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Commission File No. 2-61271 and 2-72713
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Report on Disclosure of Information of Ito-YokADo Co., Ltd.
ITO-YOKADO CO., LTD.
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(Translation of registrant's name into English)
1-4, SHIBAKOEN 4-CHOME, MINATO-KU, TOKYO 105-8571, JAPAN
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F x Form 40-F
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[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2 (b) under the Securities Exchange Act of
1934.]
Yes No x
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[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2 (b). 82- ]
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[ATTACHED]
HANKI-HOKOKUSHO (INTERIM REPORT FOR THE SIX MONTHS ENDED AUGUST 31, 2002)
On November 28, 2002, this report was filed with the Director of the Kanto Local
Finance Bureau of the Ministry of Finance pursuant to the Securities and
Exchange Law of Japan.
- 2 -
1. Financial Highlights
Millions of yen, except per-share data
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Six months ended Fiscal years ended
August 31 February 28
- --------------------------------------------------------------------------------------------------------------------------
2000 2001 2002 2001 2002
- --------------------------------------------------------------------------------------------------------------------------
Revenues from operations -- 1,573,238 1,657,078 2,959,355 3,195,919
Income from continuing operations
before income taxes -- 101,699 92,467 167,589 174,911
Net income -- 35,621 6,787 48,884 52,323
Shareholders' equity -- 1,094,918 1,114,796 1,055,723 1,127,316
Total assets -- 2,377,150 2,412,984 2,241,830 2,379,894
Shareholders' equity per share(yen) -- 2,618.96 2,664.04 2,525.21 2,693.60
Net income per share (Basic)(yen) -- 85.20 16.22 118.70 125.20
Net income per share (Diluted)(yen) -- 85.10 -- 118.57 125.05
Shareholders' equity ratio(%) -- 46.1 46.2 47.1 47.4
Cash flows from operating activities -- 127,713 153,275 214,470 198,492
Cash flows from investment activities -- (56,254) (95,055) (136,602) (148,045)
Cash flows from financial activities -- (4,003) (4,473) (24,059) (58,465)
Cash and cash equivalents at end of year -- 620,607 598,038 551,298 546,758
Number of employees -- 53,659 49,488 53,020 50,636
Number of part-time employees -- 57,146 59,891 55,165 56,275
Notes:
1. The consolidated Financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America.
2. The figures for the six months ended August 31,2000, are not shown on the
above table due to the reason that the Company started to file the
semiannual report to Ministry of Finance Japan from six months ended August
31, 2001, upon adoption of the Regulations of Semiannual Consolidated
Financial Statements that became effective on April 1, 2000.
3. Consumption taxes are excluded from the amounts of revenues from
operations.
4. All net income per share data has been presented to confirm with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128.
Basic net income per share amounts have been computed by dividing net
income available to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net income per share
amounts reflect the potential dilution and have been computed on the basis
that all convertible debentures were converted at beginning of the period.
At August 31, 2002, there were no securities that have potential dilution
effects.
5. At March 1, 2002, the Company adopted SFAS No. 144 ("Accounting for the
Impairment or Disposal of Long-Lived Assets"). Prior period's (year's)
amounts have been restated in accordance with the provisions of this
statement.
2. Operational results in the six months ended August 31, 2002
(1) Overview
In the six months ended August 31,2002, the Japanese economy showed
signs of having hit bottom according to some economic indicators.
Nonetheless, consumer spending and capital investments were both sluggish,
and economic conditions in Japan remained challenging
- 3 -
In the retail industry, sales were positively influenced by
indications of an end to the declines in product sales prices and by hot
summer weather. However, the employment situation and income levels
remained weak, and consumers continued to show restraint in their
purchasing behavior. Therefore, conditions in the retail industry were
difficult overall.
Ito-Yokado's consolidated revenues from operations increased 5.3%, to
1,657.1 billion yen, operating income was up 20.2%, to 100.8 billion yen,
income from continuing operations before income taxes ("income before
income taxes") was down 9.1%, to 92.5 billion yen, and net income
decreased 80.9%, to 6.8 billion yen. Basic earnings per share were 16.22
yen, compared with 85.20 yen in the preceding interim period.
(2) Segment Information
Business Segments Information
a. Superstore Operations
Revenues increased 2.2%, to 755.9 billion yen. Operating income was
12.1 billion yen, compared with the operating loss of 0.1 billion yen
during the six months ended August 31,2001. Income before income taxes was
down 48.3%, to 11.1 billion yen. The IY Group business reengineering plan,
implemented in Ito-Yokado superstores and other stores, began to show
results during the interim period.
b. Convenience store operations
Revenues rose 8.1%, to 833.6 billion yen, operating income rose 11.1%,
to 93.6 billion yen, and income before income taxes was up 6.4%, to 86.5
billion yen. Seven-Eleven Japan Co., Ltd. recorded increases in both
revenues and profits. In addition, the yen-dollar exchange rate used in the
consolidation of 7-Eleven, Inc.'s accounts was 129.71 yen, reflecting the
depreciation of yen, compared with the same period of previous fiscal year,
when the used rate was 120.52 yen. This change in the exchange rate also
had the effect of increasing sales and profits in this business segment.
c. Restaurant operations
Revenues declined 1.4%, to 66.2 billion yen, operating income was down
16.0%, to 4.3 billion yen, and income before income taxes decreased 2.2%,
to 4.2 billion yen. In addition to sluggish consumer spending, the food
service industry was affected by weak demand during the television
broadcast of Korea/Japan World Cup soccer matches in June 2002. As a
result, revenues from operations and income were both weak.
d. Other operations
Revenues increased 109.7%, to 12.7 billion yen. The operating loss was
9.2 billion yen, compared with an operating loss of 5.4 billion yen in the
same period of preceding fiscal year. The loss from continuing operations
before income taxes ("loss before income taxes") was 9.4 billion yen,
compared with a loss before income taxes in the same period of previous
year of 5.4 billion yen. The increase in revenues is primarily attributable
to the fact that IYBank Co., Ltd., and IY Card Service Co., Ltd. which
began operations in the previous fiscal year, contributed a full six months
of revenues in the interim period under review. The operating loss and loss
before income taxes were principally the result of higher operating
expenses associated with measures taken to enhance the operational
foundations of these two companies.
Geographic Segment Information
a. Japan
Revenues increased 3.6%, to 1,020.2 billion yen. Operating income
increased 17.6%, to 88.7 billion yen
- 4 -
b. United States of America
7-Eleven Inc., recorded increases in both revenues and income, and
also exchange rate used in consolidation of the company's account also
affected to increase revenues 8.5%, to 585.2 billion yen and operation
income 43.8%, to 11.2 billion yen.
c. Other
Business operations in other area increased revenues 5.8%, to 51.5
billion yen, and operation income 55.7% , to 0.8 billion yen.
3. Mid and long term management strategy
(1) Basic strategies of retail operations: superstore, convenience store, and
restaurant operations
Sales policies
a. To prevent the accumulation of slow-selling products and to continue to
launch new products that meet customer needs, the Company will further
strengthen item-by-item management.
b. The Company will respond to the shortening of product life cycles with
flexible sales area layouts, product changes, and earlier launches of new
products and improved timing of product switch overs.
c. In customer service, the Company will thoroughly pay careful attention to
each individual customer, offering cheerful greetings, implementing swift
and appropriate guidance, providing detail product explanations and
responding to customers' request with sincerity.
d. The Company will work to achieve optimal sales area management, sales
promotions, and division of labor through the sharing and mutual
understanding of sales plans and information by staff members in stores,
procurement, and related operations support departments.
Store policies
a. In accordance with the marketing data for each store, the Company is
thoroughly implementing store policies with an emphasis on "building
high-quality stores with strong ties to regional lifestyles."
b. The Company continues to implement its area dominance strategy, where the
company focuses on opening stores in region where it can achieve a high
store density, and to earn loyalty of customers by each region. On the
other hand, the Company aggressively promotes to open stores where IY Group
stores have not yet operated.
c. For store openings, closing and renovations, our basic policy is to make
much of quality, with a focus on profitability and efficiency.
Product development and procurement
a. While sharing information with business partners in product development,
planning, production, and sales, the Company will give top priority to
product development based on team merchandising, which enable the Company
to provide original products that are available only at IY Group stores.
Through the team merchandising, the Company strives to differentiate itself
from competitors and to enhance our valuation.
b. The Company is piling up marketing efforts and working to that can provide
the products that meet the preferences of customers in specific regions. In
addition, the Company aims to strengthen its sales capabilities by
promoting "local buying", which the Company's regional groups and stores
procure fruits, vegetables, and seafood from nearby farm and fishing areas,
as well as special products by region.
c. To thoroughly implement traceability, which enable the Company to confirm
each stage of the procurement process from manufacture or harvest to the
customer, the Company is entering contracts with regional groups and with
specialists. As a results, the Company can offer products for which we can
confirm a range of information, such as the producer and the cultivation
and growing environment.
- 5 -
(2) New fields of business
a. IYBank Co., Ltd. aims to provide customers with convenient financial
services available 24-hours a day, 365 days a year. To that end, the bank
continues to install ATMs in Ito-Yokado Group stores, to offer new
financial services and to use tie-ups with diverse financial institutions.
b. IY Card Service Co., Ltd. issues the " IY Card", which integrates credit
card and point card functions, with the goal of increasing shopping
convenience at IY Group stores. IY Card Service plans to provide various
services for customers and aims to increase the number of IY Card
cardholders.
(3) Rationalization or integration of unprofitable areas.
After careful consideration of means of improving profitability,
management decides to rationalize or integrate operations, departments or
stores that are unprofitable or inefficient, the Company will move rapidly
to implement that decision. Measures taken by the Company during the
interim period are outlined below.
a. In Robinson's Japan Co., Ltd. department stores, the completely renovated
Sapporo store reopened in June 2002 with a focus on food, miscellaneous and
accessories, and sundries. Full-fledged renovations on the Utsunomiya store
is planned in the second half of the fiscal year.
b. On May 24, 2002, the operations of Daikuma Co., Ltd. discount stores were
sold to Yamada Denki Co., Ltd.
c. On March 1, 2002, IY Foods K.K., Nihon Nosuisan K.K., and York Seika Co.,
Ltd. merged to form IY Foods K.K. The merger will increase efficiency in
the food processing business of IY Group.
- 6 -
INFORMATION FOR THE ATTACHED SEMIANNUAL CONSOLIDATED FINANCIAL STATEMENTS
1. Pursuant to the supplementary provision No. 2 of "Regulations Concerning
the Terminology, Forms and Preparation Methods of Semiannual Consolidated
Financial Statements" (Ministry of Finance Ordinance No. 28, 1976), the
consolidated financial information for the six months ended August 31, 2002
has been prepared in accordance with the accounting principles generally
accepted in the United States of America.
2. A semiannual audit of the consolidated financial statements for the six
months ended August 31,2002 has been carried out by ChuoAoyama Audit
Corporation in accordance with Semiannual Audit Standards of Japan.
- 7 -
Consolidated Balance Sheets
Ito-Yokado Co., Ltd. and its Subsidiaries at August 31, 2001, August 31, 2002
and February 28, 2002
Millions of yen
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As of August As of August As of February
ASSETS 31, 2001 31, 2002 28, 2002
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Current assets: (%) (%) (%)
Cash and cash equivalents 615,414 598,038 541,382
Accounts and notes receivable:
Trade 26,109 41,928 24,977
Finance receivable 5,072 19,603 5,220
Affiliates 899 982 713
Franchisees and other 30,117 22,840 33,737
62,197 85,353 64,647
Allowance for doubtful accounts (1,240) (690) (1,141)
60,957 84,663 63,506
Inventories (Note 3) 86,296 91,768 102,599
Assets held for sale (Note 2) 53,753 3,059 53,001
Prepaid expenses and other current assets 55,129 64,653 62,073
Total current assets 871,549 36.7 842,181 34.9 822,561 34.6
Investments and advances:
Investments in and advances to affiliates
(Note 6) 31,977 34,806 34,443
Other security investments (Note 4) 24,128 41,688 35,683
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Total investments and advances 56,105 2.3 76,494 3.2 70,126 2.9
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Property and equipment, at cost:
Leasehold improvements 800,662 814,333 804,688
Land and land rights 353,529 375,517 359,216
Buildings and structures 339,580 359,606 360,907
Furniture, fixtures and other 396,088 437,291 428,030
Construction in progress 12,861 10,141 11,581
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1,902,720 1,996,888 1,964,422
Accumulated depreciation and amortization (802,912) (856,855) (839,554)
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Net property and equipment 1,099,808 46.3 1,140,033 47.2 1,124,868 47.3
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Other assets:
Goodwill 92,708 104,119 113,143
Fixed leasehold deposits 78,923 82,004 81,226
Deferred lease rents 90,608 91,474 92,601
Other (Note 6) 87,449 76,679 75,369
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Total other assets 349,688 14.7 354,276 14.7 362,339 15.2
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Total assets 2,377,150 100.0 2,412,984 100.0 2,379,894 100.0
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The accompanying notes are an integral part of these statements.
- 8 -
Millions of yen
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As of August As of August As of February
LIABILITIES AND SHAREHOLDERS' EQUITY 31, 2001 31, 2002 28, 2002
- -----------------------------------------------------------------------------------------------------------------
Current liabilities: (%) (%) (%)
Short-term loans (Note 6) 16,337 15,767 14,066
Current portion of long-term debt
(Notes 5 and 6) 18,006 16,487 18,285
Accounts and notes payable:
Trade 259,212 273,029 237,359
Other 36,248 44,642 39,014
Accrued payroll and bonus 38,820 40,512 37,822
Income taxes payable 43,134 42,608 41,936
Deposit received 28,180 48,871 35,712
Liabilities associated with assets held for sale
(Note 2) 13,814 -- 11,265
Other current liabilities (Note 6) 74,892 66,095 78,186
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Total current liabilities 528,643 22.2 548,011 22.7 513,645 21.6
Long-term debt (Notes 5 and 6) 332,327 337,736 348,835
Accrued pension and severance costs 35,257 10,549 11,361
Deferred income taxes 12,327 12,337 14,401
Deferred credits and other liabilities (Note 6) 16,743 24,209 19,063
------------------------------------------------------------
Total liabilities 925,297 38.9 932,842 38.7 907,305 38.1
------------------------------------------------------------
Minority interest in consolidated subsidiaries 356,935 15.0 365,346 15.1 345,273 14.5
------------------------------------------------------------
Commitments and contingent liabilities (Note 8)
Shareholders' equity:
Common stock, authorized 840,000,000 shares
Number of shares issued:
418,073,733 shares at August 31 2001
418,717,685 shares at August 31 2002
418,717,685 shares at February 28 2002 46,802 2.0 47,988 2.0 47,988 2.0
Capital surplus
Additional paid-in capital 118,135 5.0 119,321 5.0 119,321 5.0
Other capital surplus 35,947 1.5 36,777 1.5 35,947 1.5
------------------------------------------------------------
154,082 6.5 156,098 6.5 155,268 6.5
Retained earnings
Legal reserve 15,097 0.6 14,902 0.6 15,097 0.6
Other retained earnings 885,990 37.3 895,449 37.1 896,003 37.7
------------------------------------------------------------
901,087 37.9 910,351 37.7 911,100 38.3
Accumulated other comprehensive income
(loss) (7,053) (0.3) 1,044 0.0 13,318 0.6
Treasury stock, at cost, 256,256 shares at
August 31 2002 and 201,004 shares at
February 28 2002 -- -- (685) (0.0) (385) (0.0)
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Total shareholders' equity 1,094,918 46.1 1,114,796 46.2 1,127,316 47.4
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Total liabilities and shareholders' equity 2,377,150 100.0 2,412,984 100.0 2,379,894 100.0
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- 9 -
Consolidated Statements of Income
Ito-Yokado Co., Ltd. and its Subsidiaries
For the six months ended August 31, 2001 and 2002, and for the fiscal year ended
February 28, 2002
Millions of yen
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Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ----------------------------------------------------------------------------------------------------------------
Revenues from operations:
Net sales 1,402,940 100.0 1,472,557 100.0 2,859,847 100.0
Other income 170,298 12.1 184,521 12.5 336,072 11.8
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1,573,238 112.1 1,657,078 112.5 3,195,919 111.8
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Costs and expenses:
Cost of sales 975,187 69.5 1,019,199 69.2 1,989,299 69.6
Depreciation and amortization 55,784 3.9 59,237 4.0 116,734 4.1
Selling, general and administrative (Note 7) 458,459 32.7 477,878 32.5 925,712 32.4
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1,489,430 106.1 1,556,314 105.7 3,031,745 106.1
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Operating income 83,808 6.0 100,764 6.8 164,174 5.7
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Other income (expenses):
Interest income 1,862 0.1 1,173 0.1 3,411 0.1
Interest expense (6,746) (0.5) (7,007) (0.4) (13,245) (0.5)
Gain on subsidiary's common stock
contribution to employee retirement
benefit trust 24,607 1.7 -- -- 24,607 0.9
Loss on sale and write-down of
security investments (3,101) (0.2) (57) (0.0) (5,878) (0.2)
Foreign currency exchange gains (losses) 1,269 0.1 (2,406) (0.2) 1,842 0.1
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17,891 1.2 (8,297) (0.5) 10,737 0.4
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Income from continuing operations before
income taxes 101,699 7.2 92,467 6.3 174,911 6.1
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Income taxes:
Current 44,022 42,827 84,471
Deferred (1,670) (766) (3,538)
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42,352 3.0 42,061 2.9 80,933 2.8
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Income from continuing operations before
minority interest and equity in earnings 59,347 4.2 50,406 3.4 93,978 3.3
Minority interest in earnings of consolidated
subsidiaries (21,800) (1.6) (22,484) (1.5) (38,599) (1.3)
Equity in earnings of affiliates 848 0.1 919 0.1 1,392 0.0
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Income from continuing operations before
and cumulative effects of changes in
accounting principles 38,395 2.7 28,841 2.0 56,771 2.0
Loss from discontinued operations
(Note 2) (2,120) (0.2) (20,045) (1.4) (3,789) (0.2)
Cumulative effects of changes in accounting
principles, net of income taxes of 759 million yen,
2,433 million yen and 765 million yen (654) (0.0) (2,009) (0.1) (659) (0.0)
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Net income 35,621 2.5 6,787 0.5 52,323 1.8
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- 10 -
Yen
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Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations before cumulative
effects of changes in accounting principles per
share, equivalent to one American Depositary Share:
Basic 91.83 68.92 135.85
Diluted 91.72 -- 135.68
Loss from discontinued operations per share,
equivalent to one American Depositary Share:
Basic (5.07) (47.90) (9.07)
Diluted (5.06) -- (9.05)
Cumulative effects of changes in accounting
principles per share, equivalent to one American
Depositary Share:
Basic (1.56) (4.80) (1.58)
Diluted (1.56) -- (1.58)
Net income per share, equivalent to one American
Depositary Share (Note 9):
Basic 85.20 16.22 125.20
Diluted 85.10 -- 125.05
Cash dividend declared per share, equivalent to
one American Depositary Share 16.00 16.00 34.00
The accompanying notes are an integral part of these statements.
- 11 -
Consolidated Statements of Shareholders' Equity
Ito-Yokado Co., Ltd. and its Subsidiaries
For the six months ended August 31, 2001 and 2002, and for the fiscal year ended
February 28, 2002
Millions of yen
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Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ---------------------------------------------------------------------------------------------------------------------------
Common stock (thousand of shares): 418,074 418,718 418,718
Balance at beginning of period 46,801 47,988 46,801
Conversion of convertible debt 1 -- 1,187
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Balance at end of period 46,802 47,988 47,988
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Capital surplus:
Additional paid-in capital:
Balance at beginning of period 118,134 119,321 118,134
Conversion of convertible debt 1 -- 1,187
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Balance at end of period 118,135 119,321 119,321
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Other capital surplus:
Balance at beginning of period 34,659 35,947 34,659
Increase due to issuance of additional shares by a
Subsidiary to third parties 1,288 830 1,288
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Balance at end of period 35,947 36,777 35,947
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Total capital surplus 154,082 156,098 155,268
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Retained earnings:
Legal reserve:
Balance at beginning of period 15,016 15,097 15,016
Transfers from retained earnings 81 16 81
Transfers to retained earnings due to sale of a subsidiary -- (211) --
-----------------------------------------------------------
Balance at end of period 15,097 14,902 15,097
-----------------------------------------------------------
Other retained earnings:
Balance at beginning of period 857,975 896,003 857,975
Net income for the period 35,621 6,787 52,323
Cash dividends (7,525) (7,536) (14,214)
Transfers to legal reserve (81) (16) (81)
Transfers from legal reserve due to sale of a subsidiary -- 211 --
-----------------------------------------------------------
Balance at end of period 885,990 895,449 896,003
-----------------------------------------------------------
Total retained earnings 901,087 910,351 911,100
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- 12 -
Millions of yen
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Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income(loss):
Net unrealized (losses) gains on
investments (Note 4):
Balance at beginning of period 1,304 94 1,304
Unrealized (losses) on securities
(net of 958 million yen, 15 million yen and 2,549
million yen deferred taxes) (1,312) (35) (3,478)
Reclassification adjustment for (losses) gains in net
Income
(net of (814) million yen, 30 million yen and (1,638)
million yen deferred taxes) 1,095 (70) 2,268
-----------------------------------------------------------
Balance at end of period 1,087 (11) 94
-----------------------------------------------------------
Cumulative translation adjustments:
Balance at beginning of period (3,627) 13,729 (3,627)
Adjustments for the period 10,209 (12,231) 17,536
-----------------------------------------------------------
Balance at end of period 6,582 1,498 13,729
-----------------------------------------------------------
Minimum pension liability adjustment:
Balance at beginning of period (14,539) -- (14,539)
Adjustments for the period
(net of (5) million yen, -- million yen and (10,119)
million yen deferred taxes) (14) -- 14,539
-----------------------------------------------------------
Balance at end of period (14,553) -- --
-----------------------------------------------------------
Interest rate swaps (Note 6):
Balance at beginning of period -- (505) --
Adjustments for the period
(net of 178 million yen, (16)million yen and 396 million
yen deferred taxes) (169) 62 (505)
-----------------------------------------------------------
Balance at end of period (169) (443) (505)
-----------------------------------------------------------
Total accumulated other comprehensive income (loss)
Balance at beginning of period (16,862) 13,318 (16,862)
Adjustments for the period 9,809 (12,274) 30,180
-----------------------------------------------------------
Balance at end of period (7,053) 1,044 13,318
-----------------------------------------------------------
Treasury stock:
Balance at beginning of period -- (358) --
Purchase of treasury stock -- (327) (358)
-----------------------------------------------------------
Balance at end of period -- (685) (358)
-----------------------------------------------------------
Total shareholders' equity 1,094,918 1,114,796 1,127,316
-----------------------------------------------------------
Disclosure of comprehensive income (loss):
Net income for the period 35,621 6,787 52,323
-----------------------------------------------------------
Net unrealized (losses) on investments (217) (105) (1,210)
Cumulative translation adjustments 10,209 (12,231) 17,356
Minimum pension liability adjustments (14) -- 14,539
Interest rate swaps (169) 62 (505)
-----------------------------------------------------------
Other comprehensive (loss) income for the period, net of tax 9,809 (12,274) 30,180
-----------------------------------------------------------
Total comprehensive (loss) income for the period 45,430 (5,487) 82,503
-----------------------------------------------------------
The accompanying notes are an integral part of these statements.
- 13 -
Consolidated Statements of Cash Flows
Millions of yen
-----------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 35,621 6,787 52,323
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effects of changes in accounting principles 654 2,009 659
Loss from discontinued operation 2,120 20,045 3,789
Depreciation and amortization 55,784 59,237 116,734
Impairment and disposal loss for property and equipment 4,355 4,629 8,666
Minority interest 21,800 22,484 38,599
Undistributed earnings of affiliates (625) (678) (1,470)
Gain on subsidiary's common stock contribution
to employee retirement benefit trust (24,607) -- (24,607)
Loss on sales and write-down of security
investments 3,102 57 5,878
Deferred income taxes and other 72 (139) 570
Changes in assets and liabilities:
Increase in accounts and notes receivable, less allowance (8,510) (23,837) (9,120)
Decrease (increase) in inventories 10,403 9,125 (3,666)
Increase in prepaid expenses and other current
and noncurrent assets (4,936) (5,199) (7,140)
Increase in accounts and notes payable and
accrued liabilities 30,469 53,553 3,720
Increase in other current and noncurrent liabilities 2,011 5,202 13,557
Net cash provided by operating activities 127,713 153,275 198,492
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment (60,668) (98,247) (129,895)
Increase in investments and advances (5,318) (7,557) (24,580)
Proceeds from sales of security investments 4,407 545 7,248
Proceeds from sales of property and equipment 6,607 2,012 7,796
Proceeds from sale of investments in subsidiary (net) -- 12,029 --
Other (1,282) (3,837) (8,614)
Net cash used in investing activities (56,254) (95,055) (148,045)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from commercial paper and revolving credit
facilities 290,304 349,052 535,699
Payments under commercial paper and revolving credit
Facilities (283,556) (345,606) (526,299)
Proceeds from issuance of long-term debt 1,005 3,263 17,576
Repayment of long-term debt (11,496) (11,343) (24,477)
Dividends paid (7,525) (7,536) (14,214)
Dividends paid to minority interests (6,626) (7,160) (13,529)
Contribution from minority interest of consolidated
Subsidiary 10,600 16,900 10,600
Purchase of subsidiary's treasury stock -- -- (40,900)
Other 3,291 (2,043) (2,921)
Net cash used in financing activities (4,003) (4,473) (58,465)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 1,853 (2,467) 3,478
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 69,309 51,280 (4,540)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 551,298 546,758 551,298
CASH AND CASH EQUIVALENTS AT END OF PERIOD 620,607 598,038 546,758
- 14 -
Millions of yen
-----------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest 6,825 6,631 13,116
Income taxes 44,098 42,238 86,925
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Capital lease obligations for property and equipment 9,448 7,694 15,210
Note: The amounts of cash and cash equivalents related to Daikuma Co., Ltd.
("Daikuma") were reclassified to "Assets held for sale" from "Cash and cash
equivalents" on the consolidated balance sheets. The difference in the amounts
of cash and cash equivalents at each of the period (year) ends between the
consolidated balance sheets and the consolidated statements of cash flows are as
follows;
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
- ---------------------------------------------------------------------------------------------------------------------------
"Cash and cash equivalents" on consolidated statements
of cash flows 620,607 598,038 546,758
"Cash and cash equivalents" on consolidated balance sheets 615,414 598,038 541,382
"Cash and cash equivalents" related to Daikuma 5,193 -- 5,376
The accompanying notes are an integral part of these statements.
- 15 -
NOTES TO SEMIANNUAL CONSOLIDATED FINANCIAL STATEMENTS
Ito-Yokado Co., Ltd. and its Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The semiannual consolidated financial statements include the accounts of
Ito-Yokado Co., Ltd. and its subsidiaries ("the Company"). The period end of
7-Eleven, Inc. (owned 72.5% by IYG Holding Company, which is jointly owned by
Ito-Yokado Co., Ltd. and Seven-Eleven Japan Co., Ltd. ("SEJ")) and its
subsidiaries (collectively "7-Eleven, Inc.") included in the consolidated
semiannual financial statements are June 30. All information of 7-Eleven, Inc.
included herein Notes to Semiannual Consolidated Financial Statements is as of
or for the six months ended June 30 and so stated in each part of the notes.
Investments in affiliates are accounted for by the equity method.
All material intercompany transactions and account balances have been
eliminated.
(2) Accounting Principles
The accounting records of the domestic companies are maintained in
accordance with accounting practices prevailing in Japan. The consolidated
financial statements reflect adjustments necessary for presentation in
conformity with generally accepted accounting principles applicable in the
United States of America ("GAAP"). Such adjustments include principally
accounting for lease and provision for impairment of long-lived assets.
(3) Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(4) Translation of Foreign Currencies
All asset and liability accounts of foreign subsidiaries and affiliates are
translated into Japanese yen at the exchange rate in effect at the respective
balance sheet dates and all income and expense accounts are translated at the
average exchange rate for the period. The resulting translation adjustments are
included in other comprehensive income (loss) and are accumulated in
shareholders' equity.
Assets and liabilities denominated in a foreign currency are translated at
exchange rates in effect at the respective balance sheet dates. Translation
gains and losses are included in earnings.
(5) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash
equivalents are comprised of cash on hand, demand deposits in banks and funds in
excess of immediate operating needs, which are principally invested in time
deposits, Money Management Fund, certificates of deposit and marketable
securities bought with reverse repurchase agreements with a remaining maturity
of three months or less.
(6) Inventories Valuation
Inventories are valued principally at the lower of cost or market. Cost is
determined principally using the average retail method for domestic companies
and the LIFO method for foreign subsidiaries.
(7) Accounting for Leases
Capital leases are recorded at the inception of the lease at the lower of
the discounted present value of future minimum lease payments or the fair value
of the property. Amortization of capital leases, improvements to leased
properties and favorable leaseholds is based upon the remaining terms of the
leases or the estimated useful lives, whichever is shorter.
In connection with the leasing of stores, the Company generally enters into
agreements whereby the Company advances to the lessors an amount equivalent to
the construction cost of the buildings and, upon completion of construction,
leases the land and buildings for 20 years. The Company generally
- 16 -
records the assets on the balance sheet during the construction period as the
Company is considered as the owner of the stores. When construction is
completed, the Company generally keeps the assets on the balance sheet as the
Company has continuing involvement in the assets.
By making the advances for the cost of construction, the Company incurs
costs equivalent to the cost of the building which the Company believes
constitutes a leasehold improvement amortizable over the life of the lease. Such
advances capitalized as leasehold improvements were 395,714 million yen, 390,560
million yen and 383,729 million yen at August 31, 2001, August 31, 2002 and
February 28, 2002. The rental payments are in effect payments for rental of the
land, and in order to allocate such rent expense ratably over the lease period,
a portion of rent paid is deferred and amortized ratably over the life of the
lease.
(8) Property and Equipment
Depreciation of property and equipment is computed generally on the
declining-balance method for the parent company and Japanese subsidiaries and on
the straight-line method for foreign subsidiaries over the estimated useful
lives of the assets, ranging from 3 to 20 years for leasehold improvements,
except those described in Note 1. (7), 3 to 39 years for buildings and
structures and 2 to 20 years for furniture, fixture and other. Leasehold
improvements of stores as described in Note 1. (7) are amortized on a
straight-line basis over the respective leasehold periods. The cost of
maintenance, repairs and minor renewals and betterments is charged to expense in
the year incurred. Major renewals and betterments are capitalized.
In general, when assets are sold or otherwise disposed of, the profits or
losses thereon, computed on the basis of the difference between depreciated
costs and proceeds, are credited or charged to income in the year of sale or
disposal, and costs and accumulated depreciation are removed from the accounts.
Long-lived assets and certain identifiable intangibles are reviewed for
impairment and written down to fair value whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and an impairment loss must be recognized.
(9) Goodwill
The Company adopted the provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets", as of March 1, 2002. This new statement addresses financial
accounting and reporting for acquired goodwill and other intangible assets. This
statement eliminates amortization of goodwill and intangible assets with
indefinite lives and requires a transition impairment test of these assets and
annual impairment test thereafter and in certain circumstances. The Company has
completed the transitional impairment tests of goodwill and intangible assets
with indefinite lives as of March 1, 2002, and no impairment was noted. The
effects of the adoption of SFAS No. 142 are as follows:
Millions of yen
------------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28,2002
- ---------------------------------------------------------------------------------------------------------------
Reported net income 35,621 6,787 52,323
- ---------------------------------------------------------------------------------------------------------------
Addition: Goodwill amortization 1,116 -- 2,254
- ---------------------------------------------------------------------------------------------------------------
Addition: Intangible assets amortization 185 -- 373
- ---------------------------------------------------------------------------------------------------------------
Adjusted net income 36,922 6,787 54,950
- ---------------------------------------------------------------------------------------------------------------
Yen
------------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Basic earnings per share: August 31, 2001 August 31, 2002 February 28,2002
- ---------------------------------------------------------------------------------------------------------------
Reported net income 85.20 16.22 125.20
- ---------------------------------------------------------------------------------------------------------------
Addition: Goodwill amortization 2.67 -- 5.39
- ---------------------------------------------------------------------------------------------------------------
Addition: Intangible assets amortization 0.44 -- 0.89
- ---------------------------------------------------------------------------------------------------------------
Adjusted net income 88.31 16.22 131.48
- ---------------------------------------------------------------------------------------------------------------
- 17 -
Yen
------------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Diluted earnings per share: August 31, 2001 August 31, 2002 February 28,2002
- ---------------------------------------------------------------------------------------------------------------
Reported net income 85.10 -- 125.05
- ---------------------------------------------------------------------------------------------------------------
Addition: Goodwill amortization 2.67 -- 5.38
- ---------------------------------------------------------------------------------------------------------------
Addition: Intangible assets amortization 0.44 -- 0.89
---------------------------------------------------------------------------------------------------------------
Adjusted net income 88.21 -- 131.32
- ---------------------------------------------------------------------------------------------------------------
(10) Allowance for Sales Promotion Expenses
An allowance for sales promotion expenses is provided for future usage of
points that entitle customers to receive reductions in the price of future
purchases. Effective March 1, 2001, this point program was established as a
sales promotion program. The outstanding balance of this allowance was 2,513
million yen, 5,653 million yen and 4,154 million yen at August 31, 2001, August
31, 2002 and February 28, 2002.
(11) Revenues Recognition
"Net sales" and "Other income" are recorded separately in the accompanying
consolidated statements of income.
The Company recognizes revenue as "Net sales" at the time sales are made to
customers. "Other income" is mainly composed of franchise fees from domestic
franchised stores.
In convenience store operations, the Company operates Seven-Eleven
convenience stores directly and through franchise fee arrangements domestically
and in foreign countries. Under the franchise agreement, all franchised stores
are provided with a variety of services and advice on the operation of
convenience stores from the Company as the franchisor.
For domestic franchise agreement, the Company recognizes franchise fees
revenue from domestic franchised stores which are principally owned and operated
by the franchisees, as it becomes receivable according to the provisions of the
franchise agreement. These fees are determined on the basis of the gross profit
of each store.
For foreign franchise agreement, foreign franchised stores are owned by the
Company and operated by franchisees. Sales and expenses relating to foreign
franchised stores are reflected as "Net sales" and "Selling, general and
administrative expenses" in the Company's financial statements. The gross profit
of franchise stores is split between the Company and its franchisees. The
franchisees' share of the gross profit of franchise stores generally
approximates 48% of the merchandise gross profit of the store and is presented
as "Selling, general and administrative expenses".
Merchandise sales and the franchisees' share of the gross profit of foreign
franchised stores and sales of domestic franchised stores are as follows:
Millions of yen
------------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28,2002
- -----------------------------------------------------------------------------------------------------------------
Merchandise sales 227,437 256,630 477,618
The franchisees' share of the gross
profit of foreign franchised stores 40,606 46,101 85,621
Sales of domestic franchised stores 1,042,755 1,078,258 2,041,078
In superstore operations the Company rents part of its sales floor space to
tenants for the operation of independent complementary retail businesses. Rental
income is recognized as "Other income" over a contracted period as it becomes
receivable according to the provisions of the rental agreement.
(12) Net Income and Cash Dividends per Share and per American Depositary Share
(see Note 9)
Basic net income per share amounts have been computed by dividing net
income available to common shareholders by the weighted-average number of common
shares outstanding during each period. Diluted net income per share amounts
reflect the potential dilution and have been computed on the basis that all
convertible debentures were converted at time of issuance.
Cash dividends per share for each period in the accompanying consolidated
statements of income present dividends declared as applicable to the respective
periods. Dividends are charged to retained earnings in the period.
- 18 -
(13) Advertising Costs
Advertising costs are generally charged to income in the year incurred. The
amounts of the costs were 17,826 million yen and 18,527 million yen for the six
months ended August 31, 2001 and 2002, and 42,697 million yen for the fiscal
year ended February 28, 2002.
(14) Income Taxes
Under the provisions of SFAS No. 109, "Accounting for Income Taxes",
deferred tax assets and liabilities are recognized for temporary differences
between the tax basis of assets and liabilities and their reported amounts in
the consolidated financial statements. The components of deferred tax assets in
the amount of 32,530 million yen (20,512 million yen included in "prepaid
expenses and other current assets" and 12,018 million yen included as "other" in
"other assets") at August 31, 2001, 28,879 million yen (21,070 million yen
included in "prepaid expenses and other current assets" and 7,809 million yen
included as "other" in "other assets") at August 31, 2002 and 26,332 million yen
(22,155 million yen included in "prepaid expenses and other current assets" and
4,177 million yen included as "other" in "other assets") at February 28, 2002.
(15) Accounting for Consumption Taxes and Excise Tax
The Japanese consumption taxes withheld and consumption taxes paid are not
included in the accompanying consolidated statements of income. The excise tax
levied in the U.S. and Canada amounted to 78,798 million yen and 91,723 million
yen for the six months ended June 30, 2001 and 2002, and 164,083 million yen for
the fiscal year ended December 31, 2001, and is included in the revenues from
operations in the accompanying consolidated statements of income.
(16) Environmental
The Company accrues for the estimated future costs related to remediation
activities at existing and previously operated gasoline storage sites and other
operating and nonoperating properties where releases of regulated substances
have been detected. Estimates of the anticipated future costs for remediation
activities at such sites are based upon the Company's prior experience with
remediation sites and consideration of factors such as the condition of the site
contamination, location of tank sites and experience with contractors that
perform environmental assessment and remediation work. The reserve is determined
on a site-by-site basis, and a liability is recorded for remediation activities
when it is probable that corrective action will be taken and the cost of the
remediation activities can be reasonably estimated.
In the U.S., a portion of the environmental expenditures incurred for
remediation activities is eligible for reimbursement under state trust funds and
reimbursement programs. A receivable is recorded for estimated probable refunds
when the related liability is recorded. The amount of the receivable is based
upon the Company's historical collection experience with the specific state fund
(or other state funds), the financial status of the state fund and the Company's
priority ranking for reimbursement from the state fund. The receivable is
discounted if the amount relates to remediation activities that have already
been completed.
(17) Derivatives
The Company adopted the provisions of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), as of March 1,
2001. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities.
Hedging risk of foreign currency transactions, the Company enters into
forward exchange contracts to purchase foreign currencies and foreign currency
option contracts. However, the Company does not apply hedge accounting,
prescribed in SFAS No. 133. The impact of the adoption of SFAS No. 133 was not
material, since the volume of transactions with risk of foreign currency
exchange rate fluctuations was not significant.
In October 2001, the Company newly entered into an interest rate swap
agreement with a notional amount of 30,000 million yen in order to hedge the
exposure to change in the fair value of fixed rate bond due November 11, 2003.
However, the Company does not apply hedge accounting, prescribed in SFAS No.
133. The impact of the adoption of SFAS No. 133 was not material.
7-Eleven, Inc.'s interest rate swap of $250,000 thousand is treated as a
cash flow hedge with an interest rate exposure in connection with its commercial
paper program.
- 19 -
(18) Accounting for Assets Retirement Obligations
The Company adopted the provisions of SFAS No. 143, "Accounting for Assets
Retirement Obligations", as of March 1, 2002. This new statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement requires the Company to recognize an estimated liability
for the removal of 7-Eleven, Inc.'s underground gasoline storage tanks on the
basis of the prior experiences with remediation of sites, the useful lives of
sites and the regulations of the States. The outstanding balance of this
liability is 6,552 million yen at August 31, 2002. The cumulative effect of
adjustment upon adopting this statement, net of income taxes resulted in a
decrease of net income by 2,009 million yen and recorded as cumulative effects
of changes in accounting principles in the consolidated financial statements.
(19) Recently Issued Accounting Standards
SFAS No. 145, "Rescissions of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections as of April 2002" was issued
in May 2002. This new statement rescinds SFAS No. 4 "Reporting Gains and Losses
from Extinguishment of Debt, and an amendment of that statement, SFAS No. 64,
"Extinguishments of Debts Made to Satisfy Sinking-Fund Requirements". This
statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers". This statement amends SFAS No. 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. The
provisions of this statement related to the rescission of SFAS No. 4 shall be
applied in fiscal years beginning after May 15, 2002 and the provisions of this
statement related to SFAS No. 13 shall be effective for the transactions
occurring after May 15, 2002. All other provisions of this statement shall be
effective for consolidated financial statement issued on or after May 15, 2002.
The impact of the adoption of SFAS No. 145 should be immaterial, though it
requires some reclassification of accounts related to the gain (loss) on debt
redemption that were recorded as extraordinary gain (loss) in the consolidated
financial statements.
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal
Activities", was issued in June 2002. This new statement nullifies Emerging
Issue Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)" and requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. The provisions of
this statement are effective for exit or disposal activities that are initiated
after December 31, 2002. The Company has not yet determined the impact of this
statement on its financial statements upon adoption.
SFAS No. 147 "Acquisitions of Certain Financial Institutions-an amendment
of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", was issued in
October 2002. This statement removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with SFAS No. 141, "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". This
statement amends SFAS No. 144 "Accounting for the Impairment and Long-Lived
Assets", to include in its scope long-term customer-relationship intangible
assets of financial institutions such as depositor-and borrower-relationship
intangible assets and credit cardholder intangible assets. Paragraph 5 of this
statement, which relates to the application of the purchase method of
accounting, is effective for acquisitions for which the date of acquisition is
on or after October 1, 2002. The provisions in paragraph 6 related to accounting
for the impairment or disposal of certain long-term customer-relationship
intangible assets are effective on October 1, 2002. Transition provisions for
previously recognized unidentifiable intangible assets in paragraph 8-14 are
effective on October 1, 2002, with earlier application permitted. The adoption
of this statement should not have any impact on the Company's financial position
or operations.
(20) Reclassification
Prior period's (year's) amounts in the consolidated financial statements
have been reclassified to conform with the current period's presentation.
- 20 -
2. ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
Effective March 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". On May 14, 2002, the Company
sold all of its shares of Daikuma Co., Ltd. (a consolidated subsidiary in the
segment of superstore operation). The accounting related to this transaction was
made in accordance with the provisions of this statement. Prior period's
(year's) amounts have been reclassified to conform with current year's
presentation. Assets held for sale and liabilities associated with assets held
for sale are separately presented in the consolidated balance sheets. At August
31, 2001, August 31, 2002 and February 28, 2002, respectively, the amount of
assets held for sale were 56,985 million yen, of which 3,232 million yen was
included in other assets, 3,059 million yen and 53,001 million yen. The details
of assets held for sale are as follows:
Millions of yen
--------------------------------------------------------
As of August As of August As of February
31, 2001 31, 2002 28, 2002
- -------------------------------------------------------------------------------------------------------
(1) Daikuma Co., Ltd.
Cash and cash equivalents 5,193 -- 5,376
Accounts and notes receivable 1,169 -- 753
Inventories 9,613 -- 8,400
Property and equipment 26,290 -- 23,075
Others 11,505 -- 12,327
Sub-total 53,770 -- 49,931
(2) Others
(principally Property & Equipment) 3,215 3,059 3,070
Total 56,985 3,059 53,001
The liabilities associated with assets held for sale are Daikuma Co., Ltd's
liabilities. At August 31, 2001, August 31, 2002 and February 28, 2002, the
amount of liabilities associated with assets held for sale were 13,814 million
yen, -- million yen and 11,265 million yen, respectively. The details of
liabilities associated with assets held for sale are as follows:
Millions of yen
--------------------------------------------------------
As of August As of August As of February
31, 2001 31, 2002 28, 2002
--------------------------------------------------------
Accounts and notes payable 6,174 -- 4,122
Long-term debt 4,105 -- 4,288
Others 3,535 -- 2,855
------------------------------------------------------
Total 13,814 -- 11,265
------------------------------------------------------
This statement also broadens the definition of what constitutes a discontinued
operation and how the results of a discontinued operation are to be measured and
presented. Upon adoption of this statement, the operating results of certain
stores and losses related to the sale of all shares of Daikuma Co., Ltd. were
classified as loss from discontinued operations in the consolidated statements
of income. The details of loss from discontinued operations for the six months
ended August 31, 2001 and 2002, and the fiscal year ended February 28, 2002 are
as follows:
Millions of yen
----------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
----------------------------------------------------------------
(1) Daikuma Co., Ltd.
Revenue from operations 56,374 21,283 106,904
Income before income taxes (1,724) (1,136) (2,670)
Loss on sale of security investments -- (16,065) --
----------------------------------------------------------------
Sub-total (1,724) (17,201) (2,670)
----------------------------------------------------------------
Income taxes (839) (1,494) (1,677)
Minority interest in earnings
of consolidated subsidiaries 314 -- 532
----------------------------------------------------------------
Loss from discontinued operations (2,249) (18,695) (3,815)
----------------------------------------------------------------
- 21 -
Millions of yen
----------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28, 2002
----------------------------------------------------------------
(2) Others
Revenue from operations 14,685 7,159 29,663
Income before income taxes 170 (3,720) (448)
Income taxes (84) 1,525 145
Minority interest in earnings
of consolidated subsidiaries 43 845 329
----------------------------------------------------------------
Loss from discontinued operations 129 (1,350) 26
----------------------------------------------------------------
Loss from discontinued operations
Total (2,120) (20,045) (3,789)
----------------------------------------------------------------
3. INVENTORIES
Inventories at August 31, 2001 and 2002 and February 28,2002 consist of:
Millions of yen
--------------------------------------------------------
As of August As of August As of February
31, 2001 31, 2002 28, 2002
- -------------------------------------------------------------------------------------------------------
Apparel 31,852 35,823 42,476
Household goods 34,360 34,258 37,174
Processed foods 11,988 11,573 12,911
Fresh foods 2,587 3,169 2,854
Gasoline 4,145 5,021 5,165
Other 1,364 1,924 2,019
--------------------------------------------------------
86,296 91,768 102,599
--------------------------------------------------------
4. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Company invests in equity securities and bonds, and has classified its
investments in debt and equity securities primarily as available-for-sale. These
securities are carried at fair value. Realized gains and losses are determined
on the average cost basis.
The following table sets forth the cost, gross unrealized gains, gross
unrealized losses and estimated market values at August 31, 2001, August 31,
2002 and February 28, 2002:
Millions of yen
----------------------------------------------------
Gross Gross Estimated
unrealized unrealized market
Cost gains losses value
- --------------------------------------------------------------------------------------------------------------
As of August 31, 2001:
Non-current:
Other security investments
Equity securities 9,757 1,829 (385) 11,201
Japanese governmental bond securities 599 -- (1) 598
----------------------------------------------------
10,356 1,829 (386) 11,799
----------------------------------------------------
Millions of yen
----------------------------------------------------
Gross Gross Estimated
unrealized unrealized market
Cost gains losses value
- --------------------------------------------------------------------------------------------------------------
As of August 31, 2002:
Non-current:
Other security investments
Equity securities 14,668 1,477 (1,876) 14,269
Japanese governmental and government-
guaranteed bond securities 22,575 38 -- 22,613
Corporate debt securities 134 -- (14) 120
----------------------------------------------------
37,377 1,515 (1,890) 37,002
----------------------------------------------------
- 22 -
Millions of yen
----------------------------------------------------
Gross Gross Estimated
unrealized unrealized market
Cost gains losses value
- --------------------------------------------------------------------------------------------------------------
As of February 28, 2002:
Non-current:
Other security investments
Equity securities 14,797 1,506 (1,929) 14,374
Japanese governmental bond securities 16,590 2 (2) 16,590
Corporate debt securities 134 -- (2) 132
----------------------------------------------------
31,521 1,508 (1,933) 31,096
----------------------------------------------------
5. ASSETS PLEDGED AS COLLATERAL
The Company's assets pledged as collateral for certain long-term debt at August
31, 2001, August 31, 2002 and February 28, 2002, are summarized as follows:
Millions of yen
-----------------------------------------------------
As of August As of August As of February
31, 2001 31, 2002 28, 2002
-----------------------------------------------------
Property and equipment, net of accumulated depreciation 19,548 19,571 21,040
Security Investments 598 16,607 16,600
-----------------------------------------------------
Total 20,146 36,178 37,640
-----------------------------------------------------
6. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
FINANCE RECEIVABLE
It was not practical to estimate the fair value of finance receivables as they
consisted of many small amount of accounts. Thus they were excluded from the
following table.
LONG-TERM LOANS RECEIVABLE
The fair value of the long-term loans receivable included in the other
assets-other and the investments in and advances to affiliates is estimated by
calculating the present value of the future cash flows at current interest
rates. It was not practicable to estimate the fair value for certain long-term
loans (carrying amounts of 7,020 million yen at August 31, 2001, August 31, 2002
and February 28, 2002) and receivables due from the States related to the
reimbursements of environmental costs (carrying amounts of 5,609 million yen,
5,844 million yen and 6,499 million yen, at August 31, 2001, August 31, 2002 and
February 28, 2002), because timing of their future cash flows is uncertain, that
were excluded from the following table. Long-term loans with maturities of less
than one year are included in the following table. (carrying amounts of 3,957
million yen, 3,344 million yen and 3,510 million yen, at August 31, 2001, August
31, 2002 and February 28, 2002)
GUARANTEE DEPOSITS RECEIVED FROM TENANTS AND FRANCHISEES
While guarantee deposits are normally due at the end of related lease or
franchise agreements, such agreements and due dates are frequently extended. As
such, it is not practicable to estimate the fair value of the guarantee deposits
because timing of their future cash flows is uncertain.
SHORT-TERM BANK LOANS AND COMMERCIAL PAPER
The carrying amount of the short-term bank loans and commercial paper is a
reasonable estimate of their fair value because of their short maturity and
interest rates that approximate market rates.
LONG-TERM LOANS PAYABLE
The fair value of the long-term loans payable is estimated by calculating the
present value of the future cash flows at current interest rates.
- 23 -
DEBENTURES
The fair value of the debentures is estimated based on bid prices obtained from
investment banking firms where traders regularly make a market for these types
of financial instruments.
BONDS
The fair value of the bonds is estimated based on current interest rates.
YEN LOAN
The fair value of the Yen Loan is estimated by calculating the present value of
the future cash flows at current interest and exchange rates.
CITYPLACE TERM LOAN
The fair value of the Cityplace Term Loan is estimated by calculating the
present value of the future cash flows at a current interest rate for a similar
financial instrument.
FORWARD EXCHANGE CONTRACTS TO PURCHASE FOREIGN CURRENCIES
The fair values of forward exchange contracts are estimated based on quotations
from financial institutions.
INTEREST RATE SWAP
The fair value of the interest rate swap contracted in Japan is estimated based
on quotations from financial institutions. The fair value of the interest rate
swap contracted in U.S. is estimated based on discounted cash flows for the term
of the swap using forward three-month LIBOR rates, and represents the estimated
amount the Company would pay if the Company chose to terminate the swap.
FOREIGN CURRENCY OPTION CONTRACTS
The fair value of the foreign currency options is estimated based on quotations
from financial institutions.
The carrying amounts of cash and cash equivalents, accounts and notes
receivable, accounts and notes payable and accrued liabilities and other current
liabilities are reasonable estimates of their fair values.
The carrying amounts and estimated fair values of the financial instruments
at August 31, 2001, August 31, 2002 and February 28, 2002, are as follows:
Millions of yen
---------------------------------------------------------------------------
As of August 31, 2001 As of August 31, 2002 As of February 28, 2002
- -------------------------------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Amount fair value amount fair value Amount fair value
- -------------------------------------------------------------------------------------------------------------------------------
Assets:
Long-term loans receivable 17,772 17,083 15,579 14,017 16,756 15,542
Liabilities:
Short-term bank loans 9,990 9,990 4,046 4,046 4,614 4,614
Commercial paper 56,187 56,187 59,522 59,522 62,232 62,232
Long-term loans payable
13,528 14,098 17,974 18,336 15,650 15,640
Debentures
41,322 41,478 41,041 41,759 44,494 45,216
Bonds
102,397 102,252 100,000 98,935 100,000 97,516
Yen Loan
13,173 14,177 19,402 19,369 22,297 22,345
Cityplace Term Loan 27,766 28,115 25,954 26,392 29,038 29,791
Derivatives:
Forward exchange contracts to purchase foreign
Currencies (57) (57) (328) (328) 232 232
Interest rate swaps
(860) (860) (1,690) (1,690) (1,895) (1,895)
Foreign currency option contracts
Put option -- -- -- -- 17 17
Call option -- -- -- -- 6 6
- 24 -
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses forward exchange contracts to reduce its exposure to
market risk resulting from fluctuations in foreign exchange rates that are
primarily comprised of importing merchandise. The realized gains or losses and
the variation gains or losses are recognized in earnings. The aggregate amounts
of such currency purchase contracts, with maturities of less than one year, were
3,227 million yen, 5,739 million yen and 7,750 million yen at August 31, 2001,
August 31, 2002 and February 28, respectively.
In U.S. the Company is party to a $250,000 thousand notional principal amount
interest rate swap agreement to reduce its exposure to market risk resulting
from fluctuations in interest rates.
This swap has been accounted for as a cash flow hedge. The Company adjusts
the carrying value of the interest rate swap to fair value at each reporting
date with a corresponding offset to Accumulated Other Comprehensive Earnings.
7. LEASE COMMITMENTS
The total rental expense for operating leases are as follows:
Millions of yen
---------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31,2001 August 31,2002 February 28,2002
- ---------------------------------------------------------------------------------------------------------------------
Total rental payments, principally land for 75,763 77,257 152,270
superstore operations
Less:
Sublease rental income from consolidated
And non-consolidated tenants* (13,719) (14,181) (28,236)
Deferred portion of rent for superstore operations (9,192) (8,902) (18,159)
---------------------------------------------------------------
Net rental expense 52,852 54,174 105,875
---------------------------------------------------------------
* Sublease rental income is classified as "Other income" and not credited to
expenses in the consolidated Statements of income.
Minimum rental commitments under substantially noncancelable operating
leases (including future rental payments to be accounted for as deferred
charges) at August 31, 2001 and 2002 and February 28, 2002 are as follows:
Millions of yen
---------------------------------------------------------------------------
As of August 31,2001 As of August 31,2002 As of February 28,2002
- ---------------------------------------------------------------------------------------------------------------------
Within one year 77,180 74,960 76,913
Over one year 679,881 637,700 648,491
---------------------------------------------------------------------------
Total 757,061 712,660 725,404
---------------------------------------------------------------------------
8. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
Environmental
7-Eleven, Inc. accrues for the anticipated future costs and the related
probable state reimbursement amounts for remediation activities at its existing
and previously operated gasoline store sites where releases of regulated
substances have been detected. At June 30, 2001, June 30, 2002 and December 31,
2001, respectively, 7-Eleven, Inc.'s estimated undiscounted liability for these
sites were 3,127 million yen, 3,872 million yen and 4,133 million yen. The
Company anticipates that substantially all of the future remediation costs for
detected releases at these sites at June 30, 2002, will be incurred within the
next five or six years.
Under state reimbursement programs in the U.S., 7-Eleven, Inc. is eligible
to receive reimbursement for a portion of future remediation costs, as well as a
portion of remediation costs previously paid. Accordingly, at June 30, 2001,
June 30, 2002 and December 31, 2001, 7-Eleven, Inc. has recorded net receivable
amounts of 6,180 million yen, 6,465 million yen and 7,125 million yen for the
estimated probable state reimbursements. In assessing the probability of state
reimbursements, 7-Eleven, Inc. takes into consideration each state's fund
balance, revenue sources
- 25 -
existing claim backlog, status of cleanup activity and claim ranking systems. As
a result of these assessments, the recorded receivable amounts in other assets
are net of allowances of 959 million yen, 1,219 million yen and 1,425 million
yen at June 30, 2001, June 30, 2002 and December 31, 2001, respectively.
While there is no assurance of the timing of the receipt of state
reimbursement funds, based on 7-Eleven, Inc.'s experience, 7-Eleven, Inc.
expects to receive the majority of state reimbursement funds, except from
California, within one to six years after payment of eligible remediation
expenses, assuming that the state administrative procedures for processing such
reimbursements have been fully developed. 7-Eleven, Inc. estimates that it will
receive reimbursement of most of its identified remediation expenses in
California, although it may take one to ten years to receive those reimbursement
funds.
The estimated future remediation expenditures and related state
reimbursement amounts could change within the near future as governmental
requirements and state reimbursement programs continue to be implemented or
revised.
Acquisition or construction of property and equipment
At August 31, 2001, August 31, 2002 and February 28, 2002, the Company had
outstanding contractual obligations for the acquisition or construction of
property and equipment aggregating approximately 20,176 million yen, 21,854
million yen and 20,637 million yen, respectively.
Other guarantees
The Company was contingently liable as guarantor of mainly employees'
housing loans and indebtedness or liability for the acquisition of the property
of certain store lessors aggregating 3,964 million yen, 10,192 million yen and
10,468 million yen at August 31, 2001, August 31, 2002 and February 28, 2002,
respectively.
9. NET INCOME PER SHARE
A reconciliation of the numerators and denominators of the basic and
diluted net income per share computations and shareholders' equity per share is
as follows:
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28,2002
- --------------------------------------------------------------------------------------------------------------
Net income 35,621 6,787 52,323
Effect of dilutive securities:
1.8% convertible bonds,
Due February 28, 2002 13 -- 13
-------------------------------------------------------------
Diluted net income 35,634 6,787 52,336
-------------------------------------------------------------
Number of shares
-------------------------------------------------------------
As of August 31, As of August 31, As February 28,
2001 2002 2002
- --------------------------------------------------------------------------------------------------------------
Weighted-average common shares 418,073,462 418,490,620 417,899,141
Outstanding
Dilutive effect of:
1.8% convertible bonds,
Due February 28, 2002 651,313 -- 628,002
-------------------------------------------------------------
Diluted common shares outstanding 418,724,775 418,490,620 418,527,143
-------------------------------------------------------------
Yen
-------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
August 31, 2001 August 31, 2002 February 28,2002
- --------------------------------------------------------------------------------------------------------------
Net income per share:
Basic 85.20 16.22 125.20
Diluted 85.10 -- 125.05
Shareholders' equity per share 2,618.96 2,664.04 2,693.60
- 26 -
10. SEGMENT INFORMATION
The operating segments reported in the following tables are defined as
components of an enterprise for which separate financial information is
available and regularly reviewed by the Company's senior management. The
Company's senior management utilizes various measurements to assess segment
performance and allocate resources to segments.
In fiscal 2002, the Company's senior management reviewed the segment
categories with an opportunity of the establishment of IYBank Co., Ltd. and
decided to create a new segment, "others," in addition to the existing three
segments. Some companies, which were previously categorized in the segments of
superstore operations or convenience store operations have been transferred to
the new segment.
Accordingly, the Company's reportable segments became four and consist of
superstore operations, convenience store operations, restaurant operations and
others, which have been identified based on differences in products and services
offered and regulatory conditions.
The superstore operations, which mainly comprise 178 Ito-Yokado superstores
in Japan, primarily sell apparel, household goods and food.
The convenience store operations mainly comprise 9,314 7-Eleven franchised
and Company-operated stores in Japan and 5,816 such stores in North America and
Hawaii. These operations consist of selling groceries, take-out foods and
beverages, gasoline (at certain locations), dairy products, non-food
merchandise, specialty items and services.
The restaurant operations are mainly composed of the Denny's Japan
restaurant chain, aggregating 561 restaurants in Japan.
The other operations are mainly composed of finance, various kinds of
services and electronic commerce operations.
Assets and long-lived assets are those assets that are used exclusively in
the operations of each business segment or geographic area at August 31, 2001
and 2002 and February 28, 2002.
Capital expenditures include capitalized lease assets.
- 27 -
The following tables show revenues from operations and other financial
information by business segment, products and services and geographic area for
the six months ended August 31, 2001 and 2002, and for the year ended February
28, 2002.
Millions of yen
------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Business Segments August 31, 2001 August 31, 2002 February 28, 2002
- --------------------------------------------------------------------------------------------------------------------
Revenues from operations:
Superstore operations
Customers 733,029 749,195 1,502,170
Intersegment 6,555 6,673 12,835
------------------------------------------------------------
Total 739,584 755,868 1,515,005
Convenience store operations
Customers 771,124 833,555 1,557,558
Intersegment 23 62 59
------------------------------------------------------------
Total 771,147 833,617 1,557,617
Restaurant operations
Customers 66,245 65,355 128,174
Intersegment 944 876 1,801
------------------------------------------------------------
Total 67,189 66,231 129,975
Others
Customers 2,840 8,973 8,017
Intersegment 3,233 3,760 6,523
------------------------------------------------------------
Total 6,073 12,733 14,540
Elimination of intersegment revenues (10,755) (11,371) (21,218)
------------------------------------------------------------
Consolidated total 1,573,238 1,657,078 3,195,919
------------------------------------------------------------
Depreciation and amortization:
Superstore operations 22,664 21,716 45,590
Convenience store operations 29,641 31,661 62,210
Restaurant operations 1,881 1,836 3,918
Others 1,598 4,024 4,616
------------------------------------------------------------
Consolidated total 55,784 59,237 116,734
------------------------------------------------------------
Operating income (loss):
Superstore operations (139) 12,091 2,972
Convenience store operations 84,285 93,649 167,319
Restaurant operations 5,057 4,250 6,952
Others (5,395) (9,241) (13,078)
Elimination of intersegment operating income -- 15 9
------------------------------------------------------------
Consolidated total 83,808 100,764 164,174
------------------------------------------------------------
Interest income:
Superstore operations 988 879 1,933
Convenience store operations 1,380 898 2,540
Restaurant operations 53 4 69
Others 5 0 6
Elimination of intersegment interest income (564) (608) (1,137)
------------------------------------------------------------
Consolidated total 1,862 1,173 3,411
------------------------------------------------------------
- 28 -
Millions of yen
------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Business Segments August 31, 2001 August 31, 2002 February 28, 2002
- --------------------------------------------------------------------------------------------------------------------
Interest expense:
Superstore operations 1,298 1,161 2,553
Convenience store operations 5,954 6,294 11,677
Restaurant operations 12 8 21
Others 46 137 122
Elimination of intersegment interest expense (564) (593) (1,128)
------------------------------------------------------------
Consolidated total 6,746 7,007 13,245
------------------------------------------------------------
Segment profit:
Superstore operations 21,550 11,134 22,737
Convenience store operations 81,244 86,465 159,496
Restaurant operations 4,341 4,246 5,874
Others (5,436) (9,378) (13,196)
------------------------------------------------------------
Consolidated income before income taxes 101,699 92,467 174,911
------------------------------------------------------------
Assets:
Superstore operations 1,041,791 974,143 1,033,646
Convenience store operations 1,139,849 1,149,097 1,116,058
Restaurant operations 84,520 85,490 83,036
Others 79,013 169,448 112,711
------------------------------------------------------------
Total 2,345,173 2,378,178 2,345,451
Corporate assets 31,977 34,806 34,443
------------------------------------------------------------
Consolidated total 2,377,150 2,412,984 2,379,894
------------------------------------------------------------
Unallocated corporate assets consist of investments in affiliates
Capital expenditures:
Superstore operations 9,050 35,142 23,648
Convenience store operations 45,168 59,956 94,139
Restaurant operations 1,403 1,851 3,607
Others 14,495 8,992 23,711
------------------------------------------------------------
Consolidated total 70,116 105,941 145,105
------------------------------------------------------------
Above segment information is available and regularly reviewed by the
Company's senior management. The Company does not have significant noncash items
other than depreciation and amortization in reported profit. The segment
information of Other income (expenses) other than Interest income and Interest
expense is as follows:
Gain on subsidiary's common stock contribution to employee retirement
benefit trust is attributed solely to the superstore operations.
Loss on sale and write-down of security investments is mainly attributed to
the superstore operations for the six months ended August 31, 2001 and for the
year ended February 28, 2002 and mainly attributed to the convenience store
operations for the six months ended August 31, 2002.
Foreign currency exchanges (losses) are attributed to the superstore
operations and the convenience store operations.
Income taxes are not allocated to the segments.
Following gains (losses) are not included in the segment information.
Minority interests in earnings of consolidated subsidiaries are mainly
attributed to the convenience store operations.
Equity in earnings of affiliates is mainly attributed to the superstore
operations.
- 29 -
Cumulative effects of changes in accounting principles are attributed
solely to the convenience store operations.
Loss from discontinued operations are mainly attributed to the superstore
operations.
Millions of yen
-------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Products and Service Information August 31, 2001 August 31, 2002 February 28, 2002
- ----------------------------------------------------------------------------------------------------------------------
Revenues from operations:
Superstore operations
Apparel 204,422 198,634 417,393
Household goods 144,857 140,717 300,606
Foods 356,910 380,099 730,366
-------------------------------------------------------------
Subtotal 706,189 719,450 1,448,365
Other 33,395 36,418 66,640
-------------------------------------------------------------
Total 739,584 755,868 1,515,005
Convenience store operations
Merchandise 443,596 501,462 923,586
Gasoline 174,119 170,983 334,671
Franchise fees from domestic franchised stores 149,646 156,990 291,518
Other 3,786 4,182 7,842
-------------------------------------------------------------
Total 771,147 833,617 1,557,617
Restaurant operations 67,189 66,231 129,975
Others 6,073 12,733 14,540
Elimination (10,755) (11,371) (21,218)
-------------------------------------------------------------
Consolidated total 1,573,238 1,657,078 3,195,919
-------------------------------------------------------------
Revenues from operations which are attributed to countries based on location
of customers and long-lived assets for the six months ended August 31, 2001 and
2002, and for the year ended February 28, 2002 are as follows:
Millions of yen
-------------------------------------------------------------
Six months ended Six months ended Fiscal year ended
Geographic Information August 31, 2001 August 31, 2002 February 28, 2002
- ----------------------------------------------------------------------------------------------------------------------
Revenues from operations:
Japan 984,967 1,020,290 1,995,024
U. S. A 539,537 585,242 1,101,488
Other 48,734 51,546 99,407
-------------------------------------------------------------
Consolidated total 1,573,238 1,657,078 3,195,919
-------------------------------------------------------------
Long-lived assets:
Japan 1,016,652 1,068,819 1,038,861
U. S. A 338,189 342,350 364,742
Other 14,319 15,096 15,179
-------------------------------------------------------------
Consolidated total 1,369,160 1,426,265 1,418,782
-------------------------------------------------------------
Transfers between reportable business segments or geographic areas are made
at prices independently determined. There has been no revenue from operations
with a single major external customer for the six months ended August 31, 2002
and 2001, and for the year ended February 28, 2002.
- 30 -
11. RELATED PARTY TRANSACTION
In May 2002, a consolidated subsidiary made a personal loan of 228 million
yen to one of the non-management director of 7-Eleven, Inc. The loan is secured
by certain shares of stock held by the director, bears interest at 2.6% and is
due in May 2003.
12. SUBSEQUENT EVENTS
On October 10,2002, the Company's Board of Directors declared a interim
cash dividend of 6,698 million yen to be payable on November 15, 2002, to
shareholders of record on August 31, 2002.
On October 11, 2002, the Company filed a Japanese domestic shelf
registration for 100,000 million yen of unsecured straight bonds with the
expected period of issuance to end October 18, 2004. In connection with this
100,000 million yen registration, the Company issued the following bonds on
November 1, 2002.
Series 5 50,000 million yen unsecured straight bonds
Issue date: November 1, 2002
Issue price: 100.00 yen (par value 100.00 yen)
Coupon rate: 0.65%
redemption date: September 18, 2009
Use: Capital investment and redemption of previously
issued bonds
On November 12, 2002, Seven-Eleven Japan Co., Ltd., a consolidated
subsidiary, purchased 3.4 million shares of its treasury stocks at 3,130 yen per
share. Total purchase amount is 10,642 million yen.
Following the enactment of the Welfare Pension Insurance Law in Japan, on
November 15, 2002, the Ito-Yokado Group Employee Pension Fund obtained approval
from Japan's Ministry of Health, Labor and Welfare for exemption from the future
obligation with respect to the portion of the Employee Pension Fund that the
Company and certain of its subsidiaries operate on behalf of the Government
(so-called substitutional portion). Under the accounting principles generally
accepted in the United States of America, the relevant profit or loss may be
recognized only on the settlement of the substitutional portion when the Company
returns the past benefit obligation to the Government, which is expected to
occur during the fiscal year ending February 28, 2004.
- 31 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITO-YOKADO CO., LTD.
(Registrant)
December 12, 2002
By: /s/ Akira Miyauchi
--------------------------------
Akira Miyauchi
Managing Director
- 32 -