(Translation)
This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.
Quarterly Report
From April 1, 2020 to June 30, 2020
(First Quarter of the 152nd Fiscal Year)
KOMATSU LTD.
First Quarter of the 152nd Fiscal Year (from April 1, 2020 to June 30, 2020)
Quarterly Report
Certain References and Information:
- This is an English translation of the Quarterly Securities Report ("Shihanki Hokokusho") filed via the Electronic Disclosure for Investors' Network ("EDINET") system as set forth in Article 27-30-2 of the Financial Instruments and Exchange Act of Japan. Komatsu Ltd. filed its Quarterly Securities Report for the three months ended June 30, 2020 with the Director-General of the Kanto Local Finance Bureau on August 7, 2020. The Quarterly Securities Report contains, among other information, Quarterly Consolidated Financial Statements for the three months ended June 30, 2020. Material information in the Quarterly Securities Report, other than the Quarterly Consolidated Financial Statements, has already been reported by Komatsu Ltd. in its press release dated July 30, 2020. Attached is an English translation of Quarterly Consolidated Financial Statements for the three months ended June 30, 2020.
- In this report, Komatsu Ltd. is hereinafter referred to as the "Company" and together with its consolidated subsidiaries as "Komatsu."
Cautionary Statement with respect to forward-looking statements:
This report contains forward-looking statements that reflect managements' views and assumptions in the light of information currently available with respect to certain future events, including expected financial position, operating results and business strategies. These statements can be identified by the use of terms such as "will," "believes," "should," "projects," "plans," "expects" and similar terms and expressions that identify future events or expectations. Actual results may differ materially from those projected, and the events and results of such forward- looking assumptions cannot be assured. Any forward-looking statements speak only as of the date of this report, and the Company assumes no duty to update such statements.
Factors that may cause actual results to differ materially from those predicted by such forward-looking statements include, but are not limited to, unanticipated changes in demand for Komatsu's principal products, owing to changes in the economic conditions in Komatsu's principal markets; changes in exchange rates or the impact of increased competition; unanticipated costs or delays encountered in achieving Komatsu's objectives with respect to globalized product sourcing and new information technology tools; uncertainties as to the results of Komatsu's research and development efforts and its ability to access and protect certain intellectual property rights; the impact of regulatory changes and accounting principles and practices; and the introduction, success and timing of business initiatives and strategies.
Financial Information
1. Basis of preparation of the quarterly consolidated financial statements
The quarterly consolidated financial statements of the Company are prepared in accordance with the accounting principles generally accepted in the United States of America (hereinafter "U.S. GAAP"), pursuant to Article 4, Supplementary Provisions of the "Ordinance on Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements," the Ordinance of the Cabinet Office No. 64 of 2007.
2. Audit certification
Pursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act of Japan, the quarterly consolidated financial statements for the three months ended June 30, 2020 were reviewed by KPMG AZSA LLC.
- 1 -
Quarterly Consolidated Financial Statements, etc.
Quarterly Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries as of June 30, 2020 and March 31, 2020
June 30, 2020 | March 31, 2020 | |||||||||
Assets | Millions of yen | Ratio (%) | Millions of yen | Ratio (%) | ||||||
Current assets | ||||||||||
Cash and cash equivalents (Note 15) | ¥ | 255,102 | ¥ | 247,616 | ||||||
Time deposits (Note 15) | 2,128 | 2,057 | ||||||||
Trade notes and accounts receivable, net (Notes 3 and 9) | 664,554 | 744,395 | ||||||||
Inventories (Note 4) | 866,723 | 805,309 | ||||||||
Other current assets (Notes 14, 15 and 16) | 148,826 | 147,413 | ||||||||
Total current assets | 1,937,333 | 52.9 | 1,946,790 | 53.3 | ||||||
Long-term trade receivables, net (Notes 3, 9, and 15) | 435,937 | 11.9 | 420,918 | 11.5 | ||||||
Investments | ||||||||||
Investments in and advances to affiliated companies | 38,451 | 38,210 | ||||||||
Investment securities (Note 5) | 7,217 | 7,328 | ||||||||
Other | 2,475 | 2,436 | ||||||||
Total investments | 48,143 | 1.3 | 47,974 | 1.3 | ||||||
Property, plant and equipment | ||||||||||
- less accumulated depreciation and amortization of ¥904,918 | ||||||||||
million at June 30, 2020 and ¥894,328 million at March 31, 2020 | 755,282 | 20.6 | 757,679 | 20.8 | ||||||
Operating lease right-of-use assets | 53,478 | 1.5 | 53,454 | 1.5 | ||||||
Goodwill | 160,403 | 4.4 | 157,521 | 4.3 | ||||||
Other intangible assets | 164,122 | 4.5 | 162,062 | 4.4 | ||||||
- less accumulated amortization (Note 6) | ||||||||||
Deferred income taxes and other assets (Notes 14, 15 and 16) | 106,186 | 2.9 | 107,288 | 2.9 | ||||||
Total assets | ¥ | 3,660,884 | 100.0 | ¥ | 3,653,686 | 100.0 |
June 30, 2020 | March 31, 2020 | |||||||||
Liabilities and Equity | Millions of yen | Ratio (%) | Millions of yen | Ratio (%) | ||||||
Current liabilities | ||||||||||
Short-term debt (Note 15) | ¥ | 473,332 | ¥ | 483,658 | ||||||
Current maturities of long-term debt (Note 15) | 135,186 | 118,880 | ||||||||
Trade notes, bills and accounts payable | 204,263 | 220,160 | ||||||||
Income taxes payable | 22,793 | 23,169 | ||||||||
Current operating lease liabilities | 14,778 | 14,933 | ||||||||
Other current liabilities (Notes 9, 14, 15 and 16) | 291,773 | 297,825 | ||||||||
Total current liabilities | 1,142,125 | 31.2 | 1,158,625 | 31.7 | ||||||
Long-term liabilities | ||||||||||
Long-term debt (Note 15) | 439,347 | 409,840 | ||||||||
Liability for pension and retirement benefits | 94,911 | 96,392 | ||||||||
Long-term operating lease liabilities | 38,659 | 38,624 | ||||||||
Deferred income taxes and other liabilities (Notes 9, 14, 15 and 16) | 92,666 | 93,980 | ||||||||
Total long-term liabilities | 665,583 | 18.2 | 638,836 | 17.5 | ||||||
Total liabilities | 1,807,708 | 49.4 | 1,797,461 | 49.2 | ||||||
Commitments and contingent liabilities (Note 13) | ||||||||||
Equity | ||||||||||
Komatsu Ltd. shareholders' equity | ||||||||||
Common stock: | ||||||||||
Authorized 3,955,000,000 shares | ||||||||||
Issued 972,581,230 shares | ||||||||||
Outstanding 944,657,798 shares at June 30, 2020 and | ||||||||||
944,621,957 shares at March 31, 2020 | 68,689 | 68,689 | ||||||||
Capital surplus | 136,381 | 136,459 | ||||||||
Retained earnings: | ||||||||||
Appropriated for legal reserve | 47,178 | 46,813 | ||||||||
Unappropriated | 1,678,504 | 1,699,477 | ||||||||
Accumulated other comprehensive income (loss) (Notes 8 and 14) | (118,141) | (130,666) | ||||||||
Treasury stock at cost, | ||||||||||
27,923,432 shares at June 30, 2020 and 27,959,273 shares at March 31, 2020 | (49,093) | (49,166) | ||||||||
Total Komatsu Ltd. shareholders' equity | 1,763,518 | 48.2 | 1,771,606 | 48.5 | ||||||
Noncontrolling interests | 89,658 | 2.4 | 84,619 | 2.3 | ||||||
Total equity | 1,853,176 | 50.6 | 1,856,225 | 50.8 | ||||||
Total liabilities and equity | ¥ | 3,660,884 | 100.0 | ¥ | 3,653,686 | 100.0 | ||||
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
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Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Three months ended June 30, 2020 and 2019.
Consolidated Statements of Income
Three months ended | Three months ended | |||||||||
June 30, 2020 | June 30, 2019 | |||||||||
Millions of yen | Ratio(%) | Millions of yen | Ratio(%) | |||||||
Net sales (Notes 9, 11 and 14) | ¥ | 458,731 | 100.0 | ¥ | 609,767 | 100.0 | ||||
Cost of sales (Notes 6, 7 and 14) | 334,720 | 73.0 | 427,357 | 70.1 | ||||||
Selling, general and administrative expenses (Notes 6, 7 and 10) | 97,373 | 21.2 | 109,667 | 18.0 | ||||||
Other operating income, net | 281 | 0.1 | 2,017 | 0.3 | ||||||
Operating income | 26,919 | 5.9 | 74,760 | 12.3 | ||||||
Other income (expenses), net | ||||||||||
Interest and dividend income | 1,185 | 0.3 | 1,746 | 0.3 | ||||||
Interest expense | (3,841) | (0.8) | (6,650) | (1.1) | ||||||
Other, net (Notes 5, 7, 8 and 14) | 4,234 | 0.9 | (2,946) | (0.5) | ||||||
Total | 1,578 | 0.4 | (7,850) | (1.3) | ||||||
Income before income taxes and equity in | 28,497 | 6.2 | 66,910 | 11.0 | ||||||
earnings of affiliated companies | ||||||||||
Income taxes (Note 8) | ||||||||||
Current | 10,076 | 13,082 | ||||||||
Deferred | (258) | 4,749 | ||||||||
Total | 9,818 | 2.1 | 17,831 | 2.9 | ||||||
Income before equity in earnings of affiliated companies | 18,679 | 4.1 | 49,079 | 8.0 | ||||||
Equity in earnings of affiliated companies | 551 | 0.1 | 668 | 0.1 | ||||||
Net income | 19,230 | 4.2 | 49,747 | 8.2 | ||||||
Less: Net income attributable to noncontrolling interests | 2,979 | 0.6 | 2,271 | 0.4 | ||||||
Net income attributable to Komatsu Ltd. | ¥ | 16,251 | 3.5 | ¥ | 47,476 | 7.8 | ||||
Yen | ||||||||||
Per share data (Note 12): | ||||||||||
Net income attributable to Komatsu Ltd.: | ||||||||||
Basic | ¥ | 17.20 | ¥ | 50.30 | ||||||
Diluted | ¥ | 17.20 | ¥ | 50.25 |
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 3 -
Consolidated Statements of Comprehensive Income
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Net income | ¥ | 19,230 | ¥ | 49,747 | |
Other comprehensive income (loss), for the period, net of tax | |||||
Foreign currency translation adjustments (Note 8) | 14,654 | (33,311) | |||
Pension liability adjustments (Notes 7 and 8) | 264 | 328 | |||
Net unrealized holding gains (losses) on derivative instruments (Notes 8 and 14) | (237) | (714) | |||
Total | 14,681 | (33,697) | |||
Comprehensive income | 33,911 | 16,050 | |||
Less: Comprehensive income (loss) attributable to noncontrolling interests | 5,135 | (447) | |||
Comprehensive income attributable to Komatsu Ltd. | ¥ | 28,776 | ¥ | 16,497 |
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
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Consolidated Statements of Equity (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Three months ended June 30, 2020
Millions of yen | ||||||||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||||
Appropriated | Accumulated | Total | Non- | |||||||||||||||||||||||
Common | Capital | Un- | other | Treasury | Komatsu Ltd. | Total | ||||||||||||||||||||
for legal | controlling | |||||||||||||||||||||||||
stock | surplus | appropriated | comprehensive | stock | shareholders' | equity | ||||||||||||||||||||
reserve | interests | |||||||||||||||||||||||||
income (loss) | equity | |||||||||||||||||||||||||
Balance at March 31, 2020 | ¥ | 68,689 | ¥ | 136,459 | ¥ | 46,813 | ¥ | 1,699,477 | ¥ | (130,666) | ¥ | (49,166) | ¥ | 1,771,606 | ¥ | 84,619 | ¥ | 1,856,225 | ||||||||
Cash dividends (Note 18) | (36,859) | (36,859) | (1,096) | (37,955) | ||||||||||||||||||||||
Transfer to retained earnings appropriated | 365 | (365) | - | - | ||||||||||||||||||||||
for legal reserve | ||||||||||||||||||||||||||
Other changes | - | 1,000 | 1,000 | |||||||||||||||||||||||
Net income | 16,251 | 16,251 | 2,979 | 19,230 | ||||||||||||||||||||||
Other comprehensive income (loss), | 12,525 | 12,525 | 2,156 | 14,681 | ||||||||||||||||||||||
for the period, net of tax (Note 8) | ||||||||||||||||||||||||||
Issuance and exercise of stock acquisition | (82) | (82) | (82) | |||||||||||||||||||||||
rights (Note 10) | ||||||||||||||||||||||||||
Purchase of treasury stock | (5) | (5) | (5) | |||||||||||||||||||||||
Sales of treasury stock | 4 | 78 | 82 | 82 | ||||||||||||||||||||||
Restricted stock compensation (Note 10) | - | - | ||||||||||||||||||||||||
Balance at June 30, 2020 | ¥ | 68,689 | ¥ | 136,381 | ¥ | 47,178 | ¥ | 1,678,504 | ¥ | (118,141) | ¥ | (49,093) | ¥ | 1,763,518 | ¥ | 89,658 | ¥ | 1,853,176 |
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
Three months ended June 30, 2019
Millions of yen | ||||||||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||||
Appropriated | Accumulated | Total | Non- | |||||||||||||||||||||||
Common | Capital | Un- | other | Treasury | Komatsu Ltd. | Total | ||||||||||||||||||||
for legal | controlling | |||||||||||||||||||||||||
stock | surplus | appropriated | comprehensive | stock | shareholders' | equity | ||||||||||||||||||||
reserve | interests | |||||||||||||||||||||||||
income (loss) | equity | |||||||||||||||||||||||||
Balance at March 31, 2019 | ¥ | 68,311 | ¥ | 136,798 | ¥ | 46,028 | ¥ | 1,654,105 | ¥ | (39,792) | ¥ | (49,868) | ¥ | 1,815,582 | ¥ | 87,286 | ¥ | 1,902,868 | ||||||||
Cash dividends (Note 18) | (55,719) | (55,719) | (3,037) | (58,756) | ||||||||||||||||||||||
Transfer to retained earnings appropriated | 537 | (537) | - | - | ||||||||||||||||||||||
for legal reserve | ||||||||||||||||||||||||||
Net income | 47,476 | 47,476 | 2,271 | 49,747 | ||||||||||||||||||||||
Other comprehensive income (loss), | (30,979) | (30,979) | (2,718) | (33,697) | ||||||||||||||||||||||
for the period, net of tax (Note 8) | ||||||||||||||||||||||||||
Issuance and exercise of stock acquisition | (120) | (120) | (120) | |||||||||||||||||||||||
rights (Note 10) | ||||||||||||||||||||||||||
Purchase of treasury stock | (6) | (6) | (6) | |||||||||||||||||||||||
Sales of treasury stock | 9 | 111 | 120 | 120 | ||||||||||||||||||||||
Restricted stock compensation (Note 10) | (34) | (34) | (68) | (68) | ||||||||||||||||||||||
Balance at June 30, 2019 | ¥ | 68,277 | ¥ | 136,653 | ¥ | 46,565 | ¥ | 1,645,325 | ¥ | (70,771) | ¥ | (49,763) | ¥ | 1,776,286 | ¥ | 83,802 | ¥ | 1,860,088 | ||||||||
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 5 -
Consolidated Statements of Cash Flows (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Three months ended June 30, 2020 and 2019
Millions of yen | ||||||
Three months ended | Three months ended | |||||
June 30, 2020 | June 30, 2019 | |||||
Operating activities | ||||||
Net income | ¥ | 19,230 | ¥ | 49,747 | ||
Adjustments to reconcile net income to net cash provided by (used in) operating | ||||||
activities: | ||||||
Depreciation and amortization | 31,822 | 32,677 | ||||
Deferred income taxes | (258) | 4,749 | ||||
Impairment loss and net loss (gain) on valuation of investment securities | 88 | (18) | ||||
Net loss (gain) on sale of fixed assets | (56) | (444) | ||||
Loss on disposal of fixed assets | 353 | 694 | ||||
Pension and retirement benefits, net | (1,110) | (1,554) | ||||
Changes in assets and liabilities: | ||||||
Decrease (increase) in trade receivables | 80,129 | 35,377 | ||||
Decrease (increase) in inventories | (52,889) | (56,019) | ||||
Increase (decrease) in trade payables | (16,319) | (7,657) | ||||
Increase (decrease) in income taxes payable | (652) | (16,858) | ||||
Other, net | (5,310) | 17,215 | ||||
Net cash provided by (used in) operating activities | 55,028 | 57,909 | ||||
Investing activities | ||||||
Capital expenditures | (37,267) | (43,998) | ||||
Proceeds from sale of fixed assets | 3,127 | 4,390 | ||||
Proceeds from sale of investment securities | 7 | 415 | ||||
Purchases of investment securities | (34) | (218) | ||||
Acquisition of subsidiaries and equity investees, net of cash acquired | (1,717) | (7,459) | ||||
Other, net | 439 | (757) | ||||
Net cash provided by (used in) investing activities | (35,445) | (47,627) | ||||
Financing activities | ||||||
Proceeds from debt issued (Original maturities greater than three months) | 193,557 | 138,093 | ||||
Payment on debt (Original maturities greater than three months) | (148,444) | (115,411) | ||||
Short-term debt, net (Original maturities three months or less) | (18,955) | 70,053 | ||||
Dividends paid | (36,859) | (55,719) | ||||
Other, net *1 | (1,343) | (3,685) | ||||
Net cash provided by (used in) financing activities | (12,044) | 33,331 | ||||
Effect of exchange rate change on cash and cash equivalents | (53) | 1,395 | ||||
Net increase (decrease) in cash and cash equivalents | 7,486 | 45,008 | ||||
Cash and cash equivalents, beginning of year | 247,616 | 148,479 | ||||
Cash and cash equivalents, end of period | ¥ | 255,102 | ¥ | 193,487 |
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
*1 In the three months ended June 30, 2020, Komatsu (the Company and its consolidated subsidiaries) has classified "Repayments of finance lease obligations" and "Sale (purchase) of treasury stock, net" as "Other, net" in the financing activities. Accordingly, the figures for the three months ended June 30, 2019 were reclassified to conform to the presentation for the three months ended June 30, 2020.
- 6 -
Komatsu Ltd. and Consolidated Subsidiaries
Three months ended June 30, 2020 and 2019
Notes to Quarterly Consolidated Financial Statements (Unaudited)
1. Basis of Quarterly Financial Statement Presentation and Summary of Significant Accounting Policies
Basis of Quarterly Financial Statement Presentation
The Company prepares and presents the accompanying quarterly consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (hereinafter "U.S. GAAP").
The accompanying quarterly consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and principally operates.
Some adjustments without booked on each subsidiaries' and affiliates' quarterly financial statements are added to the accompanying quarterly consolidated financial statements. These adjustments are mainly due to the gaps of accounting principle between Japan and the United States of America. See Note 21 "Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements".
Preparation of Financial Statements and Registration with the U.S. Securities and Exchange Commission
The Company has been preparing its consolidated financial statements in accordance with U.S. GAAP since 1963, because the Company issued foreign currency convertible bonds at European market in 1964. The Company registered its convertible bonds issued in the United States in 1967 and its common shares issued for U.S. shareholders as well as Japanese shareholders in 1970 with the U.S. Securities and Exchange Commission (hereinafter "SEC"). Since then, the Company, as a non-U. S. issuer, had been having the reporting obligations, such as filing annual report with its consolidated financial statements in accordance with U.S. GAAP, under the Securities Exchange Act of 1934. The Company's registration with SEC was terminated on June 30, 2014.
Summary of Significant Accounting Policies
There is no material change for summary of significant accounting policies stated in annual report for the fiscal year ended March 31, 2020.
Regarding the impact of the novel coronavirus (COVID-19) pandemic on Komatsu's financial position and results of operations, just how COVID-19 will spread from this point forward, or when it will be contained, is still unclear. Nevertheless, under the assumptions that the COVID-19-related impacts will continue for a length of time in the fiscal year ending March 31, 2021, Komatsu has calculated the projections for this fiscal year based on the information which is available at present and our predictions. Komatsu is making its best estimates based on the projections to assess the likelihood of recovery of deferred tax assets and the impairment losses on long-lived assets and goodwill given these items are relatively material among the accounting estimates. However, if actual future trends deviate from those assumptions included in the projections, Komatsu's financial position and results of operations may be adversely affected.
- 7 -
2. Supplemental Cash Flow Information
Additional cash flow information for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Additional cash flow information: | |||||
Interest paid | ¥ | 4,350 | ¥ | 6,656 | |
Income taxes paid | 8,685 | 29,725 |
3. Allowance for Doubtful Receivables
At June 30, 2020 and at March 31, 2020, allowances for doubtful receivables deducted from trade notes and accounts receivable, net and long-term trade receivables, net are ¥16,843 million and ¥16,822 million, respectively.
4. Inventories
At June 30, 2020 and at March 31, 2020, inventories comprise the following:
Millions of yen | |||||
June 30, 2020 | March 31, 2020 | ||||
Finished products, including finished parts held for sale | ¥ | 634,485 | ¥ | 586,468 | |
Work in process | 165,059 | 153,082 | |||
Materials and supplies | 67,179 | 65,759 | |||
Total | ¥ | 866,723 | ¥ | 805,309 | |
5. Investment Securities
The realized gains and losses and gross unrealized holding gains and losses for such equity securities which are recorded in other income (expenses), net in the accompanying consolidated statements of income, respectively, for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen
Net gains and losses recognized during the period on equity securities Less: net gains and losses recognized during the period on equity securities sold during the period
Unrealized gains and losses recognized during the period on equity securities still held as of June 30, 2020 and 2019
Three months ended
June 30, 2020
-
(88)
(1) - (87)
Three months ended
June 30, 2019
-
18
16 - 2
Komatsu measures equity securities without readily determinable fair values at the carrying amount after the write- down due to impairment, except for investments which are measured at net asset value per share. If Komatsu identifies observable price changes in orderly transactions for identical or similar investments issued by the same issuer, Komatsu measures the equity security at fair value as of the date that the observable transaction occurred. As of June 30, 2020 and as of March 31, 2020, the carrying amounts of these investments were ¥7,217 million and ¥7,328 million, respectively. Any impairment or other adjustments relating to observable price changes recorded until June 30, 2020 and until March 31, 2020 were not material.
- 8 -
6. Other Intangible Assets
Intangible assets at June 30, 2020 and at March 31, 2020 are as follows:
Millions of yen | |||||||||||||||||
June 30, 2020 | March 31, 2020 | ||||||||||||||||
Gross | Net | Gross | Net | ||||||||||||||
carrying | Accumulated | carrying | carrying | Accumulated | carrying | ||||||||||||
amount | amortization | amount | amount | amortization | amount | ||||||||||||
Other intangible assets subject to | |||||||||||||||||
amortization: | |||||||||||||||||
Software | ¥ | 55,131 | ¥ | (22,554) | ¥ | 32,577 | ¥ | 52,813 | ¥ | (21,678) ¥ | 31,135 | ||||||
Leasehold | 6,910 | (1,692) | 5,218 | 6,959 | (1,675) | 5,284 | |||||||||||
Trademarks | 52,930 | (11,726) | 41,204 | 52,444 | (10,866) | 41,578 | |||||||||||
Customer relationships | 73,697 | (25,188) | 48,509 | 73,505 | (25,197) | 48,308 | |||||||||||
Technology assets | 37,819 | (11,930) | 25,889 | 37,423 | (11,950) | 25,473 | |||||||||||
Other | 6,841 | (4,238) | 2,603 | 7,292 | (4,635) | 2,657 | |||||||||||
Total | 233,328 | (77,328) | 156,000 | 230,436 | (76,001) | 154,435 | |||||||||||
Other intangible assets not subject | 8,122 | 7,627 | |||||||||||||||
to amortization | |||||||||||||||||
Total other intangible assets | ¥ | 164,122 | ¥ | 162,062 | |||||||||||||
The aggregate amortization expense of other intangible assets subject to amortization during the three months ended June 30, 2020 and 2019 were ¥4,699 million and ¥4,483 million, respectively.
7. Cost of Retirement Benefits
Net periodic cost of Komatsu's defined benefit plans for the three months ended June 30, 2020 and 2019, consisted of the following components:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Service cost | ¥ | 2,419 | ¥ | 2,315 | |
Interest cost on projected benefit obligations | 1,471 | 1,732 | |||
Expected return on plan assets | (2,442) | (2,753) | |||
Amortization of actuarial loss or gain | 337 | 293 | |||
Amortization of prior service cost | 89 | 72 | |||
Net periodic cost | ¥ | 1,874 | ¥ | 1,659 | |
Net periodic cost of the postretirement benefit plans for the three months ended June 30, 2020 and 2019 included the following components:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Service cost | ¥ | 130 | ¥ | 141 | |
Interest cost on projected benefit obligations | 104 | 140 | |||
Expected return on plan assets | (125) | (148) | |||
Amortization of actuarial loss or gain | 19 | 12 | |||
Amortization of prior service cost | (30) | 1 | |||
Net periodic cost | ¥ | 98 | ¥ | 146 | |
Net periodic cost components other than the service cost of Komatsu's defined benefit plans and the postretirement benefit plans are recorded in other income (expenses), net in the accompanying consolidated statements of income.
- 9 -
8. Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen
Three months ended June 30, 2020
Balance, beginning of the year
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Net other comprehensive income (loss)
Net unrealized | |||||||
Foreign | holding gains | ||||||
currency | Pension | (losses) | |||||
translation | liability | on derivative | |||||
adjustments | adjustments | instruments | Total | ||||
¥(103,975) | ¥ (26,976) | ¥ | 285 | ¥(130,666) | |||
14,654 | (16) | 359 | 14,997 | ||||
- | 280 | (596) | (316) | ||||
14,654 | 264 | (237) | 14,681 |
Less: other comprehensive income (loss) | 2,151 | - | 5 | 2,156 | ||||
attributable to noncotrolling interests | ||||||||
Other comprehensive income (loss) attributable | 12,503 | 264 | (242) | 12,525 | ||||
to Komatsu Ltd. | ||||||||
Balance, end of the period | ¥ (91,472) | ¥ (26,712) | ¥ | 43 | ¥(118,141) |
All amounts are net of tax.
Balance, beginning of the year
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Net other comprehensive income (loss)
Millions of yen
Three months ended June 30, 2019
Net unrealized | |||||||
Foreign | holding gains | ||||||
currency | Pension | (losses) | |||||
translation | liability | on derivative | |||||
adjustments | adjustments | instruments | Total | ||||
¥ (15,438) | ¥ (25,890) | ¥ | 1,536 | ¥ (39,792) | |||
(33,311) | 72 | 72 | (33,167) | ||||
- | 256 | (786) | (530) | ||||
(33,311) | 328 | (714) | (33,697) |
Less: other comprehensive income (loss) | (2,625) | - | (93) | (2,718) | ||||
attributable to noncotrolling interests | ||||||||
Other comprehensive income (loss) attributable | (30,686) | 328 | (621) | (30,979) | ||||
to Komatsu Ltd. | ||||||||
Balance, end of the period | ¥ (46,124) | ¥ (25,562) | ¥ | 915 | ¥ (70,771) |
All amounts are net of tax.
- 10 -
Reclassification out of accumulated other comprehensive income (loss) for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen | ||
Three months ended | Affected line items in | |
June 30, 2020 | consolidated statements of income |
Pension liability adjustments
Amortization of actuarial loss or gain and prior ¥ (415) service cost
(415)
135
(280) Net unrealized holding gains (losses) on derivative
instruments
Forwards contracts711 (249)
Other income (expenses), net: Other, net
Total before tax
Income taxes
Net of tax
Net sales
Cost of sales
350 | Other income (expenses), net: Other, | |||
net | ||||
812 | Total before tax | |||
(216) | Income taxes | |||
596 | Net of tax | |||
Total reclassification for the period | ¥ | 316 | Net of tax | |
Millions of yen | ||||
Three months ended | Affected line items in | |||
June 30, 2019 | consolidated statements of income | |||
Pension liability adjustments | ||||
Amortization of actuarial loss or gain and prior | ¥ | (378) | Other income (expenses), net: Other, | |
service cost | net | |||
(378) | Total before tax | |||
122 | Income taxes | |||
(256) | Net of tax | |||
Net unrealized holding gains (losses) on derivative | ||||
instruments | ||||
Forwards contracts | 192 | Net sales | ||
121 | Cost of sales | |||
1,267 | Other income (expenses), net: Other, | |||
net | ||||
1,580 | Total before tax | |||
(794) | Income taxes | |||
786 | Net of tax | |||
Total reclassification for the period | ¥ | 530 | Net of tax |
- 11 -
Tax effects allocated to each component of other comprehensive income (loss) for the three months ended June 30,
2020 and 2019 are as follows:
Millions of yen
Three months ended June 30, 2020
Before tax | Tax (expense) | Net of tax |
amount | or benefit | amount |
Foreign currency translation adjustments
Foreign currency translation adjustments arising during the period
Less: reclassification adjustment for gains included in net income
Net foreign currency translation adjustments Pension liability adjustments
Pension liability adjustments arising during the period Less: reclassification adjustment for losses included in net income
Net pension liability adjustments
Net unrealized holding gains (losses) on derivative instruments Unrealized holding gains arising during the period
¥ 14,613 | ¥ | 41 | ¥ 14,654 | ||
- | - | - | |||
14,613 | 41 | 14,654 | |||
(34) | |||||
18 | (16) |
415 | (135) | 280 | |||
381 | (117) | 264 | |||
669 | |||||
(310) | 359 |
Less: reclassification adjustment for gains included in net | (812) | 216 | (596) | |||||
income | ||||||||
Net unrealized holding losses | (143) | (94) | (237) | |||||
Other comprehensive income (loss) | ¥ | 14,851 | ¥ | (170) | ¥ | 14,681 | ||
Millions of yen | ||||||||
Three months ended June 30, 2019 | ||||||||
Before tax | Tax (expense) | Net of tax | ||||||
amount | or benefit | amount |
Foreign currency translation adjustments
Foreign currency translation adjustments arising during the period
Less: reclassification adjustment for gains included in net income
Net foreign currency translation adjustments Pension liability adjustments
Pension liability adjustments arising during the period Less: reclassification adjustment for losses included in net income
Net pension liability adjustments
Net unrealized holding gains (losses) on derivative instruments Unrealized holding gains arising during the period
¥ (33,318) ¥ | 7 | ¥ (33,311) | |||
- | - | - | |||
(33,318) | 7 | (33,311) | |||
109 | |||||
(37) | 72 | ||||
378 | (122) | 256 | |||
487 | (159) | 328 | |||
725 | |||||
(653) | 72 |
Less: reclassification adjustment for gains included in net | (1,580) | 794 | (786) | |||
income | ||||||
Net unrealized holding losses | (855) | 141 | (714) | |||
Other comprehensive income (loss) | ¥ (33,686) | ¥ | (11) | ¥ (33,697) |
- 12 -
9. Revenue
(1) Disaggregation of revenue
The disaggregation of revenue by operating and geographic segment are described in Note 19.
(2) Contract balances
Contract balances arising from contracts with customers at June 30, 2020 and at March 31, 2020 are as follows:
Millions of yen | |||||
June 30, 2020 | March 31, 2020 | ||||
Receivables *1 | ¥ | 899,301 | ¥ | 980,371 | |
Contract assets *2 | 2,065 | 3,483 | |||
Contract liabilities *3 | 102,688 | 100,472 |
*1 Receivables are included in trade notes and accounts receivable, net and long-term trade receivables, net in the accompanying consolidated balance sheets. These amounts are before deducting allowance for doubtful trade receivables.
*2 Contract assets are included in trade notes and accounts receivable, net in the accompanying consolidated balance sheets. These amounts are before deducting allowance for doubtful trade receivables.
*3 Contract liabilities are included in other current liabilities and deferred income taxes and other liabilities in the accompanying consolidated balance sheets.
Revenue recognized for the three months ended June 30, 2020 that was included in the contract liability balance as of March 31, 2020 was ¥19,292 million. Revenue recognized for the three months ended June 30, 2019 that was included in the contract liability balance as of March 31, 2019 was ¥24,423 million.
In addition, the amounts of revenue recognized during the three months ended June 30, 2020 and 2019 from performance obligations satisfied or partially satisfied in previous periods were immaterial.
(3) Transaction price allocated to the remaining performance obligations
As of June 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations that have original expected durations greater than one year was ¥172,333 million, of which ¥82,444 million is expected to be recognized as revenue in the twelve months following June 30, 2020.
10. Stock-Based Remuneration
The Company had a stock option plan which transfers the Company's shares to directors and certain employees and certain representative directors of major subsidiaries under an agreement granting the right for them to request such transfers at a predetermined price until the fiscal year ended March 31, 2018.
From the fiscal year ended March 31, 2019, the Company has introduced a new compensation plan, i. e. , the restricted stock compensation system for the purpose of providing directors (other than outside directors) and employees of the Company and directors and employees of major subsidiaries with medium- to long-term incentives and advancing the sharing of value between the directors and shareholders of the company. Compensation expenses during the three months ended June 30, 2020 and 2019 were recorded in selling, general and administrative expenses, and were not material to Komatsu's financial position and results of operations. The Company recognizes compensation expense using the fair value method.
- 13 -
11. Leases
Revenues from sales-type and operating leases as a lessor, included in net sales on the consolidated statement of income, for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Sales-type lease revenue | |||||
Revenue recognized at the commencement date * | ¥ | 30,140 | ¥ | 31,101 | |
Interest income | 1,843 | 2,589 | |||
Total sales-type lease revenue | 31,983 | 33,690 | |||
Operating lease revenue | 18,782 | 22,093 | |||
Total | ¥ | 50,765 | ¥ | 55,783 | |
- The revenue recognized at the commencement date is included in net sales of the Construction, Mining and Utility Equipment operating segment.
- 14 -
12. Net Income Attributable to Komatsu Ltd. per Share
The Company has the restricted stock compensation system (hereinafter, the "System") for directors (other than outside directors) and employees of the Company and directors and employees of major subsidiaries. Among the new shares issued under the System, those transfer restrictions which have not been cancelled are distinguished as participating securities from common shares. Each common share and restricted stock has the same rights to net income attributable to Komatsu Ltd.
A reconciliation of the numerators and denominators of the basic net income attributable to Komatsu Ltd. per share computations is as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Net income attributable to Komatsu Ltd. | ¥ | 16,251 | ¥ | 47,476 | |
Net income attributable to participating securities (restricted stocks) | 10 | 14 | |||
Net income attributable to common shareholders | ¥ | 16,241 | ¥ | 47,462 | |
Number of shares | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Weighted average number of common shares outstanding, less treasury | |||||
stock | 944,646,801 | 943,935,658 | |||
Weighted average number of participating securities (restricted stocks) | 588,014 | 281,660 | |||
Weighted average number of common shares | 944,058,787 | 943,653,998 | |||
Yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Basic net income attributable to Komatsu Ltd. per share | ¥ | 17.20 | ¥ | 50.30 |
A reconciliation of the numerators and denominators of the diluted net income attributable to Komatsu Ltd. per share computations is as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Net income attributable to Komatsu Ltd. | ¥ | 16,251 | ¥ | 47,476 | |
Net income attributable to participating securities (restricted stocks) | 10 | 14 | |||
Net income attributable to common shareholders | ¥ | 16,241 | ¥ | 47,462 | |
Number of shares | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Weighted average number of common shares outstanding, less treasury | |||||
stock | 944,646,801 | 943,935,658 | |||
Dilutive effect of: | |||||
Stock options | 452,195 | 864,319 | |||
Weighted average number of participating securities (restricted stocks) | 588,014 | 281,660 | |||
Weighted average number of diluted common shares | 944,510,982 | 944,518,317 | |||
Yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Diluted net income attributable to Komatsu Ltd. per share | ¥ | 17.20 | ¥ | 50.25 |
- 15 -
13. Contingent Liabilities
Komatsu provides guarantees to third parties of loans of the employees, affiliated companies, customers and other companies. The guarantees of loans relating to the employees are mainly made for their housing loans. The guarantees of loans relating to the affiliated companies, customers and other companies are made to enhance the credit of those companies. For each guarantee provided, Komatsu would have to perform under a guarantee if the borrower defaults on a payment within the contract terms. The contract terms are from 10 years to 30 years in the case of employees with housing loans, and from 1 year to 7 years in the case of loans relating to the affiliated companies, customers and other companies. The maximum amount of undiscounted payments Komatsu would have had to make in the event of default at June 30, 2020 and at March 31, 2020 were ¥11,969 million and ¥12,142 million, respectively. The fair value of the liabilities recognized for Komatsu's obligations as guarantors under those guarantees at June 30, 2020 were insignificant. Certain of those guarantees were secured by collateral and insurance issued to Komatsu.
Komatsu provides guarantees that subsidiaries of the Company perform the obligations of the terms and conditions of contracts by standby letters of credit issued by banks. Komatsu would have to pay the liabilities incurred to banks if the subsidiaries don't perform the obligations of the terms and conditions of contracts. The maximum amount of undiscounted payments Komatsu would have had to make in the event of defaults of the contracts at June 30, 2020 and at March 31, 2020 were ¥14,250 million and ¥15,590 million, respectively.
Management of the Company believes that losses from those contingent liabilities, if any, would not have a material effect on the quarterly consolidated financial statements.
Komatsu is involved in certain legal actions and claims arising mainly in the ordinary course of its business. It is the opinion of management and legal counsel that such litigation and claims will be resolved without material effect on Komatsu's financial position.
Komatsu has business activities with customers, dealers and associates around the world and its trade receivables from such parties and the guarantees for them are well diversified to minimize concentrations of credit risks. Management does not anticipate incurring losses on its trade receivables in excess of established allowances.
- 16 -
14. Derivative Financial Instruments
Notional principal amounts of derivative financial instruments outstanding at June 30, 2020 and at March 31, 2020 are as follows:
Millions of yen | |||||
June 30, 2020 | March 31, 2020 | ||||
Forwards contracts: | |||||
Sale of foreign currencies | ¥ | 130,133 | ¥ | 147,655 | |
Purchase of foreign currencies | 118,120 | 101,835 | |||
Interest rate swaps and cross-currency swap agreements | 90,995 | 83,088 |
Fair value of derivative instruments at June 30, 2020 and at March 31, 2020 on the consolidated balance sheets are as follows:
Millions of yen | |||||||||
June 30, 2020 | |||||||||
Derivative Assets | Derivative Liabilities | ||||||||
Derivative instruments designated as | Location on the consolidated | Estimated | Location on the consolidated | Estimated | |||||
hedging instruments | Balance Sheets | fair value | Balance Sheets | fair value | |||||
Forwards contracts | Other current assets | ¥ | 908 | Other current liabilities | ¥ 1,736 | ||||
Deferred income taxes and | - Deferred income taxes and | 270 | |||||||
other assets | other liabilities | ||||||||
Interest rate swaps and | Other current assets | - Other current liabilities | 9 | ||||||
cross-currency swap | Deferred income taxes and | - Deferred income taxes and | 944 | ||||||
agreements | other assets | other liabilities | |||||||
Total | ¥ | 908 | ¥ 2,959 | ||||||
Derivative Assets | Derivative Liabilities | ||||||||
Location on the consolidated | Estimated | Location on the consolidated | Estimated | ||||||
Undesignated derivative instruments | Balance Sheets | fair value | Balance Sheets | fair value | |||||
Forwards contracts | Other current assets | ¥ 2,866 | Other current liabilities | ¥ 1,663 | |||||
Deferred income taxes and | 2 | Deferred income taxes and | 2 | ||||||
other assets | other assets |
Interest rate swaps and cross-currency swap agreements
Other current assets | 310 | Other current liabilities | 213 |
Deferred income taxes and | 97 | Deferred income taxes and | - |
other assets | other liabilities |
Total | ¥ 3,275 | ¥ 1,878 | |
Total Derivative Instruments | ¥ 4,183 | ¥ 4,837 | |
- 17 -
Millions of yen | ||||||||
March 31, 2020 | ||||||||
Derivative Assets | Derivative Liabilities | |||||||
Derivative instruments designated as | Location on the consolidated | Estimated | Location on the consolidated | Estimated | ||||
hedging instruments | Balance Sheets | fair value | Balance Sheets | fair value | ||||
Forwards contracts | Other current assets | ¥ 1,567 | Other current liabilities | ¥ 1,836 | ||||
Deferred income taxes and | 9 | Deferred income taxes and | 318 | |||||
other assets | other liabilities | |||||||
Interest rate swaps and | Other current assets | - Other current liabilities | 4 | |||||
cross-currency swap | Deferred income taxes and | - Deferred income taxes and | 866 | |||||
agreements | other assets | other liabilities | ||||||
Total | ¥ 1,576 | ¥ 3,024 | ||||||
Derivative Assets | Derivative Liabilities | |||||||
Location on the consolidated | Estimated | Location on the consolidated | Estimated | |||||
Undesignated derivative instruments | Balance Sheets | fair value | Balance Sheets | fair value | ||||
Forwards contracts | Other current assets | ¥ 7,511 | Other current liabilities | ¥ 1,673 | ||||
Deferred income taxes and | 2 | Deferred income taxes and | 2 | |||||
other assets | other liabilities |
Interest rate swaps and cross-currency swap agreements
Other current assets | 546 | Other current liabilities | 196 |
Deferred income taxes and | 207 | Deferred income taxes and | - |
other assets | other liabilities |
Total | ¥ 8,266 | ¥ 1,871 | |
Total Derivative Instruments | ¥ 9,842 | ¥ 4,895 | |
- 18 -
The effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income for the three months ended June 30, 2020 and 2019 are as follows:
Derivative instruments designated as cash flow hedging relationships
Millions of yen | |||||||
Three months ended June 30, 2020 | |||||||
Amount of | Gains (losses) reclassified from | ||||||
gains (losses) | |||||||
recognized | accumulated OCI on derivatives | ||||||
in OCI | Location of | ||||||
on derivatives | consolidated statements of income | Amount | |||||
Forwards contracts | ¥ | 652 | Net sales | ¥ | 711 | ||
Cost of sales | (249) | ||||||
Other income (expenses), | 350 | ||||||
net: Other, net | |||||||
Interest rate swaps and | 17 | - | - | ||||
cross-currency swap agreements | |||||||
Total | ¥ | 669 | ¥ | 812 | |||
Millions of yen | |||||||
Three months ended June 30, 2019 | |||||||
Amount of | Gains (losses) reclassified from | ||||||
gains (losses) | |||||||
recognized | accumulated OCI on derivatives | ||||||
in OCI | Location of | ||||||
on derivatives | consolidated statements of income | Amount | |||||
Forwards contracts | ¥ | 1,058 | Net sales | ¥ | 192 | ||
Cost of sales | 121 | ||||||
Other income (expenses), | 1,267 | ||||||
net: Other, net | |||||||
Interest rate swaps and | (333) | - | - | ||||
cross-currency swap agreements | |||||||
Total | ¥ | 725 | ¥ | 1,580 |
* OCI stands for other comprehensive income (loss).
Derivative instruments not designated as hedging instruments relationships
Forwards contracts Interest rate swaps and cross-currency swap agreements
Total
Forwards contracts Interest rate swaps and cross-currency swap agreements
Total
Millions of yen
Three months ended June 30, 2020
Location of gains (losses) recognized | Amount of gains (losses) recognized |
in income on derivatives | in income on derivatives |
Other income (expenses), net: Other, net | ¥ | (2,522) | |
Cost of sales | (5) | ||
Other income (expenses), net: Other, net | (21) | ||
¥ | (2,548) | ||
Millions of yen | |||
Three months ended June 30, 2019 | |||
Location of gains (losses) recognized | Amount of gains (losses) recognized | ||
in income on derivatives | in income on derivatives | ||
Other income (expenses), net: Other, net | ¥ | (178) | |
Cost of sales | (123) | ||
Other income (expenses), net: Other, net | (8) | ||
¥ | (309) | ||
- 19 -
15. Fair Values of Financial Instruments
(1) Cash and cash equivalents, Time deposits, Short-term debt
The carrying amounts approximate fair value because of the short maturity of these instruments.
(2) Long-term trade receivables, net, excluding lease receivables
The fair values of long-term trade receivables are based on the present value of future cash flows through maturity, discounted using the current interest rates for similar receivables of comparable maturity.
(3) Long-term debt, including current portion
The fair values of each of the long-term debt are based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted using the current market borrowing rate for similar debt of comparable maturity.
- Derivatives (Notes 14 and 16)
The fair values of derivative financial instruments are stated in Note 16 and therefore are not included in the table below.
The carrying amounts and the estimated fair values of the financial instruments as of June 30, 2020 and as of March 31, 2020, and fair value levels are summarized as follows:
Cash and cash equivalents
Time deposits
Long-term trade receivables, net, excluding lease receivables
Short-term debt
Long-term debt, including current portion
Millions of yen | ||||||||
June 30, 2020 | March 31, 2020 | |||||||
Carrying | Estimated | Carrying | Estimated | Fair Value | ||||
amount | fair value | amount | fair value | Levels | ||||
¥ 255,102 | ¥ 255,102 | ¥ 247,616 | ¥ 247,616 | Level 1 | ||||
2,128 | 2,128 | 2,057 | 2,057 | Level 2 | ||||
315,250 | 315,250 | 314,592 | 314,592 | Level 2 | ||||
473,332 | ||||||||
473,332 | 483,658 | 483,658 | Level 2 | |||||
574,533 | 576,785 | 528,720 | 528,460 | Level 2 |
Notes:
- Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could affect the estimates.
- The fair value levels are stated in Note 16.
- 20 -
16. Fair Value Measurements
Financial Accounting Standards Board Accounting Standards CodificationTM (hereinafter "ASC") 820, "Fair Value Measurements" defines that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:
Level 1 | - | Quoted prices in active markets for identical assets or liabilities |
Level 2 | - | Inputs other than quoted prices included within Level 1 that are observable for the assets or |
liabilities, either directly or indirectly | ||
Level 3 | - | Unobservable inputs for the assets or liabilities |
Assets and liabilities that are measured at fair value on a recurring basis
The fair value hierarchy levels of assets and liabilities that are measured at fair value on a recurring basis at June 30, 2020 and at March 31, 2020 are as follows:
At June 30, 2020
Assets
Derivatives
Forward contracts
Interest rate swaps and cross-currency swap agreements
Total
Liabilities
Derivatives
Forward contracts
Interest rate swaps and cross-currency swap agreements
Total
At March 31, 2020
Assets
Derivatives
Forward contracts
Interest rate swaps and cross-currency swap agreements
Total
Liabilities
Derivatives
Forward contracts
Interest rate swaps and cross-currency swap agreements
Total
Millions of yen
Level 1 | Level 2 | Level 3 | Total | ||||||||
¥ | |||||||||||
- | ¥ | 3,776 | ¥ | - | ¥ | 3,776 | |||||
- | 407 | - | 407 | ||||||||
¥ | - | ¥ | 4,183 | ¥ | - | ¥ | 4,183 | ||||
¥ | |||||||||||
- | ¥ | 3,671 | ¥ | - | ¥ | 3,671 | |||||
- | 1,166 | - | 1,166 | ||||||||
¥ | - | ¥ | 4,837 | ¥ | - | ¥ | 4,837 | ||||
Millions of yen | |||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||
¥ | |||||||||||
- | ¥ | 9,089 | ¥ | - | ¥ | 9,089 | |||||
- | 753 | - | 753 | ||||||||
¥ | - | ¥ | 9,842 | ¥ | - | ¥ | 9,842 | ||||
¥ | |||||||||||
- | ¥ | 3,829 | ¥ | - | ¥ | 3,829 | |||||
- | 1,066 | - | 1,066 | ||||||||
¥ | - | ¥ | 4,895 | ¥ | - | ¥ | 4,895 | ||||
- 21 -
Derivatives (Notes 14 and 15)
Derivatives primarily represent foreign exchange contracts and interest rate swap agreements. The fair value of foreign exchange contracts is based on a valuation model that discounts cash flows resulting from the differential between contract rate and the market-based forward rate and is classified in Level 2 in the fair value hierarchy. The fair value of interest rate swap agreements is based on a valuation model that discounts cash flows based on the terms of the contract and the swap curves and is classified in Level 2 in the fair value hierarchy.
Assets and liabilities that are measured at fair value on a non-recurring basis
During three months ended June 30, 2020 and 2019 assets and liabilities that were measured at fair value on a non- recurring basis were not material.
17. Committed Credit Lines
The Company and certain consolidated subsidiaries have entered into contracts with certain financial institutions for committed credit lines. These total amounts of committed credit lines at June 30, 2020 and at March 31, 2020 were ¥567,404 million and ¥133,945 million, respectively. These total amounts of unused committed credit lines available for full and immediate borrowings at June 30, 2020 and at March 31, 2020 were ¥547,456 million and ¥112,135 million, respectively.
18. Dividends | ||||||||||||
Payment amount of dividends | ||||||||||||
Three months ended June 30, 2020 | ||||||||||||
Resolution | Type of | Aggregate amount of | Resource of | Dividend | Record | Effective | ||||||
dividends | per share | |||||||||||
stock | dividends | date | date | |||||||||
(Millions of yen) | (Yen) | |||||||||||
Ordinary general | ||||||||||||
meeting of | Common | 36,858 | Retained | 39 | March 31, | June 19, | ||||||
shareholders held | stock | earnings | 2020 | 2020 |
on June 18, 2020
Note : The amount is rounded down to nearest million yen.
Payment amount of dividends
Three months ended June 30, 2019 | ||||||||||||
Resolution | Type of | Aggregate amount of | Resource of | Dividend | Record | Effective | ||||||
dividends | per share | |||||||||||
stock | dividends | date | date | |||||||||
(Millions of yen) | (Yen) | |||||||||||
Ordinary general | ||||||||||||
meeting of | Common | 55,718 | Retained | 59 | March 31, | June 19, | ||||||
shareholders held | stock | earnings | 2019 | 2019 |
on June 18, 2019
Note : The amount is rounded down to nearest million yen.
- 22 -
19. Business Segment and Geographic Information
Komatsu has three operating segments: 1) Construction, Mining and Utility Equipment, 2) Retail Finance, and 3) Industrial Machinery and Others. Those operating segments which have separate financial information are available for allocating resources and assessing its performance by management.
The accounting policies employed for the preparation of segment information are identical to those employed for the preparation of the quarterly consolidated financial statements of the Company.
Segment profit available for allocating resources and assessing its performance by management is determined by subtracting the cost of sales and selling, general and administrative expenses from net sales attributed to the operating segment. Segment profit excludes certain general corporate administration and finance expenses, such as costs of executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal and public relations. Segment profit also excludes certain charges which may otherwise relate to operating segments, including impairments of long-lived assets and goodwill.
Operating segments:
Information about operating segments for the three months ended June 30, 2020 and 2019 is as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Net sales: | |||||
Construction, Mining and Utility Equipment - | |||||
External customers | ¥ | 420,005 | ¥ | 560,598 | |
Intersegment | 5,806 | 879 | |||
Total | 425,811 | 561,477 | |||
Retail Finance - | |||||
External customers | 13,948 | 15,466 | |||
Intersegment | 1,973 | 1,813 | |||
Total | 15,921 | 17,279 | |||
Industrial Machinery and Others - | |||||
External customers | 24,778 | 33,703 | |||
Intersegment | 244 | 318 | |||
Total | 25,022 | 34,021 | |||
Elimination | (8,023) | (3,010) | |||
Consolidated | ¥ | 458,731 | ¥ | 609,767 | |
Segment profit: | |||||
Construction, Mining and Utility Equipment | ¥ | 23,200 | ¥ | 68,689 | |
Retail Finance | 1,895 | 3,404 | |||
Industrial Machinery and Others | 1,707 | 554 | |||
Total segment profit | 26,802 | 72,647 | |||
Corporate expenses and elimination | (164) | 96 | |||
Consolidated | ¥ | 26,638 | ¥ | 72,743 | |
- 23 -
Reconciliation of total segment profit to consolidated income before income taxes and equity in earnings of affiliated companies for the three months ended June 30, 2020 and 2019 is as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Total segment profit | ¥ | 26,802 | ¥ | 72,647 | |
Corporate expenses and elimination | (164) | 96 | |||
Total | 26,638 | 72,743 | |||
Other operating income | 281 | 2,017 | |||
Operating income | 26,919 | 74,760 | |||
Interest and dividend income | 1,185 | 1,746 | |||
Interest expense | (3,841) | (6,650) | |||
Other, net | 4,234 | (2,946) | |||
Consolidated income before income taxes and equity in earnings of | ¥ | 28,497 | ¥ | 66,910 | |
affiliated companies |
Business categories and principal products and services included in each operating segment are as follows:
a) Construction, Mining and Utility Equipment operating segment:
Excavating equipment, loading equipment, grading and roadbed preparation equipment, hauling equipment, forestry equipment, tunneling machines, underground mining equipment, recycling equipment, industrial vehicles, other equipment, engines and components, casting products and logistics
- Retail Finance: Financing
- Industrial Machinery and Others operating segment:
Metal forging and stamping presses, sheet-metal machines, machine tools, defense systems, temperature-control equipment and optical machinery
Transfers between segments are made at estimated arm's length prices.
Geographic information:
Net sales determined by customer location for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen | |||||||||||
Three months ended | |||||||||||
June 30, 2020 | |||||||||||
Construction, Mining | Industrial Machinery | ||||||||||
and Utility Equipment | Retail Finance | and Others | Total | ||||||||
Japan | ¥ | 61,407 | ¥ | 441 | ¥ | 12,395 | ¥ | 74,243 | |||
The Americas | 160,643 | 10,834 | 1,672 | 173,149 | |||||||
Europe and CIS | 60,146 | 662 | 1,474 | 62,282 | |||||||
China | 43,172 | 760 | 2,768 | 46,700 | |||||||
Asia (excluding Japan and China) | |||||||||||
and Oceania | 73,933 | 1,213 | 6,447 | 81,593 | |||||||
Middle East and Africa | 20,704 | 38 | 22 | 20,764 | |||||||
Total | ¥ | 420,005 | ¥ | 13,948 | ¥ | 24,778 | ¥ | 458,731 |
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Millions of yen | |||||||||||
Three months ended | |||||||||||
June 30, 2019 | |||||||||||
Construction, Mining | Industrial Machinery | ||||||||||
and Utility Equipment | Retail Finance | and Others | Total | ||||||||
Japan | ¥ | 63,777 | ¥ | 445 | ¥ | 13,854 | ¥ | 78,076 | |||
The Americas | 217,962 | 11,991 | 3,229 | 233,182 | |||||||
Europe and CIS | 93,197 | 675 | 1,099 | 94,971 | |||||||
China | 36,237 | 836 | 6,217 | 43,290 | |||||||
Asia (excluding Japan and China) | |||||||||||
and Oceania | 118,518 | 1,501 | 9,289 | 129,308 | |||||||
Middle East and Africa | 30,907 | 18 | 15 | 30,940 | |||||||
Total | ¥ | 560,598 | ¥ | 15,466 | ¥ | 33,703 | ¥ | 609,767 |
Net sales determined by geographic origin for the three months ended June 30, 2020 and 2019 are as follows:
Millions of yen | |||||
Three months ended | Three months ended | ||||
June 30, 2020 | June 30, 2019 | ||||
Japan | ¥ | 90,958 | ¥ | 115,233 | |
The Americas | 161,873 | 217,378 | |||
Europe and CIS | 62,733 | 97,970 | |||
China | 44,623 | 39,163 | |||
Others | 98,544 | 140,023 | |||
Total | ¥ | 458,731 | ¥ | 609,767 | |
There were no sales to a single major external customer for the three months ended June 30, 2020 and 2019
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- Material Subsequent Events Not applicable.
Komatsu evaluated subsequent events through August 7, 2020, the issue date of its quarterly consolidated financial statements. - Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements
The terminology, forms and preparation methods of the Company's quarterly consolidated financial statements are in accordance with U.S. GAAP.
The main differences between quarterly consolidated financial statements prepared in accordance with U.S. GAAP and those prepared in accordance with the Accounting Standards for Quarterly Consolidated Financial Statements and the Ordinance on Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements of Japan (hereinafter "J. GAAP") are as follows.
(1) Scope of consolidation
For quarterly consolidated financial statements in accordance with J. GAAP, the scope of consolidation is determined on an effective control and influence basis. For quarterly consolidated financial statements in accordance with U.S. GAAP, the scope of consolidation is determined on the shareholding basis on which the determination is based on voting rights and on a consolidation basis of variable interest entities.
(2) Accounting policies
a. Deferred income on installment sales
Although deferral of income on installment sales is permitted in accordance with J. GAAP, the Company recognizes income at the time of sales without deferring income on installment sales in its quarterly consolidated financial statements in accordance with U.S. GAAP.
b. Share issuance cost
Although in accordance with J. GAAP, share issuance cost is permitted to be recognized in profit or loss when incurred, the Company treats such cost in a deduction item from capital surplus as expenses incidental to capital transactions in its quarterly consolidated financial statements in accordance with U.S. GAAP.
c. Accounting for retirement benefits
Although in accordance with J. GAAP, net actuarial gains or losses are required to be amortized over certain periods that are shorter than the average remaining years of service, the Company has adopted the corridor approach in its quarterly consolidated financial statements in accordance with U.S. GAAP.
d. Business combination and goodwill
Goodwill is required to be amortized over certain periods in accordance with J. GAAP, while U.S. GAAP requires companies to implement impairment test at least once annually without goodwill being amortized. For intangible fixed assets with indefinite useful lives, U.S. GAAP also requires companies to implement impairment test without such assets being amortized.
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Presentation methods and other matters a. Presentation of legal retained earnings
Although in accordance with J. GAAP, legal retained earnings is recorded as retained earnings together with other surplus, the Company separately presents as appropriated legal reserve in its quarterly consolidated financial statements in accordance with U.S. GAAP.
b. Extraordinary income and loss
In accordance with J. GAAP, gain or loss on certain sales of non-current assets, such as gain or loss from the sale of fixed assets, is presented as extraordinary income or loss. However, since there is no concept of extraordinary items in U.S. GAAP, extraordinary income or loss is not presented in the Company's quarterly consolidated financial statements.
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Komatsu Ltd. published this content on 06 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2020 10:33:16 UTC