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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
Thousands ofMillions of yen U.S. dollars
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 20024
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.
6 SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002
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
8 SAPPORO BREWERIES LIMITED ANNUAL REPORT 2002
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200210
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%
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200212
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.
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200214
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
Thousands ofMillions of yen U.S. dollars (Note 1)
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200216
Thousands ofMillions of yen U.S. dollars (Note 1)
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
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF INCOMEThree Years ended December 31
17
Thousands ofMillions of yen U.S. dollars (Note 1)
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
Balance at end 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)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥30,281 ¥29,960 ¥27,264 $252,445
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)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYThree Years ended December 31
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200218
CONSOLIDATED STATEMENTS OF CASH FLOWSThree Years ended December 31
Thousands ofMillions of yen U.S. dollars (Note 1)
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
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200220
(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.
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200222
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200224
5. InventoriesInventories as of December 31, 2002 and 2001 are summarized as follows:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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.
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200226
8. Other Income (Expenses)“Other income (expenses)—Other, net” for the year ended December 31 consists of the following:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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) %
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200228
Significant components of deferred tax assets and liabilities as of December 31, 2002 and 2001 were as follows:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofMillions of yen U.S. dollars (Note 1)
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:
Thousands ofYear ending December 31, Millions of yen U.S. dollars (Note 1)
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:
Thousands ofYear ending December 31, Millions of yen U.S. dollars (Note 1)
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200230
13. Contingent LiabilitiesContingent liabilities as of December 31, 2002 and 2001 are summarized as follows:
Thousands ofMillions of yen U.S. dollars (Note 1)
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
Year ended or as of December 31, 2001 Millions of yen
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
Operating income (loss) . . . . . . . . . ¥ 13,731 ¥ (40) ¥ 10,517 ¥ (671) ¥ 23,537 ¥ (3,751) ¥ 19,786
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
Year ended or as of December 31, 2000 Millions of yen
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
Operating income (loss) . . . . . . . . . ¥ 12,273 ¥ (375) ¥ 9,175 ¥ (477) ¥ 20,596 ¥ (4,300) ¥ 16,296
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.
Alcoholicbeverages &soft drinks
General corporateand intercompany
eliminationsOther Total ConsolidatedReal estateRestaurant
& hotel
Alcoholicbeverages &soft drinks
General corporateand intercompany
eliminationsOther Total ConsolidatedReal estate
Restaurant& hotel
Alcoholicbeverages &soft drinks
General corporateand intercompany
eliminationsOther Total ConsolidatedReal estate
Restaurant& hotel
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200232
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
SAPPORO BREWERIES LIMITED ANNUAL REPORT 200234
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.
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
Thousands ofMillions of yen U.S. dollars
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
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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.
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