥(23,803)¥ 5,972

Thousands of U.S. dollars (Note 1)
Balance at March 31, 2009 ..................................................................................

$1,121,334$(5,030)$33,748$(2,837)$(267,100)$51,644

Net loss for the year.......................................................................................

-$583,426 $1,658,136-(116,723)

-

-

-

-

-

Adjustments from translation of foreign currency financial statements ..........

-

-

-

-

-

-

11,264-

Increase in net unrealized gains on securities, net of tax.................................

-

-

-

-

23,270---Treasury stock purchased, net ........................................................................

-

-

-

(902)

-

-

-

-

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

--(53,783)

-

-

-

-

-

Loss on sales of treasury stock........................................................................

-

(75)

-

-

-

-

-

-

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

--(7,740)

-

-

1,096

-

12,544

Balance at March 31, 2010................................................................................

$1,121,334$583,351 $1,479,890$(5,932)$57,018$(1,741)$(255,836)$64,188

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

Consolidated Statements of Changes in Net Assets

45

Consolidated Statements of Cash FlowsKAWASAKI HEAVY INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2010, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen
2010

2009

2008

2010

¥ 23,625¥ 58,055$ (41,068)

552,697

Cash flows from operating activities:
Income (loss) before income taxes and minority interests.......................... ¥ (3,821)
Adjustments to reconcile net income (loss) before income taxes andminority interests to net cash provided by (used for) operating
activities:
Depreciation and amortization ............................................................

51,42344,33437,455

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

3,132

1,399

2,764

33,662

Employees' retirement and severance benefits ....................................

9,317

2,315

7,124

100,139

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

(38)(5,335)

1,451

(408)

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

(615)

(849)

(406)

(6,610)

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

(1,013)

1,162-(10,887)

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

(2,916)

12,202(3,498)(31,341)

Provision for restructuring charges ......................................................

6,326

-

-

67,992

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

4,461

5,165

(153)

47,947

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

510

1,812

2,168

5,481

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

1,992

2,382

1,350

21,410Gain on sales of marketable and investment securities ........................

(1,739)

(620)

(349)

(18,690)

Loss on sales of property, plant and equipment ...................................

784

164

1,397

8,426

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

-

4,492

(1,376)-Equity in income of nonconsolidated subsidiaries and affiliates............

(6,522)(8,709)(7,642)(70,098)

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

(3,615)(4,352)(5,005)(38,854)

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

5,399

6,658

7,980

58,028Changes in assets and liabilities:
Decrease (increase) in:
Receivables: Trade.........................................................................

(3,792)

5,398(11,102)(40,756)

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

56,241(54,709)(19,046)

604,481

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

(2,966)(2,709)(10,723)(31,878)

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

(56,396)(55,077)

26,870(606,147)

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

(27,179)

8,274

1,849

(292,121)

Increase (decrease) in:

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

12,165(8,867)

7,758

130,750

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

(374)

4,794

(3,314)(4,021)

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

40,764(17,051)

93,607438,134

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

7,698

8,926

9,608

82,738Cash paid for interest..........................................................................

(5,408)(6,481)(8,035)(58,125)

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

(12,876)(25,064)(19,414)(138,392)

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

-(1,587)--

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

30,178(41,257)

75,766324,355

46 Consolidated Statements of Cash FlowsThousands of
U.S. dollars(Note 1)Millions of yen
2010

2009

2008

2010

Cash flows from investing activities:
Decrease (increase) in time deposits with maturities over three months..
Acquisition of property, plant and equipment ........................................
Proceeds from sales of property, plant and equipment ...........................
Acquisition of intangible assets..............................................................
Proceeds from sales of intangible assets.................................................
Acquisition of investments in securities..................................................
Proceeds from sales of investments in securities.....................................
Acquisition of investments in subsidiaries or affiliates.............................
Decrease (increase) in short-term loans ..................................................
Additions to long-term loans .................................................................
Proceeds from collection of long-term loans ..........................................
Other ....................................................................................................

21(61,198)
993(4,764)
48
(123)
1,913
(1,331)
518
(65)
115
596

706
(68,059)
2,903(6,400)15(3,043)
1,796(1,241)
(33)
(165)
1,475
(238)

(1,635)(45,598)469(5,238)55(1,183)
5,731
(278)
(990)
94
(517)

225
(657,760)
10,672(51,203)515(1,322)
20,561(14,305)
5,567
(698)
1,236
6,407

Net cash used for investing activities ..........................................................

(63,277)(72,284)(49,090)(680,105)

Cash flows from financing activities:
Increase (decrease) in short-term debt ...................................................
Proceeds from long-term debt ..............................................................
Repayment of long-term debt ...............................................................
Acquisition of treasury stock .................................................................
Proceeds from stock issuance to minority shareholders..........................
Cash dividends paid ..............................................................................
Cash dividends paid to minority shareholders........................................
Other....................................................................................................

(21,463)
94,793(31,518)(90)
230(5,004)
(741)
(296)

67,88173,551(25,017)(17)(8,321)(362)(22)

13,0993,328(34,817)(479)(8,262)(261)-(230,685)
1,018,841(338,757)
(967)
2,472
(53,783)(7,964)(3,184)

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

35,911

107,693(27,392)

385,973

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

(89)

(907)

(501)

(956)

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

2,723(6,755)(1,217)29,267

Cash and cash equivalents at beginning of year...............................................
Increase in cash and cash equivalents due to changes in fiscal period of
consolidated subsidiaries................................................................................

31,414

38,16939,228337,639

-

-

158

-

Cash and cash equivalents at end of year......................................................... ¥ 34,137¥ 31,414¥ 38,169$ 366,906

Supplemental information on cash flows:
Cash and cash equivalents:
Cash on hand and in banks in the balance sheets ................................. ¥ 34,745
Time deposits with maturities over three months ..................................
(608)
Total (Note 16) ..................................................................................... ¥ 34,137¥ 31,956(542)¥ 31,414¥ 39,875(1,706)¥ 38,169$ 373,441(6,535)$ 366,906

The accompanying notes to the consolidated financial statements are an integral part of these statements.
See Note 17 for significant noncash transactions.

Consolidated Statements of Cash Flows47

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 theirofficial accounting and disclosure records in Japanese yen. The accompanying consolidated financial statements
have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments andExchange Law and its related accounting regulations and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity withgenerally accepted accounting principles prevailing in the respective countries of domicile. The accompanying
consolidated financial statements have been restructured and translated into English with some expanded
descriptions and the inclusion of consolidated statements of changes in net assets from the consolidated
financial 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 ofreaders outside Japan, using the prevailing exchange rate at March 31, 2010, which was ¥93.04 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 adopted a new implementation guidance,"Guidance on determining a subsidiary and an affiliate" (the Financial Accounting Standard Implementation
Guidance No. 22 issued by the Accounting Standards Board of Japan on May 13, 2008). This change did nothave any effect on net loss for the year ended March 31, 2010.

2. Significant
accounting
policies(a) Consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant
companies over which the Company has power of control through majority voting rights or the existence of
certain other conditions evidencing control (together, the "Companies"). The consolidated financial statements
include the accounts of the Company and 97 subsidiaries (97 in 2009 and 95 in 2008). For the year ended March 31,
2010, 0 subsidiaries (0 in 2009 and 2 in 2008) were excluded from the consolidation. The amount of total assets,
net sales, net income and retained earnings of these excluded subsidiaries, in the aggregate, would not have had amaterial 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, 2010, 14 affiliates (12 in 2009 and 18 in 2008) were accounted for by the equity method. For
the year ended March 31, 2010, investments in 0 nonconsolidated subsidiaries (0 in 2009 and 2 in 2008) and 14
affiliates (14 in 2009 and 14 in 2008) were stated at cost without applying the equity method of accounting. If
the equity method had been applied for these investments, the net income and retained earnings of theseexcluded subsidiaries and affiliates would not have had a material effect on the consolidated financial
statements.

48 Notes to the Consolidated Financial Statements

(c) Consolidated subsidiaries' fiscal year-end
The fiscal year-end of 31 consolidated subsidiaries (28 in 2009 and 28 in 2008) is December 31. Thesesubsidiaries are consolidated as of December 31, and significant transactions for the period between
December 31 and March 31, the Company’s 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 and liabilities of the subsidiaries, including the portion
attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired
control of the respective subsidiary.
(e) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into Japanese yen at year-end rates.
The balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at year-end rates,
except for shareholders’ equity accounts, which are translated at historical rates. The income statements ofconsolidated overseas subsidiaries are translated at average rates, except for transactions with the Company,
which are translated at the rates used by the Company. The Company and its domestic subsidiaries reportforeign 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 wereprincipally recognized upon delivery. Contract revenue for the construction of plants, machinery, bridges, etc.
was principally recognized on 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-ofcompletion 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 todate 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 adopted a new accounting standard, "Accounting Standard for Construction
Contracts” (Statement No. 15 issued by the Accounting Standards Board of Japan on December 27, 2007) andthe "Guidance on Accounting Standard for Construction Contracts” (the Financial Accounting Standard
Implementation Guidance No. 18 issued by the Accounting Standards Board of Japan 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 the activity. Otherwise, the completed-contract method should be applied.
As a result of this change, sales increased by ¥32,214 million ($346,238 thousand), operating loss and loss
before income tax and minority interests decreased, and recurring profit increased by ¥3,088 million ($33,190
thousand) for the year ended March 31, 2010 compared with the amounts that would have been recorded withthe previous standard.

Notes to the Consolidated Financial Statements

49

<Service revenues>
Service revenues are recognized when the services have been rendered. Services include supervisory andinstallation services for products such as rail cars, machinery and plants. When the prices of such services areindividually determined by the contract and the collectability of the revenue is reasonably assured, the service
revenue is recognized on an accrual basis. Otherwise, the service revenue is recognized on a completion basis.
Sales and cost of sales in finance leases transactions are mainly recognized when the Company received 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 and the Companies' estimates of losses on collection.
(j) Inventories
Prior to April 1, 2008, inventories of the Company and its consolidated domestic subsidiaries were stated at cost
determined principally by the specific identification cost method, the moving average method and the first-in,
first-out method. However, if the market value of inventories had declined significantly and was not expected torecover to cost, cost was reduced to net realizable value. Effective from the year ended March 31, 2009, theCompany and its consolidated subsidiaries adopted a new accounting standard, "Accounting Standard for
Measurement of Inventories" (Statement No. 9 issued by the Accounting Standards Board of Japan on July 5,2006), for the measurement of inventories and have stated the inventories at March 31, 2009 at the lower ofcost determined principally by the specific identification cost method, the moving average method and thefirst-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 theywould have been without the change.
(k) Assets and liabilities arising from derivative transactions
Assets and liabilities arising from derivative transactions are stated at fair value.
(l) Investments in securities
The Company and its consolidated subsidiaries classify securities as (a) debt securities intended to be held tomaturity (hereafter, "held-to-maturity debt securities"), (b) equity securities issued by subsidiaries and affiliatedcompanies and (c) all other securities (hereafter, "available-for-sale securities"). There were no trading securities
at March 31, 2010 or 2009. Held-to-maturity debt securities are stated mainly at amortized cost. Equity securities
issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity
method are stated at moving average cost. Available-for-sale securities with available fair market values arestated 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 suchsecurities are computed using moving average cost. Other securities with no available market value are stated atmoving average cost.

50 Notes to the Consolidated Financial Statements

If the market value of held-to-maturity debt securities, equity securities issued by nonconsolidated subsidiaries oraffiliated companies or available-for-sale securities declines significantly, such securities are stated at market
value, and the difference between market value and the carrying amount is recognized as loss in the period of
the decline. If the market value of equity securities issued by nonconsolidated subsidiaries and affiliatedcompanies 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, except that for buildings acquired after April
1998 in Japan, 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 thebuilding’s estimated useful life.
(n) Intangible assets
Amortization of intangible assets, including software for the Company’s own use, is computed by the straightline method over the estimated useful life of the asset.
Goodwill is amortized on a straight-line basis over the period its effect lasts. If the amount is not significant, it isexpensed when incurred.
(o) Accrued bonuses
Accrued bonuses for employees are provided based on the estimated amount of payment.
(p) Provision for product warranties
The provision for product warranties is based on past experience and separately provided when able to bereasonably 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 Consumer Products& Machinery business in North America.
(s) Provision for losses on damages suit
The Provision for losses on damages suit is provided based on estimates of damages compensation and otherexpenses for the damages suit.
(t) Provision for environmental measures
The Company reserved an estimated amount to cover expenditures for environmental measures such as thedisposal of PCB waste required under the “Law Concerning Special Measures for Promotion of Appropriate
Disposal of PCB (polychlorinated biphenyl) Waste” and soil improvement.

Notes to the Consolidated Financial Statements

51

(u) Income taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for loss carryforwards andthe expected future tax consequences of temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts 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 actuariallycalculated using certain assumptions. The Company and its consolidated domestic subsidiaries provided theallowance for employees’ retirement and severance benefits based on the estimated amounts of projected
benefit obligation and the fair value of plan assets (including the retirement benefit trust).
The excess of the projected benefit obligation over liabilities for retirement and severance benefits recorded as ofApril 1, 2000 (the "net transition obligation") is being recognized in expenses in equal amounts primarily over 10
years commencing with the year ended March 31, 2001. Actuarial gains and losses and prior service costs arerecognized in expenses in equal amounts within the average of the estimated remaining service years of theemployees commencing with the following and the current period, respectively.
Employees of the Company's overseas consolidated subsidiaries are generally covered by various pension plansaccounted for in accordance with generally accepted accounting principles in the country of domicile.
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries adopted a new
accounting standard, "Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)" (Statement
No. 19 issued by the Accounting Standards Board of Japan on July 31, 2008). This change 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 market value of the derivative
financial instrument until the related loss or gain on the hedged item is recognized.
(x) Finance leases
Prior to April 1, 2008, the Company and its consolidated domestic subsidiaries accounted for finance leases
which did not transfer ownership of the leased property to the lessee as operating leases, with the disclosure ofcertain “as if capitalized” information in the notes to the consolidated financial statements. Effective from theyear ended March 31, 2009, the Company and its consolidated subsidiaries adopted a new accounting standard,"Accounting Standard for Lease Transactions" (Statement No. 13 issued by the Accounting Standards Board ofJapan on March 30, 2007), and the "Guidance on Accounting Standard for Lease Transactions" (the Financial
Accounting Standard Implementation Guidance No. 16 issued by the Accounting Standards Board of Japan on
March 30, 2007) for finance leases commencing after March 31, 2008. The new accounting standards requirethat all finance lease transactions be treated as capital leases and that the Company and its consolidated
subsidiaries capitalize assets used under such leases, except for certain immaterial or short-term finance leases

52 Notes to the Consolidated Financial Statements

accounted for as operating leases. As permitted, finance leases which commenced prior to April 1, 2008 andhave been accounted for as operating leases, continue to be accounted for as operating leases, with thedisclosure of certain “as if capitalized” information. This change had minor effect on net income for the year
ended March 31, 2009.
Leased assets under finance leases that transfer ownership rights to the lessees are amortized under the same
method as that used for property, plant and equipment or intangible assets.
(y) Earnings per share
The computations of earnings per share shown in the consolidated statements of income are based upon net
income available to common stockholders and the weighted average number of shares outstanding during eachperiod. Diluted earnings per share is computed based on the assumption that all dilutive convertible bonds wereconverted 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 accordance with the revised Corporation Tax Law in Japan and effective from the year ended March 31, 2008,
the Company and its consolidated domestic subsidiaries have changed the method of depreciation for fixed
assets acquired after April 1, 2007. As a result of this change, operating income and income before income taxes
and minority interests for the year ended March 31, 2008 were ¥1,162 million less than what they would havebeen without the change.
Also in accordance with the revised law and effective from the year ended March 31, 2008, the Company and its
consolidated domestic subsidiaries started to depreciate the 5% residual value of fixed assets acquired before
March 31, 2007 over 5 years on a straight-line basis to 1 yen from the year after the year when the book valueof each asset was depreciated to 5% of the acquisition cost. As a result of this change, operating income andincome before income taxes and minority interests for the year ended March 31, 2008 were ¥2,761 million lessthan they would have been without the change.
In addition, effective from the year ended March 31, 2009, the Company and its consolidated domestic subsidiaries reviewed and changed the useful life of machinery and equipment in accordance with the revision of the
Tax Law. As a result of this change, operating income and income before income taxes and minority interests forthe year ended March 31, 2009 were ¥1,690 million less than they would have been without the change.
(bb) Application of the Practical Solutions on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements
Effective from the year ended March 31, 2009, the Company adopted "Practical Solutions on Unification of
Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (Practical Issues Task
Force No. 18 issued by the Accounting Standards Board of Japan on May 17, 2006). This change did not haveany effect on net income for the year ended March 31, 2009.

Notes to the Consolidated Financial Statements53

3. Securities(a) Acquisition costs and book values (market values) of available-for-sale securities with available market values
as of March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

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

Acquisition
cost

Book value¥6,138¥15,566¥9,428$101,332

3,421¥9,5593,142¥18,708(279)¥9,149(2,998)$ 98,334

Difference

Difference

Millions of yen
2009

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

Acquisition
cost

Book value¥5,263¥11,833¥ 6,570

4,432¥9,695

3,275¥15,108(1,157)¥ 5,413Difference(b) Book values and market values of held-to-maturity debt securities with available market values as of March 31,
2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

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

Book valueMarket value

¥300

¥305

Difference¥5Millions of yen
2009

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

54 Notes to the Consolidated Financial Statements

Book valueMarket value

¥301

¥302

Difference¥1

Difference$53(c) Book values of investments in securities with no available fair values as of March 31, 2009 were as follows:
Millions of yen
2009Book value

Held-to-maturity debt securities:
Public corporation bond.................................
Total ..............................................................

¥2¥2

Available-for-sale securities:
Equity securities .............................................
Other.............................................................
Total ..............................................................

¥7,732
1,721¥9,453

See Note 4 for investments in nonconsolidated subsidiaries and affiliates.
(d) Sales amounts of available-for-sale securities and related gains and losses for the years ended March 31,
2010, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010
Sales amounts

Equity securities ...

¥1,913

Gains¥1,793Losses¥(52)

Sales amounts

Gains$20,561$19,271

Losses$(558)

Millions of yen
2009
Sales amounts

Equity securities ...

¥1,397

Gains

¥886

Losses¥(34)

Millions of yen
2008
Sales amounts

Equity securities ...

¥729

Gains

¥465

Losses¥-For the year ended March 31, 2009, other than above, the Company has contributed investment securities of¥6,930 million (market value) to the pension trust and recorded loss on contribution of securities to the pension
trust of ¥4,492 million.

4. Investments innonconsolidated
subsidiaries andaffiliates

Investments in nonconsolidated subsidiaries and affiliates as of March 31, 2010 and 2009 were ¥24,835 million($266,928 thousand) and ¥20,985 million, respectively.

Notes to the Consolidated Financial Statements55

5. Goodwill

Goodwill included in intangible and other assets as of March 31, 2010 and2009 was as follows:
Thousands of
U.S. dollars

Millions of yen
2010

¥866

6. Short-term debt
and long-term
debt

2009

2010

¥1,106$9,307

Short-term debt and long-term debt as of March 31, 2010 and 2009 comprised the following:Thousands of
U.S. dollars

Millions of yen

Short-term debt:
Short-term debt, principally bank loans, bearing averageinterest rates of 0.937 percent and 1.964 percent as ofMarch 31, 2010 and 2009, respectively.................................
Current portion of long-term debt, bearing average interest
rates of 1.325 percent and 1.375 percent as of March 31,
2010 and 2009, respectively .................................................
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 2008 to
2035, bearing average interest rates of 0.631 percent and1.306 percent as of March 31, 2010 and 2009, respectively..
Notes and bonds issued by the Company:
1.07〜2.33 percent notes due in 2009 .................................
1.52〜1.60 percent notes due in 2011 .................................
0.81 percent notes due in 2012 ........................................
1.84 percent notes due in 2013 ........................................
1.22 percent notes due in 2015 ........................................
1.00 percent convertible bonds due in 2011 .....................
Zero coupon convertible bonds due in 2010 .....................
Zero coupon convertible bonds due in 2011 .....................
Long-term lease obligations ....................................................
Less portion due within one year.............................................
Total long-term debt ...............................................................

2010

2009

2010

¥152,801¥176,924$1,642,315

5,290
708
¥158,799

30,158273¥207,355

56,858
7,609$1,706,782¥214,174¥150,874$2,301,956

20,00010,00010,00010,000
7,038
477
3,475
944
276,108(5,998)¥270,110

20,00020,00010,000
7,038
477
3,475
500
212,364(30,431)¥181,933

214,961
107,481
107,481
107,481
75,645
5,126
37,34910,146
2,967,626(64,467)$2,903,159

As of March 31, 2010, convertible bonds due from 2010 through 2011 were convertible into shares of common
stock at the option of the holder at prices of ¥598 ($6.42), ¥182 ($1.95) and ¥230.3 ($2.47) per share. The
conversion prices are subject to adjustments under specified conditions.

56 Notes to the Consolidated Financial StatementsAs of March 31, 2010 and 2009, the following assets were pledged as collateral for short-term debt andlong-term debt:
Thousands of
U.S. dollars

Millions of yen

Land ............................................................................................
Buildings......................................................................................
Other investments........................................................................
Total ............................................................................................

2010

2009

2010

¥ 291
4,482
313
¥5,086

¥ 818
4,789
314
¥5,921$ 3,127
48,173
3,364$54,664

As of March 31, 2010 and 2009, debt secured by the above pledged assets was as follows:
Thousands of
U.S. dollars

Millions of yen
2010

Trade payables .............................................................................
Short-term and long-term debt ....................................................
Total ............................................................................................

¥ 34
715
¥749

2009

2010

¥ 53
1,703
¥1,756$ 365
7,685$8,050

The aggregate annual maturities of long-term debt as of March 31, 2010 were as follows:
Millions of yen

Year ending March 31,
2011 .............................................................................................................
2012 .............................................................................................................
2013 .............................................................................................................
2014 .............................................................................................................
2015 and thereafter.......................................................................................
Total ..............................................................................................................

¥

5,998
59,78434,14568,385
107,796¥276,108

Thousands of
U.S. dollars$

64,467642,562
366,992
735,006
1,158,599$2,967,626

7. Provision forlosses on
construction
contracts

Inventories for construction contracts with anticipated substantial losses and provision for losses on construction
contracts were not offset. The amount of the inventories based on the construction contracts, for which
provision for losses on construction contracts was provided, was ¥12,485 million ($134,189 thousand) (Thisamount was all included in work in process).

8. Employees'
retirement andseverance
benefits

The liability for employees' retirement and severance benefits included in the long-term liability section of theconsolidated balance sheets as of March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

2010

2009

2010

¥(183,229)(9,605)29,004
77,916(3,326)¥ (89,240)¥(185,597)(11,273)
46,541
61,066
12,243(2,949)¥ (79,969)$(1,969,356)(103,235)
311,736
837,446(35,748)$ (959,157)

Notes to the Consolidated Financial Statements

57

Retirement and severance benefit expenses in the consolidated statements of income for the years ended March 31,
2010, 2009 and 2008 comprised the following:Thousands of
U.S. dollars

Millions of yen

Service costs - benefits earned during the year.....
Interest cost on projected benefit obligation ........
Expected return on plan assets.............................
Amortization of prior service costs .......................
Amortization of actuarial differences....................
Amortization of net transition obligation..............
Contribution to the defined contribution pension
plans..................................................................
Retirement and severance benefit expenses .........

2010

2009

2008

¥ 9,274
3,945(871)(2,265)
4,97812,342¥ 8,497
4,745(1,250)(2,266)(137)
12,784¥ 8,556
4,625(945)(2,285)(1,983)
12,514$ 99,677
42,401(9,361)(24,344)
53,503
132,653614¥28,017598¥22,971483¥20,965

6,599$301,128

2010

Basic assumptions and information used to calculate retirement and severance benefits were as follows:
2009

2008

mainly 2.0%

mainly 2.5%

3.0 to 3.5%
7.75%
mainly 10 years
mainly 10 years
mainly 10 years

0.0 to 3.5%
7.75%
mainly 10 years
mainly 10 years
mainly 10 years

2010

Discount rate ..........................................................
mainly 2.0%
Expected rate of return on plan assets(For the Company and consolidated domestic
subsidiaries) ...................................................
3.0 to 3.5%
(For consolidated overseas subsidiaries) ............. 5.67 to 7.75%
Amortization period for prior service costs .............. mainly 10 years
Amortization period for actuarial gains and losses... mainly 10 years
Amortization period for transition obligation........... mainly 10 years

9. Contingent
liabilities

Contingent liabilities as of March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

10. Net assets

2010

2009

¥34,409¥36,3912010$369,830

Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus. Under the Japanese Corporate Law (“The Law”), if a dividend distribution of surplus is made, the smallerof 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 consolidatedbalance sheets. Under the Law, legal earnings reserve and additional paid-in capital could be used to eliminate or
reduce a deficit, or capitalized by a resolution of the shareholders' meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.

58 Notes to the Consolidated Financial Statements

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.

11. Cost of sales

The ending balance of inventories was measured at the lower of cost or market, and loss on valuation of
inventories included in the cost of sales for the year ended March 31, 2010 was ¥297 million ($3,192 thousand).
Provision for losses on construction contracts included in the cost of sales for the year ended March 31, 2010was ¥8,270 million ($88,886 thousand).

12. Research anddevelopment
expenses

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

Research and development expenses ...................

13. "Other, net" in"Other income(expenses)"Thousands of
U.S. dollars

Millions of yen

2010

2010

2009

2008

¥38,057¥38,256¥36,228$409,039"Other, net" in “other income (expenses)" in the consolidated statements of operations for the year ended March 31,
2010, 2009, and 2008 comprised the following:Thousands of
U.S. dollars

Millions of yen
2010

2009

2008

2010

Foreign exchange gain (loss), net .........................
Gain on sales of marketable securities andinvestments in securities.....................................
Reversal of provision for environmental
measures (a) ......................................................
Reversal of allowance for doubtful receivables
for affiliates (b) ..................................................
Gain on sales of business (c).................................
Restructuring charges (d) .....................................
Loss on damages suit (e) ......................................
Loss on impairment of fixed assets (f)...................
Loss on environmental measures (g) .....................
Loss on liquidation of subsidiary (h)......................
Loss (gain) on contribution of securities to thepension trust (i)..................................................
Loss on suspension of activities for participation in
MotoGP ............................................................
Loss on valuation of securities .............................

¥10,955¥ 10,373¥(11,549)$117,745

1,739

620

465

18,690

1,077

-

-

11,575460(7,648)(6,983)(3,132)(1,489)(399)

594(5,165)(1,399)(1,812)-(2,245)(2,763)(2,167)-

4,944(82,201)(75,053)(33,662)(16,003)(4,288)-(4,492)

1,375

-

-

(2,818)(1,875)--Gain on sales of investments in affiliates ..............
Loss on sales of investments in affiliates ...............
Other, net ............................................................
Total ....................................................................

(1,823)¥ (7,243)(5,517)¥(11,491)

292
(408)
(6,522)¥(23,522)(19,595)$ (77,848)(a) "Reversal of provision for environmental measures" is due to the re-estimation of expenses for environmental
measures.

Notes to the Consolidated Financial Statements

59

(b) "Reversal of allowance for doubtful receivables for affiliates" is due to 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) "Restructuring charges" is the sum of the estimated ¥6,326 million ($67,992 thousand) for the liquidation ofexcess inventories in the Consumer Products & Machinery business in North America and early retirement
expenses of ¥1,321 million ($14,198 thousand) of the subsidiaries of the business.
(e) "Loss on damages suit" is a provision for compensation in the event the Company is required to pay
monetary damages in connection with legal action.
(f) Loss on impairment of fixed assets
Because the profitability or market prices of some asset groups declined, the Company and its consolidated
subsidiaries reduced the book value of certain assets to the recoverable amounts. Assets are grouped mainly
by units of business. However, significant assets for rent or those which are idle are treated separately.
Recoverable amounts were determined by net sales value or value in use, and net sales value was estimatedby appraisal or property tax assessment. The value in use was evaluated by discounted cash flow applying a
discount rate of 5%.
Asset groups for which the Company and its subsidiaries recognized impairment loss for the year ended March 31,
2010 were as follows:
Function or status

Location

Type of asset

Operating property
Operating property

Inami-cho, Kako-gun, Hyogo
Yokkaichi City, Mie

Buildings and structures, machinery and equipment, etc.
Buildings and structures, machinery and equipment, etc.

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

Thousands of
U.S. dollars¥1,1991,556
377¥3,132$12,886
16,723
4,053$33,662

Buildings and structures ......................................................................................
Machinery and equipment ..................................................................................
Other .................................................................................................................

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 asset

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¥1,399(g) "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.
(h) "Loss on liquidation of subsidiary" is due to liquidation expenses of Kawasaki Oita Manufacturing Co., Ltd., aconsolidated subsidiary of the Company.
( i ) "Loss (gain) on contribution of securities to the pension trust" resulted from additional contributions ofinvestment securities to the pension trust.

60 Notes to the Consolidated Financial Statements

14. Income taxes

Income taxes in Japan applicable to the Company and its consolidated domestic subsidiaries consist of corporation tax (national tax) and enterprise and inhabitants taxes (local taxes) which, in the aggregate, resulted in anormal statutory tax rate of approximately 40.5 percent for each of the years ended March 31, 2010 and 2009.
The significant differences between the statutory and effective tax rates for the year ended March 31, 2010 were
not disclosed because the Company posted a loss. The differences for the year ended March 31, 2009 were as
follows:
2009

40.5%
19.7
(12.8)
(1.2)
(0.7)
45.5%

Statutory tax rate .................................................................................................
Valuation allowance.............................................................................................
Equity in income of nonconsolidated subsidiaries and affiliates.............................
Research and development tax credit ...................................................................
Other...................................................................................................................
Effective tax rate ..................................................................................................

Significant components of deferred tax assets and liabilities as of March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

Deferred tax assets:
Accrued bonuses ...................................................................
Retirement benefits................................................................
Provision for losses on construction contracts.........................
Allowance for doubtful receivables ........................................
Inventories – elimination of intercompany profits ...................
Fixed assets – elimination of intercompany profits ..................
Depreciation ..........................................................................
Net operating loss carryforwards............................................
Unrealized loss of marketable securities, investments
in securities and other..........................................................
Other.....................................................................................
Gross deferred tax assets .....................................................
Less valuation allowance ......................................................
Total deferred tax assets.......................................................
Deferred tax liabilities:
Deferral of gain on sale of fixed assets ...................................
Net unrealized gain on securities............................................
Other.....................................................................................
Total deferred tax liabilities.....................................................
Net deferred tax assets.................................................................

15. Retained
earnings(“Other”)

2009

2010

6,222
46,401
6,084
1,278
151
399
1,851
9,917

¥ 6,378
40,130
8,164
1,164
646
449
1,699
4,803

$

3,432
34,237
109,972(22,949)
87,023841
33,023
97,297(11,618)
85,67936,887367,986
1,181,986(246,658)
935,328

5,601
3,562
4,538
13,701¥ 73,322

5,374
2,060
6,110
13,544¥ 72,135

60,19938,284
48,774
147,257$ 788,071¥

66,874
498,720
65,391
13,736
1,622
4,288
19,894
106,588

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

Notes to the Consolidated Financial Statements6116. Cash and cash
equivalents

Cash and cash equivalents reconciled to the accounts reported in the consolidated balance sheets in the years
ended March 31, 2010, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Cash on hand and in banks..................................
Time deposits with maturities
over three months .............................................
Total ....................................................................

17. Significant
noncashtransactions

2010

2009

2008

¥34,745¥31,956¥39,875$373,441(608)¥34,137(542)¥31,414(1,706)¥38,169(6,535)$366,906

2010

The increases in common stock and capital surplus and the decrease in convertible bonds due to the conversionof convertible bonds in the years ended March 31, 2010, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

Increase in common stock due to conversion ..........
Increase in capital surplus due to conversion ...........
Decrease in convertible bonds due to conversion ....

2009

¥-

2010

2008

¥-

¥1,141
1,113
2,318

$-

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

18. Earnings pershare

Per share amount calculations for the years ended March 31, 2010, 2009 and 2008 are set forth in the tablebelow. While there were residual securities, a diluted earnings per share for the year ended March 31, 2010 was
not disclosed because the Company posted a loss.
Thousands of
U.S. dollars

Millions of yen
2010

2009

2008

Basic earnings per share:
Net income (loss) ..............................................
Net income (loss) allocated to common stocks ..

¥(10,860)(10,860)¥11,728
11,728¥35,141
35,141

Weighted average number of common stocks ..

1,668

2010

$(116,723)(116,723)

Number of shares in millions

1,668

1,667
Thousands of
U.S. dollars

Millions of yen
2010

2009

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

¥(-)

Increase in common stocks ...............................
(Convertible bonds)...........................................
(Zero coupon convertible bonds) .......................

(-)
(-)

2008

¥77
(77)

2010

¥97
(97)

Number of shares in millions

62 Notes to the Consolidated Financial Statements

35
(18)
(17)

45
(24)
(21)

$(-)

19. Derivativetransactions

Since the Company and its consolidated subsidiaries operate internationally and have a substantial volume ofexport and import transactions, they enter into foreign currency exchange and option transactions in order tomanage the risks of fluctuations in exchange rates in relation to foreign currency denominated assets, liabilities
and future transactions.
The Company and its consolidated subsidiaries also enter into interest swap and option transactions to hedge
against future fluctuations in interest rates on debt, primarily to fix, cap or collar interest rates on variable rate
debt.
The Company and its consolidated subsidiaries purchase derivatives to hedge against risks of fluctuations incurrency exchange rates and interest rates rather than for dealing or speculation.
In order to minimize credit risk, the Company and its consolidated subsidiaries use only highly rated international
financial institutions as counterparties to derivative transactions.
The Company and its consolidated subsidiaries have established policies that restrict the use of derivative
instruments, including limits as to the purpose, nature, type and amount and that require reporting and review
in order to control the use of derivatives and manage risk.
(a) Outstanding positions and recognized gains and losses at March 31, 2010 were as follows:(Derivative transactions to which the Company did not apply hedge accounting)Thousands of
U.S. dollars

Millions of yen
Contract
amountCurrency related contracts:
Foreign exchange contracts:
To sell ..................................
To purchase .........................
Total ....................................

¥65,247
4,784¥70,031

Contract
amount(Over 1 year)

¥19
17
¥36

Marketvalue¥2,77963¥2,842Gain(loss)

Gain(loss)¥2,77963¥2,842$29,869677$30,546(Derivative transactions to which the Company applied hedge accounting)Millions of yen
Subject ofhedge

Foreign exchange contracts:
Deferral hedge accounting
To sell ....................................................... Receivables:Trade
To purchase .............................................. Trade payables
Alternative method (*)
To sell ....................................................... Receivables:Trade
To purchase .............................................. Trade payables
Total ...........................................................

Contract
amountContract
amount(Over 1 year)

Marketvalue¥ 80,292¥3,565¥ (913)

27,180

1,590

1,106

8,642

-

(65)

1,575
¥117,689¥5,15548¥ 176(*) For certain accounts Receivables: Trade and Trade payables denominated in foreign currencies for which foreign exchange
forward contracts are used to hedge the foreign currency fluctuations, fair value of derivative financial instrument isincluded in fair value of Receivables: Trade and Trade payables as hedge items.

Notes to the Consolidated Financial Statements

63Thousands of
U.S. dollars
Subject ofhedge

Foreign exchange contracts:
Deferral hedge accounting
To sell ....................................................... Receivables:Trade
To purchase .............................................. Trade payables
Alternative method
To sell ....................................................... Receivables:Trade
To purchase .............................................. Trade payables
Total ...........................................................

Contract
amountContract
amount(Over 1 year)$ 862,985$38,317$(9,812)292,132

17,08911,88692,884-(698)

16,928$1,264,929$55,406515$ 1,891

Marketvalue

Millions of yen
Subject ofhedge

Interest related contracts:
Interest swap
Deferral hedge accounting
Received flowing-fixed payment.............. Short-term
debt andLong-term debt
Special treatment (*)
Received flowing-fixed payment.............. Long-term debt

Contract
amountContract
amount(Over 1 year)¥30,000¥30,000¥(705)

14,249¥44,249

13,000¥43,000¥(705)

Marketvalue(*) As interest rate swaps subject to special treatment of interest rate swap are accounted for as a single item with underlying
long-term debt, which are hedged items, their market value is included in that of long-term debt.
Thousands of
U.S. dollars
Subject ofhedge

Interest related contracts:
Interest swap
Deferral hedge accounting
Received flowing-fixed payment.............. Short-term
debt andLong-term debt
Special treatment
Received flowing-fixed payment.............. Long-term debt

64 Notes to the Consolidated Financial Statements

Contract
amountContract
amount(Over 1 year)

Marketvalue$322,442$322,442$(7,577)

153,149$475,591

139,724$462,166$(7,577)

(b) Outstanding positions and recognized gains and losses at March 31, 2009 were as follows:
Millions of yen

Currency related contracts:
Foreign exchange contracts:
To sell ..................................................................................
To purchase .........................................................................
Total ....................................................................................

Contract
amountMarketvalue

Gain(loss)¥82,692
4,396¥78,259
4,294¥4,433(102)¥4,331

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

20. Financial
Instruments

Effective from the year ended March 31, 2010, the Company adopted a revised accounting standard, “Accounting Standard for Financial Instruments” (Statement No. 10 issued by the Accounting Standards Board of Japanon March 10, 2008) and the “Guidance on Disclosures about Fair Value of Investments” (The Financial Accounting Standard Implementation Guidance No. 19 issued by the Accounting Standards Board of Japan on March 10,2008). This change did not have any effect on net loss for the year ended March 31, 2010 but requires more
information on the financial instruments than in prior years. The information for the year ended March 31, 2010
required pursuant to the accounting standards was as follows:(1) Circumstances on financial instruments(a) Policies on dealing financial instruments
The Company finances long-term operating capital and capital expenditure by debt from banks and theissuance of bonds and its short-term operating capital by debt from banks and the issuance of short-termbonds (electronic commercial paper). Temporary surplus funds are managed by financial assets that havea high level of safety. The Company applies derivative instruments to hedge the risks described below anddoes not deal in speculative transactions as a matter of policy.
(b) Details and risk of financial 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,
the risk is hedged by forward exchange contracts, etc., against the net position of foreign currency
exposure. Investment in securities mainly consists of equity securities of the companies which conductbusiness with the Company held to maintain the relationship with such business partners. With suchsecurities, listed stocks have market fluctuation risk.
Almost all trade payables are due within 1 year. Some are denominated in foreign currency because ofimport of materials etc., and are exposed to the risk of foreign currency fluctuation. However, the risk is
considered mitigated because almost the entire position of the trade payables denominated in foreign
currency is less than the position of receivables in the same currency. Debt, bonds payable and leaseobligations in accordance with finance leases are mainly borrowed to raise operating capital and makeNotes to the Consolidated Financial Statements

65

capital expenditures and are due in a maximum of ten and a half years from the fiscal year end. Some areexposed to the risk of interest rate fluctuation. However, such risk is hedged by derivatives (interest swaps)
as necessary.
Derivatives consist of forward exchange and currency option contracts to hedge foreign currency fluctuation risk on receivables and payables in foreign currencies and interest swap contracts to hedge interest
rate risk on debts. With regard to hedge accounting, see Note 2. (w), “Significant accounting policies”“Hedge accounting.”(c) Risk management on financial instruments(i) Management of credit risk such as customers’ default risk
The sales management sections in the Company’s and its consolidated subsidiaries’ regularly evaluate
the circumstances of their customers and monitor the dues and balances by customer to detect andreduce doubtful debts.
With derivative transactions, the Company makes contracts with highly rated financial institutions to
reduce counterparty risk.
The maximum credit risk at the fiscal year end is presented as the balance sheet amount of the financial
instruments which are exposed to credit risk.
(ii) Management of market risk (in foreign currency exchange rates or interest rates, etc.)
The Company and some consolidated subsidiaries hedge foreign currency fluctuation risk on receivables
and payables in foreign currencies with forward exchange contracts, which are the categorized by thetype of currency and the monthly due date. Basically, the net position of receivables less payables inforeign currency is hedged with forward exchange contracts. The Company and some consolidated
subsidiaries hedge interest rate risk on debts with interest swap contracts.
With regard to investments in securities, the Company reviews its holding policies by periodic analysis ofmarket prices and issuers’ financial conditions, taking into account relationships with business partners.
With regard to derivatives, according to rules providing transaction authorization, the finance departments of the Company and its consolidated subsidiaries manage transactions according to the basic
policies such as those on the limitations on transaction amounts under the authority of the director who
is in charge of finance. Monthly transactions are reported to the director in charge of finance.
(iii) Management of liquidity risk (The risk that the Company defaults)
The Company manages liquidity risk by maintaining and updating its finance plan with the financedepartment based on the reports from each section of the business. Managing liquidity risk includes
diversifying financing methods, adjusting terms of debt by taking into account the financing circumstances, securing commitment lines, etc.
(d) Supplemental information on market values of financial instruments
Market values of financial instruments include values based on market price and reasonably estimatedvalues when market price is not available. Because a change factor is counted in the estimation, theestimated price may be changed by adopting different assumptions. With regard to the below mentioned
contract prices etc. of derivatives described in “Market values of financial instruments,” the prices
themselves do not present the market risk on the derivative transactions.

66 Notes to the Consolidated Financial Statements

(2) Market values of financial instruments
The book values, market values and the differences between them as of March 31, 2010 are as follows(Financial instruments for which the market value is extremely difficult to determine are not included as
described in remark 2.):Thousands of
U.S. dollars

Millions of yen

Cash on hand and in banks.................................
Receivables: Trade................................................
Investments in securities.......................................
Total assets ..........................................................
Trade payables .....................................................
Short-term debt and current portionof long-term debt (excluding lease obligations) ..
Long-term debt, less current portion(excluding lease obligations)...............................
Total liabilities ......................................................
Derivative transactions (*) ....................................

Book valueMarket value

Difference¥ 34,745
400,264
19,010¥454,019
302,739¥ 34,745
400,130
19,015¥453,890
302,739(134)
5¥ (129)-158,091

158,091--

269,874¥730,704¥ 2,313272,098¥732,929¥ 2,313(2,224)¥(2,224)¥(23,903)$ 23,903$¥

Difference(1,439)53$ (1,386)-$(*) Net receivables/payables from derivative transactions are stated at the net amount, and the net payable item is presented
with ( ).

Remark 1. Methods used to calculate market values of financial instruments and the details of securities andderivative instruments<Assets>-Cash on hand and in banks
Cash on hand and in banks are stated at the relevant book value because the settlement periods are short andthe market values are almost the same as the book value.
-Receivables
Receivables are stated at present value computed by applying a discount rate reflecting the settlement period
and the credit risk.
-Investment in securities
Equity securities are stated at market value, and bonds are stated at market price or asking price by financial
institutions. See (l) “Investment in securities” for the detailed information by classification.
<Liabilities>-Trade payables, short-term debt and current portion of long-term debt
Because the settlement periods of the above items are short and their market values are almost the same astheir book values, the relevant book 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 longterm debt is calculated by applying a discount rate to the total of principal and interest. That discount rate isbased on the assumed interest rate if a similar new loan was entered into.
<Derivatives>
See Note 19, “Derivative Transactions.”

Notes to the Consolidated Financial Statements

67

Remark 2. Financial instruments for which the market value is extremely difficult to determine
Description

Unlisted equity securities and investments in partnership.....................................
Stocks of nonconsolidated subsidiaries and affiliates ...........................................
Investments in affiliates.......................................................................................
Total ...................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥ 9,440
6,670
18,165¥34,275$101,462
71,689195,238$368,389

Because these items have no market values and it is extremely difficult to determine their market values, they are
not included in investment in securities above.
Remark 3. Planned redemption amounts after the balance sheet date for monetary receivables and investment
in securities with maturity dates are as follows:
Millions of yen
Within 1 year

Cash on hand and in banks.................................
Receivables: Trade................................................
Investment in securities-Bonds ................................................................
Total ....................................................................

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years¥ 34,745
376,835¥

23,430¥-¥-¥411,580

300¥23,730¥-¥-

Thousands of
U.S. dollars
Within 1 year

Cash on hand and in banks.................................
Receivables: Trade................................................
Investment in securities-Bonds ................................................................
Total ....................................................................

Over 1 year but
within 5 years

Over 5 years but
within 10 years

Over 10 years$ 373,441
4,050,247$

251,827$-$-$4,423,688

3,224$255,051$-$-

Remark 4. Planned repayment amounts after the balance sheet date for bonds payable, convertible bonds andlong-term debt
See Note 6, “Short-Term debt and Long-term debt.”

68 Notes to the Consolidated Financial Statements

21. Finance leases

As discussed in Note 2(x), finance leases commenced prior to April 1, 2008 which do not transfer ownership ofthe leased assets to the lessee are accounted for as operating leases. Information regarding such leases, as
required to be disclosed in Japan, is as follows:(a) As lessee
The original costs of leased assets under non-capitalized finance leases and the related accumulated depreciation
and amortization, assuming it was calculated by the straight-line method over the term of the respective lease,
as of March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

2009

Property, plant and equipment .....................................................
Accumulated depreciation ...........................................................

¥ 39,053(19,014)
20,039¥ 41,241(16,489)
24,752$ 419,744(204,363)
215,381

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

727
(469)
258

758
(356)
402

7,813
(5,040)
2,773

¥

¥

2010

$

The present values of future minimum lease payments under non-capitalized finance leases as of March 31,
2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

Current portion............................................................................
Noncurrent portion ......................................................................
Total ............................................................................................

2010

2009

¥ 5,413
16,289¥21,702¥ 5,572
21,088¥26,660

2010$ 58,179
175,075$233,254

Lease payments, "as if capitalized" depreciation and amortization and interest expense for non-capitalized
finance leases for the year ended March 31, 2010, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments ....................................................
Depreciation and amortization ..............................
Interest .................................................................

2010

2009

2008

2010

¥6,033
5,642
590¥6,273
5,869
680¥6,028
5,671
644$64,843
60,6406,341

Notes to the Consolidated Financial Statements

69

(b) As lessor
The original costs of leased assets under finance leases and the related accumulated depreciation and amortization as of March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

2009

2010

Property, plant and equipment .....................................................
Accumulated depreciation ...........................................................

¥ 1,800(1,023)777¥2,038(933)
1,105$ 19,346(10,995)
8,351

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

60
(45)
15

63
(34)
29

644
(483)
161

¥

¥

$

The present values of future minimum lease payments to be received under finance leases as of March 31, 2010
and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen

Current portion............................................................................
Noncurrent portion ......................................................................
Total ............................................................................................

2010

2009

2010

¥ 370
659
¥1,029¥ 516
1,056¥1,572$ 3,976
7,083$11,059

Lease payments received, depreciation and amortization and interest on finance leases for the year ended
March 31, 2010, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

Lease payments received.......................................
Depreciation and amortization ..............................
Interest .................................................................

22. Operatingleases

¥338
324
55

2009

2008

¥402
335
69

¥379
307
65

2010

$3,632
3,482
591

The present values of future minimum lease payments under operating leases as lessee as of March 31, 2010
and 2009 were as follows:
Thousands of
U.S. dollars

Millions of yen
2010

Current portion............................................................................
Noncurrent portion ......................................................................
Total ............................................................................................

70 Notes to the Consolidated Financial Statements

¥306
308
¥614

2009

¥310
621
¥931

2010

$3,2883,311$6,59923. Segment
information(a) Information by industry segment
Industry segments of the Company and its consolidated subsidiaries are classified based on an internal company
system as follows: 1) Shipbuilding, 2) Rolling Stock, 3) Aerospace, 4) Gas Turbines & Machinery, 5) Plant &Infrastructure Engineering, 6) Consumer Products & Machinery, 7) Hydraulic Machinery and 8) Other.
The Shipbuilding segment manufactures and sells ships, submarines and maritime application equipment. The
Rolling Stock segment produces and sells rolling stock. Products manufactured and sold by the Aerospacesegment include airplanes and helicopters. The Gas Turbines & 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.
Millions of yen
2010
External
sales

Aerospace...........................
Gas Turbines & Machinery...

Depreciation
andamortization

Capitalexpenditures¥ 128,948
172,420304,371
215,874¥ 4,350
3,668
8,192
6,222

¥ 6,693
5,264
9,142
10,278

6,277

104,851

975

1,111

(31,649)
6,961
(415)
(1,134)(182)¥ (1,316)

236,306
57,901
154,655
1,375,326(22,887)¥1,352,439

19,2833,883
3,066
49,6391,784¥51,423

17,1052,282
5,554
57,4291,843¥59,272

Depreciation
andamortization

Capitalexpenditures

Total
sales

Operatingexpenses

188,892
191,379¥ 1,565
2,414
2,005
22,765¥ 153,458
169,570
190,897
214,144¥ 151,968
161,811
189,148
207,450¥ 1,490
7,759
1,749
6,694

90,495

11,076

101,571

95,294

216,990
68,80997,8591,173,473¥1,173,473

3,974
7,320
32,55083,669(83,669)¥

220,964
76,129130,409
1,257,142(83,669)¥1,173,473

252,613
69,168130,824
1,258,276(83,487)¥1,174,789

Shipbuilding........................ ¥ 151,893
Rolling Stock.......................
167,156

Intersegment
sales

Operatingincome (loss)

Total
assetsPlant & Infrastructure
Engineering ......................
Consumer Products &Machinery.........................
Hydraulic Machinery ...........
Other..................................
Total ...................................
Eliminations and corporate..
Consolidated total ..............

Millions of yen
2009
External
sales

Total
sales

Operatingexpenses¥ 1,762¥ 128,188¥ 129,207¥ (1,019)¥ 139,017¥ 3,987¥ 7,116

186,454
200,425
195,156

1,368
1,873
18,316

187,822202,298
213,472

176,453
206,476
202,446

11,369(4,178)11,026200,482
331,671
203,902

5,140
6,659
4,607

6,147
20,38010,176105,178

13,853

119,031

110,060

8,971

113,158

1,716

1,270

336,459
84,919103,580
1,338,597¥1,338,597

4,038
8,524
42,142
91,876(91,876)¥

340,497
93,443
145,7221,430,473(91,876)¥1,338,597

350,640
85,054141,466
1,401,802(91,918)¥1,309,884(10,143)
8,389
4,256
28,67142¥ 28,713

268,01360,430149,478
1,466,151(66,380)¥1,399,771

14,9573,729
1,847
42,642
1,692¥44,334

24,298
10,539
1,174
81,1001,350¥82,450

Shipbuilding........................ ¥ 126,426
Rolling Stock &Construction Machinery....
Aerospace...........................
Gas Turbines & Machinery...

Intersegment
sales

Operatingincome (loss)

Total
assetsPlant & Infrastructure
Engineering ......................
Consumer Products &Machinery.........................
Hydraulic Machinery ...........
Other..................................
Total ...................................
Eliminations and corporate..
Consolidated total ..............

Notes to the Consolidated Financial Statements

71Millions of yen
2008
External
sales

Construction Machinery....
Aerospace...........................
Gas Turbines & Machinery...

Depreciation
andamortization

Capitalexpenditures¥ 134,577¥ 2,459¥ 4,161

7,173
10,876
13,392

161,585
281,517
188,133

3,579
6,232
3,765

6,454
6,154
5,392

145,455

10,839132,174

1,926

1,318

422,537
83,635
142,469
1,516,252(92,065)¥1,424,187

19,6709,117
2,353
76,673237¥76,910315,30953,348164,445
1,431,088(52,318)¥1,378,770

13,5172,659
1,699
35,836
1,619¥37,455

19,3674,801
1,674
49,321
1,217¥50,538

Depreciation
andamortization

Capitalexpenditures$ 46,754
39,42388,04866,874$ 71,936
56,577
98,258110,468

1,126,945

10,47911,941(340,165)
2,539,832
74,817622,323(4,458)
1,662,245(12,188) 14,782,093(1,956)(245,991)$ (14,144) $14,536,102

207,254
41,73432,957533,523
19,174$552,697

183,845
24,527
59,698617,250
19,809$637,059

Total
sales

Operatingexpenses¥ 1,568¥ 142,965¥ 139,712¥ 3,253

171,739
237,349
185,486

727
1,644
16,940172,466
238,993
202,426

165,293
228,117
189,034

142,547

13,747156,294433,963
84,028104,588
1,501,097¥1,501,097

8,244
8,724
40,234
91,828(91,828)¥442,207
92,752
144,822
1,592,925(91,828)¥1,501,097

Shipbuilding........................ ¥ 141,397
Rolling Stock &Intersegment
sales

Operatingincome (loss)

Total
assetsPlant & Infrastructure
Engineering ......................
Consumer Products &Machinery.........................
Hydraulic Machinery ...........
Other..................................
Total ...................................
Eliminations and corporate..
Consolidated total ..............

Thousands of U.S. dollars
2010
External
sales
Shipbuilding........................ $ 1,632,556
Rolling Stock.......................
Aerospace...........................
Gas Turbines & Machinery...

1,796,604
2,030,223
2,056,953

Intersegment
sales

Total
sales

Operatingexpenses$ 16,821 $ 1,649,377 $ 1,633,363
1,822,549
25,945
1,739,155
2,051,773
21,5502,032,975
2,301,633
244,680
2,229,686

Operatingincome (loss)

Total
assets$ 16,014 $ 1,385,941
83,394
1,853,181
18,7983,271,399
71,9472,320,227

Plant & Infrastructure
Engineering ......................

972,646

119,045

1,091,691

1,024,226

67,465

Consumer Products &Machinery.........................

2,332,222
739,564
Other..................................
1,051,796
Total ................................... 12,612,564
Eliminations and corporate..
Consolidated total .............. $12,612,564
Hydraulic Machinery ...........

2,374,935
42,713
2,715,100
818,240
78,676
743,4231,401,646
349,850
1,406,104
899,280 13,511,844 13,524,032(899,280)(899,280)(897,324)- $12,612,564 $12,626,708$

In October 2008, the Company, Hitachi Construction Machinery Co., Ltd. and TCM Corporation agreed that thethree companies would jointly carry out research and development, that the Company would spin off theconstruction machinery business and Hitachi Construction Machinery Co., Ltd. would invest in the newly
established subsidiary spin off from the Company. According to the agreement, because the relationshipbetween the rolling stock business and the construction machinery business had become weakened, theconstruction 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 ($221,678 thousand) (external sales decreased by ¥22,207 million ($238,682 thousand)), andincreased in the Other segment by ¥21,622 million ($232,394 thousand) (external sales increased by ¥22,207
million ($238,682 thousand)). Operating income for the year ended March 31, 2010 increased in the Rolling
Stock segment by ¥3,321 million ($35,694 thousand), and operating loss increased in the Other segment by¥3,322 ($35,705) 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 those for ships, airplanes and plants exceeding ¥3,000 million. 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 adopted a new accounting standard, "AccountingStandard for Construction Contracts” (Statement No. 15 issued by the Accounting Standards Board of Japan on

72 Notes to the Consolidated Financial Statements

December 27, 2007) and the “Guidance on Accounting Standard for Construction Contracts” (the FinanceAccounting Standard Implementation Guidance No. 18 issued by the Accounting Standard Board of Japan on
December 27, 2007). The new accounting standards require that the percentage-of-completion method beapplied 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 beapplied.
As a result of this change, sales for the year ended March 31, 2010 increased in the Shipbuilding segment by¥15,609 million ($167,766 thousand), in the Rolling Stock segment by ¥702 million ($7,545 thousand), in the
Aerospace segment by ¥5,663 million ($60,866 thousand), in the Gas Turbines & Machinery segment by ¥7,247
million ($77,891 thousand) and in the Plant & Infrastructure Engineering segment by ¥2,991 million ($32,147
thousand), and operating income for the year ended March 31, 2010 increased in the Shipbuilding segment by¥1,374 million ($14,767 thousand), in the Rolling Stock segment by ¥65 million ($698 thousand), in the
Aerospace segment by ¥494 million ($5,309 thousand), in the Gas Turbines & Machinery segment by ¥649
million ($6,975 thousand) and in the Plant & Infrastructure Engineering segment by ¥504 million ($5,417
thousand) compared to amounts that would have been recorded with the previous standard.
As discussed in Note 2(j), prior to April 1, 2008, inventories of the Company and its consolidated domestic
subsidiaries were stated at cost determined principally by the specific identification cost method, the moving
average method and the first-in, first-out method. However, if the market value of inventories had declined
significantly and was not expected to recover to cost, cost was reduced to net realizable value. Effective from theyear ended March 31, 2009, the Company and its consolidated subsidiaries adopted a new accounting standard,"Accounting Standard for Measurement of Inventories" (Statement No. 9 issued by the Accounting Standards
Board of Japan on July 5, 2006), for the measurement of inventories and have stated the inventories at March 31,
2009 at the lower of cost determined principally by the specific identification cost method, the moving averagemethod and the first-in, first-out method or net realizable value. As a result of this change, operating income forthe year ended March 31, 2009 decreased in the Rolling Stock & Construction Machinery segment by ¥516
million, in the Gas Turbines & 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), effective from the year ended March 31, 2009, the Company and its consolidated
domestic subsidiaries reviewed and revised the useful life of machinery and equipment in accordance with therevision of the Tax Law. As a result of this change, operating income for the year ended March 31, 2009
decreased in the Rolling Stock & Construction Machinery segment by ¥473 million, in the Gas Turbines &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 segment by ¥205 million compared to amounts that would have beenrecorded with the previous standard.

Notes to the Consolidated Financial Statements73

(b) Information by geographic area
Millions of yen
2010Japan.........................................................
North America ...........................................
Europe.......................................................
Asia ...........................................................
Other areas................................................
Total ..........................................................
Eliminations and corporate...................
Consolidated total ...............................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥ 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

Operatingincome (loss)¥ (990)(8,170)
848
6,075
927
(1,310)(6)¥(1,316)

Total
assets¥1,130,537
159,335
47,042
39,3286,871
1,383,113(30,674)¥1,352,439

Millions of yen
2009Japan.........................................................
North America ...........................................
Europe.......................................................
Asia ...........................................................
Other areas................................................
Total ..........................................................
Eliminations and corporate...................
Consolidated total ...............................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥ 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

Operatingincome (loss)¥13,407(1,386)
708
4,552
367
17,648
11,065¥28,713

Total
assets¥1,169,702
182,269
59,21738,4212,970
1,452,579(52,808)¥1,399,771

Millions of yen
2008Japan.........................................................
North America ...........................................
Europe.......................................................
Asia ...........................................................
Other areas................................................
Total ..........................................................
Eliminations and corporate...................
Consolidated total ...............................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥1,058,487
267,560
131,608
33,297
10,145
1,501,097¥1,501,097¥ 307,546
25,202
5,321
24,752247
363,068(363,068)¥¥1,366,033
292,762
136,92958,04910,392
1,864,165(363,068)¥1,501,097¥1,291,102
293,276
132,449
56,597
10,1191,783,543(359,356)¥1,424,187

Operatingincome (loss)¥74,931
(514)
4,480
1,452
273
80,622(3,712)¥76,910

Total
assets¥1,103,514
191,075
83,92837,917
3,335
1,419,769(40,999)¥1,378,770

Thousands of U.S. dollars
2010
External
sales
Japan......................................................... $ 9,859,909
North America ...........................................
1,454,277Europe.......................................................
Asia ...........................................................
Other areas................................................
Total ..........................................................
Eliminations and corporate...................
Consolidated total ...............................

718,669
461,188
118,521
12,612,564$12,612,564Intersegment
sales

Total
sales

Operatingexpenses$ 1,657,352
180,181
19,260406,729
2,041
2,265,563(2,265,563)$$11,517,261
1,634,458
737,929
867,917
120,562
14,878,127(2,265,563)$12,612,564$11,527,901
1,722,269
728,815
802,623
110,598
14,892,206(2,265,498)$12,626,708

Operatingincome (loss)$(10,640)(87,811)
9,114
65,294
9,964(14,079)(65)$(14,144)

Total
assets$12,151,085
1,712,542
505,610422,699
73,852
14,865,788(329,686)$14,536,102

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, machineryand motorcycles were principally recognized upon delivery. Contract revenue for the construction of plants,

74 Notes to the Consolidated Financial Statements

machinery, bridges, etc. was principally recognized on 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 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 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 adopted a new accounting standard, "AccountingStandard for Construction Contracts” (Statement No. 15 issued by the Accounting Standards Board of Japan on
December 27, 2007) and the "Guidance on Accounting Standard for Construction Contracts” (the Financial
Accounting Standard Implementation Guidance No. 18 issued by the Accounting Standards Board of Japan on
December 27, 2007). The new accounting standards require that the percentage-of-completion method shall beapplied 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 beapplied.
As a result of this change, sales in Japan for the year ended March 31, 2010 were ¥32,214 million ($346,238
thousand) more than they would have been without the change, and operating loss in Japan for the year ended
March 31, 2010 was ¥3,088 million ($33,190 thousand) less than it would have been without the change.
As discussed in Note 2(j), prior to April 1, 2008, inventories of the Company and its consolidated domestic
subsidiaries were stated at cost determined principally by the specific identification cost method, the moving
average method and the first-in, first-out method. However, if the market value of inventories had declined
significantly and was not expected to recover to cost, cost was reduced to net realizable value. Effective from theyear ended March 31, 2009, the Company and its consolidated subsidiaries adopted a new accounting standard,"Accounting Standard for Measurement of Inventories" (Statement No. 9 issued by the Accounting Standards
Board of Japan on July 5, 2006), for the measurement of inventories and have stated the inventories at March 31,
2009 at the lower of cost determined principally by the specific identification cost method, the moving averagemethod and the first-in, first-out method or net realizable value. As a result of this change, operating income inJapan for the year ended March 31, 2009 was ¥4,074 million less than it would have been without the change.
As discussed in Note 2(aa), effective from the year ended March 31, 2009, the Company and its consolidated
domestic subsidiaries reviewed and revised the useful life of machinery and equipment in accordance with therevision of the Tax Law. As a result of this change, operating income in Japan for the year ended March 31,
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 ($1,230,513 thousand), ¥96,934 million and ¥115,076 million at March 31, 2010, 2009 and 2008,
respectively, consisting mainly of surplus funds (cash and time deposits) of the Company and property, plant andequipment, and investments, intangible other assets of the Company's head office.

Notes to the Consolidated Financial Statements

75

(d) Overseas sales
Overseas sales consists of the total sales of the Company and its consolidated subsidiaries made outside ofJapan. Overseas sales information for the years ended March 31, 2010, 2009 and 2008 was as follows:
Millions of yen%

Millions of yen

Overseas
sales

Againstnet sales

Europe.......................................

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

19.3
7.9
12.0
8.6
47.8

Asia ...........................................
Other areas................................
Total ..........................................

Thousands of
U.S. dollars

Overseas
sales

Againstnet sales

2010
Overseassales¥358,717
153,613
161,906
148,315¥822,551

23.9
10.2
10.7
9.9
54.7

$2,438,295
999,946
1,521,678
1,076,140$6,036,059

Millions of yen

Overseas
sales

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

23.1
8.7
13.0
9.7
54.5

2010

North America ...........................

%

%

2009

2008

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

24. Additional
information(a) Effective from the year ended March 31, 2008, the Company changed the accounting periods for consolidation of two subsidiaries, Kawasaki Robotics (USA) Inc. and Kawasaki Construction Machinery Corp. of
America, from the 12 months ended December 31 to the 12 months ended March 31 to improve transparency and quality of the consolidated financial statements.
(b) Accounting Standards Board of Japan Statement No. 11, “Accounting Standard for Related Party Disclosures”
and Accounting Standards Board of Japan Guidance No. 13, “Guidance on Accounting Standard for Related
Party Disclosures” issued by the Accounting Standards Board of Japan on October 17, 2006, require certain
additional related party disclosures effective for the year ended March 31, 2009. Related Party transactions
for the year ended March 31, 2010 were as follows:
Directors and principle shareholdersof 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

76 Notes to the Consolidated Financial Statements

Director
Tadaharu Ohashi
Chairperson and representative
director of the Company
Administrative director of Japan Aircraft
Development Corporation (JADC)
Concurrent director
Guarantee of indebtedness JADC
¥14,196 million ($152,579 thousand)-Nonconsolidated subsidiaries andaffiliates of the Company

Affiliate of the Company
Commercial Airplane Co., Ltd.
Chiyoda-ku, Tokyo¥10 million ($107 thousand)Sales of transportation machinery

Directly 40%
Order of the Company products
Sales of the Company products¥39,337 million ($422,796 thousand)Receivables: Trade¥14,101 million ($151,558 thousand)(c) A summary of the total financial information of all affiliates (14 companies) (15 in 2009) which was the basis
for calculating the equity in income of nonconsolidated affiliates, including that of Nantong COSCO KHI ShipEngineering Co., Ltd. which is a significant affiliate, for the year ended March 31, 2010 and 2009 was asfollows:
Thousands of
U.S. dollars

Millions of yen

Total current assets .....................................................................
Total fixed assets .........................................................................
Total current liabilities .................................................................
Total long-term liabilities .............................................................
Total net assets ...........................................................................
Total net sales .............................................................................
Total minority interests in net income of
consolidated subsidiaries...........................................................
Total net income .........................................................................

2010

2009

2010

¥117,441
74,798116,405
11,59764,237
161,625¥116,719
65,741
111,588
14,57456,298176,380$1,262,263
803,933
1,251,128
124,645
690,423
1,737,156

20,33215,017

22,815
17,730218,529
161,403(d) Effective from the year ended March, 31 2010, the Company and its consolidated subsidiaries adopted a new
accounting standard, "Accounting Standard for Disclosures about Fair Value of Investment and Rental
Property” (Statement No. 20 issued by the Accounting Standards Board of Japan on November 28, 2008),
and the "Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental
Property” (the Finance Accounting Standard Implementation Guidance No. 23 issued by the AccountingStandard Board of Japan on November 28, 2008). Pursuant to the new accounting standards, there were no
significant investments or rental properties the fair value of which was required to be disclosed for the year
ended March 31, 2010.

25. Subsequent
eventsOn June 25, 2010, the following appropriation of nonconsolidated retained earnings was approved at theordinary meeting of shareholders of the Company:

Cash dividends (¥3.0 per share) .........................................................................

Millions of yen

Thousands of
U.S. dollars¥5,003$53,772

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 and June 21, 2017.

Date of issue
Amount of issue
Issue priceRate (%)
Redemption date
Security
Purpose of fund raised
Bond subscription

0.722 percent notes due in 2015

1.062 percent notes due in 2017

June 21, 2010
¥10,000 million ($107,480 thousand)¥100 ($1.07) per value ¥100 ($1.07)
Annual rate of interest 0.722%
in per value
June 19, 2015
Unsecured
Redemption of bonds
Public offering

June 21, 2010
¥10,000 million ($107,480 thousand)¥100 ($1.07) per value ¥100 ($1.07)
Annual rate of interest 1.062%
in per value
June 21, 2017
Unsecured
Redemption of bonds
Public offering

Notes to the Consolidated Financial Statements

7726. Other matters(a) On June 27, 2006, the Company received a decision from the Japan Fair Trade Commission ordering correction of unfair bids that the Company may have committed on construction contracts for garbage 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. As aresult, the Company reserved ¥6,983 million ($75,053 thousand) for the reimbursement payment as provision
for losses on a damages suit. The Company also sought an inquiry objecting to an order to pay penalties of¥5,165 million ($55,513 thousand) which the Fair Trade Commission imposed on March 28, 2007. The
inquiry is continuing.
In addition, the Company reserved an amount for the reimbursement payment as provision for losses on adamages suit in the year ended March 31, 2009.
(b) On November 16, 2007, the Company received a judgment from the Kobe District Court requiring reimbursement of ¥1,364 million ($14,660 thousand) to Kobe City in a suit brought by citizens of the city claiming that
the Company unfairly bid on a construction contract for a garbage incineration facility in Kobe City that theCompany was awarded in 1995. On November 29, 2007, the Company appealed the judgment to the Osaka
High Court, but the Company received a judgment requiring reimbursement of ¥1,637 million ($17,594
thousand), which was equivalent to 6% of the order price, to Kobe City on October 30, 2007. On November 10,
2007, the Company appealed the judgment to the Supreme Court, but the Court dismissed the appeal on
April 23, 2009.
(c) On April 25, 2007, the Company received a judgment from the Fukuoka District Court requiring reimbursement of ¥2,088 million ($22,441 thousand) jointly with Hitachi Zosen Corporation and three other companies
to Fukuoka City in a suit brought by citizens of the city claiming that the Company unfairly bid on a construction contract for a garbage incineration facility in Fukuoka City that Hitachi Zosen Corporation was awarded
in 1996. On May 9, 2007, the Company appealed the judgment to the Fukuoka High Court, but the Court
dismissed the appeal on November 30, 2007. On December 12, 2007, the Company appealed the judgmentto the Supreme Court, but the Court dismissed the appeal on April 23, 2009.
(d) On November 16, 2007, the Company received a judgment from the Kobe District Court requiring reimbursement of ¥530 million ($5,696 thousand) jointly with Hitachi Zosen Corporation and four other companies in asuit brought by citizens of the city claiming that the Company unfairly bid on a construction contract for a
garbage incineration facility in Amagasaki City that Hitachi Zosen Corporation was awarded in 1996. On
November 29, 2007, the Company appealed the judgment to the Osaka High Court and won the case on
November 30, 2007. On December 7, 2007, the citizens of Amagasaki City, the complainants, appealed thejudgment to the Supreme Court. The Supreme Court reversed the Osaka High Court decision and remanded
the case back to Osaka High Court on April 28, 2009.
(e) On September 25, 2008, the Company received a judgment from the Otsu District Court requiring reimbursement of ¥409 million ($4,395 thousand) jointly with Mitsubishi Heavy industries, Ltd. and three othercompanies to Kohoku Greater Area Administrative Affairs Centre in a suit brought by them claiming that theCompany unfairly bid on a construction contract for a garbage incineration facility in Otsu City that Mitsubishi
Heavy Industries, Ltd. was awarded in 1996. On October 10, 2008, the Company appealed the judgment to
the Osaka High Court, but the Company and the other four companies lost the case on June 18, 2009 andthe judgment was finalized on July 8, 2009.
(f) On December 8, 2009, the Company received a judgment from the Nagoya District Court requiring
reimbursement of ¥1,215 million ($13,058 thousand) jointly with JFE Engineering Corporation (former NKK)
and four other companies in a suit brought by Ichinomiya City claiming that the Company unfairly bid on aconstruction contract for a garbage incineration facility in Ichinomiya City that JFE Engineering Corporation(former NKK) was awarded in 1994 on December 8, 2009. The Company appealed the judgment to the
Nagoya High Court on December 25, 2009.

78 Notes to the Consolidated Financial Statements

Independent Auditors’ Report

Independent Auditors’ Report79Major Consolidated Subsidiaries and Affiliates
Name

Location

Paid-in Capital
Equity(Millions of yen,(% ownership byunless otherwise noted) KHI Group)

Principal Businesses

SHIPBUILDINGJapan

Kawasaki Shipbuilding Corporation

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

Nantong COSCO KHI Ship Engineering Co., Ltd.†

China

CNY1,462,200*

50.00

Manufacture and sale of ships

Japan

400

100.00

Manufacturing and sales of doors/window frames for

ROLLING STOCK
Alna Yusoki-Yohin Co., Ltd.

train cars and buses, signs for bus stops, advertisingmaterials, bus shelters, automobile sign lights,
various types of panels, and waiting rooms
Nichijo Manufacturing Co., Ltd.

Japan

120

75.02

Manufacture and sale of snowplows

Kawasaki Rail Car, Inc.

U.S.A.

US$60,600*

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

EarthTechnica Co., Ltd.

Japan

1,200

100.00Fukae Powtec Corporation

Japan

300

100.00

Manufacture and sale of crushers and related plants

Japan

6,048

100.00

Manufacture, maintenance, and modification of aircraft

sorters, and other equipment

AEROSPACENIPPI Corporationand components; manufacture of rocket components,
aerospace equipment, targeting systems,
nondestructive testing systems, and industrial fansJapan

Nippi Kosan Co., Ltd.

120

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

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

Japan

1,460

83.59

Wuhan Kawasaki Marine Machinery Co., Ltd.

China

1,100

55.00

Manufacture, sale, and installation of general-purpose
boilers and air-conditioning equipment
Manufacture, sale, and after-sales serviceof Kawasaki-brand azimuth thrusters, side thrusters,
and other machinery

Kawasaki Machine Systems, Ltd. ❊

Japan

796

100.00

Sale and repair of gas turbine generators, and industrial
robotsTonfang Kawasaki Air-Conditioning Co., Ltd.

†

China

US$9,673*

50.00

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

80 Major Consolidated Subsidiaries and Affiliates

Name

Location

Paid-in Capital
Equity(Millions of yen,(% ownership byunless otherwise noted) KHI Group)

Principal Businesses

PLANT & INFRASTRUCTURE ENGINEERING
Kawasaki Plant Systems, Ltd.

Japan

8,500

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

JP Steel Plantech Co.

Japan

1,995

24.81

Shanghai COSCO Kawasaki Heavy Industries

China

US$29,800*

45.00

Manufacture and sale of steel structures

China

CNY100,000*

50.00

Design, equipment procurement, sales, installation,†

Sale of and engineering services for steelworks plants
and equipment

Steel Structure Co., Ltd.

†

Anhui Conch Kawasaki Engineering Co., Ltd.†

technical instruction for trial operation, andafter-service for environmentally friendly, energyefficient equipment
Anhui Conch Kawasaki Equipment Manufacturing

China

CNY148,000*

50.00

Design, production, sales, maintenance, after-service,and supply of spare parts for cement plantsCo., Ltd.

†CONSUMER PRODUCTS & MACHINERY
Kawasaki Motors Manufacturing Corp., U.S.A. ●U.S.A.

US$120,000*

100.00

Manufacture of motorcycles, ATVs, personal
watercraft, small gasoline engines, industrial robots,and rolling stock

Kawasaki Motors Corp., U.S.A.

U.S.A.

US$165,900*

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

U.S.A.

US$10,000*

100.00

KM Receivables Corporation

U.S.A.

US$100100.00

Canadian Kawasaki Motors Inc.

Canada

C$2,000*

100.00Inventory financing for dealers of Kawasaki
Motors Corp., U.S.A.
Management of accounts receivable of Kawasaki
Motors Finance Corporation
Distribution of motorcycles, ATVs, and personal
watercraft in Canada

Kawasaki Motors Europe N.V.

Netherlands€64,093*

100.00Kawasaki Motors Pty. Ltd.

Australia

A$2,000*

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

P.T. Kawasaki Motor Indonesia

Indonesia

US$40,000*

83.00

Kawasaki Motors (Phils.) Corporation

Philippines

P101,430*

50.001

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

B1,900,000*

100.00

Manufacture and distribution of motorcycles
in Indonesia
Manufacture and distribution of motorcycles in thePhilippines
Manufacture and distribution of motorcycles
in Thailand
Manufacture and sale of parts for motorcycles in

KHITKAN Co., Ltd.

Thailand

B182,000*

100.00Kawasaki Motores Do Brasil Ltda.

Brazil

R16,742*100.00Distribution of motorcycles in Brazil

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

U.S.A.

US$1,000*

100.00

Sale and after-sales service of industrial robots

Kawasaki Robotics (UK) Ltd.

U.K.

£917*

100.00Thailandin the United States
Sale and after-sales service of industrial robots
in the U.K. and Ireland
Kawasaki Machine Systems Korea, Ltd.

Korea

W1,500**100.00Kawasaki Robotics (Tianjin) Co., Ltd.

China

CNY13,174*

100.00

Sale and after-sales service of industrial robots androbot systems
Sale and after-sales service of industrial robots in
China

Major Consolidated Subsidiaries and Affiliates

81

Name

Location

Paid-in Capital
Equity(Millions of yen,(% ownership byunless otherwise noted) KHI Group)

Principal Businesses

HYDRAULIC MACHINERY
Kawasaki Precision Machinery Ltd.

Japan

3,000

100.00Design, manufacture, sale, after-sales service, andmaintenance for hydraulic machinery and equipment,
electric-powered devices, and control systems

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

Manufacturing, sales, and repair of hydraulic

Kawasaki Precision Machinery (Suzhou) Ltd.

China

500

100.00equipment, marine equipment, and other machinery
Assembly of hydraulic pumps and motors forconstruction machinery
Kawasaki Chunhui Precision Machinery (Zhejiang) Ltd.

China

CNY38,468*

54.00

Manufacture and sale of hydraulic pumps forconstruction machinery

OTHER
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

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
Design, manufacture, sale, and maintenance of

KCM Corporation

Japan

3,000

100.00KCMJ 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

construction machinery(principally the U.K.), the Middle East, and Africa;
provision of order intermediation services
Kawasaki Heavy Industries (U.S.A.), Inc.

U.S.A.

US$600*100.00

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

KCMA Corporation

U.S.A.

US$8,000*

100.00Kawasaki do Brasil Industria e Comercio Ltda.

Brazil

R1,136*100.00

Manufacture and sale of construction machinery in the
United States
Responsible for sales and acting as intermediary
in Brazil and the rest of Latin America for orders of
KHI products and for providing various types ofengineering business services* Monetary unit in thousands** Monetary unit in millions† Affiliate accounted for using equity method
Partially included in:● Rolling Stock★ Gas Turbines & Machinery❊ Consumer Products & Machinery(As of March 31, 2010)
82 Major Consolidated Subsidiaries and Affiliates

Network
Kobe Head Office
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, Japan
Phone: 81-78-371-9530
Fax: 81-78-371-9568
Tokyo Head OfficeWorld Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, Japan
Phone: 81-3-3435-2111
Fax: 81-3-3436-3037
DOMESTIC WORKS
Gifu Works
1, Kawasaki-cho, Kakamigahara,
Gifu 504-8710, Japan
Phone: 81-58-382-5712
Fax: 81-58-382-2981
Nagoya Works 1
3-11, Kusunoki, Yatomi,
Aichi 498-0066, Japan
Phone: 81-567-68-5117
Fax: 81-567-68-5090
Nagoya Works 2
7-4, Kanaoka, Tobishima-mura,Ama-gun, Aichi 490-1445, Japan
Phone: 81-567-55-0800
Fax: 81-567-55-0803
Kobe Works
1-1, Higashikawasaki-cho 3-chome,
Chuo-ku, Kobe, Hyogo 650-8670, Japan
Phone: 81-78-682-5001
Fax: 81-78-682-5503
Hyogo Works
1-18, Wadayama-dori 2-chome,
Hyogo-ku, Kobe, Hyogo 652-0884, Japan
Phone: 81-78-682-3111
Fax: 81-78-671-5784

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, 100001 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
Kawasaki Shipbuilding Corporation
1-1, Higashikawasaki-cho 3-chome, Chuo-ku,
Kobe, Hyogo 650-8670, Japan
Phone: 81-78-682-5501
Fax: 81-78-682-5514
Sakaide Shipyard
1, Kawasaki-cho, Sakaide,
Kagawa 762-8507, Japan
Phone: 81-877-46-1111
Fax: 81-877-46-7006

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

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

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

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

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

Tokyo Head Office11-1, Minamisuna 2-chome, Koto-ku,
Tokyo 136-8588, Japan
Phone: 81-3-3615-5200
Fax: 81-3-5690-3159
KCM Corporation
2680, Oka, Inami-cho,Kako-gun, Hyogo 675-1113, Japan
Phone: 81-79-495-1211
Fax: 81-79-495-1226
Kawasaki Thermal Engineering Co., Ltd.
18-31, Higashinakajima 1-chome,
Higashiyodogawa-ku, Osaka 533-0033, Japan
Phone: 81-6-6325-0300
Fax: 81-6-6325-0301
NIPPI Corporation
3175 Showa-machi, Kanazawa-ku,
Yokohama, Kanagawa 236-8540, Japan
Phone: 81-45-773-5100
Fax: 81-45-773-5101

EarthTechnica Co., Ltd.
2-4, Kanda, Jimbocho, Chiyoda-ku,
Tokyo 101-0051, Japan
Phone: 81-3-3230-7151
Fax: 81-3-3230-7158
Kawasaki Heavy Industries (U.S.A.), Inc.
60 East 42nd Street, Suite 2501,
New York, NY 10165, U.S.A.
Phone: 1-212-759-4950
Fax: 1-212-759-6421
Houston Branch
333 Clay Street, Suite 4310,
Houston, TX 77002-4109, 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.
5080 36th Street S.E.,
Grand Rapids, MI 49512, U.S.A.
Phone: 1-616-949-6500
Fax: 1-616-975-3103
Kawasaki Motors Manufacturing Corp., U.S.A.
6600 Northwest 27th Street,
Lincoln, NE 68524, U.S.A.
Phone: 1-402-476-6600
Fax: 1-402-476-6672
Maryville Plant
28147 Business Highway 71,
Maryville, MO 64468, U.S.A.
Phone: 1-660-582-5829
Fax: 1-660-582-5826
KCMA Corporation
2140 Barrett Park Drive, Suite 101,
Kennesaw, GA 30144, U.S.A.
Phone: 1-770-499-7000
Fax: 1-770-421-6842
Canadian Kawasaki Motors Inc.
101 Thermos Rd.,
Toronto, Ontario 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

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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

Benelux Brancht Hofveld 6 C2,1702 Groot-Bijgaarden,
Brussels, Belgium
Phone: 32-2-481-7820
Fax: 32-2-481-7829
Kawasaki Machine Systems Korea, Ltd.
69BL 1LT, 638, Gojan-Dong, Namdong-Gu,
Incheon, 405-817, Korea
Phone: 82-32-821-6941~5
Fax: 82-32-821-6947

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

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

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

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

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

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

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. 23 East Service Road,
Bo. Cupang, Muntinlupa City,
Metro Manila 1771, The Philippines
Phone: 63-2-842-3140
Fax: 63-2-842-2730

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

Kawasaki Heavy Industries (Singapore) Pte. Ltd.
6 Battery Road, #18-04,
Singapore 049909
Phone: 65-6225-5133~4
Fax: 65-6224-9029

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

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

France Branch
Parc d’activité de la clef de Saint Pierre,
Rondpoint de l’Epine des champs,
78996 Elancourt Cedex, France
Phone: 33-1-30-69-0000
Fax: 33-1-30-69-5001

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

Italy Branch
Via Luigi Meraviglia 31,
20020 Barbaiana di Lainate, Italy
Phone: 39-02-93-28-521
Fax: 39-02-93-28-5284
Sweden Branch
Haradsvagen 255, S-14172
Huddinge, Sweden
Phone: 46-8-464-0200
Fax: 46-8-464-0240
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

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

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: 86-513-8350-0666
Fax: 86-513-8351-4349
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: 86-21-3366-3100
Fax: 86-21-3366-3108
Kawasaki Heavy Industries Machinery
Trading (Shanghai) Co., Ltd.
10F, Chong Hing Finance Center,
288 Nanjing Road West, Huangpu District,
Shanghai 200003, People’s Republic of China
Phone: 86-21-3366-3200
Fax: 86-21-3366-3205
Anhui Conch Kawasaki Engineering Co., Ltd.
3F, Conch International Conference Center,
1007 South Jiuhua Road, Wuhu, Anhui 241136,
People’s Republic of China
Phone: 86-0553-839-8606
Fax: 86-0553-839-8676
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: 86-0553-839-8015
Fax: 86-0553-839-9553
Anhui Conch Kawasaki Equipment Manufacturing Co., Ltd.
Huolonggang town, Yiijiang zone, Wuhu, Anhui 241138,
People’s Republic of China
Phone: 86-0553-839-9692
Fax: 86-0553-839-9560
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.
No.380 Hanjiang Road, Xinbei District, Changzhou City,
Jiangsu Province, 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 Hanjiang Road, Xinbei District, Changzhou City,
Jiangsu Province, People’s Republic of China
Phone: 86-519-8308-9001~2
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(As of June 1, 2010)
84 Network

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

Incorporated:

1896

Paid-in Capital:¥104,328,628,664

Number of Shares Issued:

1,669,629,122 shares

Number of Shareholders:

167,090

Number of Employees:

32,297

Stock Exchange Listings:

Tokyo, Osaka, Nagoya

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

Transfer Agent:
The Chuo Mitsui Trust and Banking Company,
Limited33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, Japan
Handling Office:
The Chuo Mitsui Trust and Banking Company,
LimitedOsaka Branch Office
2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan
Independent Auditors:
KPMG AZSA & Co.
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-thecounter (OTC) market in the United States under
CUSIP number 486359201, 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, 2010)

Corporate Data

85

Kawasaki Heavy Industries, Ltd. Annual Report 2010

This annual report was created using environment-friendly waterless printing that does notproduce toxic fluids.
We selected soy ink and used FSC-certified paper produced from appropriately managed forests
to create this report.

Printed in Japan
ISSN 0287 - 1793