Annual Report 2007 - Komatsu

Notes to Consolidated Financial Statements
Komatsu Ltd. and Consolidated Subsidiaries
18. Net Income per Share
A reconciliation of the numerators and denominators of the basic and diluted net income per share computations is as follows:
Thousands of
Millions of yen
U.S. dollars
2007 2006 2005 2007
Income from continuing operations ¥153,264 ¥109,141 ¥55,868 $1,298,847
Income from discontinued operations less applicable income taxes,
minority interests and equity in earnings of affiliated companies 11,374 5,149 3,142 96,390
Net income ¥164,638 ¥114,290 ¥59,010 $1,395,237
Number of shares
2007 2006 2005
Weighted average common shares outstanding, less treasury stock 993,597,436 992,733,616 991,662,555
Dilutive effect of:
Stock options 1,788,951 1,697,534 660,966
Weighted average diluted common shares outstanding 995,386,387 994,431,150 992,323,521
Yen
U.S. cents
2007 2006 2005 2007
Income from continuing operations:
Basic ¥154.25 ¥109.94 ¥56.34 ¢130.72
Diluted 153.97 109.75 56.30 130.48
Income from discontinued operations:
Basic ¥ 11.45 ¥ 5.19 ¥ 3.17 ¢ 9.70
Diluted 11.43 5.18 3.17 9.69
Net income:
Basic ¥165.70 ¥115.13 ¥59.51 ¢140.42
Diluted 165.40 114.93 59.47 140.17
19. Commitments and Contingent Liabilities
At March 31, 2007, Komatsu was contingently liable for discounted
and transferred receivables on a recourse basis with
the financial institutions of ¥11,671 million ($98,907 thousand)
(Note 5).
Komatsu provides guarantees to third parties of loans of the
employees, affiliated companies and other companies. The
guarantees relating to the employees are mainly made for their
housing loans. The guarantees of loans relating to the affiliated
companies 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 5 years in the case of loans relating to the affiliated
companies and other companies. The maximum amount of
undiscounted payments Komatsu would have had to make in
the event of default is ¥57,063 million ($483,585 thousand) at
March 31, 2007. The fair value of the liabilities recognized for
Komatsu’s obligations as guarantors under those guarantees at
March 31, 2007 were insignificant. Certain of those guarantees
were secured by collateral and insurance issued to the Company.
Management of Komatsu believes that losses from those
contingent liabilities, if any, would not have a material effect
on the consolidated financial statements.
Commitments for capital investment outstanding at
March 31, 2007, aggregated approximately ¥12,900 million
($109,322 thousand).
Komatsu is involved in certain legal actions and claims arising
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 are well diversified to minimize concentrations of credit
risks. Management does not anticipate incurring losses on its
trade receivables in excess of established allowances.
Komatsu also issues contractual product warranties under
which it generally guarantee the performance of products delivered
and services rendered for a certain period or term. Change
in accrued product warranty cost for the years ended March 31,
2007 and 2006 is summarized as follows:
Thousands of
Millions of yen
U.S. dollars
2007 2006 2007
Balance at beginning of year ¥ 26,582 ¥ 21,251 $ 225,271
Addition 39,756 22,051 336,915
Utilization (37,862) (17,575) (320,864)
Other 523 855 4,432
Balance at end of year ¥ 28,999 ¥ 26,582 $ 245,754
80 Annual Report 2007