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 July 1, 2020 to September 30, 2020
(Second Quarter of the 152nd Fiscal Year)
KOMATSU LTD.
Second Quarter of the 152nd Fiscal Year (from July 1, 2020 to September 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 September 30, 2020 with the Director-General of the Kanto Local Finance Bureau on November 11, 2020. The Quarterly Securities Report contains, among other information, Quarterly Consolidated Financial Statements for the three months and six months ended September 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 October 28, 2020. Attached is an English translation of Quarterly Consolidated Financial Statements for the three months and six months ended September 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 September 30, 2020 and for the six months ended September 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 September 30, 2020 and March 31, 2020
September 30, 2020
March 31, 2020
Assets
Millions of yen
Ratio (%)
Millions of yen
Ratio (%)
Current assets
Cash and cash equivalents (Note 15)
¥
234,454
¥
247,616
Time deposits (Note 15)
1,399
2,057
Trade notes and accounts receivable, net (Notes 3 and 9)
669,907
744,395
Inventories (Note 4)
838,901
805,309
Other current assets (Notes 14, 15 and 16)
131,429
147,413
Total current assets
1,876,090
52.2
1,946,790
53.3
Long-term trade receivables, net (Notes 3, 9 and 15)
426,638
11.9
420,918
11.5
Investments
Investments in and advances to affiliated companies
38,014
38,210
Investment securities (Note 5)
7,698
7,328
Other
2,538
2,436
Total investments
48,250
1.3
47,974
1.3
Property, plant and equipment
- less accumulated depreciation and amortization of ¥914,739
million at September 30, 2020 and ¥894,328 million at March 31, 2020
757,463
21.1
757,679
20.8
Operating lease right-of-use assets
54,487
1.5
53,454
1.5
Goodwill
158,834
4.4
157,521
4.3
Other intangible assets
162,840
4.5
162,062
4.4
- less accumulated amortization (Note 6)
Deferred income taxes and other assets (Notes 14, 15 and 16)
109,874
3.1
107,288
2.9
Total assets
¥
3,594,476
100.0
¥
3,653,686
100.0
September 30, 2020
March 31, 2020
Liabilities and Equity
Millions of yen
Ratio (%)
Millions of yen
Ratio (%)
Current liabilities
Short-term debt (Note 15)
¥
380,289
¥
483,658
Current maturities of long-term debt (Note 15)
57,339
118,880
Trade notes, bills and accounts payable
194,054
220,160
Income taxes payable
22,317
23,169
Current operating lease liabilities
14,662
14,933
Other current liabilities (Notes 9, 14, 15 and 16)
301,336
297,825
Total current liabilities
969,997
27.0
1,158,625
31.7
Long-term liabilities
Long-term debt (Note 15)
528,427
409,840
Liability for pension and retirement benefits
95,476
96,392
Long-term operating lease liabilities
39,752
38,624
Deferred income taxes and other liabilities (Notes 9, 14, 15 and 16)
94,114
93,980
Total long-term liabilities
757,769
21.1
638,836
17.5
Total liabilities
1,727,766
48.1
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 972,887,610 shares
Outstanding 945,032,303 shares at September 30, 2020 and
944,621,957 shares at March 31, 2020
69,037
68,689
Capital surplus
136,587
136,459
Retained earnings:
Appropriated for legal reserve
47,258
46,813
Unappropriated
1,699,110
1,699,477
Accumulated other comprehensive income (loss) (Notes 8 and 14)
(125,409)
(130,666)
Treasury stock at cost,
27,855,307 shares at September 30, 2020 and 27,959,273 shares at March 31, 2020
(48,985)
(49,166)
Total Komatsu Ltd. shareholders' equity
1,777,598
49.5
1,771,606
48.5
Noncontrolling interests
89,112
2.4
84,619
2.3
Total equity
1,866,710
51.9
1,856,225
50.8
Total liabilities and equity
¥
3,594,476
100.0
¥
3,653,686
100.0
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 2 -
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Six months ended September 30, 2020 and 2019
Consolidated Statements of Income
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Millions of yen
Ratio(%)
Millions of yen
Ratio(%)
Net sales (Notes 9, 11 and 14)
¥
957,717
100.0
¥
1,213,485
100.0
Cost of sales (Notes 6, 7 and 14)
699,812
73.1
855,318
70.5
Selling, general and administrative expenses (Notes 6, 7 and 10)
197,148
20.6
217,478
17.9
Other operating income (expenses), net
(415)
(0.0)
1,293
0.1
Operating income
60,342
6.3
141,982
11.7
Other income (expenses), net
Interest and dividend income
2,414
0.3
3,732
0.3
Interest expense
(7,406)
(0.8)
(13,108)
(1.1)
Other, net (Notes 5, 7, 8 and 14)
3,180
0.3
(4,394)
(0.4)
Total
(1,812)
(0.2)
(13,770)
(1.1)
Income before income taxes and equity in
58,530
6.1
128,212
10.6
earnings of affiliated companies
Income taxes (Note 8)
Current
19,787
35,948
Deferred
(2,689)
(330)
Total
17,098
1.8
35,618
2.9
Income before equity in earnings of affiliated companies
41,432
4.3
92,594
7.6
Equity in earnings of affiliated companies
1,189
0.1
1,730
0.1
Net income
42,621
4.5
94,324
7.8
Less: Net income attributable to noncontrolling interests
5,327
0.6
4,262
0.4
Net income attributable to Komatsu Ltd.
¥
37,294
3.9
¥
90,062
7.4
Yen
Per share data (Note 12):
Net income attributable to Komatsu Ltd.:
Basic
¥
39.48
¥
95.40
Diluted
¥
39.46
¥
95.32
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Net income
¥
42,621
¥
94,324
Other comprehensive income (loss), for the period, net of tax
Foreign currency translation adjustments (Note 8)
6,506
(66,214)
Pension liability adjustments (Notes 7 and 8)
487
145
Net unrealized holding gains (losses) on derivative instruments (Notes 8 and 14)
252
(1,231)
Total
7,245
(67,300)
Comprehensive income
49,866
27,024
Less: Comprehensive income (loss) attributable to noncontrolling interests
7,315
(361)
Comprehensive income attributable to Komatsu Ltd.
¥
42,551
¥
27,385
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 3 -
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Three months ended September 30, 2020 and 2019
Consolidated Statements of Income
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Millions of yen
Ratio(%)
Millions of yen
Ratio(%)
Net sales (Notes 9, 11 and 14)
¥
498,986
100.0
¥
603,718
100.0
Cost of sales (Notes 6, 7 and 14)
365,092
73.2
427,961
70.9
Selling, general and administrative expenses (Notes 6, 7 and 10)
99,775
20.0
107,811
17.9
Other operating income (expenses), net
(696)
(0.1)
(724)
(0.1)
Operating income
33,423
6.7
67,222
11.1
Other income (expenses), net
Interest and dividend income
1,229
0.2
1,986
0.3
Interest expense
(3,565)
(0.7)
(6,458)
(1.1)
Other, net (Notes 5, 7, 8 and 14)
(1,054)
(0.2)
(1,448)
(0.2)
Total
(3,390)
(0.7)
(5,920)
(1.0)
Income before income taxes and equity in
30,033
6.0
61,302
10.2
earnings of affiliated companies
Income taxes (Note 8)
Current
9,711
22,866
Deferred
(2,431)
(5,079)
Total
7,280
1.5
17,787
2.9
Income before equity in earnings of affiliated companies
22,753
4.6
43,515
7.2
Equity in earnings of affiliated companies
638
0.1
1,062
0.2
Net income
23,391
4.7
44,577
7.4
Less: Net income attributable to noncontrolling interests
2,348
0.5
1,991
0.3
Net income attributable to Komatsu Ltd.
¥
21,043
4.2
¥
42,586
7.1
Yen
Per share data (Note 12):
Net income attributable to Komatsu Ltd.:
Basic
¥
22.27
¥
45.11
Diluted
¥
22.26
¥
45.07
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Net income
¥
23,391
¥
44,577
Other comprehensive income (loss), for the period, net of tax
Foreign currency translation adjustments (Note 8)
(8,148)
(32,903)
Pension liability adjustments (Notes 7 and 8)
223
(183)
Net unrealized holding gains (losses) on derivative instruments (Notes 8 and 14)
489
(517)
Total
(7,436)
(33,603)
Comprehensive income
15,955
10,974
Less: Comprehensive income attributable to noncontrolling interests
2,180
86
Comprehensive income attributable to Komatsu Ltd.
¥
13,775
¥
10,888
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 4 -
Consolidated Statements of Equity (Unaudited)
Komatsu Ltd. and Consolidated Subsidiaries
Six months ended September 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)
(4,498)
(41,357)
Transfer to retained earnings appropriated
445
(445)
－
－
for legal reserve
Other changes
(357)
(357)
1,676
1,319
Net income
37,294
37,294
5,327
42,621
Other comprehensive income (loss),
5,257
5,257
1,988
7,245
for the period, net of tax (Note 8)
Issuance and exercise of stock acquisition
(275)
(275)
(275)
rights (Note 10)
Purchase of treasury stock
(38)
(38)
(38)
Sales of treasury stock
57
219
276
276
Restricted stock compensation (Note 10)
348
346
694
694
Balance at September 30, 2020
¥
69,037
¥
136,587
¥
47,258
¥
1,699,110
¥
(125,409)
¥
(48,985)
¥
1,777,598
¥
89,112
¥
1,866,710
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
Six months ended September 30, 2019
Millions of yen
Retained earnings
Appropriated
Accumulated
Total
Non-
Common
Capital
Un-
other
Treasury
Komatsu Ltd.
for legal
controlling
stock
surplus
appropriated
comprehensive
stock
shareholders'
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
Cash dividends (Note 18)
(55,719)
(55,719)
(4,614)
Transfer to retained earnings appropriated
552
(552)
－
for legal reserve
Other changes
10
(29)
(19)
106
Net income
90,062
90,062
4,262
Other comprehensive income (loss),
(62,677)
(62,677)
(4,623)
for the period, net of tax (Note 8)
Issuance and exercise of stock acquisition
(325)
(325)
rights (Note 10)
Purchase of treasury stock
(22)
(22)
Sales of treasury stock
14
312
326
Total equity
1,902,868
(60,333)
－
87
94,324
(67,300)
(325)
(22)
326
Restricted stock compensation (Note 10)
378
375
753
753
Balance at September 30, 2019
¥
68,689
¥
136,872
¥
46,580 ¥ 1,687,896 ¥
(102,498) ¥
(49,578)
¥ 1,787,961
¥
82,417 ¥ 1,870,378
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
Six months ended September 30, 2020 and 2019
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Operating activities
Net income
¥
42,621
¥
94,324
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization
64,713
64,683
Deferred income taxes
(2,689)
(330)
Impairment loss and net loss (gain) on valuation of investment securities
63
(101)
Net loss (gain) on sale of fixed assets
(99)
(620)
Loss on disposal of fixed assets
1,099
1,618
Pension and retirement benefits, net
(237)
(796)
Changes in assets and liabilities:
Decrease (increase) in trade receivables
72,882
56,322
Decrease (increase) in inventories
(32,499)
(88,414)
Increase (decrease) in trade payables
(25,801)
(12,440)
Increase (decrease) in income taxes payable
(1,406)
(17,030)
Other, net
33,889
38,540
Net cash provided by (used in) operating activities
152,536
135,756
Investing activities
Capital expenditures
(85,278)
(91,837)
Proceeds from sale of fixed assets
6,010
6,979
Proceeds from sale of investment securities
21
525
Purchases of investment securities
(537)
(492)
Acquisition of subsidiaries and equity investees, net of cash acquired
(1,717)
(21,606)
Other, net
1,477
(267)
Net cash provided by (used in) investing activities
(80,024)
(106,698)
Financing activities
Proceeds from debt issued (Original maturities greater than three months)
407,541
230,299
Payment on debt (Original maturities greater than three months)
(418,930)
(228,337)
Short-term debt, net (Original maturities three months or less)
(33,828)
45,511
Dividends paid
(36,859)
(55,719)
Other, net
(4,938)
(5,417)
Net cash provided by (used in) financing activities
(87,014)
(13,663)
Effect of exchange rate change on cash and cash equivalents
1,340
(872)
Net increase (decrease) in cash and cash equivalents
(13,162)
14,523
Cash and cash equivalents, beginning of year
247,616
148,479
Cash and cash equivalents, end of period
¥
234,454
¥
163,002
The accompanying Notes are an integral part of these Quarterly Consolidated Financial Statements.
- 6 -
Komatsu Ltd. and Consolidated Subsidiaries
Three months and six months ended September 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 the financial position and results of operations of Komatsu (the Company and its consolidated subsidiaries), 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.
2. Supplemental Cash Flow Information
Additional cash flow information for the six months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Additional cash flow information:
Interest paid
¥
7,533
¥
12,963
Income taxes paid, net
9,906
48,217
- 7 -
3. Allowance for Doubtful Receivables
At September 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 ¥16,663 million and ¥16,822 million, respectively.
4. Inventories
At September 30, 2020 and at March 31, 2020, inventories comprise the following:
Millions of yen
September 30, 2020
March 31, 2020
Finished products, including finished parts held for sale
¥
613,894
¥
586,468
Work in process
159,814
153,082
Materials and supplies
65,193
65,759
Total
¥
838,901
¥
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 six months ended September 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 September 30, 2020 and 2019
Six months ended September 30, 2020
(63)
6
(69)
Six months Ended September 30, 2019
101
(9)
110
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 September 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 September 30, 2020 and 2019
Three months ended September 30, 2020
25
7
18
Three months ended September 30, 2019
83
(25)
108
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 September 30, 2020 and as of March 31, 2020, the carrying amounts of these investments were ¥7,698 million and ¥7,328 million, respectively. Any impairment or any adjustment relating to observable price changes recorded until September 30, 2020 and until March 31, 2020 were not material.
- 8 -
6. Other Intangible Assets
Intangible assets at September 30, 2020 and at March 31, 2020 are as follows:
Millions of yen
September 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
¥
57,173
¥
(22,443)
¥
34,730
¥
52,813
¥
(21,678) ¥
31,135
Leasehold
7,059
(1,758)
5,301
6,959
(1,675)
5,284
Trademarks
52,489
(12,496)
39,993
52,444
(10,866)
41,578
Customer relationships
73,061
(26,063)
46,998
73,505
(25,197)
48,308
Technology assets
37,725
(12,378)
25,347
37,423
(11,950)
25,473
Other
6,877
(4,390)
2,487
7,292
(4,635)
2,657
Total
234,384
(79,528)
154,856
230,436
(76,001)
154,435
Other intangible assets not subject
7,984
7,627
to amortization
Total other intangible assets
¥
162,840
¥
162,062
The aggregate amortization expense of other intangible assets subject to amortization during the six months ended September 30, 2020 and 2019 were ¥9,793 million and ¥9,099 million, respectively. The aggregate amortization expense of other intangible assets subject to amortization during the three months ended September 30, 2020 and 2019 were ¥5,094 million and ¥4,616 million, respectively.
- 9 -
7. Cost of Retirement Benefits
Net periodic cost of Komatsu's defined benefit plans for the six months ended September 30, 2020 and 2019, consisted of the following components:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Service cost
¥
4,755
¥
4,556
Interest cost on projected benefit obligations
2,949
3,393
Expected return on plan assets
(4,892)
(5,395)
Amortization of actuarial loss or gain
673
585
Amortization of prior service cost
163
142
Net periodic cost
¥
3,648
¥
3,281
Net periodic cost of the postretirement benefit plans for the six months ended September 30, 2020 and 2019
included the following components:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Service cost
¥
259
¥
279
Interest cost on projected benefit obligations
207
277
Expected return on plan assets
(249)
(293)
Amortization of actuarial loss or gain
38
23
Amortization of prior service cost
(60)
2
Net periodic cost
¥
195
¥
288
Net periodic cost of Komatsu's defined benefit plans for the three months ended September 30, 2020 and 2019, consisted of the following components:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Service cost
¥
2,336
¥
2,241
Interest cost on projected benefit obligations
1,478
1,661
Expected return on plan assets
(2,450)
(2,642)
Amortization of actuarial loss or gain
336
292
Amortization of prior service cost
74
70
Net periodic cost
¥
1,774
¥
1,622
Net periodic cost of the postretirement benefit plans for the three months ended September 30, 2020 and 2019
included the following components:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Service cost
¥
129
¥
138
Interest cost on projected benefit obligations
103
137
Expected return on plan assets
(124)
(145)
Amortization of actuarial loss or gain
19
11
Amortization of prior service cost
(30)
1
Net periodic cost
¥
97
¥
142
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.
- 10 -
8. Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) for the six months ended September 30, 2020 and
2019 are as follows:
Millions of yen
Six months ended September 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)
6,506
(39)
1,421
7,888
－
526
(1,169)
(643)
6,506
487
252
7,245
Less: other comprehensive income (loss)
1,963
－
25
1,988
attributable to noncontrolling interests
Other comprehensive income (loss) attributable
4,543
487
227
5,257
to Komatsu Ltd.
Balance, end of the period
¥ (99,432)
¥ (26,489)
¥
512
¥ (125,409)
All amounts are net of tax.
Millions of yen
Six months ended September 30, 2019
Balance, beginning of the year
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Net other comprehensive income (loss) Less: other comprehensive income (loss) attributable to noncontrolling interests
Other comprehensive income (loss) attributable to Komatsu Ltd.
Net unrealized
Foreign
holding gains
currency
Pension
(losses)
translation
liability
on derivative
adjustments
adjustments
instruments
Total
(15,438) ¥ (25,890) ¥ 1,536 ¥ (39,792)
(66,214)
(368)
527
(66,055)
－
513
(1,758)
(1,245)
(66,214)
145
(1,231)
(67,300)
(4,502)
－
(121)
(4,623)
(61,712)
145
(1,110)
(62,677)
Equity transactions with noncontrolling
(29)
－
－
(29)
interests
Balance, end of the period
¥ (77,179)
¥ (25,745)
¥
426
¥ (102,498)
All amounts are net of tax.
- 11 -
Changes in accumulated other comprehensive income (loss) for the three months ended September 30, 2020 and
2019 are as follows:
Millions of yen
Three months ended September 30, 2020
Net unrealized
Foreign
holding gains
currency
Pension
(losses)
translation
liability
on derivative
adjustments
adjustments
instruments
Total
Balance, beginning of the period
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Net other comprehensive income (loss)
¥ (91,472)
¥ (26,712)
¥
43
¥ (118,141)
(8,148)
(23)
1,062
(7,109)
－
246
(573)
(327)
(8,148)
223
489
(7,436)
Less: other comprehensive income (loss)
(188)
－
20
(168)
attributable to noncontrolling interests
Other comprehensive income (loss) attributable
(7,960)
223
469
(7,268)
to Komatsu Ltd.
Balance, end of the period
¥ (99,432)
¥ (26,489)
¥
512
¥
(125,409)
All amounts are net of tax.
Millions of yen
Three months ended September 30, 2019
Net unrealized
Foreign
holding gains
currency
Pension
(losses)
translation
liability
on derivative
adjustments
adjustments
instruments
Total
Balance, beginning of the period
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (loss)
Net other comprehensive income (loss) Less: other comprehensive income (loss) attributable to noncontrolling interests
Other comprehensive income (loss) attributable to Komatsu Ltd.
¥ (46,124)
¥ (25,562) ¥
915
¥ (70,771)
(32,903)
(440)
455
(32,888)
－
257
(972)
(715)
(32,903)
(183)
(517)
(33,603)
(1,877)
－
(28)
(1,905)
(31,026)
(183)
(489)
(31,698)
Equity transactions with noncontrolling
(29)
－
－
(29)
interests
Balance, end of the period
¥ (77,179)
¥ (25,745)
¥
426
¥ (102,498)
All amounts are net of tax.
- 12 -
Reclassification out of accumulated other comprehensive income (loss) for the six months ended September 30,
2020 and 2019 are as follows:
Millions of yen
Six months ended
Affected line items in
September 30, 2020
consolidated statements of income
Pension liability adjustments
Amortization of actuarial loss or gain and prior ¥ (814) service cost
(814)
288
(526)
Net unrealized holding gains (losses) on derivative instruments
Forwards contracts1,282 (289)
Other income (expenses), net: Other, net
Total before tax
Income taxes
Net of tax
Net sales
Cost of sales
707
Other income (expenses), net: Other,
net
1,700
Total before tax
(531)
Income taxes
1,169
Net of tax
Total reclassification for the period
¥
643
Net of tax
Millions of yen
Six months ended
Affected line items in
September 30, 2019
consolidated statements of income
Pension liability adjustments
Amortization of actuarial loss or gain and prior
¥
(752)
Other income (expenses), net: Other,
service cost
net
(752)
Total before tax
239
Income taxes
(513)
Net of tax
Net unrealized holding gains (losses) on derivative
instruments
Forwards contracts
847
Net sales
(11)
Cost of sales
1,971
Other income (expenses), net: Other,
net
2,807
Total before tax
(1,049)
Income taxes
1,758
Net of tax
Total reclassification for the period
¥
1,245
Net of tax
- 13 -
Reclassification out of accumulated other comprehensive income (loss) for the three months ended September 30,
2020 and 2019 are as follows:
Millions of yen
Three months ended
Affected line items in
September 30, 2020
consolidated statements of income
Pension liability adjustments
Amortization of actuarial loss or gain and prior ¥ (399) service cost
(399)
153
(246)
Net unrealized holding gains (losses) on derivative instruments
Forwards contracts571 (40)
Other income (expenses), net: Other, net
Total before tax
Income taxes
Net of tax
Net sales
Cost of sales
357
Other income (expenses), net: Other,
net
888
Total before tax
(315)
Income taxes
573
Net of tax
Total reclassification for the period
¥
327
Net of tax
Millions of yen
Three months ended
Affected line items in
September 30, 2019
consolidated statements of income
Pension liability adjustments
Amortization of actuarial loss or gain and prior
¥
(374)
Other income (expenses), net: Other,
service cost
net
(374)
Total before tax
117
Income taxes
(257)
Net of tax
Net unrealized holding gains (losses) on derivative
instruments
Forwards contracts
655
Net sales
(132)
Cost of sales
704
Other income (expenses), net: Other,
net
1,227
Total before tax
(255)
Income taxes
972
Net of tax
Total reclassification for the period
¥
715
Net of tax
- 14 -
Tax effects allocated to each component of other comprehensive income (loss) for the six months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Six months ended September 30, 2020
Before tax
Tax (expense)
Net of tax
amount
or benefit
amount
Foreign currency translation adjustments
Foreign currency translation adjustments arising during the
¥
6,411
¥
95
¥
6,506
period
Less: reclassification adjustment for gains included in net
－
－
－
income
Net foreign currency translation adjustments
6,411
95
6,506
Pension liability adjustments
Pension liability adjustments arising during the period
(55)
16
(39)
Less: reclassification adjustment for losses included in net
814
(288)
526
income
Net pension liability adjustments
759
(272)
487
Net unrealized holding gains (losses) on derivative instruments
Unrealized holding gains arising during the period
2,033
(612)
1,421
Less: reclassification adjustment for gains included in net
(1,700)
531
(1,169)
income
Net unrealized holding gains
333
(81)
252
Other comprehensive income (loss)
¥
7,503
¥
(258)
¥
7,245
Millions of yen
Six months ended September 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
¥ (66,291) ¥
77
¥ (66,214)
－
－
－
(66,291)
77
(66,214)
(527)
159
(368)
752
(239)
513
225
(80)
145
1,204
(677)
527
Less: reclassification adjustment for gains included in net
(2,807)
1,049
(1,758)
income
Net unrealized holding losses
(1,603)
372
(1,231)
Other comprehensive income (loss)
¥ (67,669)
¥
369
¥ (67,300)
- 15 -
Tax effects allocated to each component of other comprehensive income (loss) for the three months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Three months ended September 30, 2020
Before tax
Tax (expense)
Net of tax
amount
or benefit
amount
Foreign currency translation adjustments
Foreign currency translation adjustments arising during the
¥
(8,202)
¥
54
¥
(8,148)
period
Less: reclassification adjustment for gains included in net
－
－
－
income
Net foreign currency translation adjustments
(8,202)
54
(8,148)
Pension liability adjustments
Pension liability adjustments arising during the period
(21)
(2)
(23)
Less: reclassification adjustment for losses included in net
399
(153)
246
income
Net pension liability adjustments
378
(155)
223
Net unrealized holding gains (losses) on derivative instruments
Unrealized holding gains arising during the period
1,364
(302)
1,062
Less: reclassification adjustment for gains included in net
(888)
315
(573)
income
Net unrealized holding gains
476
13
489
Other comprehensive income (loss)
¥
(7,348)
¥
(88)
¥
(7,436)
Millions of yen
Three months ended September 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
¥ (32,973) ¥
70
¥ (32,903)
－
－
－
(32,973)
70
(32,903)
(636)
196
(440)
374
(117)
257
(262)
79
(183)
479
(24)
455
Less: reclassification adjustment for gains included in net
(1,227)
255
(972)
income
Net unrealized holding losses
(748)
231
(517)
Other comprehensive income (loss)
¥ (33,983)
¥
380
¥ (33,603)
- 16 -
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 September 30, 2020 and at March 31, 2020 are as follows:
Millions of yen
September 30, 2020
March 31, 2020
Receivables *1
¥
889,458
¥
980,371
Contract assets *2
2,141
3,483
Contract liabilities *3
114,017
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 and long-term trade receivables, 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 six months ended September 30, 2020, that was included in the contract liability balance as of March 31, 2020 was ¥31,214 million. Revenue recognized for the six months ended September 30, 2019, that was included in the contract liability balance as of March 31, 2019 was ¥36,659 million.
Revenue recognized for the three months ended September 30, 2020, that was included in the contract liability balance as of March 31, 2020 was ¥11,922 million. Revenue recognized for the three months ended September 30, 2019, that was included in the contract liability balance as of March 31, 2019 was ¥12,236 million.
The amount of revenue recognized during the six months and three months ended September 30, 2020 and 2019, from performance obligations satisfied or partially satisfied in previous periods was immaterial.
(3) Transaction price allocated to the remaining performance obligations
As of September 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 ¥159,894 million, of which ¥72,752 million is expected to be recognized as revenue in the twelve months following September 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 six months ended September 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. Compensation expenses during the three months ended September 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.
- 17 -
11. Leases
Revenues from sales-type and operating leases as a lessor, included in net sales on the consolidated statement of income, for the six months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Sales-type lease revenue
Revenue recognized at the commencement date *1
¥
54,521
¥
52,917
Interest income
4,135
5,084
Total sales-type lease revenue
58,656
58,001
Operating lease revenue
38,835
45,708
Total
¥
97,491
¥
103,709
*1 The revenue recognized at the commencement date is included in net sales of the Construction, Mining and Utility Equipment operating segment.
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 September 30, 2020 and 2019 are as follows:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Sales-type lease revenue
Revenue recognized at the commencement date *2
¥
24,381
¥
21,816
Interest income
2,292
2,495
Total sales-type lease revenue
26,673
24,311
Operating lease revenue
20,053
23,615
Total
¥
46,726
¥
47,926
*2 The revenue recognized at the commencement date is included in net sales of the Construction, Mining and Utility Equipment operating segment.
- 18 -
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
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Net income attributable to Komatsu Ltd.
¥
37,294
¥
90,062
Net income attributable to participating securities (restricted stocks)
25
31
Net income attributable to common shareholders
¥
37,269
¥
90,031
Number of shares
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Weighted average number of common shares outstanding, less treasury
stock
944,719,831
944,025,303
Weighted average number of participating securities (restricted stocks)
635,174
329,917
Weighted average number of common shares
944,084,657
943,695,386
Yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Basic net income attributable to Komatsu Ltd. per share
¥
39.48
¥
95.40
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Net income attributable to Komatsu Ltd.
¥
21,043
¥
42,586
Net income attributable to participating securities (restricted stocks)
15
17
Net income attributable to common shareholders
¥
21,028
¥
42,569
Number of shares
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Weighted average number of common shares outstanding, less treasury
stock
944,793,459
944,114,481
Weighted average number of participating securities (restricted stocks)
682,914
377,649
Weighted average number of common shares
944,110,545
943,736,832
Yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Basic net income attributable to Komatsu Ltd. per share
¥
22.27
¥
45.11
- 19 -
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
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Net income attributable to Komatsu Ltd.
¥
37,294
¥
90,062
Net income attributable to participating securities (restricted stocks)
25
31
Net income attributable to common shareholders
¥
37,269
¥
90,031
Number of shares
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Weighted average number of common shares outstanding, less treasury
stock
944,719,831
944,025,303
Dilutive effect of:
Stock options
422,423
820,742
Weighted average number of participating securities (restricted stocks)
635,174
329,917
Weighted average number of diluted common shares
944,507,080
944,516,128
Yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Diluted net income attributable to Komatsu Ltd. per share
¥
39.46
¥
95.32
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Net income attributable to Komatsu Ltd.
¥
21,043
¥
42,586
Net income attributable to participating securities (restricted stocks)
15
17
Net income attributable to common shareholders
¥
21,028
¥
42,569
Number of shares
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Weighted average number of common shares outstanding, less treasury
stock
944,793,459
944,114,481
Dilutive effect of:
Stock options
392,975
777,632
Weighted average number of participating securities (restricted stocks)
682,914
377,649
Weighted average number of diluted common shares
944,503,520
944,514,464
Yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Diluted net income attributable to Komatsu Ltd. per share
¥
22.26
¥
45.07
- 20 -
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 September 30, 2020 and at March 31, 2020 were ¥11,313 million and ¥12,142 million, respectively. The fair value of the liabilities recognized for Komatsu's obligations as guarantors under those guarantees at September 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 September 30, 2020 and at March 31, 2020 were ¥13,110 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.
- 21 -
14. Derivative Financial Instruments
Notional principal amounts of derivative financial instruments outstanding at September 30, 2020 and at March 31,
2020 are as follows:
Millions of yen
September 30, 2020
March 31, 2020
Forwards contracts:
Sale of foreign currencies
¥
128,954
¥
147,655
Purchase of foreign currencies
107,848
101,835
Interest rate swaps and cross-currency swap agreements
90,675
83,088
Fair value of derivative instruments at September 30, 2020 and at March 31, 2020 on the consolidated balance
sheets are as follows:
Millions of yen
September 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
¥
709
Other current liabilities
¥
685
Deferred income taxes and
3 Deferred income taxes and
191
other assets
other liabilities
Interest rate swaps and
Other current assets
－ Other current liabilities
13
cross-currency swap
Deferred income taxes and
－ Deferred income taxes and
891
agreements
other assets
other liabilities
Total
¥
712
¥ 1,780
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
¥ 2,541
Other current liabilities
¥
905
Deferred income taxes and
18 Deferred income taxes and
2
other assets
other assets
Interest rate swaps and cross-currency swap agreements
Other current assets
180
Other current liabilities
234
Deferred income taxes and
132
Deferred income taxes and
－
other assets
other liabilities
Total
¥ 2,871
¥ 1,141
Total Derivative Instruments
¥ 3,583
¥ 2,921
- 22 -
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
- 23 -
The effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income for the six months ended September 30, 2020 and 2019 are as follows:
Derivative instruments designated as cash flow hedging relationships
Millions of yen
Six months ended September 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
¥
1,945
Net sales
¥
1,282
Cost of sales
(289)
Other income (expenses),
707
net: Other, net
Interest rate swaps and
88
－
－
cross-currency swap agreements
Total
¥
2,033
¥
1,700
Millions of yen
Six months ended September 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
¥
1,637
Net sales
¥
847
Cost of sales
(11)
Other income (expenses),
1,971
net: Other, net
Interest rate swaps and
(433)
－
－
cross-currency swap agreements
Total
¥
1,204
¥
2,807
* OCI stands for other comprehensive income (loss).
Derivative instruments not designated as hedging instruments relationships
Millions of yen
Six months ended September 30, 2020
Forwards contracts Interest rate swaps and cross-currency swap agreements
Total
Location of gains (losses) recognized
Amount of gains (losses) recognized
in income on derivatives
in income on derivatives
Other income (expenses), net: Other, net
¥
(2,038)
Cost of sales
(11)
Other income (expenses), net: Other, net
(41)
¥
(2,090)
Millions of yen
Six months ended September 30, 2019
Location of gains (losses) recognized
Amount of gains (losses) recognized
in income on derivatives
in income on derivatives
Forwards contracts
Other income (expenses), net: Other, net
¥
40
Interest rate swaps and
Cost of sales
(20)
cross-currency swap agreements
Other income (expenses), net: Other, net
(164)
Total
¥
(144)
- 24 -
The effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019 are as follows:
Derivative instruments designated as cash flow hedging relationships
Millions of yen
Three months ended September 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
¥
1,293
Net sales
¥
571
Cost of sales
(40)
Other income (expenses),
357
net: Other, net
Interest rate swaps and
71
－
－
cross-currency swap agreements
Total
¥
1,364
¥
888
Millions of yen
Three months ended September 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
¥
579
Net sales
¥
655
Cost of sales
(132)
Other income (expenses),
704
net: Other, net
Interest rate swaps and
(100)
－
－
cross-currency swap agreements
Total
¥
479
¥
1,227
* OCI stands for other comprehensive income (loss).
Derivative instruments not designated as hedging instruments relationships
Millions of yen
Three months ended September 30, 2020
Forwards contracts Interest rate swaps and cross-currency swap agreements
Total
Location of gains (losses) recognized
Amount of gains (losses) recognized
in income on derivatives
in income on derivatives
Other income (expenses), net: Other, net
¥
484
Cost of sales
(6)
Other income (expenses), net: Other, net
(20)
¥
458
Millions of yen
Three months ended September 30, 2019
Location of gains (losses) recognized
Amount of gains (losses) recognized
in income on derivatives
in income on derivatives
Forwards contracts
Other income (expenses), net: Other, net
¥
218
Interest rate swaps and
Cost of sales
103
cross-currency swap agreements
Other income (expenses), net: Other, net
(156)
Total
¥
165
- 25 -
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.
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 September 30, 2020 and as of March 31, 2020, and fair value levels are summarized as follows:
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.
- 26 -
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 September 30, 2020 and at March 31, 2020 are as follows:
Millions of yen
At September 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
Level 1
Level 2
Level 3
Total
¥
－
¥
3,271
¥
－
¥
3,271
－
312
－
312
¥
－
¥
3,583
¥
－
¥
3,583
¥
－
¥
1,783
¥
－
¥
1,783
－
1,138
－
1,138
¥
－
¥
2,921
¥
－
¥
2,921
Millions of yen
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
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
- 27 -
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 six months ended September 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 September 30, 2020 and at March 31, 2020 were ¥563,530 million and ¥133,945 million, respectively. These total amounts of unused committed credit lines available for full and immediate borrowings at September 30, 2020 and at March 31, 2020 were ¥543,148 million and ¥112,135 million, respectively.
- 28 -
18. Dividends
Six months ended September 30, 2020
(1) Payment amount of dividends
Type of
Aggregate amount of
Resource of
Dividend
Record
Effective
Resolution
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 on
stock
earnings
2020
2020
June 18, 2020
Note : The amount is rounded down to nearest million yen.
Dividends to be paid for the six months ended September 30, 2020, of which effective date is after September 30, 2020
Type of
Aggregate amount of
Resource of
Dividend
Record
Effective
Resolution
dividends
per share
stock
dividends
date
date
(Millions of yen)
(Yen)
Board of Directors
Common
Retained
September
December
held on October 28,
17,019
18
stock
earnings
30, 2020
1, 2020
2020
Note : The amount is rounded down to nearest million yen.
Six months ended September 30, 2019
(1) Payment amount of dividends
Type of
Aggregate amount of
Resource of
Dividend
Record
Effective
Resolution
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 on
stock
earnings
2019
2019
June 18, 2019
Note : The amount is rounded down to nearest million yen.
Dividends to be paid for the six months ended September 30, 2019, of which effective date is after September 30, 2019
Type of
Aggregate amount of
Resource of
Dividend
Record
Effective
Resolution
dividends
per share
stock
dividends
date
date
(Millions of yen)
(Yen)
Board of Directors
Common
Retained
September
December
held on October 30,
51,967
55
stock
earnings
30, 2019
2, 2019
2019
Note : The amount is rounded down to nearest million yen.
- 29 -
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 six months ended September 30, 2020 and 2019 is as follows:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Net sales:
Construction, Mining and Utility Equipment -
External customers
¥
864,314
¥
1,109,313
Intersegment
12,236
2,361
Total
876,550
1,111,674
Retail Finance -
External customers
28,928
31,144
Intersegment
3,824
3,639
Total
32,752
34,783
Industrial Machinery and Others -
External customers
64,475
73,028
Intersegment
463
701
Total
64,938
73,729
Elimination
(16,523)
(6,701)
Consolidated
¥
957,717
¥
1,213,485
Segment profit:
Construction, Mining and Utility Equipment
¥
52,217
¥
129,833
Retail Finance
4,682
6,810
Industrial Machinery and Others
4,102
4,039
Total segment profit
61,001
140,682
Corporate expenses and elimination
(244)
7
Consolidated
¥
60,757
¥
140,689
- 30 -
Information about operating segments for the three months ended September 30, 2020 and 2019 is as follows:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Net sales:
Construction, Mining and Utility Equipment -
External customers
¥
444,309
¥
548,715
Intersegment
6,430
1,482
Total
450,739
550,197
Retail Finance -
External customers
14,980
15,678
Intersegment
1,851
1,826
Total
16,831
17,504
Industrial Machinery and Others -
External customers
39,697
39,325
Intersegment
219
383
Total
39,916
39,708
Elimination
(8,500)
(3,691)
Consolidated
¥
498,986
¥
603,718
Segment profit:
Construction, Mining and Utility Equipment
¥
29,017
¥
61,144
Retail Finance
2,787
3,406
Industrial Machinery and Others
2,395
3,485
Total segment profit
34,199
68,035
Corporate expenses and elimination
(80)
(89)
Consolidated
¥
34,119
¥
67,946
Reconciliation of total segment profit to consolidated income before income taxes and equity in earnings of affiliated companies for the six months ended September 30, 2020 and 2019 is as follows:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Total segment profit
¥
61,001
¥
140,682
Corporate expenses and elimination
(244)
7
Total
60,757
140,689
Other operating income (expenses), net
(415)
1,293
Operating income
60,342
141,982
Interest and dividend income
2,414
3,732
Interest expense
(7,406)
(13,108)
Other, net
3,180
(4,394)
Consolidated income before income taxes and equity in earnings of
¥
58,530
¥
128,212
affiliated companies
- 31 -
Reconciliation of total segment profit to consolidated income before income taxes and equity in earnings of affiliated companies for the three months ended September 30, 2020 and 2019 is as follows:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Total segment profit
¥
34,199
¥
68,035
Corporate expenses and elimination
(80)
(89)
Total
34,119
67,946
Other operating income (expenses), net
(696)
(724)
Operating income
33,423
67,222
Interest and dividend income
1,229
1,986
Interest expense
(3,565)
(6,458)
Other, net
(1,054)
(1,448)
Consolidated income before income taxes and equity in earnings of
¥
30,033
¥
61,302
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 six months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Six months ended
September 30, 2020
Construction, Mining
Industrial Machinery
and Utility Equipment
Retail Finance
and Others
Total
Japan
¥
132,208
¥
894
¥
35,610
¥
168,712
The Americas
329,436
21,792
7,052
358,280
Europe and CIS
127,556
1,758
2,911
132,225
China
71,887
1,534
5,583
79,004
Asia (excluding Japan and China)
and Oceania
154,579
2,867
13,274
170,720
Middle East and Africa
48,648
83
45
48,776
Total
¥
864,314
¥
28,928
¥
64,475
¥
957,717
- 32 -
Millions of yen
Six months ended
September 30, 2019
Construction, Mining
Industrial Machinery
and Utility Equipment
Retail Finance
and Others
Total
Japan
¥
148,738
¥
1,003
¥
34,094
¥
183,835
The Americas
440,065
24,140
7,438
471,643
Europe and CIS
178,580
1,364
3,429
183,373
China
61,444
1,644
11,057
74,145
Asia (excluding Japan and China)
and Oceania
218,525
2,960
16,820
238,305
Middle East and Africa
61,961
33
190
62,184
Total
¥
1,109,313
¥
31,144
¥
73,028
¥
1,213,485
Net sales determined by customer location for the three months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Three months ended
September 30, 2020
Construction, Mining
Industrial Machinery
and Utility Equipment
Retail Finance
and Others
Total
Japan
¥
70,801
¥
453
¥
23,215
¥
94,469
The Americas
168,793
10,958
5,380
185,131
Europe and CIS
67,410
1,096
1,437
69,943
China
28,715
774
2,815
32,304
Asia (excluding Japan and China)
and Oceania
80,646
1,654
6,827
89,127
Middle East and Africa
27,944
45
23
28,012
Total
¥
444,309
¥
14,980
¥
39,697
¥
498,986
Millions of yen
Three months ended
September 30, 2019
Construction, Mining
Industrial Machinery
and Utility Equipment
Retail Finance
and Others
Total
Japan
¥
84,961
¥
558
¥
20,240
¥
105,759
The Americas
222,103
12,149
4,209
238,461
Europe and CIS
85,383
689
2,330
88,402
China
25,207
808
4,840
30,855
Asia (excluding Japan and China)
and Oceania
100,007
1,459
7,531
108,997
Middle East and Africa
31,054
15
175
31,244
Total
¥
548,715
¥
15,678
¥
39,325
¥
603,718
Net sales determined by geographic origin for the six months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Six months ended
Six months ended
September 30, 2020
September 30, 2019
Japan
¥
207,249
¥
253,075
The Americas
329,658
441,105
Europe and CIS
135,153
187,061
China
75,964
66,426
Others
209,693
265,818
Total
¥
957,717
¥
1,213,485
- 33 -
Net sales determined by geographic origin for the three months ended September 30, 2020 and 2019 are as follows:
Millions of yen
Three months ended
Three months ended
September 30, 2020
September 30, 2019
Japan
¥
116,291
¥
137,842
The Americas
167,785
223,727
Europe and CIS
72,420
89,091
China
31,341
27,263
Others
111,149
125,795
Total
¥
498,986
¥
603,718
There were no sales to a single major external customer for the six months and three months ended September 30, 2020 and 2019.
- 34 -
Material Subsequent Events Not applicable.
Komatsu evaluated subsequent events through November 11, 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.
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.
Komatsu Ltd. published this content on 09 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2020 11:50:01 UTC
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