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Kirin Brewery Co Ld
25 February 2003
PART 1
KIRIN BREWERY COMPANY, LIMITED February 19, 2003
SUMMARY OF CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2002 (UNAUDITED)
(English Translation)
Fiscal year ended December 31, 2002
KIRIN BREWERY COMPANY, LIMITED
10-1, Shinkawa 2-chome, Chuo-ku, Tokyo, Japan (URL http://www.kirin.co.jp/english/ )
Code No.: 2503
Shares Listed: Tokyo, Osaka, Nagoya, Fukuoka, Sapporo,
Representative: Mr. Koichiro Aramaki, President
For further information, please contact: Mr. Sumio Nagata, General Manager,
Communications Dept.
Telephone: 81- 3- 5540- 3450 from overseas
Date of the Board of Directors' Meeting for the annual operation results: February 19, 2003
Whether US GAAP is applied: none
1. Business results and financial positions for the current fiscal year
(January 1, 2002 - December 31, 2002) (Unit: Japanese yen )
(1) Results of operations: (Fractions less than 1 yen million have been omitted.)
Sales Percentage Operating Percentage Income before Percentage
(millions yen) change income change special items change
(%) (millions yen) (%) (millions yen) (%)
Year ended December 31, 2002 1,583,248 1.4 89,789 19.6 84,443 21.8
Year ended December 31, 2001 1,561,879 (1.2) 75,065 (20.5) 69,339 (25.5)
Net income Percentage Net income Net income Ratio of net Ratio of Ratio of
(millions yen) change per share per share income to ordinary ordinary
(%) primary diluted shareholders' income to income to
(yen) (yen) equity total assets sales
(%) (%) (%)
Year ended December 31, 2002 32,540 40.7 33.26 - 4.2 5.0 5.3
Year ended December 31, 2001 23,122 (29.8) 23.49 23.48 3.0 4.2 4.4
Notes : 1. Equity in earnings of affiliates:
December 31, 2002 2,102 million yen
December 31, 2001 1,864 million yen
2. Average number of shares of common stock outstanding during the period (Consolidated ):
December 31, 2002 978,318,065 shares
December 31, 2001 984,485,996 shares
3. Change in accounting policies: None
4. Percentage change means the ratio of increase or decrease in each item of business results for the
year ended December 31,
2002, to those for the year ended December 31,2001.
(2) Financial positions:
Total assets Shareholders' Ratio of shareholders' Shareholders'
(millions yen) equity equity to total assets equity per share
(millions yen) (%) (yen)
December 31, 2002 1,744,131 769,227 44.1 795.71
December 31, 2001 1,661,652 782,902 47.1 795.29
Notes : :Number of shares of common stock issued and outstanding (Consolidated)
December 31, 2002 966,713,386 shares
December 31, 2001 984,417,871 shares
(3) Cash flows :
Cash flows Cash flows Cash flows Cash and
from operating from investing from financing cash equivalents
activities activities activities at end of period
(million yen) (million yen) (million yen) (million yen)
Year ended December 31, 2002 87,750 (175,377) 50,699 105,625
Year ended December 31, 2001 71,144 (12,108) 20,865 144,331
(4)Scope of consolidation and application of equity method :
Consolidated subsidiaries: 305 companies
Subsidiaries under equity method: 1 company
Affiliates under equity method: 16 companies
(5)Changes in scope of consolidation and application of equity method :
Consolidation: Increase 47 companies, Decrease 3 companies
Equity method: Increase 3 companies, Decrease 2 companies
2. Forecast of business results for the next fiscal year (January 1, 2003-December 31, 2003)
Sales Income before Net income
(million yen) special items (million yen)
(million yen)
6 months ending June 30,2003 770,000 36,000 11,000
Year ending December 31, 2003 1,670,000 98,000 39,000
Note: Forecasted net income per share 40.34 yen
Refer to page 8 - 9 for the assumptions and other matters related to the above forecast.
MANAGEMENT POLICIES
---------------------------------------------------------------------------------
1. Basic Kirin Group Management Policies
We are dedicated to contributing to the health, happiness and comfort of people around the world. Thus, the Kirin Group
pursues these policies:
(1) Priority on Customers and Quality
(2) Open and Fair Behavior
(3) Respect for People
(4) Sound Management
(5) Contribution to Society
Incorporating these principles into our corporate culture, Kirin Group aims to be an institution that creates value to
enrich the lives of our customers.
2. Fundamental Company Policy on Distribution of Profits
Providing appropriate returns on income to shareholders is a top priority at Kirin, where we have continued to provide
annual dividends since our establishment in 1907. In the future, while giving due consideration to strengthening the
quality of management and business development, Kirin believes that providing stable dividends is how to meet
shareholder demands. Retained earnings will be earmarked for investment in businesses for the future.
At the 163rd Ordinary General Meeting of Shareholders held on March 28, 2002, Kirin resolved to repurchase up to 30
million common shares of its own stock, up to a maximum acquisition cost of 30 billion yen, with the aim of executing
flexible financial policies and management strategies. As of November 20, Kirin had purchased 15,935,000 common shares
of its own stock for 12,185,355,000 yen.
3. Position and Policy on Reduction of the Stock Trading Unit
Kirin places importance on increasing its corporate value, expanding its shareholder base and increasing the liquidity
of its stock. We will seriously consider reducing the trading unit, taking into account the overall costs and benefits.
4. Targeted Management Indicators
A key management objective is improving EVA * (a performance indicator) in order to strengthen the profit structure. By
investing in growth fields and strategically allocating resources to maximize efficacy and efficiency, we aim to achieve
our sales targets, despite the turbulent market environment, and build a solid corporate structure that continues to
generate earnings.
*EVA (Economic Value Added) is a registered trademark of Stern Stewart & Co.
5. Medium- to Long-term Management Strategy
The KG 21 Action Plan, a medium-term business plan covering the years 2001 to 2003, was announced in September 2000.
This plan will serve as the basis for structural reform of the entire Kirin Group, with the aim of creating a solid
management foundation. Furthermore, the domestic alcohol beverage business, centered on low-alcohol beverages, is being
restructured. Kirin Group companies will cooperatively work to be a business group that creates value to enhance the
lives of its customers, and steps are being taken to strengthen product and marketing capabilities while increasing
quality and productivity.
6. Issues for the Kirin Group
(1) Structural Reform of the Kirin Group and Stronger Cooperation among Group Companies
Reorganization of Businesses
To promote group management, increase the corporate value of the Kirin Group and boost profitability, Kirin's
previous five main business segments and 15 business fields have been restructured into Core Businesses,
Core-related Businesses and Diversified Businesses.
Reform of Corporate Structure
Based on the new arrangement of businesses, starting in 2001, the structure of the Kirin Group was reorganized
into a holding company, business companies and internal business units called "companies." Kirin Brewery operates
both as a business company, managing the domestic beer and happo-shu business, and as a holding company
overseeing each business and strengthening group operations.
Reform of Corporate Management
In 2001, EVA was adopted throughout the Kirin Group as a new performance indicator to evaluate the results and
progress of each business company and internal company.
(2) Increasing Corporate Value by Strengthening Profitability, with Core Businesses as the Nucleus
Shifting to a Comprehensive Alcohol Business Centered on Low-Alcohol Beverages
Kirin is focusing less on business limited to specific alcohol categories infavor of developing a comprehensive
alcohol business emphasizing beer, happo-shu, chu-hi drinks and other low-alcohol beverages. This repositioning
will allow Kirin to better meet the diversifying needs of its customers, and provide the maximum value for
alcohol beverages that customers demand.
Structural Reforms to Strengthen Group Competitiveness
In its marketing divisions, Kirin will work to strengthen sales capabilities by rebuilding a customer-oriented
marketing structure that can adapt to changes in the business environment. In the production divisions, new
product development will be accelerated and more advanced technology introduced to support Kirin's shift to a
comprehensive alcohol beverage company. We are simultaneously promoting the creation of a highly efficient
production system. In our distribution divisions we are carrying out structural reforms for administrative
operations.
Develop Diversified Businesses Centered on the Pharmaceutical Business
Kirin will further strengthen its domestic pharmaceutical sales system. To enhance the product pipeline, we are
concentrating resources in research, speeding development, and introducing new drug candidates through
in-licensing. We will also take steps to strengthen the business platforms of the agribio and nutrient food and
feed businesses.
(3) Coexistence with Society
With increasing societal expectation on companies to earn public trust, the Kirin Group is conducting business
activities in conformity with compliance measures. We are reinforcing environmental management and we are
promoting responsible drinking.
7. Policies Concerning the Management Structure
The management structure is being reformed through changes in makeup of the board of directors. An executive
officer system to clarify the responsibilities of the decision-making and operation functions has been
introduced. The number of directors is being reduced and the establishment of an advisory board will enhance the
top-level decision-making function of the board. An appointment advisory committee and compensation advisory
committee is being established to help increase transparency, and the establishment of new meeting bodies is
aimed at creating a structure to support prompt decision-making by the executive officers.
RESULTS OF OPERATIONS AND FINANCIAL POSITION
---------------------------------------------------------------------------------
1. Review of Operations
The Japanese economy continues to show signs of recession, while corporate earnings recovered slightly, the year was
marked by increasingly tight employment conditions, long-term deflation and slow consumer spending.
In the beer and happo-shu market, sales of happo-shu continued to be strong following the launch of several new brands,
but general demand for beer and happo-shu declined slightly from the previous year, owing to the continued economic
slump and diversification of consumer tastes. The market for chu-hi and other low-alcohol drinks, however, rose sharply
from the previous year. In the wine and spirits market, although demand for wine increased slightly from the previous
year, demand for whiskey fell sharply due to a slump in the restaurant and bar market. Despite an array of aggressive
marketing strategies implemented within the restaurant and bar industry, overall demand remained flat in the face of
sluggish individual consumption. In the pharmaceutical industry, falling drug prices dampened domestic sales growth.
Responding these circumstances, Kirin implemented a number of measures to help it achieve the goals outlined in the
three-year, medium-term business plan begun in 2001 (KG 21 Action Plan). All corporate activities were examined in terms
of customer focus and product suitability. Top priority was also placed on enhancing competitiveness in the core
domestic alcohol business, and Kirin took steps to solidify customer support by enhancing the level of cooperation among
Group companies.
Consolidated sales for 2002 increased 1.4% from the previous fiscal year to 1,583.2 billion yen, owing to an increase in
sales in the soft drink business, and of happo-shu and chu-hi, which offset a slight decline in beer sales. Although a
decline in the retail price of happo-shu had a negative effect on the bottom line, across-the-board cuts in areas such
as marketing and production expenses led to a 21.8% increase in consolidated income before extraordinary items to 84.4
billion yen, and a 40.7% increase in net income to 32.5 billion yen.
The year-end dividend was 6 yen per share, which added to the interim dividend of 6 yen per share brought the total
dividend for the year to 12 yen per share.
Results by Business Segment
Alcohol Beverage Business
Kirin implemented several new value-added initiatives in its product offerings and sales methods, based on a
comprehensive evaluation of the happo-shu, chu-hi and other low-alcohol beverages market, in an effort to respond to
increasingly diversified customer preferences. The operational base was also strengthened as Kirin entered new growth
fields such as the shochu market, in a move to further develop the comprehensive alcohol beverage business.
In the beer and happo-shu sector, Kirin took steps to strengthen the image of Kirin Lager as a modern-day, authentic
beer. Kirin Classic Lager has been increasingly popular mainly at restaurants and drinking establishments, with sales
well above those of the previous year. Ichiban Shibori benefited from the launch of Kirin Tarunama Senyo Server, Japan's
first home draft beer system. This new style of beer for the home proved exceedingly popular. Maribana Ichiban Shibori,
a limited edition brew released in November, was also popular. Tanrei continued to receive strong support in the
happo-shu market as the leading brand. Tantei Green Label, an extension brand marketed towards health-conscious
consumers, was the most successful product launch ever in the light beer/happo-shu category. Gokunama, launched in
response to customer demands for a happo-shu that is both full-flavored and economical, achieved sales that greatly
exceeded forecasts. Maroyaka Kobo, an unfiltered beer with live yeast and kept cool throughout distribution, was
extremely well receiv ed following its release on a trial basis to select stores in he t Tokyo area. Kirin Chu-hi
Hyoketsu achieved a dramatic rise in sales following the launch of orange and plum flavors, and the limited wintertime
release of Apple Nouveau. One year since its release, Hyoketsu is now the top chu-hi brand.
In the wine and spirits category, Kirin acquired the global business of the Four Roses brand, and began securing
exclusive marketing rights for Japan to Chivas Regal and other major brands of the former Seagram Co., Ltd. in a move to
establish a marketing strategy that prioritizes mainstay products and aims at broadening the wine product lineup. As
part of Kirin's effort to create a new upscale market for shochu (Japanese distilled liquor made from grain), Mugi
Shochu Pure Blue, a premium shochu made from 100% barley, and the easy-drinking clear liquor Hyoketsu 21o Straight, were
released on a trial basis in select areas of Tokyo in November. Kirin also acquired stock in Eishogen Co., Ltd. in April
and began selling Eishogen products in December, broadening Kirin's lineup of Chinese liquors.
Sales measures undertaken during the year included the integration of the marketing divisions of the former
Kirin-Seagram Ltd. into the Kirin Group headquarters, allowing for the establishment of a coordinated sales strategy for
the entire alcohol business. A network of contract locations, the first of its kind in the domestic alcohol business,
was also established for the chilled distribution system, creating a distribution framework that offers customers added
value in the form of freshness management. In addition, the subsidiary Kirin Communication Stage Co., Ltd. was
established to handle in-store marketing for volume retailers, a sector of the market that is expanding quickly. This
new company has already begun operations in the Tokyo area.
In production, renovations were completed to the Toride and Okayama production facilities. Production efficiency has
been enhanced, and the Okayama facility and Shonan facility of Kirin Beverage Corporation have begun manufacturing Kirin
Chu-hi Hyoketsu. In distribution, integration of distribution channels for wine and spirits has been completed, and
block distribution functions are beginning to be integrated with Kirin Beverage and distribution was made more efficient
throughout the Kirin Group.
Overseas, performance remained robust at Lion Nathan Ltd., a Group company based in Australia. Capital increases to the
major Philippine brewery San Miguel Corporation were completed in March, and in May a new product, Kirin Bar Beer, was
launched in Taiwan with manufacturing assistance from Lion Nathan. These moves helped to realize Group synergies, and
drive profit-oriented business development focused on Asia and Oceania.
Consequently, total net sales in the alcohol beverage business segment decreased 0.8% from the previous year to 1,069.5
billion yen.
Soft Drinks Business
Kirin Beverage Corporation, which operates Kirin's soft drinks business, undertook aggressive marketing to enhance its
key brands. Initiatives were made to further increase the value of the Namacha brand, Kirin Beverage's representative
product, in the increasingly competitive sugarless tea drinks market. Sales of the new product Amino Supli surpassed
forecasts. Shipments of Fire surpassed 10 million cases for the fourth consecutive year.
The new company Kirin MC Danone Waters Co., Ltd. was established in November as a joint venture between Kirin Beverage,
Groupe Danone, and Mitsubishi Corporation. This new company aims to establish itself as the leading company in Japan's
mineral water market.
In China, sales of Gogono-kocha ("gafternoon tea") remained steady, and sales of Namacha have grown steadily since its
launch in 2001.
Consequently, total net sales in the soft drink business segment rose 3.0% from the previous year to 342.9 billion yen.
Other Businesses
In pharmaceuticals, Kirin conducted information sharing activities with Sankyo Co., Ltd. for ESPO, a genetically
engineered hormone that regulates red blood cell production, and for GRAN, an agent that stimulates white blood cell
production. Kirin also stepped up exclusive marketing efforts in Japan for Rocaltrol Injection, a treatment for
secondary hyperparathyroidism. Doses of GRAN in pre-filled syringes were also launched in August, contributing to
further expand sales. R&D was accelerated on KRN321, the second generation of ESPO, and manufacturing authorization was
acquired for pre-filled syringes of ESPO. In the field of human antibodies, the creation of cows to produce human
antibodies was achieved in a joint R&D project with the U.S. company Hematech, LLC. Steady success was also realized in
the field of cell therapy, as clinical trials began on APC8020, a preparation for the treatment of multiple myeloma, and
an application for an import license was made for AM9802, a device for cell therapy research.
In the agribio business, Flower Season Co., Ltd. was established in September as a joint venture with Dole Food Company,
Inc. and its affiliated company as a wholesaler of flowers and ornamental plants, marking Kirin's entry into the growing
volume retail market. Kirin also moved to bolster its base in the carnation business, buying the marketing rights and
specific variety rights held by the Israeli carnation propagation and seedling marketing company R. Shemi Ltd., in
October through its 100 percent owned Spanish subsidiary, Barberet & Blanc S.A.
In the nutrient food and feed business, Takeda Kirin Foods Co., Ltd. smoothly began its sales efforts in the seasonings
field in from April. The release of new products in the health foods field such as the Kirin Brewer' fs Yeast series
helped to increase earning capacity.
As a result of the above, total net sales in the other business segment rose 13.2% from the previous year to 170.2
billion yen.
2. Financial Position
Net cash used in investing activities during 2002 increased due to factors such as Kirin's investment in San Miguel
Corporation, but this was offset by the issuance of bonds and increases in long-term debt as well as royalty income. As
a result, cash and cash equivalents ("gcash") on a consolidated basis decreased 38.7 billion yen from the previous
fiscal year to 105.6 billion yen.
Consolidated cash flows are as follows:
Cash flow from operating activities
Income before income taxes and minority interests increased 17.3 billion yen from the previous year, and the decrease in
working capital (accounts receivable, inventories, purchasing obligations and beer taxes payable) increased 17.8 billion
yen. As a result of these and other factors, net cash provided by operating activities increased to 87.7 billion yen,
16.6 billion yen over the previous year.
Cash flow from investing activities
Payments for purchase of property and equipment, including capital investment in the domestic alcohol business, were
85.4 billion yen, 14.0 billion yen higher than the previous year's total. Payment for purchase of marketable securities
and investment securities totaled 103.8 billion yen. Proceeds from termination of funds in trust, however, were 17.4
billion yen. As a result of these and other factors, net cash used in investing activities increased to 175.3 billion
yen, 163.2 billion yen over the previous year.
Cash flow from financing activities
Cash dividends paid amounted to 11.7 billion yen, approximately the same as in the previous year. Kirin raised 37.9
billion yen from an increase in bank loans, however, and 40.0 billion yen from the issuance of bonds. As a result, net
cash provided by financing activities was 50.6 billion yen, an increase of 29.8 billion yen over the previous year.
3. Outlook
Kirin is now in the final year of the KG 21 Action Plan and is further strengthening coordination and cooperation among
the Group companies in order to achieve the goals of this plan. Additional efforts to reform the cost structure are
being undertaken to this end, based on the results of similar efforts made mainly in the domestic alcohol business in
2002, and with the aim of forging a strong corporate structure in which stable earnings are maintained.
In the domestic alcohol business, strategic investments were made in growth categories such as happo-shu, chu-hi drinks,
shochu and wine, further strengthening the base of the comprehensive alcohol business. Several new market-creating
products were launched that are attractive and offer customers new levels of value. Kirin will also streamline its
distribution network and marketing structure and step up sales efforts in response to the rise in the tax on happo-shu,
liberalization of alcohol sales regulations, and other changes in the market environment.
Product initiatives include, in the happo-shu category, the launch of Tanrei Alpha and Namakuro. In the beer category
Kirin Lager Blue Label will be launched, and Maroyaka Kobo will be released nationwide, offering a new level of added
value to customers while simultaneously serving to strengthen the power of Kirin's key brands. The Kirin Chu-hi Hyoketsu
brand will be kept fresh by the addition of lime as a new flavor, which will help the brand continue to lead the market
and grow further. In wine, shochu and spirits categories, Mugi Shochu Pure Blue and Hyoketsu 21< Straight will be
marketed nationwide, while the lineup of products will be further enhanced by the launch of new sparkling wines and
everyday wines, and the addition of Two Dogs Lychee. For spirits, Kirin will concentrate on increasing sales of its two
mainstay brands, Chivas Regal scotch and Four Roses bourbon. The addition to the product lineup of several brands of
Chinese liquor obtained from Eishogen Co., Ltd. will also increase Kirin's ability to offer a comprehensive line of
alcohol products. Sales measures will focus on achieving sales targets and protecting margins to be accomplished through
further strengthening of sales effectiveness and strategic distribution of resources into growth markets. Specifically,
Kirin Communication Stage Co., Ltd. will expand its sales efforts nationwide, the marketing structure towards volume
retailers will be enhanced, and measures will be taken to build a sales structure with a high level of flexibility and
support. Kirin will also continue to work towards lowering marketing costs.
Kirin will continue to accumulate production technology in line with its position as a comprehensive alcohol producer,
conduct development aimed at producing retail products and build a structure that ensures a high level of product
quality.
Kirin will also continue its efforts to improve the efficiency of distribution throughout the Group, raise the standard
level of service to further improve the degree of product freshness found in stores, and enhance the chilled
distribution infrastructure. The management level of food safety and assurance at all Group companies will be raised,
further improving product quality. In the overseas beer business, Kirin will continue to pursue profit-oriented business
development focused on Asian and Oceania. It will also work to leverage Group synergy through projects such as the
launch in Shanghai of the new product Kirin Qingchun Beer, developed with the assistance of Lion Nathan Ltd, and through
cooperation in the wine business. In the soft drink business, Kirin will deploy a competitive brand formation led by
enhancements to its cost competitiveness, and initiate reforms aimed at creating a firmer marketing structure. In its
product line, Kirin will grow and strengthen its mainstay brands Namacha, Amino Supli, Gogono-kocha ("afternoon tea")
and Fire, as well as its two brands of mineral water, Volvic and Alkaline-ion no Mizu. It will also introduce popular
and revolutionary new products to stimulate demand in the soft drinks market. In the marketing and distribution areas,
Kirin will focus on building a stronger structure.
Overseas, Amino Supli will be launched in Shanghai to further enhance the product lineup.
In the development of other businesses, pharmaceutical sales will be increased through early release of ESPO pre-filled
syringes, and further upgrades to the product pipeline. The agribio business will be expanded in the key fields of
chrysanthemums and carnations, and further enhancements to the operational base both in Japan and overseas. In the
nutrient food and feed business, Kirin will pursue development of high-value added products that use beer yeast. Kirin
will also continue its environmental initiatives and support for sports and cultural activities, aimed at developing a
closer bond with the aim of harmonious coexistence with society.
In reforming its management structure, Kirin is restructuring of its board of directors, and introducing an executive
officer system to clarify the distinction between the respective responsibilities of the decision-making and operation
functions. These two initiatives will help enhance compliance.
For the year ending December 31, 2003, Kirin projects consolidated sales of 1,670.0 billion yen (a year-on-year increase
of 5.5%), income before extraordinary items of 98.0 billion yen(a year-on-year increase of 16.1%), and net income of
39.0 billion yen (a year-on-year increase of 19.9%).
Cash dividends for 2003 are expected to total 12 yen per share, consisting of interim and year-end dividends of 6 yen
per share each.
4. Note Concerning Results Projections
The statements concerning future performance that are presented in this document are based on judgments using
information available to Kirin and the Kirin Group at the time of publication. Certain risks and uncertainties could
cause the results of Kirin and the Kirin Group to differ materially from any projections presented herein. These risks
and uncertainties include, but are not limited to, the economic circumstances surrounding the Company's businesses,
market trends, and exchange rates.
CONSOLIDATED BALANCE SHEETS (millions yen)
ASSETS (Note) At Percentage At Percentage Increase
December 31, over total December 31, over total (Decrease)
2002 assets 2001 assets Amount
Amount Amount
Current Assets
Cash (*3) 108,148 143,525 (35,377)
Notes and accounts receivable (*3) 269,106 256,254 12,852
Marketable securities 2,017 12,272 (10,255)
Inventories (*3) 83,949 65,731 18,218
Deferred income taxes 17,788 17,188 600
Funds in trust - 17,411 (17,411)
Other 48,032 42,673 5,359
Allowance for doubtful accounts (5,456) (2,087) (3,369)
Total current assets 523,585 30.0 552,969 33.3 (29,384)
Fixed Assets
Property, Plant and Equipment (*1)
Buildings and structures (*3) 189,050 187,361 1,689
Machinery, equipment and
vehicles (*3) 190,687 178,783 11,904
Land (*3,5) 166,393 156,269 10,124
Construction in progress 13,290 22,636 (9,346)
Other (*3) 49,961 52,528 (2,567)
Total 609,382 35.0 597,578 36.0 11,804
Intangible Fixed Assets
Goodwill 30,751 21,199 9,552
Consolidation differences 45,513 45,700 (187)
Other (*3) 75,857 58,475 17,382
Total 152,122 8.7 125,376 7.5 26,746
Investments and Other Assets
Investment securities (*2,3) 330,905 263,060 67,846
Long term loans 5,916 5,150 766
Life insurance investments 35,093 33,792 1,301
Deferred income taxes 55,868 45,191 10,677
Deferred income taxes due to revaluation for (*5) 1,997 1,995 2
land
Other (*2) 33,172 39,567 (6,395)
Allowance for doubtful accounts (3,913) (3,029) (884)
Total 459,041 26.3 385,728 23.2 73,313
Total fixed assets 1,220,546 70.0 1,108,683 66.7 111,863
TOTAL ASSETS 1,744,131 100.0 1,661,652 100.0 82,479
(millions yen)
LIABILITIES, MINORITY INTERESTSAND SHAREHOLDERS' (Note) At Percentage At Percentage Increase
EQUITY December 31, over total December 31, over total (Decrease)
2002 assets 2001 assets Amount
Amount Amount
Current Liabilities
Notes and accounts payable 98,649 105,084 (6,435)
Short-term loans payable (*3) 47,824 26,133 21,691
Beer taxes payable 113,660 119,315 (5,655)
Income taxes payable 15,599 19,280 (3,681)
Accrued expenses 59,573 57,243 2,330
Deposits received 61,227 64,406 (3,179)
Other 64,619 50,177 14,442
Total current liabilities 461,154 26.4 441,641 26.6 19,513
Long-term Liabilities
Bonds 129,948 87,400 42,548
Long-term debt (*3) 105,148 74,511 30,637
Pension and retirement benefits 95,414 100,060 (4,646)
Retirement benefits for directors and corporate
auditors 1,950 2,022 (72)
Reserve for repair and maintenance of vending
machines 6,657 5,520 1,137
Deposits received (*3) 78,567 84,241 (5,674)
Other 21,633 20,178 1,455
Total long-term liabilities 439,318 25.2 373,934 22.5 65,384
TOTAL LIABILITIES 900,473 51.6 815,576 49.1 84,897
MINORITY INTERESTS 74,431 4.3 63,174 3.8 11,257
Common Stock 102,045 5.8 102,045 6.1 -
Additional Paid-In Capital 70,868 4.1 70,868 4.3 -
Revaluation variance for Land (*5) (1,627) (0.1) (1,625) (0.1) (1)
Retained Earnings 630,744 36.2 608,603 36.6 22,141
Net unrealized holding gains on securities 6,132 0.4 19,331 1.2 (13,199)
Foreign currency translation adjustments (25,308) (1.5) (16,235) (1.0) (9,073)
Total 782,855 44.9 782,988 47.1 (133)
Treasury Stock (13,628) (0.8) (86) (0.0) (13,542)
TOTAL SHAREHOLDERS' EQUITY 769,227 44.1 782,902 47.1 (13,675)
TOTAL LIABILTIES, MINORITY INTERESTS AND 1,744,131 100.0 1,661,652 100.0 82,479
SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF INCOME (millions yen)
(Note) Year Percentage Year Percentage Increase
ended over sales ended over sales (Decrease)
December December Amount
31, 2002 31, 2001
Amount Amount
Sales 1,583,248 100.0 1,561,879 100.0 21,369
Cost of Sales 1,000,199 63.2 999,907 64.0 292
Gross Profit 583,048 36.8 561,972 36.0 21,076
Selling, General and Administrative Expenses (*1,2) 493,259 31.2 486,907 31.2 6,352
Operating Income 89,789 5.7 75,065 4.8 14,724
Non-operating Income
Interest income 1,147 1,675 (528)
Return on funds in trust 210 558 (348)
Dividend income 2,614 1,864 750
Equity in earnings of affiliates 2,102 1,864 238
Other 4,143 5,718 (1,575)
Total 10,217 0.6 11,681 0.7 (1,464)
Non-operating Expenses
Interest expense 8,955 9,733 (778)
Other 6,607 7,673 (1,066)
Total 15,562 1.0 17,407 1.1 (1,845)
Income before Special Items and Income Taxes 84,443 5.3 69,339 4.4 15,104
Special Income
Gain on sales of fixed assets (*3) 3,401 2,981 420
Gain on sales of investment securities 420 9,959 (9,539)
Gain on establishment of trust for employees' pension and -
retirement benefit 4,599 (4,599)
Gain on sales of affiliates - 6,387 (6,387)
Reversal of allowance for furnace overhaul 700 - 700
Total 4,521 0.3 23,928 1.5 (19,407)
Special Expenses
Loss on disposal of fixed assets (*4) 6,715 4,998 1,717
Loss on sales of fixed assets (*5) 379 759 (380)
Loss on disposal of affiliates - 991 (991)
Write-down of fixed assets of foreign subsidiaries (*6) - 3,708 (3,708)
Loss on revaluation of investment securities 2,236 3,283 (1,047)
Loss on sales of investment securities 7 1,299 (1,292)
Loss on devaluation of golf club membership (*7) - 2,257 (2,257)
Amortization of net transition obligation of accounting
standard for employees' severance and retirement benefits - 18,835 (18,835)
Loss on devaluation of real estate in trust 3,352 - 3,352
Premium on retirement benefits 1,755 - 1,755
Total 14,447 0.9 36,133 2.3 (21,686)
Income before Income Taxes and Minority Interests 74,517 4.7 57,134 3.7 17,383
Income Taxes (Current) 37,092 2.3 40,207 2.6 (3,115)
Income Taxes (Deferred) (878) (0.1) (10,705) (0.7) 9,827
Minority Interests 5,762 0.4 4,509 0.3 1,253
Net Income 32,540 2.1 23,122 1.5 9,418
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (millions yen)
Year ended Year ended Increase
December 31, 2002 December 31, 2001 (Decrease)
Retained earnings at beginning of period 608,603 595,575 13,028
Increase in retained earnings
Increase resulting from new affiliates under
equity method - 4 (4)
Foreign currency translation adjustment of
foreign subsidiaries and affiliates 1,167 1,291 (124)
Increase due to revaluation of property, plant and
equipment of foreign subsidiaries and affiliates 1,338 - 1,338
Reversal of revaluation variance for land 1 - 1
Increase in retained earnings of an equity method
affiliate due to increase of consolidation scope - 706 (706)
Total 2,507 2,003 504
Decrease in retained earnings
Cash dividends paid 11,781 11,814 (33)
Bonuses paid to directors and corporate auditors 205 283 (78)
(corporate auditors' portion included above 31 28 3)
Decrease resulting from newly consolidated
subsidiaries 409 - 409
Decrease due to exclusion of subsidiaries
From consolidation scope 511 - 511
Total 12,907 12,097 810
Net income 32,540 23,122 9,418
Retained earnings at end of period 630,744 608,603 22,141
(millions yen)
Year ended Year ended Increase
December 31, December 31, (Decrease)
2002 2001
Cash flows from operating activities
Income before income taxes and minority interests 74,517 57,134 17,383
Depreciation 75,206 73,588 1,618
Amortization of consolidation differences 3,034 2,875 159
Increase (decrease) in pension and retirement benefits (4,227) 14,870 (19,097)
Interest and dividend income and return on funds in trust (3,972) (4,098) 126
Interest expense 8,955 9,733 (778)
Gain on sales of fixed assets (3,401) (2,981) (420)
Gain on sales of marketable securities and investment (420) (10,024) 9,604
securities
Gain on establishment of trust for employees' pension and - (4,599) 4,599
retirement benefit
Gain on sales of affiliates - (6,387) 6,387
Loss on disposal or sales of fixed assets 7,094 5,757 1,337
Write-down of fixed assets of foreign subsidiaries - 3,708 (3,708)
Loss on revaluation of investment securities 2,236 3,283 (1,047)
Loss on devaluation of real estate in trust 3,352 - 3,352
Decrease (increase) in notes and accounts receivable (6,164) (13,945) 7,781
Decrease (increase) in inventories (11,131) (1,762) (9,369)
Increase (decrease) in notes and accounts payable (11,265) 3,249 (14,514)
Increase (decrease) in beer taxes payable (6,107) (4,359) (1,748)
Increase (decrease) in deposits received (5,587) (9,662) 4,075
Other 8,646 (2,356) 11,002
Sub-total 130,766 114,022 16,744
Interest, dividend and return on funds in trust received 6,227 5,013 1,214
Interest paid (8,785) (9,660) 875
Income taxes paid (40,457) (38,230) (2,227)
Net cash provided by operating activities 87,750 71,144 16,606
Cash flows from investing activities
Payments for purchases of property, plant, equipment and (85,492) (71,449) (14,043)
Intangible fixed assets
Proceeds from sales of property, plant and equipment 5,312 4,297 1,015
Payments for purchases of marketable securities and (103,832) (9,183) (94,649)
Investment securities
Proceeds from sales and redemption of marketable securities 11,075 30,548 (19,473)
and investment securities
Proceeds from termination of funds in trust 17,411 20,000 (2,589)
Proceeds from termination of life insurance investment - 533 (533)
Payments for investments in consolidated subsidiaries' (12,674) (19,215) 6,541
common stock
Proceeds from sale of consolidated subsidiaries' common - 37,086 (37,086)
stock
Other (7,177) (4,725) (2,452)
Net cash used in investing activities (175,377) (12,108) (163,269)
Cash flows from financing activities
Increase (decrease) in short-term loans payable 4,331 (5,225) 9,556
Proceeds from long-term debt 67,977 18,435 49,542
Repayments of long-term debt (34,327) (36,151) 1,824
Proceeds from issue of bonds 40,000 69,900 (29,900)
Payment for redemption of bonds - (10,602) 10,602
Payments for purchases of treasury stock (13,542) (82) (13,460)
Cash dividends paid (11,777) (11,814) 37
Cash dividends paid to minority shareholders (2,203) (3,489) 1,286
Other 239 (104) 343
Net cash used in financing activities 50,699 20,865 29,834
Effect of exchange rate fluctuation on cash and cash equivalents (1,282) 93 (1,375)
Net increase (decrease) in cash and cash equivalents (38,209) 79,995 (118,204)
Cash and cash equivalents at beginning of period 144,331 64,335 79,996
Cash and cash equivalents of newly consolidated subsidiaries at (495) - (495)
beginning of period
Cash and cash equivalents at end of period 105,625 144,331 (38,706)
SIGNIFICANT ACCOUNTING POLICIES FOR CONSOLIDATION
---------------------------------------------------------------------------------
The following is the table of scope of consolidation and application of equity method.
Classification Number of companies
Consolidated subsidiaries (Note 1) 305
Unconsolidated subsidiaries applied by equity method (Note 2) 1
Affiliated companies applied by equity method (Note 3) 16
(Consolidation)
Note 1:
(1) The names of main consolidated subsidiaries are KIRIN BEVERAGE CORPORATION and LION NATHAN LTD.
(2) The changes of the scope of consolidation are as follows:
(a) Due to acquisition of additional shares, Flower Gate, Inc., KIRIN-ASUPRO SALES CORPORATION and another
company became consolidated subsidiaries.
(b) Due to new establishment or acquisition, 43 companies including EI SHO GEN CO., LTD. and Takeda-Kirin Foods
Corporation became consolidated subsidiaries.
(c) Due to the commencement of its operations, YOKOHAMA AKARENGA, INC. became a consolidated subsidiary.
(d) Due to the discontinuation of its operations, Kirin International Finance (Netherlands) B.V. was determined
to be immaterial and therefore excluded from the consolidation scope.
(e) Due to liquidation, a subsidiary of KIRIN BEVERAGE CORPORATION was excluded from the consolidation scope.
(f) Due to sales of shares, a subsidiary of LION NATHAN LTD. was excluded from the consolidation scope.
(3) Subsidiaries including KIRIN AGRIBIO USA, INC. are excluded from the consolidation scope because the effect of
their sales and net income or losses for the current fiscal year, and total assets and retained earnings as of
December 31, 2002 on the consolidated financial statements are immaterial.
(4) The following are the names of consolidated subsidiaries whose balance sheet dates are different from that of the
Company.
Name of subsidiary Balance sheet date
LION NATHAN LTD. and its subsidiaries September 30, 2002 (*)
TWYFORD INTERNATIONAL INC. September 30, 2002 (*)
and its subsidiaries
JAPAN POTATO CORPORATION September 30, 2002 (*)
Kirin-Asupro Co., Ltd. November 30, 2002 (*)
KIRIN FEED LIMITED November 30, 2002 (*)
KIRIN-ASUPRO SALES CORPORATION November 30, 2002 (*)
EI SHO GEN CO., LTD. March 31, 2002 (**)
Takeda-Kirin Foods Corporation March 31, 2002 (***)
(*) Financial statements of the consolidated subsidiaries listed above as of their balance sheet dates and for
the year then ended are used and necessary adjustments are made for the purpose of consolidation.
(**) The company's adjusted financial statements as of December 31, 2002 and for the year then ended are used for
the purpose of consolidation.
(***)The company's interim financial statements as of September 30, 2002 and for the year then ended are used and
necessary adjustments are made for the purpose of consolidation.
(Equity Method)
Note 2:
The unconsolidated subsidiary applied by equity method is SHANGHAI JINJIANG KIRIN BEVERAGE & FOOD CO., LTD.
Note 3:
(1) The names of main affiliated companies under the equity method are KIRIN DISTELLERY COMPANY LIMITED, KINKI
COCA-COLA BOTTOLING CO., LTD., YONEKYU CORPORATION and SAN MIGUEL CORPORATION.
The change of the scope of application of equity method:
(2)
(a) Due to new establishment and acquisition of shares, SAN MIGUEL CORPORATION, FLOWER SEASON COMPANY, LIMITED
and another company became affiliates under equity method.
(b) Due to acquisition of additional shares and therefore becoming a consolidated subsidiary, Flower Gate, Inc.
KIRIN-ASUPRO SALES CORPORATION was no longer applied by the equity method.
(3) Investments in unconsolidated subsidiaries including KIRIN AGRIBIO USA, INC. not accounted for by the equity
method and affiliated companies including Diamond Sports Club Co., Ltd. not accounted for by the equity method,
are stated at cost because the effect of their net income or losses for the current fiscal year and retained
earnings as of December 31, 2002 on the consolidated financial statements are immaterial.
(4) Although the Company holds voting interest greater than 20% yet less than 50% in SOCIETE IMMOBILIERE ET
FINANCIERE POUR L'ALIMENTATION, it is not determined to have significant influence over this entity. Therefore
above-mentioned company is excluded from affiliates under equity method.
(5) Where accounting periods of the affiliated companies under the equity method are different from that of the
Company, the Company used their financial statements for the current period without any adjustments for equity
calculation purposes.
Where the difference is more than 6 months, the Company used their latest financial statements and necessary
adjustments are made for equity calculation purposes.
1. Valuation of securities
Debt securities intended to be held to maturity are valued by amortized cost method.
Available-for-sale securities with available fair market values are stated at fair market value as of the balance sheet
date with unrealized gains and unrealized losses on these securities reported, net of applicable income taxes, as a
separate component of shareholders' equity.
Realized gains and losses on sale of available-for-sale securities are computed using the moving-average method.
Other securities with no available fair market value are stated at moving-average cost.
2. Derivative financial instruments
Derivative financial instruments are stated at fair values.
3. Valuation of Inventories
Merchandise, finished goods and semi-finished goods are mainly stated at cost determined by the average method.
Raw materials and supplies are mainly stated at cost determined by the moving average method.
Construction in process is stated at cost determined by the specific identification method.
4. Depreciation of property, plant and equipment
Depreciation of property, plant and equipment is calculated on the declining balance method, except for buildings
(excluding buildings fixtures) acquired on and after April 1, 1998, where depreciation is calculated on the
straight-line method. Leased assets are depreciated
over each lease term based on the straight-line method with the estimated residual value at the end of the lease term.
Consolidated foreign subsidiaries adopt the straight-line method.
5. Amortization of intangible fixed assets
The straight-line method is used for intangible fixed assets over estimated useful lives. Consolidated foreign
subsidiaries mainly adopt the straight-line method over 20 years.
6. Allowance for doubtful accounts
Allowance for doubtful accounts is provided in an amount sufficient to cover probable losses on collection. It consists
of the estimated uncollectible amount with respect to certain identified doubtful receivables and an amount calculated
using the actual percentage of collection losses.
7. Pension and retirement benefits
The Company and consolidated subsidiaries provide allowance for employees' pension and retirement benefits at December
31, 2002 based on the estimated amounts of projected benefit obligation and the fair value of the plan assets at the
date. Actuarial differences are amortized by the straight-line method over the average estimated service period, which
is 15 years, beginning from the next fiscal year.
8. Retirement benefits for directors and corporate auditors
Provision for retirement benefits for directors and corporate auditors represents 100% of such retirement benefit
obligations at December 31,2002 calculated in accordance with policies of the Company and subsidiaries.
9. Reserve for repair and maintenance of vending machines
KIRIN BEVERAGE CORPORATION and its consolidated subsidiaries provide reserve for repair and maintenance cost of vending
machines, by estimating the necessary repair and maintenance cost in the future, allocating the costs over 5 year
period. The actual expenditure is deducted in the balance of the reserve on the balance sheet.
10. Leases
Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred
to the lessee, are accounted for in the same manner as operating leases.
Consolidated foreign subsidiaries mainly capitalize finance leases.
11. Hedge accounting
Where certain hedging criteria are met, the Company defers the recognition of gains and losses resulting from the
changes in fair value of derivative financial instruments until the related losses or gains on the hedging items are
recognized.
For forward foreign exchange contracts used for hedging purposes, the foreign currency receivables or payables are
recorded at the contracted forward rates. In addition, for interest rate swap contracts meeting hedging criteria, the
net amount to be paid or received under the interest rate swap contracts is added or to be deducted from the interest
on the assets or liabilities for which the swap contract was executed.
The Company and its subsidiaries use forward foreign currency contracts and interest rate swaps as derivative financial
instruments only for the purpose of mitigating future risks of fluctuation of foreign currency exchange rates with
respect to foreign currency receivables from the sale of the Companies' products and interest rate increases with
respect to borrowings, within the amounts of foreign currency borrowings or receivables.
The following summarizes hedging derivative financial instruments used by the Company and its subsidiaries and items
hedged:
Hedging instruments Hedged items
Forward foreign exchange contracts Foreign currency trade receivables and trade payables
Interest rate swap contracts loans receivable and loans payable
Commodity swap contracts Commodity price
The Company and its subsidiaries evaluate the effectiveness of hedge semi-annually by comparing the cumulative changes
in cash flows from or the changes in fair value of hedged items and the corresponding changes in the hedging derivative
instruments.
12. Consumption tax
Consumption tax is excluded from the revenue and expense accounts, which are subject to such tax.
13.Valuation of the assets and liabilities of consolidated subsidiaries
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the
portion attributable to minority shareholders, are evaluated using the fair value at the time the respective
subsidiaries were initially consolidated.
14. Consolidation differences
Differences between the cost and the underlying net equity of investments in consolidated subsidiaries and affiliates,
which are accounted for by the equity method is amortized using the straight-line method over 15 to 20 years. Where the
difference is small, it is recognized as expense when incurred.
15.Appropriation of retained earnings
The appropriation of retained earnings of the consolidated subsidiaries is based upon the appropriation resolved at the
subsidiaries during the current fiscal year.
16. Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-time highly
liquid investments with negligible risk of changes in value and maturity of not exceeding 3 months at the time of
purchase are considered to be cash and cash equivalents.
NOTES TO:
(CONSOLIDATED BALANCE SHEETS)
1 Accumulated depreciation ( millions yen)
At At
December 31, 2002 December 31, 2001
Accumulated depreciation 753,504 724,174
2 Investments in non-consolidated subsidiaries and affiliates ( millions yen)
At At
December 31, 2002 December 31, 2001
Investments in securities (Stocks) 136,533 69,472
Other in investments and other assets (Equity) 209 306
3 Detail of collateral ( millions yen)
(1) Collateral
At At
December 31, 2002 December 31, 2001
Cash 0 -
Notes and accounts receivable 359 391
Inventories 3,031 3,055
Buildings and structures 1,822 1,432
Machinery, equipment and vehicles 2,007 1,719
Land 950 1,132
Other of property, plant and Equipment (Fixtures) 27 35
Other of intangible fixed assets 149 -
Investment securities 29 33
Total 8,379 7,800
Following assets, which are included above, are pledged as factory
foundation collateral
Buildings and structures 273 313
Machinery, equipment and vehicles 33 36
Land 383 657
Total 690 1,008
(2) Secured borrowing ( millions yen)
At At
December 31, 2002 December 31, 2001
Short-term loans payable 3,963 2,400
Long-term debt (include current maturities of long-term loans) 2,267 1,630
Deposits received 3,408 3,408
Postage charge (facility limit) 13 29
Total 9,653 7,468
Following borrowings, which are included above, are guaranteed by
factory foundation collateral
Short-term loans payable 2,100 2,400
1. Factory foundation collateral consists of the Headquarters factory and Matsumoto factory of Nagano Tomato
Corporation.
4 Contingent liabilities
(1) Guarantees for unconsolidated subsidiaries and affiliated companies ( millions yen)
At At
December 31, 2002 December 31, 2001
1,825 2,644
(Number 4 5)
(2) Guarantees for employee's housing loan from banks ( millions yen)
At At
December 31, 2002 December 31, 2001
11,609 13,399
(3) Guarantees for customers ( millions yen, Foreign currency: thousand)
At At
December 31, 2002 December 31, 2001
Southeastern Container, Inc. 1,331 1,464
USD 11,102 USD 11,102
Other 924 858
(Number 61 55)
Foreign currencies included above 780 443
AUD11,704 AUD 7,631
NZD 5
Total contingent liabilities 15,691 18,368
(Agreements similar to guarantees included above 1,025 969)
5 Revaluation of land
KIRIN BEVERAGE CORPORATION revalued land used for business pursuant to Law Concerning Revaluation Reserve for Land
(effective March 31, 1998) and revision of the Law on March 31, 2001.
Due to revaluation of land in assets, the revaluation difference, net of tax, is accounted for as revaluation variance
for land in shareholder's equity, and tax portion is accounted for as deferred income taxes.
Revaluation was performed by adjusting the road rating pursuant to Article 2, Paragraph 4 of the Enforcement Ordinance
for the Law Concerning Revaluation Reserve for Land effective March 31, 1998.
Where the road rating is not provided, adjusted valuation of real estate tax set in the Article 2, Paragraph 3 was
used.
Date of revaluation December 31, 2001
( millions yen)
At At
December 31, 2002 December 31, 2001
The difference between the fair value and carrying amounts of the 1,773 -
revaluated land at year-end
(CONSOLIDATED STATEMENTS OF INCOME)
1 Major elements of selling , general and administrative expenses (millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Sales promotion 136,364 139,870
Freight 45,023 45,546
Advertising 56,626 61,290
Pension and retirement benefit costs 10,290 8,078
Employee's compensation 88,378 82,658
Research and development 22,771 22,868
Depreciation 24,143 24,571
2 Research and development expenses included in selling, general and administrative expenses (millions yen)
and cost of sales
Year ended Year ended
December 31, 2002 December 31, 2001
Total Research and development expenses 23,024 23,063
3 Gain on sales of fixed assets (millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Land 3,157 2,897
Other 243 83
Total 3,401 2,981
4 Loss on disposal of fixed assets (millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Buildings and structures 3,323 2,328
Machinery, equipment and vehicles 3,114 2,407
Other 277 262
Total 6,715 4,998
5 Loss on sales of fixed assets (millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Buildings and structures 80 401
Machinery, equipment and vehicles 197 255
Other 101 102
Total 379 759
6 Write-down of fixed assets of foreign subsidiaries
Write-down of fixed assets of foreign subsidiaries represent impairment loss of goodwill and other assets of LION
NATHAN LTD. 2001.
7 Loss on devaluation of golf club membership
Doubtful accounts expense for security deposit of golf club membership
(CONSOLIDATED STATEMENTS OF CASH FLOWS)
1 Reconciliation between cash and cash equivalents on consolidated statements of cash flows at end of period and related
accounts on consolidated balance sheets is as follows;
(millions yen)
At At
December 31, 2002 December 31, 2001
Cash 108,148 143,525
Marketable securities 2,017 12,272
Fixed (time) deposit over 3 months (2,522) (3,411)
Marketable securities over 3 months (2,017) (8,054)
Cash and cash equivalents at end of period 105,625 144,331
2 Assets and liabilities of the newly consolidated subsidiaries by acquisition (millions yen)
At At
December 31, 2002 December 31, 2001
Current Assets 32,572 11,938
Fixed Assets 25,591 44,457
Consolidation differences 3,076 92
Current Liabilities (8,112) (4,423)
Long-term Liabilities (13,321) (14,933)
Minority interests (5,390) (10,240)
Acquisition cost 34,415 26,891
Acquisition cost at the beginning of the period (925) (7,803)
Acquisition cost during the period 33,490 19,087
Cash and cash equivalents of the acquired companies (20,816) 127
Expenditure of acquisition 12,674 19,215
3 Assets and liabilities of the companies excluded from consolidation scope due to sales of stock (millions yen)
At At
December 31, 2002 December 31, 2001
Current Assets - 10,310
Fixed Assets - 42,603
TOTAL ASSETS - 52,914
Current Liabilities - (2,611)
Long-term Liabilities - (15,545)
TOTAL LIABILTIES - (18,157)
4 Non cash transaction
Securities contributed to employees' pension and retirement benefits trust (millions yen)
At At
December 31, 2002 December 31, 2001
Securities contributed - 3,802
Gain on contribution - 4,599
Total Securities contributed - 8,401
(SEGMENT INFORMATION)
1. Business Segment Information
( millions yen)
Year ended December 31,2002
Alcoholic Soft drinks Other Total Elimination/ Consolidated
beverages Unallocation
Sales, operating expenses
and operating income
Sales
1 Unaffiliated customers 1,069,521 342,946 170,780 1,583,248 - 1,583,248
2 Intersegment 2,941 955 109,173 113,070 (113,070) -
Total sales 1,072,463 343,901 279,954 1,696,319 (113,070) 1,583,248
Operating expenses 1,013,342 324,954 265,031 1,603,328 (109,869) 1,493,459
Operating income 59,120 18,946 14,923 92,991 (3,201) 89,789
Assets, depreciation and
capital expenditure
Assets 897,449 239,117 317,311 1,453,878 290,253 1,744,131
Depreciation 42,842 15,738 15,362 73,943 1,263 75,206
Capital expenditure 33,342 20,506 30,115 83,964 1,332 85,296
( millions yen)
Year ended December 31,2001
Alcoholic Soft drinks Other Total Elimination/ Consolidated
beverages Unallocation
Sales, operating expenses
and operating income
Sales
1 Unaffiliated customers 1,078,004 332,951 150,922 1,561,879 - 1,561,879
2 Intersegment 2,845 1,296 129,678 133,819 (133,819) -
Total sales 1,080,849 334,248 280,600 1,695,698 (133,819) 1,561,879
Operating expenses 1,034,393 317,128 264,733 1,616,255 (129,441) 1,486,814
Operating income 46,455 17,120 15,867 79,443 (4,378) 75,065
Assets, depreciation and
capital expenditure
Assets 759,833 233,771 288,247 1,281,853 379,799 1,661,652
Depreciation 40,960 16,105 14,637 71,703 1,885 73,588
Capital expenditure 40,698 15,481 16,866 73,046 517 73,564
Notes: 1. Types and nature of products are considered in classification of business segments.
2. Main products of sales by segment are as follows;
Sales by segment Main products
Alcoholic beverages Beer, Sparkling malt liquor (Happo-shu), Whiskey, Spirits, Wine etc.
Soft drinks Soft drink, Other drink
Other Pharmaceutical products, Engineering, Logistics, Floriculture etc.
3. Unallocable operating expenses included in "Elimination / Unallocation" mainly consist of costs for new
business development and costs for research and development of new basic technologies.
Year ended December 31, 2002 3,583million yen
Year ended December 31, 2001 3,982million yen
4. Unallocable assets included in "Elimination / unallocation" mainly consist of surplus funds (cash and
marketable securities),long- term investments (investment securities and life insurance investments), and
assets which belong to administrative department of the Company.
Year ended December 31, 2002 333,309million yen
Year ended December 31, 2001 410,749million yen
(SEGMENT INFORMATION)
2. Geographical Segment Information
( millions yen)
Year ended December 31,2002
Japan Asia,Oceania Other Total Elimination/ Consolidated
Unallocation
Sales, operating expenses
and operating income
Sales
1 Unaffiliated customers 1,404,629 121,769 56,849 1,583,248 - 1,583,248
2 Intersegment 2,035 1,223 1,518 4,777 (4,777) -
Total sales 1,406,665 122,993 58,368 1,588,026 (4,777) 1,583,248
Operating expenses 1,333,980 106,905 53,790 1,494,676 (1,216) 1,493,459
Operating income 72,684 16,087 4,578 93,350 (3,561) 89,789
Assets 1,049,397 297,583 75,426 1,422,408 321,723 1,744,131
( millions yen)
Year ended December 31,2001
Japan Asia,Oceania Other Total Elimination/ Consolidated
Unallocation
Sales, operating expenses
and operating income
Sales
1 Unaffiliated customers 1,408,904 105,224 47,750 1,561,879 - 1,561,879
2 Intersegment 2,268 910 703 3,882 (3,882) -
Total sales 1,411,172 106,135 48,453 1,565,761 (3,882) 1,561,879
Operating expenses 1,349,543 91,998 45,035 1,486,577 236 1,486,814
Operating income 61,629 14,136 3,417 79,184 (4,119) 75,065
Assets 1,003,365 186,513 62,289 1,252,168 409,484 1,661,652
Notes: 1. Geographical distances are considered in classification of country or area.
2. Major countries or areas included in each segment except for Japan are as follows;
Asia, Oceania East Asia, Southeast Asia, Oceania
Other USA, Europe
3. Amounts and major items included in "Elimination/Unallocation" are the same as those described in Notes 3 and
4 in "1.Business Segment Information".
3. Overseas sales
( millions yen)
Year ended December 31,2002
Asia, Oceania Other Total
(1) Overseas sales 122,982 58,073 181,056
(2) Consolidated sales - - 1,583,248
(3) Percentage of overseas sales to 7.8 3.7 11.4
consolidated sales(%)
Year ended December 31,2001
Asia, Oceania Other Total
(1) Overseas sales 105,879 48,100 153,979
(2) Consolidated sales - - 1,561,879
(3) Percentage of overseas sales to 6.8 3.1 9.9
consolidated sales(%)
Notes: 1. Geographical distances are considered in classification of country or area.
2. Major countries or areas included in each segment are as follows;
Asia, Oceania East Asia, Southeast Asia, Oceania
Other USA, Europe
3. Overseas sales represent sales of the Company and consolidated subsidiaries to countries and areas outside of
Japan.
(LEASE TRANSACTIONS)
Lessee lease
(Finance lease transactions without ownership transfer to lessee)
(1) Purchase price equivalent, accumulated depreciation equivalent and book value equivalent of leased properties
( millions yen)
At At
December 31, 2002 December 31, 2001
Machinery, equipment and vehicles
Purchase price equivalent 2,468 2,794
Accumulated depreciation equivalent 1,279 1,462
Book value equivalent 1,188 1,331
Property, plant and equipment, other (Tools)
Purchase price equivalent 2,953 4,165
Accumulated depreciation equivalent 1,585 2,700
Book value equivalent 1,368 1,465
Total
Purchase price equivalent 5,422 6,959
Accumulated depreciation equivalent 2,864 4,162
Book value equivalent 2,557 2,797
(2) Lease commitments ( millions yen)
At At
December 31, 2002 December 31, 2001
Due within one year 960 1,142
Due over one year 1,657 1,822
Total 2,617 2,964
(3) Lease payments, depreciation equivalent and interest equivalent ( millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Lease payments 1,350 1,495
Depreciation equivalent 1,197 1,257
Interest equivalent 72 87
(4) Method of computing depreciation equivalent
Depreciation equivalent is computed on the straight-line method over the lease terms with residual
value of zero.
(5) Allocation of interest equivalent
Differences between total lease expenses and its acquisition costs of the leased properties comprise
interest equivalent and insurance, maintenance and certain other operating costs. Interest equivalent
is allocated using interest method over the terms of leases.
(Operating lease transactions)
Lease commitments ( millions yen)
At At
December 31, 2002 December 31, 2001
Due within one year 2,147 1,408
Due over one year 6,421 3,639
Total 8,568 5,048
Lessor lease
(Finance lease transactions without ownership transfer to lessee)
(1) Purchase price, accumulated depreciation and book value of leased properties
( millions yen)
At At
December 31, 2002 December 31, 2001
Property, plant and equipment, other (Leased assets)
Purchase price 18,313 18,600
Accumulated depreciation 11,498 11,837
Book value 6,815 6,762
Intangible fixed assets, other (Leased assets)
Purchase price - -
Accumulated depreciation - -
Book value 739 696
Total
Purchase price 18,313 18,600
Accumulated depreciation 11,498 11,837
Book value 7,554 7,458
(2) Lease commitments ( millions yen)
At At
December 31, 2002 December 31, 2001
Due within one year 2,024 2,235
Due over one year 5,813 5,512
Total 7,838 7,748
(3) Lease revenue, depreciation and interest equivalent ( millions yen)
Year ended Year ended
December 31, 2002 December 31, 2001
Lease revenue 2,860 3,030
Depreciation 2,448 2,502
Interest equivalent 381 334
(4) Allocation of interest equivalent
Interest equivalent is allocated using the interest method over the terms of leases.
(Related party transactions)
Disclosure for related party transactions is omitted, as there have been no significant transactions with related
parties.
(Deferred income taxes)
1. Significant components of deferred income tax assets and liabilities (millions yen)
At At
December 31, 2002 December 31, 2001
Deferred income tax assets
Pension and retirement benefits 31,938 35,959
Deferred charges 9,924 9,261
Depreciation 8,328 8,410
Unrealized profits on fixed assets 4,105 4,050
Other 35,209 32,667
Sub-total 89,507 90,349
Less valuation allowance (94) (300)
Total deferred income tax assets 89,413 90,049
Deferred income tax liabilities
Reserve for deferred gains on sales of fixed assets for tax (10,186) (11,000)
purposes
Net unrealized holding gains on securities (4,794) (14,020)
Accelerated depreciation for foreign subsidiary (4,201) (4,064)
Other (5,917) (6,949)
Total deferred income tax liabilities (25,099) (36,034)
Net deferred income tax assets 64,313 54,014
Deferred income tax due to revaluation of land 1,997 1,995
Net deferred income tax assets are included in the consolidated
balance sheets as follows:
Current Assets- Deferred income tax assets 17,788 17,188
Fixed Assets Deferred income tax assets 55,868 45,191
Current Liabilities-Other (10) (5)
Long-term Liabilities-Other (9,333) (8,359)
2. Significant components of difference between the statutory tax rate and the effective tax rate (%)
At At
December 31, 2002 December 31, 2001
Statutory tax rate 42.1 42.1
Permanent difference- expenses 3.4 6.9
Permanent difference- revenues (1.0) (1.3)
Per capita inhabitants taxes 0.4 0.5
Amortization of consolidation differences 1.7 2.1
Other 2.0 1.3
Effective tax rate 48.6 51.6
(SECURITIES)
1. Held-to-maturity securities with market values ( millions yen)
At At
December 31, 2002 December 31, 2001
Securities whose market value Book value Market value Difference Book value Market value Difference
exceeds the book value
Governmental/municipal 1,348 1,374 26 1,048 1,075 26
bonds
Corporate bonds 1,341 1,357 15 1,787 1,810 23
Other - - - - - -
Sub-Total 2,689 2,731 41 2,835 2,885 49
Securities whose market Book value Market value Difference Book value Market value Difference
value does not exceed the book
value
Governmental/municipal 49 49 (0) 49 49 (0)
bonds
Corporate bonds - - - - - -
Other - - - - - -
Sub-Total 49 49 (0) 49 49 (0)
Total 2,739 2,781 41 2,885 2,935 49
2. Available-for-sale securities with market values ( millions yen)
At December 31,2002 At December 31,2001
Securities whose book value Acquisition Book value Difference Acquisition Book value Difference
exceeds their acquisition cost cost cost
Stocks 65,890 89,819 23,929 91,783 127,407 35,624
Bonds
Governmental/municipal 49 54 4 49 56 6
bonds
Corporate bonds 13 14 1 60 64 4
Other 999 1,001 1 6,498 6,545 47
Other 50 50 0 5,076 5,149 72
Sub-Total 67,003 90,941 23,936 103,468 139,223 35,755
Securities whose book value Acquisition Book value Difference Acquisition Book value Difference
does not exceed their cost cost
acquisition cost
Stocks 70,635 57,307 (13,327) 18,389 15,950 (2,439)
Bonds
Governmental/municipal - - - - - -
bonds
Corporate bonds - - - - - -
Other - - - - - -
Other 2,063 2,055 (7) 2,395 2,348 (47)
Sub-Total 72,698 59,363 (13,334) 20,785 18,298 (2,486)
Total 139,702 150,305 10,602 124,253 157,522 33,268
3. Available-for-sale securities sold during the period ( millions yen)
Amount sold Year ended December 31,2002 Year ended December 31,2001
Amount sold 1,719 13,252
Total gain on sales 420 10,024
Total loss on sales 7 1,302
(SECURITIES)
4. Book value of major securities not measured at fair value (millions yen)
Year ended December 31,2002 Year ended December 31,2001
Available-for-sale securities
Unlisted securities 43,209 41,751
Investment fund constituted of bonds - 1,637
Mid term government security fund - 987
Other 135 1,045
Total 43,345 45,421
5. The redemption schedule of available-for-sale securities with maturity dates and held-to-maturity securities
(as of December 31, 2002) (millions yen)
Due within 1 year 1 to 5 years 5 to 10 years Over 10 years
Bonds
Governmental/municipal bonds 149 1,302 - -
Corporate bonds 815 541 - -
Other 1,001 - - -
Other 50 - - -
Total 2,017 1,843 - -
(as of December 31, 2002) (millions yen)
Due within 1 year 1 to 5 years 5 to 10 years Over 10 years
Bonds
Governmental/municipal bonds - 1,154 - -
Corporate bonds 644 1,143 - -
Other 5,562 1,013 - -
Other 2,233 - - -
Total 8,440 3,311 - -
6. Impairment loss on investment securities
Impairment loss of 2,236millions yen was recognized for available-for-sale securities in the year ended December 31,
2002.
Where the fair values of available-for-sale securities have declined by more than 30% from their acquisition costs,
the value of those securities are considered to have "substantially declined" and the important losses are recorded on
those securities, unless the values are considered recoverable. For available-for-sale securities without available
fair value, when substantive values of those securities have declined by more than 50% from their acquisition costs,
the values of those securities are considered to have "substantially declined" and the important losses are recorded
on those securities, except for the cases where the recoverability of the values of those securities in the future is
supported by a reasonable ground.
Impairment loss of 3,283millions yen was recognized for available-for-sale securities in the year ended December 31,
2001.
Where the fair values of available-for-sale securities have declined by more than 30% from their acquisition costs,
the value of those securities are considered to have "substantially declined" and the important losses are recorded on
those securities, unless the values are considered recoverable. For available-for-sale securities without available
fair value, when substantive values of those securities have declined by more than 50% from their acquisition costs,
the values of those securities are considered to have "substantially declined" and the important losses are recorded
on those securities, except for the cases where the recoverability of the values of those securities in the future is
supported by a reasonable ground.
(DERIVATIVE TRANSACTIONS)
At December 31, 2002
Disclosure of derivative transactions is omitted, because hedge accounting applies to all of the derivative contracts
utilized by Kirin Brewery Company, Limited and its consolidated subsidiaries.
At December 31, 2001
Disclosure of derivative transactions is omitted, because hedge accounting applies to all of the derivative contracts
utilized by Kirin Brewery Company, Limited and its consolidated subsidiaries.
(Pension and retirement benefits)
1. Summary of the pension and retirement benefit plan
The Company and its subsidiaries provide three types of contributory defined benefit plans, which are lump-sum
severance payment, Welfare Pension Fund, and approved retirement pension. Premium on retirement benefit may be added
upon retirement of employees.
Several foreign subsidiaries provide defined contribution plans and/or defined benefit plans. The Company has
established trust for employees' pension and retirement benefit.
2. Pension and retirement benefit obligation (millions yen)
At December 31,2002 At December 31,2001
(1) Projected benefit obligation (347,351) (315,240)
(2) Fair value of plan assets 167,291 174,482
(3) Unfunded pension obligation (1)+(2) (180,059) (140,757)
(4) Unrecognized actuarial difference 84,645 40,697
(5) Pension and retirement benefit (3)+(4) (95,414) (100,060)
Notes: 1. Substitutional portion of the Welfare Pension Fund is included.
2. Several subsidiaries compute the projected benefit obligation by using simplified method.
3. Pension and retirement benefit expenses ( millions yen)
Year ended December 31,2002 Year ended December 31,2001
(1) Service cost (Notes1, 2) 9,376 8,912
(2) Interest cost 9,349 9,651
(3) Expected return on plan assets (5,687) (5,782)
(4) Amortization of net transition obligation - 18,835
(5) Amortization of actuarial difference 2,707 -
(6) Pension and retirement benefits expenses 15,745 31,616
Notes: 1. Employees' contribution to the Welfare Pension Fund is excluded.
2. Pension and retirement benefits expenses of subsidiaries using simplified method are included.
4. Basis for calculation of pension and retirement benefits, etc.
Year ended December Year ended December
31,2002 31,2001
(1) Periodic allocation of anticipated pension and retirement benefits Straight-line method Straight-line method
(2) Discount rate mainly 2.5% 3.0%
(3) Expected rate of return on plan assets mainly 3.5% mainly 3.5%
(4) Periods over which the actuarial difference is amortized 15 years 15 years
(5) Periods over which the net transition obligation is amortized - 1 year
(PRODUCTION, ORDERS RECEIVED AND SALES)
(1) PRODUCTION PERFORMANCE
Production performance for the current fiscal year classified by the type of business segment is as follows:
Business Segment year ended December 31, 2002 Percentage change (%)
Alcoholic beverages 1,009,811(millions yen) (1.1)
Soft drinks 102,947(millions yen) 3.8
Other 96,697(millions yen) 9.9
Total 1,209,456(millions yen) 0.1
Notes: The amounts are calculated based on sales price without consumption taxes.
(2) ORDERS RECEIVED
Orders received for the current fiscal year classified by the type of business segment is as follows:
The Company and its subsidiaries manufacture their products based on their projection for market demand except for
contract manufacture in "alcoholic beverages" and "soft drinks" segments and inspection machines and others in "other"
segment
Business Segment Orders received during Percentage change (%) Backlog Percentage change
period (%)
Alcoholic beverages 224(millions yen) - - -
Soft drinks 1,086(millions yen) 130.6 - -
Other 7,912(millions yen) (25.5) 1,114(millions yen) (60.6)
Total 9,223(millions yen) (16.9) 1,114(millions yen) (60.6)
Notes: The amounts are calculated based on sales price without consumption taxes.
(3) SALES PERFORMANCE
Sales performance for the current fiscal year classified by the type of business segment is as follows:
Business Segment year ended December 31, 2002 Percentage change (%)
Alcoholic beverages 1,069,521(millions yen) (0.8)
Soft drinks 342,946(millions yen) 3.0
Other 170,780(millions yen) 13.2
Total 1,583,248(millions yen) 1.4
Notes: The amounts do not include the related consumption tax, etc.
This information is provided by RNS
The company news service from the London Stock Exchange
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