SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002 · sapporo breweries limited annual report 2002...

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SAPPORO BREWERIES LIMITEDANNUAL REPORT 2002

SAPPORO BREWERIES LIMITED20-1, Ebisu 4-chome, Shibuya-ku

Tokyo 150-8522, Japan

http://www.sapporobeer.jp/

Printed in JapanThis report is printed on recycled paper.

Thousands ofMillions of yen U.S. dollars

2002 2001 2002

Net sales ¥511,752 ¥557,233 $4,266,377Net income 1,168 4,390 9,739

Yen U.S. dollars

Per share:Net income

Primary ¥3.45 ¥12.96 $0.03Diluted – 12.90 –Cash dividends 5.00 5.00 0.04


Shareholders’ equity ¥106,527 ¥105,945 $ 888,092Total assets 717,486 729,601 5,981,543Capital expenditures 13,640 12,256 113,717Depreciation and amortization 31,463 32,322 262,303Note: U.S. dollar amounts are translated from Japanese yen, for convenience only, at the rate of ¥119.95=US$1.

SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002

FINANCIAL HIGHLIGHTSYears ended December 31

MESSAGE FROM THE PRESIDENT 1

REVIEW OF OPERATIONS 4

FIVE-YEAR SUMMARY 10

MANAGEMENT’S DISCUSSION AND ANALYSIS 11

CONSOLIDATED BALANCE SHEETS 14

CONSOLIDATED STATEMENTS OF INCOME 16

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 17

CONSOLIDATED STATEMENTS OF CASH FLOWS 18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 33

MANAGEMENT/CORPORATE DATA 34

[CONTENTS]

MESSAGE FROM THE PRESIDENT

1

Tatsushi IwamaPresident and Representative Director

In 2002, total beer demand in Japan fell year on year,

and Happo-shu sales slowed. As a result, combined

shipments of beer and Happo-shu came in under the

2001 mark. At Sapporo, our beer shipments were largely

in line with overall market trends. But combined shipments

of beer and Happo-shu dropped as our new Happo-shu

products failed to spur the demand we expected, even

though shipments increased. Accordingly, consolidated

net sales for 2002 decreased 8.2% to ¥511,752 million,

operating income fell 44.5% to ¥10,978 million and net

income slid 73.4% to ¥1,168 million.

MEDIUM-TERM MANAGEMENT PLAN AND PROGRESS STRENGTHENING GROUP

OPERATIONS WHILE TARGETING CORE COMPETENCES

In 2000, we announced a medium-term management plan, Exciting Action Plan, which

runs through the end of 2003. The main thrust of this plan is to rebuild our core beer

operations while reforming management. Specifically, we have been clearly separating

beverage and real estate operations, allocating resources to the former. Beer and

Happo-shu are our main focus. Coinciding with these initiatives, we have been structurally

reforming Sapporo to turn your company into a value-driven company. All these efforts

have been taken in line with our corporate slogan of delivering “Only the Best.”

In this letter, we want to tell you about some of our achievements so far. One is the

introduction of SMS21 (Sapporo Management System 21), which is pivotal to the

2 SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002

accomplishment of our goals. SMS21 has strengthened group management by compel-

ling us to look at our profit structure from various angles, such as operations, brands,

regions and sales channels. Increasing profits in our core beer operations is an ongoing

theme. This will be achieved by continuing to bolster our brands, a key imperative, as

well as by stepping up efforts to raise the return on investments and our productivity.

During 2003, we reduced the number of breweries from eight to six as part of our actions

to deliver higher profits.

In beverage operations, we have been reinforcing our corporate brand by maximizing

the brand equity of individual products. At the same time, we aim to stimulate new sources

of demand with new products that take us in entirely new directions. We are determined

to remain in step with the increasingly borderless nature of the market, which is being

shaped by changing consumer behavior and preferences.

In soft drinks, we have broadened our lineup of green teas, spearheaded by Gyokuro-Iri

O-Cha. And we have been creating new demand by developing

products that satisfy consumer needs for soft drinks that are

good for your health and taste great.

In restaurant operations, we are enhancing our

competitiveness with sales strategies grounded on clear

concepts for each business model. And our costs are

coming down as we rationalize distribution and other

areas of this business.

In real estate operations, our objective is to utilize

our assets to achieve growth over the medium

and long terms. Yebisu Garden Place and

Sapporo Factory, our two core holdings,

will remain our primary focus.

Although our operating environment

remains difficult, we will resolutely

3

deal with the issues we face so as to generate higher earnings and raise our

corporate value.

MOVING TO A HOLDING COMPANY STRUCTURE

We have decided to adopt a holding company structure in July this year. The aim is simple:

to maximize enterprise and shareholder value of the group by consistently increasing our

scale and our earnings. Sapporo Breweries Limited will become a holding company

following the separation of our key businesses into four operating companies: Alcoholic

Beverages, Soft Drinks, Restaurant, and Real Estate. In conjunction with this reorgani-

zation, we will conduct a stock swap to make Sapporo Lion Limited a wholly owned

subsidiary. We will change our name to Sapporo Holdings Limited, which will become the

listed company. Sapporo Holdings will be responsible for the formulation and execution

of group strategy and for addressing issues that are common to the group. The operating

companies, for their part, will be well placed to effectively and speedily execute business

strategies. We feel that by maintaining the autonomy of each operating company, while

fostering greater interplay among them, we will be able to capture synergies on the

operating front and develop a more stable earnings structure.

This move, and other actions we will take, underline our commitment to fulfilling our

responsibilities to shareholders, society and employees. Concurrently, we are practicing

highly transparent management focused on increasing our corporate value while doing

our utmost to increase profits.

March 2003

Tatsushi Iwama

President and Representative Director


ALCOHOLICBEVERAGES & SOFTDRINKS OPERATINGREVENUES(¥ BILLION)

530499 491 483

441

98 99 00 01 02

REVIEW OF OPERATIONS

ALCOHOLIC BEVERAGES &SOFT DRINKSTotal shipments of Sapporo beer and

Happo-shu declined year on year as

higher shipments of Happo-shu could

not offset a decline in beer volume. In

the wine & spirits division, domestic

wines performed well, while in the soft

drinks division sales of flagship

Gyokuro-Iri O-Cha rose. Overall, segment

operating revenues fell 8.6% to

¥441,247 million and operating income

dropped 44.8% to ¥7,578 million.

Beer, Happo-shu and NewlyDeveloping Category:Maximizing Brand Value to Builda Stronger Corporate Brand2002 was characterized by sluggish

growth in beer demand and the failure

of a 10-yen, industry-wide price cut to

spur higher demand for Happo-shu.

Continuing on from 2001, Sapporo

worked to grow beer brands from a

medium- to long-term perspective as

well as to use Happo-shu to deliver

new forms of value. Both initiatives

take their cue from the company’s

corporate slogan “Beer Entertainment,

Sapporo,” which is founded on the

concept of offering consumers more

ways to enjoy Sapporo’s products. As

a result of these efforts, shipments of

mainstay draft beer, Black Label, were

on a par with demand in the market as

a whole but did fall year on year. And

premium-brand Yebisu posted above-

market growth for the 10th straight

year, again underscoring the value

consumers see in this unique brand.

In Happo-shu, Hokkaido Namashibori

also remained popular and has estab-

lished itself as a firm favorite with

customers. During the year, Sapporo

attempted to stimulate demand by

offering new products imbuing new

value, but these beverages failed to

take hold due to the impact of the

10-yen price reduction on the overall

Happo-shu market. The imported

stout beer Guinness, which Sapporo

has been selling since 1964, eclipsed

2001 shipments on the back of

aggressive sales efforts directed at

Irish pubs and other eating and drink-

ing establishments. In other develop-

ments, Super Clear, a beer-flavored

sparkling beverage with an alcohol

content of about 0.5%, attracted con-

siderable attention when it went on

sale in December 2002. This product

was launched to target changing

consumer preferences.

In the current fiscal year, Sapporo

will further buttress its corporate

brand by maximizing the value of indi-

vidual brands. To this end, Sapporo

has divided its beer and Happo-shu

products into two brand categories—

Sapporo Brand and Yebisu Brand—

and is concentrating on optimal brand

building of each. With Black Label, a

stalwart Sapporo Brand, the company

will build even greater loyalty among

the draft beer’s core customers. And

in Happo-shu, Sapporo will more

strongly promote the just-brewed taste

of Hokkaido Namashibori, which is

now entering its third year on the

market. Moreover, with Hokkaido

Namashibori Half & Herb, Sapporo

will attempt to quench the thirst of

health-conscious customers looking

for a low-calorie beverage. The first

5

sub-brand, launched in March 2003,

Hokkaido Namashibori Half & Herb

offers maximum freshness with a draft

beer edge. Earlier, in February 2003,

Sapporo launched Senretsu Happo

Nama, yet another product that dem-

onstrates Sapporo’s attempts to

develop new beverages with a powerful

market presence. With Yebisu, which

spearheads the Yebisu Brand,

Sapporo aims to maximize the value

of this product as a premium beer. And

as part of its efforts to respond to the

increasingly borderless nature of the

alcoholic beverage market, which is

being molded by changing consumer

behavior and preferences, Sapporo

aims to quickly cultivate new demand.

One recent move saw Sapporo acquire

the rights from Diageo Plc. to sell

Smirnoff Ice in Japan. A low-alcohol

drink that has been a major hit in 25

countries from Europe to North

America, Smirnoff Ice went on sale in

Japan in March 2003.

Wine & Spirits:Capturing a Larger Market Shareby Growing the Existing Lineupand Introducing New ProductsFrom Around the WorldPolaire series labels, Ureshii Wine and

Clear Dry, mainstay low-priced wines,

as well as wines fermented by marine

yeast, turned in strong performances

during 2002. While demand has

remained sluggish as a whole in the

domestic wine market in the wake of

the end of Japan’s wine boom,

Sapporo’s domestic wine sales

climbed 15% in 2002. In imported

wines, Sapporo worked to develop the

market, focusing primarily on import-

ing wines from major European wine

countries and Chile. Sapporo also

brought to market high-quality, low-

price imported wines using a propri-

etary “direct shipment & direct filling”

system. Under this system, wines

imported in tanks from France and

Italy are bottled at Sapporo’s facilities

in Japan. Despite these and other

measures to lift sales, combined sales

of domestic and imported wines were

held to last year’s level by a lackluster

imported wine market. However,

Sapporo outperformed the overall

market by about 4%, giving it a greater

share. In spirits, efforts continued to

develop the on-premise market, spurring

sharply higher sales of the mainstay

Hyosai Sour. Combined with the

launch of concentrated liqueurs, spirit

sales soared above last year’s level.


In 2003, Sapporo will expand its

lineup and conduct high-profile

marketing campaigns to build on its

competitive advantage in the wine and

spirits markets. This will involve add-

ing to the Grand Polaire series, a

premium Polaire label, to bolster its

stable of premium domestic wines.

And Sapporo will aggressively promote

the popular Polaire series brands,

Ureshii Wine and Clear Dry, position-

ing 2003 as the first year in a drive to

establish this series as the top domes-

tic wine brand. In imported wines,

Sapporo will introduce Japanese

consumers to a range of famous

brands, from high-priced labels to low-

price wines, as it broadens its lineup.

Sapporo has already had success with

La Cuvee Mythique from France and

Beringer from California. In spirits,

Sapporo’s goals are to gain widespread

market acceptance for concentrated

liqueurs and to expand sales of

on-premise-use Hyosai Sour and

imported spirits.

Soft Drinks:Six Consecutive Years ofShipment GrowthThe soft drinks division is managed by

consolidated subsidiary Sapporo Beer’s

Beverage Co., Ltd. In 2002, sales

remained strong, paced by strategic

products Gyokuro-Iri O-Cha and

Gabunomi Milk Coffee. The pivotal

Gyokuro-Iri O-Cha, in particular, posted

sales above the average growth rate in

the sugar-free tea market. This above-

average performance was attributable

to aggressive marketing initiatives, as

well as product planning that precisely

matched to the seasons of the year. In

fruit juice drinks, products such as the

Tsubutsubu Oishibori series and

Shunrei Mikan, which deliver both

refreshment and taste, were popular. In

2002, Sapporo set about rebuilding

mineral water operations. In December

2002, Sapporo started selling the

world-famous Evian brand in vending

machines. These and other develop-

ments enabled Sapporo to post its sixth

consecutive year of growth in ship-

ments in the soft drinks division.

In 2003, Sapporo will broaden its

product offerings guided by two key-

words: health and peace of mind. In

response to the growing health con-

sciousness of consumers, Sapporo is

developing green teas with no artificial

fragrances or coloring, juice drinks with

more fruit juice content, and beverages

that meet specific nutritional needs.

Sapporo’s aim is to not only address

customers’ desire for healthy diets but

also to put their minds at ease.

Examples include Gyokuro-Ir i

Marufukucha, which augments the

Gyokuro-Iri O-Cha series, and

Mikanbare, a fruit juice using only the

7

finest Japanese oranges. In mineral

water, Sapporo will begin sales in April

2003 of Wattwiller, a natural mineral

water from the French Alps that is high

in calcium. This new product joins

Evian, which is sold through vending

machines, and Nihonmeizan no

Tennensui, a domestically sourced

natural water. With this array of soft

drinks, Sapporo has set its sights on

3% sales growth. Predictions for the

overall soft drink market in Japan call

for flat sales in 2003.

RESTAURANT & HOTELRestaurant operating revenues were

down due to sluggish consumer

spending. Hotel operating revenues

were slightly lower than in 2001 due to

slowing domestic and overseas

economies. Overall, segment operating

revenues declined 2.4% to ¥41,648

million and the segment recorded an

operating loss of ¥307 million.

Establishing a Solid OperatingBase by Redefining the FoodCulture and Through TrustedServiceRestaurants

Group subsidiary Sapporo Lion

Limited is the lynchpin of this division,

operating more than 200 outlets

nationwide, including beer halls and

restaurants. Furthermore, Sapporo

has opened beer gardens adjacent to

breweries, so that beer drinkers can

enjoy the taste of freshly brewed draft.

In 2002, Sapporo worked to expand

sales by opening new restaurants in an

efficient manner and developing new

business models. And on the earnings

front, cost-containment efforts targeted

purchasing, personnel and other

operating expenses. A worse-than-

expected cooling of consumer senti-

ment due to the protracted recession

in Japan, and a drop in customer num-

bers due to concerns over mad cow

disease, however, thwarted these

efforts, causing operating revenues to

fall year on year. Undeterred, Sapporo

intends to continue delivering safe,

flavorful dishes to customers, and

developing more sources of quality

ingredients. To establish a solid oper-

ating base, Sapporo will improve the

earnings structure of existing restau-

rants while expanding the scope of

operating activities by opening new

restaurants and aggressively creating

new business models.

RESTAURANT &HOTEL OPERATINGREVENUES(¥ BILLION)

44 43 43 43 42

98 99 00 01 02


Hotels

Sapporo Hotel Enterprises Limited

manages The Westin Tokyo, situated

in Yebisu Garden Place. Boasting

internationally recognized standards

of excellence, The Westin Tokyo wel-

comes a high proportion of overseas

business travelers as guests and is

highly acclaimed as a luxury hotel. In

2002, sales were slightly down year on

year as corporate use of rooms and

banquet facilities slipped amid the

worldwide economic slowdown.

REAL ESTATEGlass Square, a new shopping and

restaurant complex, opened in

November 2002 at Yebisu Garden

Place, adding to the appeal of this

unique Tokyo complex. Meanwhile,

Sapporo Factory, which completed a

major refurbishment program,

recorded its highest level of revenues

since its grand opening. Real estate

revenues, however, fell 10.4% in

2002 to ¥26,038 million as the real

estate market softened, particularly in

respect of demand for office space.

This led to a 21.8% decline in

operating income to ¥8,225 million.

Glass Square to Help AttractMore CustomersThis segment comprises urban rede-

velopment and real estate leasing and

management. Sapporo’s aim is to

effectively leverage existing assets,

rather than purchase new ones, to

establish a reliable source of medium-

and long-term earnings.

Urban redevelopment operations

have steadily grown to become another

pillar of business for Sapporo. Under

a policy of “Only the Best,” these

operations aim for redevelopment that

generates greater harmony between

people and their surroundings. At the

same time, Sapporo is actively seek-

ing to create enhanced brand value.

The company’s signature projects are

Yebisu Garden Place and Sapporo

Factory, both of which stand on the

sites of former breweries. In real estate

leasing and management, the com-

pany has similarly developed condo-

miniums and office buildings on

former brewery sites.

Yebisu Garden Place is a unique,

multifaceted complex encompassing

over 83,000 square meters. It com-

prises a luxury hotel, condominiums, a

department store, office buildings,

cinemas and restaurants. In November

2002, in a development that will add

even more appeal to Yebisu Garden

Place, Sapporo opened Glass Square,

a shopping and restaurant complex,

offering trend-conscious adults more

lifestyle choices, from clothing and

food to household goods.

Meanwhile, Sapporo Factory, which

stands on Sapporo’s “birthplace,”

underwent a refurbishment in April

2002. The renovation of commercial

facilities was designed to attract more

customers. This goal was apparently

REAL ESTATEOPERATINGREVENUES(¥ BILLION)

3029

2829

26

98 99 00 01 02

9

accomplished, with Sapporo Factory as

a whole recording its highest level of

revenues since opening.

Despite these strong performances,

segment revenues dipped below

revenues in 2001 as the real estate

market softened, particularly in

respect of demand for office space.

2003 will see Sapporo continue to

develop real estate operations centered

on Yebisu Garden Place and Sapporo

Factory, while fully leveraging its exten-

sive expertise in real estate develop-

ment as it stakes out a unique position

in the real estate market.

OTHERIn 2002, segment operating revenues

rose 13.9% to ¥2,819 million as

Sapporo built a greater presence in

growth markets that tap its brewing

yeast-related expertise.

Agribusiness and BrewingEquipment Business OperationsOther operations encompass agri-

business and a brewing equipment

business where Sapporo exhibits its

unique technological prowess. At

present, Japan imports more than

90% of the barley and hops used to

make beer. The agribusiness is

responsible for growing and cultivat-

ing barley and hops in Europe, China,

North America and Oceania and for

procuring a reliable supply of high-

quality raw ingredients under its

technical direction. In the virus-free

orchid market, where Sapporo boasts

the No. 1 share in terms of shipments,

the company can offer stable supplies

of high-quality orchids thanks to the

application of technology gained

through barley and hop operations.

This allows Sapporo to offer products

across the full price spectrum from the

premium to the medium- and low-price

ranges. In its brewing equipment busi-

ness, Sapporo’s non-pasteurized filtra-

tion technology, which removes yeast

without affecting the taste of beer, is

employed by overseas brewers as well

as in a wide range of other industries.

Sapporo uses know-how of plant

design and construction from beer

manufacturing to offer engineering

services targeted mainly at food-

related industries. The company’s

pioneering draft beer filtration and

engineering technologies fulfill

customers’ needs at every stage of the

manufacturing process from design

through construction and operation

management. Sapporo has worked on

projects for Japanese refined sake,

distilled spirit, soft drink and pharma-

ceutical manufacturers, as well as

breweries in Japan and overseas. In

2002, Sapporo also strengthened its

manufacturing and sales systems in

its brewing yeast-related business,

where the markets for dry yeast and

yeast extract are expanding.

OTHER OPERATINGREVENUES(¥ BILLION)

1.5

2.22.1

2.5

2.8

98 99 00 01 02


Years ended December 31

Millions of yen

2002 2001 2000 1999 1998

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . ¥511,752 ¥557,233 ¥564,065 ¥572,923 ¥605,701Alcoholic beverages & soft drinks . . . . . 441,247 483,028 491,017 498,752 530,223Restaurant & hotel . . . . . . . . . . . . . . . . . 41,648 42,682 43,092 43,235 44,225Real estate . . . . . . . . . . . . . . . . . . . . . . . 26,038 29,048 27,889 28,736 29,720Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,819 2,475 2,067 2,200 1,533

Operating costs and expenses . . . . . . . . . 500,774 537,447 547,769 556,003 594,460Operating income . . . . . . . . . . . . . . . . . . . 10,978 19,786 16,296 16,920 11,241Income (loss) before income taxesand minority interests . . . . . . . . . . . . . . . (3,349) 3,102 2,217 5,728 (10,419)

Net income (loss) . . . . . . . . . . . . . . . . . . . 1,168 4,390 1,304 4,434 (11,189)

Yen

Per share:Net income (loss):

Primary . . . . . . . . . . . . . . . . . . . . . . . . ¥ 3.45 ¥ 12.96 ¥ 3.85 ¥ 13.09 ¥ (33.02)Diluted . . . . . . . . . . . . . . . . . . . . . . . . – 12.90 – 13.02 –

Shareholders’ equity . . . . . . . . . . . . . . . 314.69 312.71 304.98 304.53 295.07Cash dividends . . . . . . . . . . . . . . . . . . . 5.00 5.00 5.00 5.00 5.00

Millions of yen

Year-end data:Shareholders’ equity . . . . . . . . . . . . . . . ¥106,527 ¥105,945 ¥103,337 ¥103,184 ¥ 99,978Total assets . . . . . . . . . . . . . . . . . . . . . . 717,486 729,601 764,682 808,098 841,422Financial liabilities . . . . . . . . . . . . . . . . . 384,303 372,864 399,995 422,344 457,182Return on equity (%) . . . . . . . . . . . . . . . 1.1 4.2 1.3 4.3 –Capital expenditures . . . . . . . . . . . . . . . 13,640 12,256 26,504 32,005 34,387Depreciation and amortization . . . . . . . 31,463 32,322 33,251 33,974 34,319

NET INCOME (LOSS) PER SHARE(¥)

NET SALES AND COST OF SALES RATIO(¥ BILLION, %)

OPERATING INCOME(¥ BILLION)

TOTAL ASSETS(¥ BILLION)

2002

2001

2000

1999

1998

511.870.7

557.2

564.1

572.9

605.7

70.1

71.7

72.2

74.0

717.5

729.6

764.7

808.1

841.4

2002

2001

2000

1999

1998

11.0

19.8

16.3

16.9

11.2

2002

2001

2000

1999

1998

3.5

13.0

3.9

13.1

(33.0)

2002

2001

2000

1999

1998

NET SALES (¥ BILLION) COST OF SALES RATIO (%)

FIVE-YEAR SUMMARY

11

OPERATIONAL REVIEWIn 2002, the Japanese economy remained in the recessionary

doldrums. Consumer spending languished as deflation per-

sisted, the problem loan issue remained unresolved and the

employment picture worsened. Adding to the economic

uncertainty were concerns over the U.S. economy and plum-

meting stock prices.

Against this backdrop, Sapporo posted consolidated net

sales of ¥511,752 million, 8.2% down year on year. This

decrease was primarily attributable to lower beer shipments

and discounting of Happo-shu products. Operating income

dropped 44.5% to ¥10,978 million and net income fell

73.4% to ¥1,168 million, despite efforts to contain operating

expenses and improve net financial income.

Alcoholic Beverages & Soft Drinks

This segment is made up of several operating divisions: beer

and Happo-shu, wine & spirits, soft drinks, and distribution,

primarily of Sapporo products.

Operating revenues in 2002 were ¥441,247 million, down

¥41,781 million, or 8.6%, year on year.

In beer and Happo-shu operations, Sapporo continued

to promote different strategies for these two product catego-

ries under the common banner of “Beer Entertainment,

Sapporo,” a concept founded on offering consumers more

ways to enjoy Sapporo’s products. With beer, Sapporo’s

SHARE OF NET SALES(%)

Other 0.6%

Alcoholic beverages & soft drinks 86.2%

MANAGEMENT’S DISCUSSION AND ANALYSIS

strategy is to nurture brands over the medium to long term.

And with Happo-shu, the company aims to deliver new value

to consumers. Black Label shipments, although dropping

year on year, were on a par with demand in the market as a

whole, thanks to a coordinated marketing campaign to build

brand equity, centered on TV commercials. “Premium” brand

Yebisu posted sales growth above the industry average for

the tenth straight year, again underscoring the value consum-

ers see in this unique brand. In Happo-shu, Hokkaido

Namashibori was again popular, cementing its place as one

of Sapporo’s core Happo-shu products.

In the wine & spirits division, sales volumes in domestic

wines increased over levels in 2001 despite a soft overall

market, reflecting strong demand for low-priced wines and

the popularity of a wine fermented by marine yeast. In

imported wines, Sapporo worked to develop the market,

focusing primarily on importing wines from major European

wine-making countries and Chile. Sapporo also brought to

market high-quality, low-priced imported wines using a pro-

prietary “direct shipment & direct filling” system. Under this

system, wines imported in tanks from France and Italy are

bottled at Sapporo’s wineries in Japan. Despite these and

other measures to lift sales, combined sales of domestic and

imported wines were held to last year’s level by a lackluster

imported wine market.

Real estate 5.1%

Restaurant & hotel 8.1%


CAPITAL EXPENDITURES(¥ BILLION)

NET INCOME (LOSS)(¥ BILLION)

LONG-TERM DEBT(¥ BILLION)

SHAREHOLDERS’ EQUITY(¥ BILLION)

13.6

12.3

26.5

32.0

34.4

2002

2001

2000

1999

1998

2002

2001

2000

1999

1998

1.2

4.4

1.3

4.4

(11.2)

254.1

268.4

279.4

328.7

346.9

2002

2001

2000

1999

1998

106.5

105.9

103.3

103.2

100.0

2002

2001

2000

1999

1998

In spirits, Sapporo continued efforts to develop the on-

premise market, spurring sharply higher demand for mainstay

Hyosai Sour.

In the soft drinks division, the company ran an aggressive

marketing program for the pivotal Gyokuro-Iri O-Cha, as well

as planned products that precisely matched the seasons of

the year. In fruit juice drinks, products such as the Tsubutsubu

Oishibori series and Shunrei Mikan, which deliver both

refreshment and taste, were popular. As a result of these

performances, the soft drinks division posted its sixth

consecutive year of growth in shipments.

Segment operating income totaled ¥7,578 million, ¥6,153

million, or 44.8%, down on 2001.

Restaurant & Hotel

In restaurant operations, operating revenues declined

because of a worse-than-expected cooling of consumer

sentiment due to the protracted recession in Japan, and a

drop in restaurant turnout due to concerns over mad cow

disease. These factors negated efforts to expand sales

by opening new restaurants in an efficient manner and

developing new business models. And on the earnings front,

Sapporo worked to contain purchasing, personnel and other

operating expenses.

In hotel operations, operating revenues at The Westin

Tokyo edged down as corporate use of rooms and banquet

facilities slipped amid the worldwide economic slowdown.

For the segment as a whole, operating revenues declined

¥1,034 million, or 2.4%, to ¥41,648 million. The segment

recorded an operating loss of ¥307 million due to the poor

result at Sapporo Lion Limited’s restaurant operations.

Real Estate

In November 2002, Sapporo opened Glass Square, a new

shopping and restaurant complex, which will add to the

appeal of one of the segment’s core assets, Yebisu Garden

Place. And earlier in the year, in April 2002, Sapporo Factory

underwent a refurbishment. This helped to draw in more

customers, enabling Sapporo Factory to record its highest

level of revenues since opening.

Despite these strong performances, segment rev-

enues dipped below 2001 revenues as the real estate

market softened, particularly in respect of demand for

office space.

Real estate revenues declined ¥3,010 million, or 10.4%,

to ¥26,038 million, while operating income fell ¥2,292 million,

or 21.8%, to ¥8,225 million.

13

RETURN ON ASSETS(%)

RETURN ON SHAREHOLDERS’ EQUITY(%)

1.1

4.2

1.3

4.3

(–)

2002

2001

2000

1999

1998

0.16

0.60

0.17

0.55

(–)

2002

2001

2000

1999

1998

Other

This segment includes the results of the company’s

agribusiness, engineering division and brewing yeast-related

business. Operating revenues rose ¥344 million, or 13.9%, to

¥2,819 million, and the segment recorded an operating loss

of ¥523 million.

Financial Position

Sapporo’s total assets peaked on December 31, 1994 at

¥927,988 million. The increase to this point was due to capital

expenditures associated with the Yebisu Garden Place

development, which opened in October 1994. Since then

Sapporo has focused on improving the return on assets. As

of December 31, 2002, total assets stood at ¥717,486 million,

¥12,115 million lower than a year ago and 22.7% lower than

at the end of 1994.

Financial liabilities increased ¥11,439 million to ¥384,303

million at December 31, 2002 as the company issued new

bonds and increased long-term debt.

Total shareholders’ equity increased 0.5% from ¥105,945

million a year earlier to ¥106,527 million at December 31,

2002. The equity ratio improved from 14.5% to 14.8%.

Cash Flows

Cash flows from operating activities were ¥22,697 million,

reflecting the add back of non-cash items such as ¥31,463

million in depreciation and amortization and ¥2,088 million

for an increase in employees’ retirement benefits. The loss

before income taxes and minority interests of ¥3,349

million used cash and compared with income of ¥3,102

million in 2001.

Investing activities used net cash of ¥12,244 million,

mainly representing outflows of ¥1,987 million for the pur-

chase of investment securities and ¥10,654 million for the

acquisition of property, plant and equipment.

Financing activities used net cash of ¥9,517 million. This

was the net result of inflows of ¥30,000 million from the

issuance of bonds and the procurement of long-term debt,

which were outweighed by outflows of ¥48,702 million for the

redemption of bonds and the repayment of a ¥20,000 million

deposit for redemption of bonds.

As a result of the above changes, cash and cash equiva-

lents at the end of the year were ¥9,934 million, ¥780 million

higher than a year ago.


CONSOLIDATED BALANCE SHEETSDecember 31, 2002 and 2001

Thousands ofMillions of yen U.S. dollars (Note 1)

ASSETS 2002 2001 2002

Current assets:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 9,934 ¥ 9,154 $ 82,816Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 95 413Marketable securities (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 3 1,018Notes and accounts receivable—trade. . . . . . . . . . . . . . . . . . . . . . . . . . 74,596 84,603 621,894Less: Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . (153) (215) (1,280)Inventories (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,002 32,994 241,783Deferred tax assets (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730 947 6,082Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 165 954Deposit for redemption of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 – 166,736Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,627 20,575 171,967

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,022 148,321 1,292,383

Investments and long-term loans:Investment securities (Notes 4 and 6):

Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . . . . 1,740 1,736 14,508Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,137 26,514 201,225

Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,506 11,961 95,924Deferred tax assets (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,311 1,592 52,612Less: Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . (3,211) (2,274) (26,772)Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,276 25,667 210,724

65,759 65,196 548,221

Property, plant and equipment (Note 6):Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,314 100,311 836,295Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,742 490,406 4,091,219Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (178,995) (166,805) (1,492,247)Machinery and automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,879 235,807 1,991,492Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,795) (157,071) (1,382,203)Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,484 4,305 20,712Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,672 26,657 222,363Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,932) (20,369) (174,505)

493,369 513,241 4,113,126

Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,336 2,843 27,813

¥ 717,486 ¥ 729,601 $ 5,981,543

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

15


LIABILITIES AND SHAREHOLDERS’ EQUITY 2002 2001 2002

Current liabilities:Short-term bank loans (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 27,866 ¥ 37,516 $ 232,313Current portion of long-term debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . 102,290 66,911 852,773Notes and accounts payable

Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,332 39,753 311,229Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,380 6,986 53,186

Liquor taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,624 51,095 363,687Income taxes payable (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 736 3,620Accrued bonuses (Note 2 (j)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 904 7,082Deposits received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,127 5,709 42,742Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,835 66,919 482,154

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,737 276,529 2,348,786

Long-term debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,147 268,437 2,118,775

Dealers’ deposits for guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,492 40,479 312,565

Employees’ retirement benefits (Note 9) . . . . . . . . . . . . . . . . . . . . . . . 15,966 13,878 133,108

Directors’ and corporate auditors’ severance benefits . . . . . . . . . . . 538 543 4,484

Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,861 18,376 132,233

Minority interests in consolidated subsidiaries . . . . . . . . . . . . . . . . . 5,218 5,414 43,500

Contingent liabilities (Note 13)

Shareholders’ equity:Common stock (Notes 7 and 16)

Authorized — 1,000,000,000 sharesIssued — at December 31, 2002 338,833,597 shares . . . . . . . 43,832 – 365,416

— at December 31, 2001 338,833,597 shares . . . . . . . – 43,832 –Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,242 32,242 268,797Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,281 29,960 252,445Unrealized holding gains on securities . . . . . . . . . . . . . . . . . . . . . . . . . . 460 – 3,835Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . (204) (75) (1,700)Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) (14) (701)

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,527 105,945 888,092

¥717,486 ¥729,601 $5,981,543



2002 2001 2000 2002

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥511,752 ¥557,233 ¥564,065 $4,266,377Operating cost and expenses:Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361,668 390,493 404,366 3,015,156Selling, general and administrative expenses . . . . . . . . . . . . 139,106 146,954 143,403 1,159,697

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,978 19,786 16,296 91,524

Other income (expenses):Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . 949 986 1,132 7,910Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,597) (9,082) (9,951) (63,334)Other, net (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,679) (8,588) (5,260) (64,024)

(Loss) income before income taxesand minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,349) 3,102 2,217 (27,924)

Income taxes (Note 10):Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784 978 677 6,534Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,137) (1,778) 488 (42,830)

(4,353) (800) 1,165 (36,296)

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 488 252 1,367

Net income (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,168 ¥ 4,390 ¥ 1,304 $ 9,739


CONSOLIDATED STATEMENTS OF INCOMEThree Years ended December 31

17


2002 2001 2000 2002

Common stock:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥43,832 ¥43,832 ¥43,832 $365,416

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥43,832 ¥43,832 ¥43,832 $365,416

Capital surplus:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥32,242 ¥32,242 ¥32,242 $268,797


Retained earnings:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥29,960 ¥27,264 ¥27,111 $249,767Adjustment for adoption of tax-effect accounting (Note 2 (n)) . . . . – – 843 –

Beginning balance, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . 29,960 27,264 27,954 249,767Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,168 4,390 1,304 9,739Decrease resulting from inclusion ofadditionally consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . – – (300) –

Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (847) (1,694) (1,694) (7,061)


Unrealized holding gains on securities:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ – ¥ – ¥ – $ –Net change during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 – – 3,835

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 460 ¥ – ¥ – $ 3,835

Foreign currency translation adjustment (Note 2 (m)) :Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (75) ¥ – ¥ – $ (623)Net change during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129) (75) – (1,077)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (204) ¥ (75) ¥ – $ (1,700)

Treasury stock, at cost:Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (14) ¥ (1) ¥ (1) $ (116)Cost of treasury stock (bought) sold . . . . . . . . . . . . . . . . . . . . . . (70) (13) 0 (585)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ (84) ¥ (14) ¥ (1) $ (701)


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYThree Years ended December 31


CONSOLIDATED STATEMENTS OF CASH FLOWSThree Years ended December 31


2002 2001 2000 2002

Cash flows from operating activities:(Loss) income before income taxes and minority interests . . . . . . . ¥ (3,349) ¥ 3,102 ¥ 2,217 $ (27,924)Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,463 32,322 33,252 262,303Increase (decrease) in employees’ retirement benefits . . . . . . . . . . 2,088 3,580 (795) 17,410Increase in allowance for doubtful receivables . . . . . . . . . . . . . . . . 876 350 1,381 7,305Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (949) (986) (1,132) (7,910)Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,593 9,082 9,951 63,303Gain on sales of property, plant and equipment . . . . . . . . . . . . . . . (97) (48) (13,001) (805)Loss on disposal of property, plant and equipment . . . . . . . . . . . . . 3,121 4,519 13,407 26,021Gain on sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . – – (1,829) –Devaluation of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . 0 – 153 0(Gain) loss on sales of investment securities . . . . . . . . . . . . . . . . . . (461) (260) 85 (3,843)Devaluation of investment securities . . . . . . . . . . . . . . . . . . . . . . . . 3,690 1,239 2,944 30,760Decrease in notes and accounts receivable . . . . . . . . . . . . . . . . . . 9,974 1,278 3,571 83,150Decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975 5,147 2,284 33,136Decrease in notes and accounts payable . . . . . . . . . . . . . . . . . . . . (2,345) (2,948) (3,438) (19,550)Decrease in liquor taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,471) (2,641) (2,933) (62,280)Decrease in deposit received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,813) (3,588) (1,069) (31,787)(Decrease) increase in other current liabilities . . . . . . . . . . . . . . . . . (7,468) 43 (10,838) (62,260)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,141) 408 4,144 (51,204)

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,686 50,599 38,354 255,825Interest and dividend received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966 1,099 1,147 8,055Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,910) (9,054) (10,081) (65,954)Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,045) (559) (721) (8,709)Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 22,697 42,085 28,699 189,217

Cash flows from investing activities:Proceeds from sales of marketable securities . . . . . . . . . . . . . . . . . 3 4 5,160 25Cash invested in investment securities . . . . . . . . . . . . . . . . . . . . . . (1,987) (262) (912) (16,569)Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . 1,850 1,384 227 15,422Cash invested in property, plant and equipment . . . . . . . . . . . . . . . (10,654) (11,332) (28,780) (88,819)Proceeds from sales of property, plant and equipment . . . . . . . . . . 826 2,127 12,601 6,886Cash invested in intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,247) (1,363) (990) (10,399)Increase in long-term loan receivable . . . . . . . . . . . . . . . . . . . . . . . (25) (75) (6,094) (208)Collection of long-term loan receivable . . . . . . . . . . . . . . . . . . . . . . 605 460 6,340 5,041Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,615) (1,251) (911) (13,466)Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . (12,244) (10,308) (13,359) (102,087)

Cash flows from financing activities:Net (decrease) increase in short-term bank loans . . . . . . . . . . . . . . (12,650) (8,610) 7,100 (105,461)Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 38,025 15,471 483,535Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,209) (36,546) (48,719) (151,804)Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 20,000 20,000 250,104Redemption of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,702) (45,000) (16,870) (406,019)Payment of deposit for redemption of bonds . . . . . . . . . . . . . . . . . (20,000) – – (166,736)Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (854) (1,692) (1,694) (7,124)Cash dividends paid to minority interest . . . . . . . . . . . . . . . . . . . . . (32) (63) (68) (265)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,930 4,952 (72) 24,426Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . (9,517) (28,934) (24,852) (79,344)

Effect of exchange rate changes on cash and cash equivalents . . . (156) 180 114 (1,287)Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 780 3,023 (9,398) 6,499Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . 9,154 6,131 15,488 76,317Cash and cash equivalents of additional consolidated subsidiaries . . – – 41 –Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . ¥ 9,934 ¥ 9,154 ¥ 6,131 $ 82,816


19

1. Basis of PresentationSapporo Breweries Limited (the “Company”) and consolidated domestic subsidiaries maintain their accounting records andprepare their financial statements in accordance with accounting principles and practices generally accepted and applied inJapan, and the consolidated foreign subsidiary in conformity with that of the country of its domicile. The accompanying consoli-dated financial statements have been compiled from the consolidated financial statements filed with the Prime Minister as requiredby the Securities and Exchange Law of Japan. Accordingly, the accompanying consolidated financial statements are not intendedto present the consolidated financial position, results of operations and cash flows in accordance with accounting principles andpractices generally accepted in countries and jurisdictions other than Japan.

Relevant notes and consolidated statements of shareholders’ equity have been prepared as additional information and certainreclassifications have been made to present the accompanying consolidated financial statements in a format which is familiar toreaders outside Japan.

Certain reclassifications of previously reported amounts have been made to conform the consolidated financial statements forthe years ended December 31, 2000 and 2001 to the 2002 presentation.

For the convenience of the reader, the accompanying consolidated financial statements as at, and for the year ended, December31, 2002 have been presented in U.S. dollars by translating yen amounts at the rate of ¥119.95=$1, the exchange rate prevailingas of December 31, 2002.

2. Summary of Significant Accounting Policies(a) Principles of consolidationThe accompanying consolidated financial statements include the accounts of the Company and 14 of its significant subsidiaries.All significant intercompany balances, transactions and profits have been eliminated in consolidation.

The Company’s remaining subsidiaries, whose gross assets, net sales, net income and retained earnings are not significant inthe aggregate in relation to comparable figures in the consolidated financial statements, have not been consolidated.

As the balance sheet date of one consolidated subsidiary is March 31, 2003, its interim financial statements as of September30, 2002 were used for the purposes of consolidation.

(b) Investments in unconsolidated subsidiaries and affiliatesInvestment in one affiliate for the three years ended December 31, 2002 has been accounted for by the equity method of accounting.

Investments in unconsolidated subsidiaries and affiliates other than those accounted for by the equity method of accounting arestated at cost as, in the aggregate, they are not significant in amount. Cost is determined by the moving-average method.

(c) Cash equivalentsAll highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents.

(d) Marketable securities and investment securitiesA new accounting standard for financial instruments, which became effective from the year ended December 31, 2001, requiresthat securities be classified into three categories: trading, held-to-maturity debt or other securities. Under the new standard,trading securities are carried at fair value, held-to-maturity debt securities are carried at amortized cost, and other securities arecarried at cost. The cost of securities sold is determined by the moving average method.

As of January 1, 2001, the Company and its consolidated subsidiaries assessed the purpose for which investments securitiesare held and classified their investments as “held-to-maturity debt securities” or “other securities” and accounted for the securi-ties as of December 31, 2001 in accordance with the new standard referred to above. As a result, marketable securities presentedas current assets of ¥20,097 million were reclassified to investment securities as of January 1, 2001. The effect of the adoption ofthis new standard for financial investments was to increase income before income taxes and minority interests by ¥1,996 millionfor the year ended December 31, 2001.

Effective from the year ended December 31, 2002, the Company and its consolidated subsidiaries adopted the new valuationmethod for “other securities” with available market quotations. Under the new valuation method, “other securities” for whichmarket quotations are available are stated at fair value as of the end of the year with net unrealized gains or losses being includedas a separate component of shareholders’ equity, net of related taxes. Realized gains and losses on sales are determined usingthe average cost method and are included in the net profit or loss for the period. As a result of adoption of the new method,“Unrealized holding gains on securities,” “Deferred tax liabilities” and “Minority interests in consolidated subsidiaries” increasedby ¥460 million ($3,835 thousand), ¥340 million ($2,835 thousand) and ¥0 million ($1 thousand) as compared with the amountswhich would have been reported if the previous method had been applied consistently.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(e) DerivativesDerivatives are stated at fair value.

(f) InventoriesInventories are stated at cost, determined principally by the average method.

(g) Property, plant and equipmentProperty, plant and equipment are stated at cost. Depreciation is computed by the declining-balance method over the estimateduseful lives of manufacturing facilities for alcoholic beverages and soft drinks, and by the straight-line method for the assets for realestate and hotel operations and buildings acquired in Japan subsequent to March 31, 1998. The annual provisions for depreciationhave been computed in accordance with the rates ranging from 3 to 65 years for buildings and structures and from 4 to 14 years formachinery and automobiles.

For property and equipment retired or otherwise disposed of, the costs and related depreciation are charged from the respectiveaccounts and the net difference, less any amount realized on disposal, is charged to operations.

Maintenance and repairs, including minor renewals and improvements, are charged to income as incurred.

(h) IntangiblesIntangibles having a limited life are amortized by the straight-line method over their estimated useful lives.

(i) Allowance for doubtful accountsThe allowance for doubtful accounts is estimated at the average percentage of actual bad debt in the past, which is thenapplied to the balance of receivables. In addition, the amount deemed necessary to cover uncollectible receivables is providedon an individual account basis.

(j) Accrued bonusesEmployees’ bonuses are provided on an accrual basis based on the estimated amounts to be paid subsequent to the balancesheet date.

(k) Employees’ retirement benefitsUntil the year ended December 31, 2000, the liability for employees’ retirement benefits was stated at the present value of theamount which would be required to be paid if all eligible employees voluntarily retired at the balance sheet date. The present valuerate of future payments of the liability for employees’ retirement benefits was 69% at December 31, 2000.

In addition, the Company and certain subsidiaries followed the practice of funding the actuarially computed amount whichincludes current service cost and the amortization of past service cost. Past service cost is being amortized over a period of 20years. The Company and certain subsidiaries charged such past service cost to income when payment became liable.

Effective from the year ended December 31, 2001, the Company and its subsidiaries adopted the new Japanese accountingstandard for retirement benefits. In accordance with the new standard, employees’ retirement benefits as of December 31, 2001are provided mainly at an amount calculated based on the retirement benefit obligations and fair value of plan assets as ofDecember 31, 2001 as adjusted for the unrecognized net retirement benefit obligation at transition, unrecognized actuarial gain orloss and unrecognized past service costs. The net retirement benefit obligation at transition is being amortized over a period of 15years by the straight-line method, except for one consolidated subsidiary which has fully charged it to income for the year endedDecember 31, 2001. Actuarial gain and loss are amortized in the year following the year in which the gain or loss is recognizedprimarily by the straight-line method over the average remaining years of service of the employees (10 years through 15 years).

The effect of the adoption of the new standard for retirement benefits was to decrease income before income taxes andminority interests by ¥4,505 million for the year ended December 31, 2001.

On November 15, 2002, the Company obtained approval from the Minister of Health, Labour and Welfare to be exemptedfrom future payments of the substituted portion of the welfare pension fund plans.

The Company recognized as an extinguishment, on the day it received this approval, the retirement benefit obligations and anamount equivalent to pension assets that must be returned that are associated with the substituted portion, applying the transi-tional measures prescribed in Section 47-2 of The Japanese Institute of Certified Public Accountants’ Accounting CommitteeReport No. 13 “Practical Guidelines for Accounting for Retirement Benefits (Interim Report).” In conjunction with this recognition,the Company charged the full amount of the net transition obligation of ¥5,523 million ($46,043 thousand) and the unrecognizedactuarial loss of ¥3,178 million ($26,491 thousand) to income in the year ended December 31, 2002. The equivalent amount to bereturned as of December 31, 2002 was ¥9,999 million ($83,357 thousand).

21

(l) Directors’ and corporate auditors’ severance benefitsDirectors and corporate auditors of the Company and certain consolidated subsidiaries are customarily entitled to lump-sumpayments. Provisions for officers’ severance benefits for directors’ and corporate auditors’ are made at estimated amounts.

(m) Foreign currency translationUntil the year ended December 31, 2000, short-term receivables and payables denominated in foreign currencies were translated intoyen at the exchange rates in effect at the balance sheet date. Other assets and liabilities denominated in foreign currencies weretranslated at historical rates.

Bonds denominated in foreign currencies hedged by forward exchange contracts or swapped to provide yen cash flows, aretranslated into yen amounts at the contracted rates of exchange or stated at the amount of the relevant yen cash flows. Gainsresulting from forward exchange contracts or swap agreements are deferred and amortized over the contract period.

Effective from the year ended December 31, 2001, the Company and its subsidiaries adopted the new Japanese accountingstandard for foreign currency translations. Under the new standard, all monetary assets and liabilities denominated in foreigncurrencies, whether long-term or short-term, are translated into Japanese yen at the exchange rates prevailing at the balancesheet date. Resulting exchange gains and losses are credited and charged to income. In addition, the new accounting standardrequires that translation adjustments arising from the translation of the financial statements of consolidated subsidiaries andaffiliates accounted for by the equity method be recognized as a separate component of shareholders’ equity. In the prior year,such adjustments were stated in a separate component of assets. The adoption of this new method had no impact on theconsolidated statements of income for the year ended December 31, 2001.

(n) Income taxesIncome taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants taxes andenterprise taxes. The Company and its subsidiaries adopted the deferred tax accounting method. Income taxes were determinedusing the asset and liability approach, whereby deferred tax assets and liabilities were recognized in respect of temporary differ-ences between the tax basis of assets and liabilities and those as reported in the financial statements.

(o) Research and development costsResearch and development costs are charged to income when incurred.

(p) Hedge accountingGain or loss on derivatives designated as hedging instruments is deferred until the loss or gain on the underlying hedged item isrecognized. In addition, if an interest-rate swap meets certain conditions, interest expense is computed and recognized using acombined rate.

(q) LeasesNoncancelable lease transactions are primarily accounted for as operating leases (whether such leases are classified as oper-ating leases or finance leases) except that lease agreements which stipulate the transfer of ownership of the leased assets areaccounted for as finance leases.

3. Change in Method of AccountingEffective January 1, 2001, the Company changed its method of accounting for inventory valuation with respect to merchandisefrom the last purchase cost method to the periodic average cost method. The value of inventories has increased with an increasein the amount of merchandise offered by the Company. Therefore this change was made in order to comply with more appropri-ate inventory valuation and computation of profit and loss, together with the application of a new accounting system for inventory.

For the year ended December 31, 2001, the effect of this change was to decrease operating income and income beforeincome taxes and minority interests by ¥74 million. The effect on segment information is explained in Note 15.


4. Marketable Securities and Investment SecuritiesThe following summarizes information relating to securities after the adoption of the new standard in 2001.

“Other securities” were carried at cost, which was determined by the moving-average method, at December 31, 2001. AtDecember 31, 2002, “other securities” with available market quotations were stated at fair value in accordance with the newvaluation method.

(a) Held-to-maturity debt securities with available fair valueThe aggregate carrying value, fair value, gross unrealized gains and losses of held-to-maturity debt securities classified as “Othersecurities,” for which fair values were available at December 31, 2002 and 2001 were as follows:

i) Securities whose fair value exceeds their carrying value:


Carrying Fair Unrealized Carrying Fair UnrealizedDecember 31, 2002 value value gains value value gains

Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥10 ¥10 ¥0 $83 $85 $2Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – – –Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – – –

¥10 ¥10 ¥0 $83 $85 $2

Millions of yen

Carrying Fair UnrealizedDecember 31, 2001 value value gains

Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥10 ¥11 ¥1Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – –Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – –

¥10 ¥11 ¥1

ii) No securities whose carrying value exceeds their fair value existed.

(b) Other securities with available fair valueThe aggregate acquisition cost, carrying value, gross unrealized gains and losses of “Other securities” for which fair values wereavailable at December 31, 2002 were as follows:


Acquisition Carrying Unrealized Acquisition Carrying UnrealizedDecember 31, 2002 cost value gains (losses) cost value gains (losses)

Securities whose carrying value exceeds their acquisition cost:Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 5,923 ¥ 8,763 ¥ 2,840 $ 49,375 $73,052 $ 23,677Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 0 30 32 2Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – – –

¥ 5,927 ¥ 8,767 ¥ 2,840 $ 49,405 $73,084 $ 23,679

Securities whose acquisition cost exceeds their carrying value:Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥12,138 ¥10,106 ¥(2,032) $101,195 $84,251 $(16,944)Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10 0 83 81 (2)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 129 0 1,078 1,072 (6)

¥12,277 ¥10,245 ¥(2,032) $102,356 $85,404 $(16,952)

23

The aggregate carrying value, fair value, unrealized gain, net of tax to be recorded, deferred tax liabilities and minority interestof “Other securities” for which fair values were available at December 31, 2001 were as follows:

December 31, 2001 Millions of yen

Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥23,216Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,276Unrealized gain, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,193Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

(c) The realized gain and loss on sales of “Other securities” during the year ended December 31, 2002 and 2001 were as follows:


2002 2001 2002

Selling amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,837 ¥1,388 $15,312Gain on sales of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 260 3,843Loss on sales of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 28

(d) The carrying value of “Securities” for which fair values were not available at December 31, 2002 and 2001 were as follows:


2002 2001 2002

(1) Held-to-maturity debt securitiesDomestic debt securities privately offered . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 146 ¥ 154 $ 1,216

(2) Investment in subsidiaries and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,606 1,602 13,387(3) Other securities

Equity investments in non-listed companies . . . . . . . . . . . . . . . . . . . . . . . . 3,920 3,494 32,680Domestic debt securities privately offered . . . . . . . . . . . . . . . . . . . . . . . . . 172 172 1,430Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 0 8,338

(e) Redemption schedules for securities with maturity dates, classified as “Held-to-maturity debt securities” and “Other securities”at December 31, 2002, are summarized as follows:


Due after Due afterDue one year, Due one year,

within but within within but withinone year five years one year five years

Debt securities:Government and municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 10 ¥ – $ 83 $ –Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 58 834 484Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 – 25 –

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 – 75 –

¥122 ¥58 $1,017 $484


5. InventoriesInventories as of December 31, 2002 and 2001 are summarized as follows:


2002 2001 2002

Finished goods and merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 8,957 ¥10,377 $ 74,672Real estate for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,652 1,762 13,775Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,828 5,020 40,254Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,655 13,778 97,163Supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 2,057 15,919

¥29,002 ¥32,994 $241,783

6. Short-term Bank Loans and Long-term DebtShort-term bank loans represent notes or overdraft accounts. The annual average interest rates applicable to short-term bank loansfor the years ended December 31, 2002 and 2001 were 0.53% and 0.48%, respectively.

As of December 31, 2002, the balance outstanding under the yen-denominated domestic commercial paper program, whichis included in short-term bank loans, was ¥8,000 million ($66,694 thousand).

Long-term debt as of December 31, 2002 and 2001 is summarized as follows:


2002 2001 2002

1.8% convertible bonds due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ – ¥ 18,702 $ –5.9% bonds due 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000 166,7361.2% convertible bonds due 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,720 19,720 164,4021.85% bonds due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 10,000 –2.25% bonds due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 10,000 –2.50% bonds due 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3682.45% bonds due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 10,000 –1.8% bonds due 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000 166,7362.225% bonds due 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3681.62% bonds due 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3682.06% bonds due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3680.86% bonds due 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3681.31% bonds due 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000 83,3681.27% bonds due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 – 83,3680.87% bonds due 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 – 83,3681.22% bonds due 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 – 83,368

Loans from banks and insurance companiesmaturing from 2002 to 2018 with weighted –average interest rates during the year:2002—1.71%2001—2.19%

Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,831 57,566 498,799Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,886 109,360 1,224,563

356,437 335,348 2,971,548Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (102,290) (66,911) (852,773)

¥ 254,147 ¥268,437 $2,118,775

25

The aggregate annual maturities of long-term debt as of December 31, 2002 are as follows:

Thousands ofYear ending December 31, Millions of yen U.S. dollars (Note 1)

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥102,290 $ 852,7732004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,114 267,7262005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,281 602,5952006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,913 382,7652007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,279 419,1642008 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,560 446,525

¥356,437 $2,971,548

The 1.2% convertible bonds due 2009 are convertible into shares of common stock of the Company at the option of the holdersat the conversion prices of ¥991.00 per share at December 31, 2002, subject to adjustments in certain circumstances including theissuance of common stock at a price below the fair market price.

The assets pledged as collateral for short-term bank loans and long-term debt included in the current portion of convertible bondsamounting to ¥62,331 million ($519,642 thousand) and ¥62,566 million at December 31, 2002 and 2001, respectively, are as follows:


2002 2001 2002

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥4,305 ¥7,102 $35,888Property, plant and equipment, at net book value . . . . . . . . . . . . . . . . . . . . . . . 2,049 2,341 17,079

7. Shareholders’ EquityThe Commercial Code of Japan provides that an amount not exceeding one half of the issue price of new shares may, with theapproval of the Board of Directors, be accounted for as capital surplus is transferred to capital stock.

Retained earnings include a legal reserve provided in accordance with the provisions of the Commercial Code. This reserve isnot available for dividend payments, but it may be used to reduce or eliminate a deficit by resolution of the meeting of shareholdersor may be transferred to common stock by resolution of the Board of Directors.


8. Other Income (Expenses)“Other income (expenses)—Other, net” for the year ended December 31 consists of the following:


2002 2001 2000 2002

Loss on sales and disposal of property,plant and equipment and intangibles, net . . . . . . . . . . . . . . . . . . . . ¥(3,025) ¥(4,471) ¥ (406) $(25,216)

Gain on sale of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . – – 1,829 –Gain on sale of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 461 260 – 3,843Subsidy for construction of a factory . . . . . . . . . . . . . . . . . . . . . . . . . – 1,050 – –Compensation for dismantlement of old factory . . . . . . . . . . . . . . . . 974 – – 8,121Expenses for issuing new bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145) (104) (116) (1,206)Devaluation of marketable securities and investments . . . . . . . . . . . . (3,691) (1,239) (3,098) (30,768)Loss on disposition of inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,079) (1,705) (613) (8,998)Reversal (provision) for doubtful receivables . . . . . . . . . . . . . . . . . . . 181 (540) (1,584) 1,513Past service costs of the present contributory plans . . . . . . . . . . . . . . . . – – (796) –Early retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (139) –Equity in income of an affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (629) (177) 284Amortization of net retirement benefit obligation at transition . . . . . . – (1,745) – –Loss on exemption from future payments of substituted portion ofthe welfare pension fund plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (618) – – (5,148)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (771) 535 (160) (6,449)

¥(7,679) ¥(8,588) ¥(5,260) $(64,024)

9. Retirement Benefit PlanThe Company and its domestic subsidiaries have defined benefit plans, ie., welfare pension fund plans, tax-qualified pensionplans and lump-sum payment plans covering substantially all employees. Additional benefits may be granted to employeesaccording to the conditions under which termination occurs.

Employees’ retirement benefits as of December 31, 2002 and 2001 were analyzed as follows:


2002 2001 2002

Retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(69,594) ¥(86,355) $(580,190)Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,292 35,705 185,840

(47,302) (50,650) (394,350)Unrecognized net retirement benefit obligation at transition . . . . . . . . . . . . . . 20,265 27,706 168,947Unrecognized actuarial gain or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 9,091 86,922Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 – 5,743Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44) (25) (370)Employees’ retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(15,966) ¥(13,878) $(133,108)

The Company and a number of subsidiaries have recognized prior service costs related to a change in the level of benefitsoffered under the lump-sum retirement payment plans.

27

Components of retirement benefit expenses for the year ended December 31, 2002 and 2001 were as follows:


Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 2,830 ¥ 2,666 $ 23,589Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,150 2,360 17,925Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,557) (1,652) (12,982)Amortization of net retirement benefit obligation at transition . . . . . . . . . . . . . . 7,439 3,723 62,022Amortization of actuarial gain or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,780 – 31,511Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 – 137Retirement benefit expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥14,658 ¥ 7,097 $122,202

This includes the full amortization of unrecognized actuarial loss and net transition obligation associated with the return of thesubstituted portion of the welfare pension fund plans. These full amortization were recorded as extraordinary losses and offset bygains from the return of the substituted portion.

Assumptions used in calculation of the above information were as follows:

2002 2001

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 – 2.5% 2.5%Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 – 4.5% 3.0 – 4.5%Period of recognition of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 years –Method of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Straight-line basis Straight-line basisPeriod of recognition of actuarial gain or loss (which are amortized by the straight-linemethod over a period of average remaining service years of employees at the time ofoccurrence from the following year of occurrence) . . . . . . . . . . . . . . . . . . . . . . . . . 10 – 15 years 10 – 15 years

Period of recognition of net retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . 15 years Mainly 15 years*

* One subsidiary amortized the transition amount in 1 year.

10. Income TaxesIncome taxes applicable to the Company and its domestic consolidated subsidiaries comprise corporation tax, inhabitants’ taxesand enterprise tax and in the aggregate resulted in normal statutory tax rates of 42.1% for the year ended December 31, 2002,2001 and 2000. The deviation from the normal statutory tax rates is due primarily to (1) the accounting policy of not providingfor deferred income taxes arising from timing differences between financial and tax reporting, and (2) certain expenseswhich are not deductible for income tax purposes.

The effective tax rate reflected in the consolidated statements of income for the year ended December 31, 2002 and 2001differs from the statutory tax rate for the following reasons:

2002 2001

Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.1% 42.1 %Effect of:

Disallowed expenses, including entertainment expenses . . . . . . . . . . . . . . . . . . . (14.1) 17.0Dividend and other income deductible for income tax purposes . . . . . . . . . . . . . . 3.6 (2.5)Inhabitants’ per capita taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6.4) 7.1Unschedulable temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56.2) 20.7Changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159.8 (108.4)Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 (1.8)

Effective tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130.0% (25.8) %


Significant components of deferred tax assets and liabilities as of December 31, 2002 and 2001 were as follows:


2002 2001 2002

Deferred tax assets:Employees’ retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 6,009 ¥ 5,387 $ 50,098Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,894 1,700 15,789Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,222 2,167 18,528Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,310 856 10,917Equipment for promotional giveaways, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 398 752 3,314Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 563 1,820Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 858 5,802 7,151Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,993 1,105 16,616

Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,902 18,332 124,233Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,862) (8,139) (32,195)Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,040 10,193 92,038

Deferred tax liabilities:Reserve for advanced depreciation deduction, etc. . . . . . . . . . . . . . . . . . . . . 3,660 7,953 30,511Unrealized holding gains on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 – 2,835Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9 62Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,007 7,962 33,408

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 7,033 ¥ 2,231 $ 58,630

11. LeasesThe following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of leased prop-erty as of December 31, 2002 and 2001, that would have been reflected in the consolidated balance sheet if finance leaseaccounting had been applied to the finance lease transactions currently accounted for as operating leases:


2002 2001 2002

Acquisition costs:Machinery and automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,599 ¥ 2,978 $ 13,330Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,513 22,443 171,016

¥22,112 ¥25,421 $184,346

Accumulated depreciation:Machinery and automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,223 ¥ 2,312 $ 10,198Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,517 13,478 112,687

¥14,740 ¥15,790 $122,885

Net book value:Machinery and automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 376 ¥ 666 $ 3,132Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,996 8,965 58,329

¥ 7,372 ¥ 9,631 $ 61,461

Lease payments relating to finance lease transactions accounted for as operating leases amounted to ¥4,289 million ($35,761thousand) and ¥4,557 million, which were equal to the depreciation expenses of the leased assets computed by the straight-linemethod over the lease terms for the years ended December 31, 2002 and 2001, respectively.

29

Future minimum lease payments, including the interest portion thereon, subsequent to December 31, 2002 for finance leasetransactions accounted for as operating leases are summarized as follows:


2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥3,121 $26,0182004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,251 35,443

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥7,372 $61,461

Future minimum lease payments subsequent to December 31, 2002 for operating leases are summarized as follows:


2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥15 $1222004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 368

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥59 $490

12. Derivatives and Hedging ActivitiesThe Company has utilized interest-rate swap agreements to reduce its interest expense or its exposure to adverse fluctuations ininterest rates relating to loans and bonds payable. No interest-rate swap agreements were utilized at the end of 2002.

As of December 31, 2001, the interest-rate swap agreements outstanding were as follows:

Year ended December 31, 2001 Millions of yen

Notional Market Unrealizedamount value gain/(loss)

Interest-rate swap agreements:Fixed-rate into variable-rate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥10,000 ¥25 ¥25Variable-rate into different variable-rate indexed obligations . . . . . . . . . . . . . . . . . . . . . . . 1,000 1 1

¥26


13. Contingent LiabilitiesContingent liabilities as of December 31, 2002 and 2001 are summarized as follows:


2002 2001 2002

Guarantee of loans, principally for employees housing loans . . . . . . . . . . . . . . . ¥3,991 ¥5,348 $33,269

14. Amounts Per ShareNet income per share and diluted net income per share have been computed based on the weighted average number of sharesof common stock outstanding during each year.

Year ended December 31

U.S. dollarsYen (Note 1)

2002 2001 2000 2002

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥3.45 ¥12.96 ¥3.85 $0.03Diluted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 12.90 – –

Net assets per share have been computed based on the number of shares of common stock outstanding at eachbalance sheet date.

As of December 31

U.S. dollarsYen (Note 1)

2002 2001 2002

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥314.69 ¥312.71 $2.62

15. Segment InformationFinancial information by business segment is summarized as follows:

Year ended or as of December 31, 2002 Millions of yen

Operating revenues . . . . . . . . . . . . ¥441,247 ¥41,648 ¥ 26,038 ¥2,819 ¥511,752 ¥ – ¥511,752Intra-group sales and transfer . . . . 2,231 1 4,557 566 7,355 (7,355) –Total . . . . . . . . . . . . . . . . . . . . . . . 443,478 41,649 30,595 3,385 519,107 (7,355) 511,752Operating expenses . . . . . . . . . . . . 435,900 41,956 22,370 3,908 504,134 (3,360) 500,774

Operating income (loss) . . . . . . . . . ¥ 7,578 ¥ (307) ¥ 8,225 ¥ (523) ¥ 14,973 ¥ (3,995) ¥ 10,978

Identifiable assets . . . . . . . . . . . . . ¥374,571 ¥30,205 ¥277,263 ¥4,622 ¥686,661 ¥30,825 ¥717,486Depreciation and amortization . . . . ¥ 18,919 ¥ 1,265 ¥ 10,826 ¥ 320 ¥ 31,330 ¥ 133 ¥ 31,463Capital expenditures . . . . . . . . . . . ¥ 8,923 ¥ 1,390 ¥ 2,859 ¥ 387 ¥ 13,559 ¥ 81 ¥ 13,640

Alcoholicbeverages &soft drinks

General corporateand intercompany

eliminationsOther Total ConsolidatedReal estate

Restaurant& hotel

31

Year ended or as of December 31, 2002 Thousands of U.S. dollars (Note 1)

Operating revenues . . . . . . . . . . . . $3,678,593 $347,210 $ 217,078 $23,496 $4,266,377 $ – $4,266,377Intra-group sales and transfers . . . . 18,600 13 37,984 4,724 61,321 (61,321) –Total . . . . . . . . . . . . . . . . . . . . . . . 3,697,193 347,223 255,062 28,220 4,327,698 (61,321) 4,266,377Operating expenses . . . . . . . . . . . . 3,634,016 349,779 186,495 32,578 4,202,868 (28,015) 4,174,853

Operating income (loss) . . . . . . . . . $ 63,177 $ (2,556) $ 68,567 $ (4,358) $ 124,830 $ (33,306) $ 91,524

Identifiable assets . . . . . . . . . . . . . $3,122,724 $251,812 $2,311,488 $38,538 $5,724,562 $256,981 $5,981,543Depreciation and amortization . . . . $ 157,721 $ 10,548 $ 90,250 $ 2,671 $ 261,190 $ 1,113 $ 262,303Capital expenditures . . . . . . . . . . . $ 74,388 $ 11,590 $ 23,835 $ 3,224 $ 113,037 $ 680 $ 113,717


Operating revenues . . . . . . . . . . . . ¥483,028 ¥42,682 ¥ 29,048 ¥2,475 ¥557,233 ¥ – ¥557,233Intra-group sales and transfer . . . . 2,396 2 4,683 596 7,677 (7,677) –

Total . . . . . . . . . . . . . . . . . . . . . . . 485,424 42,684 33,731 3,071 564,910 (7,677) 557,233Operating expenses . . . . . . . . . . . . 471,693 42,724 23,214 3,742 541,373 (3,926) 537,447


Identifiable assets . . . . . . . . . . . . . ¥394,894 ¥30,453 ¥288,070 ¥4,934 ¥718,351 ¥11,250 ¥729,601Depreciation and amortization . . . . ¥ 19,464 ¥ 1,344 ¥ 11,017 ¥ 345 ¥ 32,170 ¥ 152 ¥ 32,322Capital expenditures . . . . . . . . . . . ¥ 10,420 ¥ 689 ¥ 747 ¥ 328 ¥ 12,184 ¥ 72 ¥ 12,256


Operating revenues . . . . . . . . . . . . ¥491,017 ¥43,092 ¥ 27,889 ¥2,067 ¥564,065 ¥ – ¥564,065Intra-group sales and transfers . . . . 2,479 – 4,916 1,350 8,745 (8,745) –

Total . . . . . . . . . . . . . . . . . . . . . . . 493,496 43,092 32,805 3,417 572,810 (8,745) 564,065Operating expenses . . . . . . . . . . . . 481,223 43,467 23,630 3,894 552,214 (4,445) 547,769


Identifiable assets . . . . . . . . . . . . . ¥415,028 ¥32,121 ¥301,804 ¥4,558 ¥753,511 ¥11,171 ¥764,682Depreciation and amortization . . . . ¥ 20,239 ¥ 1,241 ¥ 11,393 ¥ 183 ¥ 33,056 ¥ 195 ¥ 33,251Capital expenditures . . . . . . . . . . . ¥ 20,462 ¥ 2,391 ¥ 2,829 ¥ 584 ¥ 26,266 ¥ 238 ¥ 26,504

1. The business segment information has been prepared according to a ministerial ordinance under the Securities and Exchange Law of Japan.2. (i) Due to the accounting change relating to inventory valuation, as explained in Note 3, operating expenses for “Alcoholic beverages & soft drinks”

increased by ¥74 million and operating income decreased by the same amount for the year ended December 31, 2001, as compared with thecorresponding amounts for the previous year. This change had no impact on other segments.

(ii) As a result of the adoption of the new standard for retirement benefits, as explained in Note 2 (k), operating income for “Alcoholic beverages & softdrinks” decreased by ¥2,817 million, operating loss for “Restaurant & hotel” decreased by ¥23 million, operating income for “Real estate” decreasedby ¥13 million, operating loss for “Other” increased by ¥4 million and unallocated operating expense, which is included in “General corporate andintercompany eliminations,” increased by ¥836 million for the year ended December 31, 2001, as compared with the corresponding amounts forthe previous year.

3. Sales outside Japan and sales to foreign customers were less than 10% of the Company’s consolidated sales for the years ended December 31 2002,2001 and 2000.

4. Corporate assets consist principally of cash and cash equivalents, short-term and long-term investments, and assets of general administration.



eliminationsOther Total ConsolidatedReal estateRestaurant

& hotel




Restaurant& hotel




Restaurant& hotel


16. Subsequent Events(1) On March 28, 2003, the following appropriation of retained earnings was approved at the general meeting of the shareholdersof the Company:

Thousands ofU.S. dollars

Millions of yen (Note 1)

Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,693 $14,111

(2) Share swapOn February 21, 2003, the boards of directors of the Company and subsidiary Sapporo Lion Limited passed resolutions toexchange shares with the aim of enabling both companies to effectively and speedily execute business strategies, thereby givingmore impetus to management. A share swap agreement was signed on the same day and was approved at the general meetingof shareholders on March 28, 2003.

(a) Details of Share SwapSapporo Lion Limited will become a wholly owned subsidiary of the Company as a result of the share swap.

(b) Date of Share SwapJuly 1, 2003

(c) Share Swap RatioThe Company Sapporo Lion Limited

1 2.81

(d) New Shares Issued for Share SwapSapporo Breweries Limited common stock 17,345,888 shares

The shares of the Company will not be allotted to common stock of Sapporo Lion Limited held by the Company.

(e) Increases in Capital and Capital SurplusThere will be no increase in the capital of the Company.

The capital surplus of the Company will increase by Sapporo Lion Limited’s net assets on the date of the share swap,multiplied by the ratio of the number of shares to be transferred to the Company by the share swap to the total number ofshares issued by Sapporo Lion Limited.

33

The Board of Directors of Sapporo Breweries Limited

We have audited the consolidated balance sheets of Sapporo Breweries Limited and consolidated subsidiaries as of December

31, 2002 and 2001 and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three

years in the period ended December 31, 2002, all expressed in yen. Our audits were made in accordance with auditing standards,

procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records

and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the aforementioned consolidated financial statements, expressed in yen, present fairly the consolidated

financial position of Sapporo Breweries Limited and consolidated subsidiaries at December 31, 2002 and 2001 and the

consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002,

in conformity with accounting principles and practices generally accepted in Japan consistently applied during the period,

except for the change, with which we concur, in the method of accounting for inventory valuation as described in Note 3 to the

consolidated financial statements.

As described in Note 2 to the consolidated financial statements, the Sapporo Breweries Limited and consolidated subsidiaries

has adopted new accounting standards for employees’ retirement benefits, financial instruments and foreign currency translations

effective the year ended December 31, 2001 and for valuation of other securities with available market quotations effective the year

ended December 31, 2002 in the preparation of their consolidated financial statements.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended December 31,

2002 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and,

in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

Tokyo, Japan

March 28, 2003 Shin Nihon & Co.

See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of Sapporo BreweriesLimited and consolidated subsidiaries under Japanese accounting principles and practices.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


MANAGEMENT(As of March 28, 2003)

Head Office20-1, Ebisu 4-chome, Shibuya-kuTokyo 150-8522, [email protected]

Date of EstablishmentSeptember 1949

Number of Employees4,970(Consolidated, as of December 31, 2002)2,332(Parent company, as ofDecember 31, 2002)

Domestic OfficesSales & marketing divisions: 9Factories: 9Laboratories: 2(As of December 31, 2002)

Consolidated SubsidiariesSapporo Lion LimitedSapporo Wines LimitedYebisu Winemart Co., Ltd.Sapporo Beer’s Beverage Co., Ltd.Sapporo Development Co., Ltd.Yebisu Garden Place Co., Ltd.Tokyo Energy Service Co., Ltd.Sapporo Hotel Enterprises LimitedChateau Restaurants Co., Ltd.Sapporo Florist Co., Ltd.Sapporo Logistics System Co., Ltd.Sapporo Agency LimitedNew Sanko LimitedSapporo U.S.A., Inc.

Overseas SubsidiarySapporo U.S.A., Inc.

Securities Traded: Common StockTokyo Stock Exchange, First Section

[Board of Directors]* Corporate Executive Officer

President and Representative DirectorTatsushi Iwama*

Vice President and RepresentativeDirectorMasashi Hosoda*

Executive Managing DirectorsTadahiro Tokiwa*Sadao Fukuda*

DirectorHiroaki Eto

Managing DirectorsYukio Ashibu*Kohei Furuse*Yasuhiko Watanabe*Shinji Saito*

[Corporate Auditors]

Nobuhisa YamagishiIkuo UnoYoshitaka KuroseAtsunori Hirai

[Corporate Executive Officers]

Senior OfficersToru TsuchiyaHikaru TsujitaTakao Murakami

OfficersKazuo TanakaSatoshi NoguchiNobuhiro HashibaMichihide OkaseriMasaru MaejimaJunichi NarisawaIchiro KuboteraAkira OhkumaMasaru Fukunaga

CORPORATE DATA

Transfer Agent and RegistrarMizuho Trust & Banking Co., Ltd.2-1, Marunouchi 1-chome, Chiyoda-kuTokyo 103-8240, Japan

Annual Meeting of ShareholdersThe annual meeting of shareholders ofthe Company is normally held in Marcheach year in Tokyo, Japan. In addition,the Company may hold an extraordinarymeeting of shareholders whenevernecessary by giving at least two weeks’advance notice to shareholders.

AuditorsShin Nihon & Co.


2002 2001 2002

Net sales ¥511,752 ¥557,233 $4,266,377Net income 1,168 4,390 9,739

Yen U.S. dollars

Per share:Net income

Primary ¥3.45 ¥12.96 $0.03Diluted – 12.90 –Cash dividends 5.00 5.00 0.04


Shareholders’ equity ¥106,527 ¥105,945 $ 888,092Total assets 717,486 729,601 5,981,543Capital expenditures 13,640 12,256 113,717Depreciation and amortization 31,463 32,322 262,303Note: U.S. dollar amounts are translated from Japanese yen, for convenience only, at the rate of ¥119.95=US$1.


FINANCIAL HIGHLIGHTSYears ended December 31

MESSAGE FROM THE PRESIDENT 1

REVIEW OF OPERATIONS 4

FIVE-YEAR SUMMARY 10

MANAGEMENT’S DISCUSSION AND ANALYSIS 11

CONSOLIDATED BALANCE SHEETS 14

CONSOLIDATED STATEMENTS OF INCOME 16

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 17

CONSOLIDATED STATEMENTS OF CASH FLOWS 18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 33

MANAGEMENT/CORPORATE DATA 34

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SAPPORO BREWERIES LIMITEDANNUAL REPORT 2002

SAPPORO BREWERIES LIMITED20-1, Ebisu 4-chome, Shibuya-ku

Tokyo 150-8522, Japan

http://www.sapporobeer.jp/

Printed in JapanThis report is printed on recycled paper.

SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002 · sapporo breweries limited annual report 2002...

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