ライフコーポレーション（8194） – ［Delayed］［Full text］Consolidated Financial Results for the Fiscal Year Ended February 28,2022(under Japanese GAAP)

Note: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the Japanese original, the latter shall prevail. Consolidated Financial Results for the Fiscal Year Ended February 28, 2022 (under Japanese GAAP) April 11, 2022 LIFE CORPORATION Tokyo Stock Exchange 8194 http://www.lifecorp.jp/ Takaharu Iwasaki, Representative Director and President Koichi Miyata, General Manager, Investor Relations Department +81-3-5807-5111 (from overseas) Company name: Listing: Securities code: URL: Representative: Inquiries: TEL: Scheduled date of Annual General Meeting of Shareholders: Scheduled date to commence dividend payments: Scheduled date to file Annual Securities Report: Preparation of supplementary material on annual financial results: Yes Holding of annual financial results meeting: May 26, 2022 May 27, 2022 May 27, 2022 Yes (for institutional investors and analysts) (Amounts less than one million yen are rounded down.) 1. Consolidated financial results for the fiscal year ended February 28, 2022 (from March 1, 2021 to February 28, 2022) (1) Consolidated operating results (Percentages indicate year-on-year changes.) Operating revenue Operating profit Ordinary profit Profit attributable to owners of parent Millions of yen % Millions of yen % Millions of yen % Millions of yen % 768,335 759,146 1.2 6.2 22,932 (16.3) 23,695 (15.8) 15,208 (14.7) 27,388 97.3 28,156 93.4 17,824 127.5 Fiscal year ended February 28, 2022 February 28, 2021 Note: Comprehensive income Fiscal year ended February 28, 2022: Fiscal year ended February 28, 2021: ¥15,322 million [(16.3)%] ¥18,314 million [139.0%] Reference: Operating revenue is the total of net sales and receipts from operating revenue. Net sales Fiscal year ended February 28, 2022: Fiscal year ended February 28, 2021: Receipts from operating revenue Fiscal year ended February 28, 2022: Fiscal year ended February 28, 2021: ¥745,080 million [1.2%] ¥736,346 million [6.2%] ¥23,254 million [2.0%] ¥22,800 million [5.5%] Earnings per share Return on equity Diluted earnings per share Ordinary profit/ total assets Operating profit/operating revenue Fiscal year ended February 28, 2022 February 28, 2021 Yen 324.50 380.32 Yen % 14.6 19.9 % 8.8 10.6 % 3.0 3.6 Reference: Share of profit (loss) of entities accounted for using equity method Fiscal year ended February 28, 2022: Fiscal year ended February 28, 2021: ¥ million ¥ million (2) Consolidated financial position Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen 270,229 268,307 110,299 97,560 % 40.8 36.4 Yen 2,353.44 2,081.61 As of February 28, 2022: ¥110,299 million As of February 28, 2021: ¥97,560 million (3) Consolidated cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at end of period Millions of yen Millions of yen Millions of yen Millions of yen (7,926) 41,747 (20,303) (20,587) 22,695 (19,029) 9,409 14,943 Annual dividends First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Total cash dividends (Annual) Dividend payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated) Yen Yen Yen Yen Yen Millions of yen 25.00 30.00 35.00 25.00 50.00 2,345 40.00 70.00 3,287 35.00 70.00 % 13.1 21.6 21.2 % 2.6 3.2 As of February 28, 2022 February 28, 2021 Reference: Equity Fiscal year ended February 28, 2022 February 28, 2021 2. Cash dividends Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 Fiscal year ending February 28, 2023 (Forecast) Note: Breakdown of year-end dividend for the fiscal year ended February 28, 2022: Ordinary dividend of ¥30.00, and the 60th anniversary commemorative dividend of ¥10.00 3. Consolidated earnings forecasts for the fiscal year ending February 28, 2023 (from March 1, 2022 to February 28, 2023) Operating revenue Operating profit Ordinary profit (Percentages indicate year-on-year changes.) Profit attributable to owners of parent Earnings per share Fiscal year ending February 28, 2023 Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen 770,000 – 23,200 1.2 24,000 1.3 15,500 1.9 330.72 Note: The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29), etc., from the beginning of the fiscal year ending February 28, 2023. Therefore, the above consolidated earnings forecasts represent the amounts calculated by applying the said accounting standard, etc., but do not include year-on-year changes for operating revenue as the accounting treatment method subject to comparison differs. The Company expects operating revenue to decrease by approximately ¥22.0 billion due to this change. * Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None (2) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements i. Changes in accounting policies due to revisions to accounting standards and other regulations: None ii. Changes in accounting policies due to other reasons: None iii. Changes in accounting estimates: None iv. Restatement: None (3) Number of issued shares (ordinary shares) i. Total number of issued shares at the end of the period (including treasury shares) As of February 28, 2022 As of February 28, 2021 49,450,800 shares 53,450,800 shares ii. Number of treasury shares at the end of the period As of February 28, 2022 As of February 28, 2021 2,583,502 shares 6,583,138 shares iii. Average number of shares during the period Fiscal year ended February 28, 2022 46,867,560 shares Fiscal year ended February 28, 2021 46,868,068 shares Note: The number of treasury shares at the end of the period includes the Company’s shares (90,300 shares as of February 28, 2022, and 90,300 shares as of February 28, 2021) held by Custody Bank of Japan, Ltd. (Trust Account) as the trust assets for the “Trust for Delivering Shares to Directors.” In addition, the Company’s shares held by Custody Bank of Japan, Ltd. (Trust Account) are included in the treasury shares that are excluded from the calculation of the average number of shares during the period. (90,300 shares as of February 28, 2022, and 90,300 shares as of February 28, 2021) Reference: Overview of non-consolidated financial results 1. Non-consolidated financial results for the fiscal year ended February 28, 2022 (from March 1, 2021 to February 28, 2022) (1) Non-consolidated operating results (Percentages indicate year-on-year changes.) Operating revenue Operating profit Ordinary profit Profit Millions of yen % Millions of yen % Millions of yen % Millions of yen % 767,379 758,259 1.2 6.2 22,808 (16.1) 23,556 (15.8) 15,066 (14.7) 27,193 96.3 27,972 92.4 17,665 126.9 Fiscal year ended February 28, 2022 February 28, 2021 Fiscal year ended February 28, 2022 February 28, 2021 Earnings per share Diluted earnings per share Yen 321.46 376.93 Yen (2) Non-consolidated financial position Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen 275,299 274,950 110,634 98,170 % 40.2 35.7 Yen 2,360.60 2,094.63 As of February 28, 2022 February 28, 2021 Reference: Equity As of February 28, 2022: As of February 28, 2021: ¥110,634 million ¥98,170 million 2. Non-consolidated earnings forecasts for the fiscal year ending February 28, 2023 (from March 1, 2022 to February 28, 2023) (Percentages indicate year-on-year changes.) Operating revenue Ordinary profit Profit Earnings per share Fiscal year ending February 28, 2023 Millions of yen % Millions of yen % Millions of yen % 769,000 – 23,700 0.6 15,250 1.2 Yen 325.39 Note: The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29), etc., from the beginning of the fiscal year ending February 28, 2023. Therefore, the above non-consolidated earnings forecasts represent the amounts calculated by applying the said accounting standard, etc., but do not include year-on-year changes for operating revenue as the accounting treatment method subject to comparison differs. The Company expects operating revenue to decrease by approximately ¥22.0 billion due to this change. * Financial results reports are not required to be subjected to audit conducted by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable. Actual business and other results may differ substantially due to various factors. Please refer to “(4) Future outlook” in “1. Overview of operating results, etc.” on page 4 of the attached material for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof. Attached material 1. Overview of operating results, etc. ……………………………………………………………………………………………………………………… 2 (1) Overview of operating results for the fiscal year under review………………………………………………………………………….. 2 (2) Overview of financial position for the fiscal year under review ………………………………………………………………………… 3 (3) Overview of cash flows for the fiscal year under review ………………………………………………………………………………….. 4 (4) Future outlook ……………………………………………………………………………………………………………………………………………. 4 2. Basic concept regarding selection of accounting standards …………………………………………………………………………………….. 6 3. Consolidated financial statements and significant notes thereto ……………………………………………………………………………… 7 (1) Consolidated balance sheet ………………………………………………………………………………………………………………………….. 7 (2) Consolidated statement of income and consolidated statement of comprehensive income …………………………………….. 9 Consolidated statement of income ………………………………………………………………………………………………………………… 9 Consolidated statement of comprehensive income ………………………………………………………………………………………… 10 (3) Consolidated statement of changes in equity ………………………………………………………………………………………………… 11 (4) Consolidated statement of cash flows ………………………………………………………………………………………………………….. 13 (5) Notes to consolidated financial statements …………………………………………………………………………………………………… 14 Notes on premise of going concern ……………………………………………………………………………………………………………… 14 Significant accounting policies for preparation of consolidated financial statements ………………………………………….. 14 Changes in presentation …………………………………………………………………………………………………………………………….. 16 Additional information ……………………………………………………………………………………………………………………………… 17 Consolidated balance sheet ………………………………………………………………………………………………………………………… 18 Consolidated statement of income ………………………………………………………………………………………………………………. 20 Consolidated statement of comprehensive income ………………………………………………………………………………………… 23 Consolidated statement of changes in equity ………………………………………………………………………………………………… 23 Consolidated statement of cash flows ………………………………………………………………………………………………………….. 26 Segment information, etc. ………………………………………………………………………………………………………………………….. 27 Per share information ………………………………………………………………………………………………………………………………… 30 Significant subsequent events …………………………………………………………………………………………………………………….. 30 4. Non-consolidated financial statements and significant notes thereto ……………………………………………………………………… 31 (1) Balance sheet …………………………………………………………………………………………………………………………………………… 31 (2) Statement of income …………………………………………………………………………………………………………………………………. 33 (3) Statement of changes in equity …………………………………………………………………………………………………………………… 34 (4) Notes to non-consolidated financial statements …………………………………………………………………………………………….. 36 5. Other ……………………………………………………………………………………………………………………………………………………………. 37 – 1 – 1. Overview of operating results, etc. (1) Overview of operating results for the fiscal year under review In the fiscal year under review, the Japanese economy continued to see weak recovery due to the impact of repeated outbreaks of the COVID-19 pandemic. The situation remained far from optimistic also because of geopolitical risks and other factors impacting the Japanese economy. In this economic environment, there are clouds on the horizon for the food supermarket industry, which is the Group’s area of business, despite the industry continuing to benefit from increased demand for eating at home caused by COVID-19. In addition, amid sluggish growth in individual income and limited recovery in consumer confidence, increasing price competition, expansion of e-commerce, expansion of grocery delivery services, expansion of takeout and delivery services from restaurants, intensifying competition across industry boundaries, and higher costs, including personnel expenses and raw materials expenses, have led to a tougher environment for business operations. In an environment characterized by the presence of COVID-19, the Group has put in place a variety of measures including social distancing, so it can continue fulfilling its mission of providing a lifeline to residents while putting the highest priority on ensuring the safety and security of customers and employees. Also, the Group ran ongoing promotions, such as sales to support specific locales, to help producers, restaurant industry companies, and manufacturers who were impacted by fewer tourists due to people staying at home. Other major initiatives during the fiscal year under review included those for the online supermarket business, which has received positive reviews in various private surveys. In terms of systems, the Group collaborated with 10X, Inc. to further improve convenience and launched the Life Online Supermarket App, the first mobile app version of the online supermarket, in March 2021, and acquired downloads steadily. In terms of distribution, the Group made efforts to construct a stable and high-quality distribution network for the online supermarket service as well as the home delivery service for in-store purchases. In April, the Company and Maguchi Holdings Co., Ltd. established LIFE HOME DELIVERY, a new company that provides last-mile delivery. Having started operations in June, this company is gradually expanding its business, with nine stores for the online supermarket service and 25 stores for the home delivery service covered as of the end of February 2022. In terms of organization, in January 2022, the Company established E-Commerce Business Division, which directly reports to the President, in order to accelerate the further development and expansion of the online supermarket business, and reorganized related organizations into the new division. Also, the Group held a special campaign from September 2021 through February 2022 to celebrate the 60th anniversary of the Company and the 5th anniversary of the LC JCB CARD, the Group’s co-branded credit card. The Company is striving to expand credit card memberships and usage such as by establishing Card Business Department in January. Further, the Company expanded the delivery area of its service for Amazon Prime members that began in September 2019. In the Tokyo region, the delivery area now covers all or part of 23 wards and 13 cities in Tokyo, eight cities in Kanagawa prefecture, 13 cities in Chiba prefecture, and five cities in Saitama prefecture. In the Osaka region, it now covers 23 cities in Osaka prefecture, six cities in Hyogo prefecture, and three cities in Kyoto prefecture, with the exception of certain areas. In addition, the Group strengthened its product development and lineup of BIO-RAL, a private brand that uses healthy materials and production methods for customers interested in health and natural products. The Group also created new BIO-RAL natural supermarkets as well as dedicated sections at existing stores. The Group opened eight new stores: Higashinippori Store (Tokyo) in March 2021, Mizonokuchi Store (Kanagawa Prefecture) in April, Shijo karasuma Store (Kyoto Prefecture) and Hongo 3-chome Ekimae Store (Tokyo) in September, BIO-RAL EKI MARCHE OSAKA Store (Osaka Prefecture), – 2 – which is the third location for the natural supermarket brand, in October, SEVEN PARK Amami Store (Osaka Prefecture) in November, HIRAKATA T-SITE Store (Osaka Prefecture) in December, and BIO-RAL Shimokitazawa Ekimae Store (Tokyo), the fourth location for the natural supermarket brand, in February 2022. On the other hand, three stores were closed. For existing stores, the Group proactively made renovations at a total of 32 stores to address the changing needs of customers, including Oyodo Store, Tatsumi Store, Nagata Store, Kyodo Store, Takidani Store, Nijo Ekimae Store, Central Square Morinomiya Store, Fuchu Nakagawara Store, Bentencho Store, and Kawasaki Miyuki Store. Effects of opening new stores, expanding e-commerce such as online supermarkets (e-commerce, electronic sales), bolstering BIO-RAL and other private brand products, and implementing product initiatives that sought to enhance taste contributed to the Group’s performance. As a result, operating revenue was ¥768,335 million (up 1.2% year on year) and gross profit increased due to improved profit margin. On the other hand, as for selling, general and administrative expenses, the Group saw increases in personnel expenses from increased hiring activities, rent expenses from opening new stores, and non-personnel expenses from strengthening the growing e-commerce business. As a result, operating profit was ¥22,932 million (down 16.3% year on year), ordinary profit was ¥23,695 million (down 15.8% year on year), and profit attributable to owners of parent was ¥15,208 million (down 14.7% year on year) as each item saw a year-on-year decline. Results by segment are as follows: (Retail Business) Operating revenue was ¥767,379 million (up 1.2% year on year), with net sales of ¥745,080 million (up 1.2% year on year), and segment profit of ¥23,556 million (down 15.8% year on year). Net sales by department were ¥323,082 million (up 2.6% year on year) for fresh produce, ¥324,343 million (up 0.9% year on year) for general food, ¥64,823 million (down 3.2% year on year) for lifestyle products, ¥23,150 million (down 1.6% year on year) for apparel, and ¥9,680 million (up 0.01% year on year) for tenants. (Other Business) Operating revenue from LIFE FINANCIAL SERVICE was ¥2,415 million (up 3.7% year on year), with segment profit of ¥139 million (down 24.5% year on year). (2) Overview of financial position for the fiscal year under review The Group considers the maintenance and securing of an appropriate level of liquid funds as an important financial policy in order to continue to smoothly carry out its business activities. In order to achieve continuous corporate growth, we plan to aggressively invest in new store openings and renovation of existing stores, and we will do our best to fund this by using net cash flows from operating activities, with any shortfall to be financed by borrowings from financial institutions. Total assets of the Group at the end of the current fiscal year were ¥270,229 million, an increase of ¥1,922 million from the end of the previous fiscal year. Current assets totaled ¥74,480 million, a decrease of ¥187 million from the end of the previous fiscal year. This was mainly due to a ¥5,533 million decrease in cash and deposits, while accounts receivable – trade increased by ¥2,608 million, merchandise and finished goods increased by ¥687 million, accounts receivable – other increased by ¥1,160 million and prepaid expenses (other current assets) increased by ¥776 million. Non-current assets totaled ¥195,748 million, an increase of ¥2,109 million from the end of the previous fiscal year. This was mainly due to an increase of ¥3,038 million in property, plant and equipment from the previous fiscal year, resulting from new store openings, renovation, and land acquisition. – 3 – Total liabilities at the end of the current fiscal year were ¥159,929 million, a decrease of ¥10,817 million from the end of the previous fiscal year. This was mainly due to decreases of ¥26,800 million in accounts payable – trade and ¥7,695 million in accounts payable – other, respectively, while the total of short-term borrowings and long-term borrowings increased by ¥26,703 million. Total net assets at the end of the current fiscal year were ¥110,299 million, an increase of ¥12,739 million from the end of the previous fiscal year. This was mainly due to a ¥12,625 million increase in retained earnings. (3) Overview of cash flows for the fiscal year under review Cash and cash equivalents (“cash”) for the fiscal year under review totaled ¥9,409 million (down 37.0% year on year). The main reasons for the decrease are as follows. Cash flows from operating activities Net cash used in operating activities amounted to ¥7,926 million in the current fiscal year (compared to ¥41,747 million in cash provided by operating activities in the previous year). This was mainly due to a decrease of ¥26,800 million in trade payables and a decrease of ¥5,158 million in accounts payable – other, resulting from the settlements in the current fiscal year of purchase and other payables for which the payments were pending because the last day of the previous fiscal year was a holiday for financial institutions, despite profit before income taxes of ¥22,312 million and depreciation, a non-cash gain/loss item, of ¥14,179 million. Cash flows from investing activities Net cash used in investing activities amounted to ¥20,303 million in the current fiscal year (down 1.4% year on year). This was mainly due to expenditures of ¥19,000 million for the purchase of property, plant and equipment, including land acquisition, opening new stores, and renovation of existing stores. Cash flows from financing activities Net cash provided by financing activities amounted to ¥22,695 million in the current fiscal year (compared to ¥19,029 million in cash used in financing activities in the previous year). This was mainly due to repayments of long-term borrowings of ¥12,647 million despite a net increase of ¥36,350 million in short-term borrowings. (4) Future outlook The future outlook for the Japanese economy continues to provide little room for optimism, given the ongoing impact of COVID-19 with factors including an increase in the number of cases and the progress of vaccinations. There are also overseas factors that would affect the Japanese economy, such as excessive inflation, frequent occurrence of natural disasters, U.S. financial, monetary, and trade policies, trends in the Chinese economy, and geopolitical risks including the situation in Ukraine. Although demand for eating at home is still strong due to changes in consumer behavior caused by COVID-19, conditions in the retail industry remain challenging due to concerns about deterioration of corporate profitability, slow growth in personal income, and a decline in consumer confidence in the future. The industry is undergoing significant changes, as seen by new entrants from outside the sector, including major e-commerce players, offering fresh produce. In this difficult environment, we decided to extend the scope of the 6th Medium-Term Plan by one year, making fiscal 2022 its final year, in order to address issues remaining from the COVID-19 pandemic. This plan, commenced in fiscal 2018, aims to make each of our stores the No. 1 in the area with even greater trust from customers. – 4 – In the 6th Medium-Term Plan, while reassessing the issues that the Company is facing, we have clearly expressed the Group’s vision as the “True to LIFE Declaration” comprised of three keywords: “delicious,” “exciting,” and “happy.” To achieve this vision, we will continue to execute the action plan whose outline is set out below. – – – – – – The store is the star! – Each and every store strives to embody the concept of “True to LIFE” in a way that meets the needs of local customers, with all initiatives based on the notion that “the store is the star” so that we can empower eager and spirited store staff to independently think and put ideas into action. Investment in people – We seek to become a company that provides great job satisfaction to its employees, at which diverse people succeed in a stress-free environment without being pressed for time. Investment in stores – We will review all of our measures from the ground up, including customer service, store design and displays, renovations, and new stores, with the goal of creating stores that customers associate with ideas and feelings such as “True to LIFE,” “delicious,” “welcoming,” “comfortable,” “reassuring,” and “a little fun.” Investment in merchandise – In addition to focusing on a customer-oriented perspective, we aim to provide merchandise that does not compromise on the elements that make up “delicious,” namely ingredients, recipes, and freshness. LIFE’s strengths – By honing in on our online supermarket strategy and card business strategy in particular, we will significantly differentiate ourselves from competitors and grow these aspects into strengths of the Company. Strategy to support “True to LIFE” – We will enhance our sales support strategy involving sales promotions and other measures, infrastructure strategy on logistics, food process centers, and information systems, and cost reduction / funds procurement strategy, which consists of initiatives for optimizing purchasing costs and for finance. – Activities to instill, develop, and maintain the concept of “True to LIFE” – By ensuring that every individual from officers to employees including part-timers understand the concept of “True to LIFE,” base their thinking on this notion, and practice it in day-to-day operations, we aim to not only convey this “True to LIFE” concept to customers but also to create an organization that develops the next generation of human resources with excellent teamwork through such activities. Through the abovementioned action plan, we aim to improve our corporate value and achieve sustained growth, as a business entity that is trusted by customers, society and employees. Further, based on reflections of the 6th Medium-Term Plan and changes in the external environment, the Group will shift into a new 7th Medium-Term Plan, whose period will begin in fiscal 2023. Under the new plan, the Group will seek to differentiate itself from the competition and further refine the “True to LIFE” concept by taking measures that utilize data and technology, further developing its online supermarkets and the BIO-RAL natural supermarket business, and expanding its unique product lineup, while reassessing the status of current issues. The COVID-19 pandemic has made it extremely difficult to accurately forecast performance outlook, given the serious negative impact it has had on operations of certain industries, despite causing changes to consumer behavior that generate demand for eating at home in the food supermarket industry, including the Company. For the final year of the 6th Medium-Term Plan (fiscal 2022), the Group forecasts operating revenue of ¥770.0 billion (Note), operating profit of ¥23.2 billion (up 1.2% year on year), ordinary profit of ¥24.0 billion (up 1.3% year on year), and profit attributable to owners of parent of ¥15.5 billion (up 1.9% year on year), although the outlook remains unclear due to the presence of COVID-19. The performance forecast may be revised in response to changes in the – 5 – socioeconomic environment and other factors, but in order to achieve the goal of “True to LIFE” that was set in the 6th Medium-Term Plan, we will continue to steadily make investments in people, investments in stores, and investments in merchandise, all based on the notion that “the store is the star.” Note: The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29), etc., from the beginning of the fiscal year ending February 28, 2023. Therefore, the operating revenue forecast represents the amount calculated by applying the said accounting standard, etc., but does not include year-on-year change as the accounting treatment method subject to comparison differs. The Company expects operating revenue to decrease by approximately ¥22.0 billion due to this change. 2. Basic concept regarding selection of accounting standards The Group currently operates and raises funds mainly in Japan and has decided to apply Japanese GAAP for the time being. The Group intends to adopt International Financial Reporting Standards (IFRS) in an appropriate manner based on future business development and trends of other companies in Japan. – 6 – 3. Consolidated financial statements and significant notes thereto (1) Consolidated balance sheet As of February 28, 2021 As of February 28, 2022 (Millions of yen)Assets Current assets Cash and deposits Accounts receivable – trade Merchandise and finished goods Raw materials and supplies Accounts receivable – other Other Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Furniture and fixtures Accumulated depreciation Furniture and fixtures, net Land Other Accumulated depreciation Other, net Total property, plant and equipment Intangible assets Investments and other assets Investment securities Long-term loans receivable Deferred tax assets Guarantee deposits Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets *2 *2 15,343 5,524 23,193 189 27,383 3,033 74,668 183,085 (95,596) 87,489 9,934 (4,876) 5,057 51,790 (37,003) 14,786 38,774 1,358 (15) 1,343 147,452 3,635 1,520 8,586 7,189 23,321 1,975 (41) 42,551 193,638 268,307 *2, *4 *2 *1 9,809 8,133 23,880 258 28,544 3,854 74,480 188,078 (101,429) 86,648 10,906 (5,646) 5,260 55,761 (39,224) 16,537 39,256 2,807 (20) 2,787 150,490 3,508 1,208 7,935 6,761 24,086 1,799 (41) 41,749 195,748 270,229 *3 *2, *4 *2 *1 – 7 – As of February 28, 2021 As of February 28, 2022 (Millions of yen)Liabilities Current liabilities Accounts payable – trade Short-term borrowings Current portion of long-term borrowings Lease obligations Accounts payable – other Income taxes payable Provision for bonuses Provision for sales promotion expenses Other Total current liabilities Non-current liabilities Long-term borrowings Lease obligations Deferred tax liabilities for land revaluation Provision for share awards for directors (and other officers) Retirement benefit liability Asset retirement obligations Other Total non-current liabilities *2 *3 *2 *4 Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Remeasurements of defined benefit plans Total accumulated other comprehensive income Total net assets Total liabilities and net assets *2 *2 *4 68,466 2,150 12,647 1,078 23,232 6,126 2,595 1,884 12,284 130,466 24,113 2,567 969 36 3,256 5,409 3,926 40,280 170,747 10,004 11,613 86,595 (9,914) 98,298 375 (1,114) 0 (738) 97,560 268,307 41,666 38,500 14,865 1,082 15,536 3,901 2,555 1,963 12,406 132,478 12,248 2,412 969 56 2,999 5,014 3,750 27,451 159,929 10,004 5,628 99,221 (3,930) 110,923 357 (1,114) 133 (623) 110,299 270,229 *4 *4 – 8 – (2) Consolidated statement of income and consolidated statement of comprehensive income Consolidated statement of income (Millions of yen) Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 Net sales Cost of sales Gross profit Receipts from operating revenue Operating gross profit Selling, general and administrative expenses Freight costs Promotion expenses Store remodeling expense and repair expense Utilities expenses Rent expenses Salaries, allowances and bonuses Provision for bonuses Retirement benefit expenses Provision for share awards for directors (and other officers) Legal and other welfare expenses Depreciation Other Total selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Income from recycling Data offer fee Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of investment securities Compensation income Gain on sale of non-current assets Insurance claim income Total extraordinary income Extraordinary losses Impairment losses Loss on retirement of non-current assets Loss on store closings Loss on COVID-19 Sublease loss Loss on sale of investment securities Loss on valuation of investment securities Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit attributable to owners of parent 736,346 510,681 225,664 22,800 248,464 29,053 9,944 6,957 8,132 28,849 85,498 2,590 1,562 25 11,927 13,110 23,424 221,075 27,388 154 60 239 142 473 1,070 216 86 302 28,156 – 262 5 4 272 2,595 419 302 106 134 – 3 3,561 24,867 7,343 (299) 7,043 17,824 17,824 *1 *2 *3 *1 *2 *3 – 9 – 745,080 514,356 230,724 23,254 253,978 30,027 9,850 7,161 8,585 30,177 90,029 2,533 1,511 19 12,805 14,061 24,281 231,046 22,932 141 53 291 143 428 1,058 184 110 294 23,695 249 – – – 249 1,241 187 89 70 35 7 – 1,632 22,312 6,684 420 7,104 15,208 15,208 Consolidated statement of comprehensive income Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 Profit Other comprehensive income Valuation difference on available-for-sale securities Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent 17,824 2 486 489 18,314 18,314 *1 *1 (Millions of yen)15,208 (18) 132 114 15,322 15,322 – 10 – (3) Consolidated statement of changes in equity Fiscal year ended February 28, 2021 (Millions of yen)Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity 10,004 11,613 70,435 (9,912) 82,140 Shareholders’ equity (2,113) 17,824 448 16,160 86,595 (1) (1) (9,914) (2,113) 17,824 (1) 448 16,158 98,298 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Reversal of revaluation reserve for land Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Reversal of revaluation reserve for land Net changes in items other than shareholders’ equity Total changes during period – 10,004 – 11,613 Accumulated other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Remeasure-ments of defined benefit plans Total accumulated other comprehen-sive income Total net assets 372 (666) (485) (779) 81,360 41 41 (2,113) 17,824 (1) 448 41 16,199 486 486 0 2 2 (448) (448) Balance at end of period 375 (1,114) (738) 97,560 – 11 – Fiscal year ended February 28, 2022 (Millions of yen)Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity 10,004 11,613 86,595 (9,914) 98,298 Shareholders’ equity (5,984) (5,984) 5,628 (2,582) 15,208 12,625 99,221 (0) 5,984 5,984 (3,930) (2,582) 15,208 (0) – 12,625 110,923 – 10,004 (18) (18) Accumulated other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Remeasure-ments of defined benefit plans Total accumulated other comprehen-sive income Total net assets 375 (1,114) 0 (738) 97,560 (2,582) 15,208 (0) – 114 114 132 132 133 Balance at end of period 357 (1,114) (623) 110,299 – 114 12,739 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Cancellation of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Cancellation of treasury shares Net changes in items other than shareholders’ equity Total changes during period – 12 – (4) Consolidated statement of cash flows (Millions of yen) Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 Cash flows from operating activities Profit before income taxes Depreciation Retirement benefit expenses Impairment losses Increase (decrease) in provision for bonuses Increase (decrease) in provision for sales promotion expenses Increase (decrease) in retirement benefit liability Interest and dividend income Interest expenses Loss on store closings Loss (gain) on sale of investment securities Loss on retirement of non-current assets Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in accounts receivable – other Increase (decrease) in trade payables Increase (decrease) in accounts payable – other Other, net Subtotal Interest and dividends received Interest paid Income taxes paid Payments associated with disaster loss Net cash provided by (used in) operating activities Cash flows from investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of intangible assets Proceeds from sale of investment securities Purchase of shares of subsidiaries and associates Loan advances Proceeds from collection of loans receivable Payments of guarantee deposits Proceeds from refund of guarantee deposits Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Net increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Repayments of lease obligations Repayments of installment payables Dividends paid Purchase of treasury shares Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 24,867 13,225 26 2,595 183 (604) (2,975) (214) 216 32 – 419 3,853 649 (1,292) 235 3,317 2,097 46,632 68 (203) (4,748) (2) 41,747 (800) 800 (18,907) 293 (1,030) – – (20) – (966) 221 (176) (20,587) (13,550) 10,300 (12,322) (1,141) (203) (2,109) (1) (19,029) 2,130 12,813 14,943 22,312 14,179 19 1,241 (40) 78 (86) (194) 184 – (241) 187 (2,608) (755) (1,160) (26,800) (5,158) (53) 1,103 57 (173) (8,914) – (7,926) (800) 800 (19,000) 126 (867) 485 (12) (57) 22 (828) 62 (235) (20,303) 36,350 3,000 (12,647) (1,224) (204) (2,577) (0) 22,695 (5,533) 14,943 9,409 *1 *1 – 13 – (5) Notes to consolidated financial statements Notes on premise of going concern Not applicable. Significant accounting policies for preparation of consolidated financial statements 1. Scope of consolidation (1) Number of consolidated subsidiaries and names of consolidated subsidiaries (i) Number of consolidated subsidiaries (ii) Names of consolidated subsidiaries 1 company LIFE FINANCIAL SERVICE (2) Names, etc. of non-consolidated subsidiaries (i) Names of non-consolidated subsidiaries LIFE KOSAN CORPORATION LIFE STORE CORPORATION (ii) Reason for exclusion from scope of consolidation Non-consolidated subsidiaries are all small in scale, and any total amount in terms of their total assets, net sales, profit or loss (amount corresponding to the Company’s ownership interest) as well as retained earnings (amount corresponding to the Company’s ownership interest) and others does not significantly affect the consolidated financial statements. 2. Application of equity method names of major companies, etc. (1) Number of unconsolidated subsidiaries or associates accounted for using equity method and There are no non-consolidated subsidiaries or associates accounted for using equity method. (2) Names, etc. of major non-consolidated subsidiaries and associates not accounted for using equity method (i) Names of non-consolidated subsidiaries LIFE KOSAN CORPORATION LIFE STORE CORPORATION (ii) Names of associates Japan Education Center for Future Retailing Inc LIFE HOME DELIVERY (iii) Reason for not using equity method Non-consolidated subsidiaries and associates not accounted for using equity method are excluded from the scope of application of equity method, because such exclusion has only an immaterial effect on the consolidated financial statements in terms of each company’s profit or loss (amount corresponding to the Company’s ownership interest) and retained earnings (amount corresponding to the Company’s ownership interest), and they have no significance as a whole. 3. Fiscal year of consolidated subsidiaries Consolidated subsidiaries’ fiscal year-end is the same as the consolidated balance sheet date. 4. Accounting policies (1) Valuation basis and methods for significant assets (i) Securities a. Held-to-maturity debt securities Amortized cost method (straight-line method) is applied. b. Available-for-sale securities Securities with market value are stated at fair value based on the market price on the consolidated balance sheet date (valuation differences are booked directly in a separate component of net assets, and cost of securities sold is determined by the moving average method), while securities without market value are stated at cost determined by the moving-average method. (ii) Inventories a. Merchandise and finished goods Stated at cost determined by the retail method (the carrying value is written – 14 – down according to the decrease in profitability). However, fresh food and inventories at distribution and processing centers are stated at cost determined by the last purchase price method (the carrying value is written down according to the decrease in profitability). b. Raw materials and supplies Mainly stated at cost determined by the last purchase price method (the carrying value is written down according to the decrease in profitability). (2) Accounting methods for depreciation of significant depreciable assets (i) Property, plant and equipment (excluding leased assets) Straight-line method (excluding vehicles, for which the declining-balance method is applied). Major useful lives are as follows. Buildings and structures 3 to 60 years Machinery, equipment and vehicles 2 to 17 years 2 to 20 years Tools, furniture and fixtures Low-value depreciable assets with an acquisition cost of ¥100,000 or more but less than ¥200,000 are depreciated in equal amounts over three years. Property, plant and equipment acquired on or before March 31, 2007 are depreciated in equal amounts over five years starting from the fiscal year following the completion of depreciation to the limit of depreciable amount. (ii) Intangible assets (excluding leased assets) The straight-line method is applied. Software for internal use is amortized using the straight-line method over its useful life (five years). (iii) Leased assets Leased assets related to finance lease transactions that transfer ownership The same depreciation method applied to non-current assets owned by the Company is applied. Leased assets related to finance lease transactions that do not transfer ownership The straight-line method is applied assuming the lease period as the useful life without residual value. (3) Accounting for significant provisions (i) Allowance for doubtful accounts To prepare for credit losses on receivables, an estimated uncollectable amount is provided at the amount estimated by either using the historical rate of credit loss for general receivables, or based on individual consideration of collectability for specific receivables such as highly doubtful receivables. (ii) Provision for bonuses To provide for payment of bonuses to employees, the amount is provided based on the estimated amount of bonuses to be paid. (iii) Provision for sales promotion expenses To provide for the use of points granted under the point card system for sales promotion purposes, the amount estimated to be used in the future based on the historical usage rate for the unused point balance is provided. The provision is included in sales promotion expenses. (iv) Provision for share awards for directors (and other officers) To prepare for the delivery of the Company’s shares to Directors (excluding outside Directors) in accordance with the Company’s Director Performance-Linked Share Distribution Regulations, the amount is provided based on the estimated amount of – 15 – share award obligations as of the end of the fiscal year. (4) Accounting methods for retirement benefits (i) Method of attributing expected retirement benefits to periods In the calculation of retirement benefit obligations, expected retirement benefits are attributed to the period up to the end of the fiscal year on a benefit formula basis. (ii) Method of amortizing actuarial gains and losses and past service cost Past service cost is amortized using the straight-line method over a fixed number of years (11 years) within the average remaining service years of employees when incurred. Actuarial gains and losses are amortized using the straight-line method over a fixed number of years (11 years) within the average remaining service years of employees when incurred in each fiscal year, from the fiscal year following the accrual of each gain or loss. (5) Scope of cash in the consolidated statement of cash flows Cash in the consolidated statement of cash flows (cash and cash equivalents) consist of cash on hand, deposits that can be withdrawn at any time, and short-term investments with maturities of three months or less from the acquisition date that are readily convertible into cash and are exposed to only an insignificant risk of fluctuations in value (6) Other significant matters for preparing consolidated financial statements Accounting for consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes in the consolidated statements of income (and net consumption tax receivable or payable is recorded on the balance sheet.). Changes in presentation Consolidated statement of income “Subsidy income” (¥65 million for the current fiscal year), which was independently presented in the previous fiscal year, is included in “Other” under non-operating income from the current fiscal year because it became insignificant in terms of the amount. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified. As a result, ¥115 million presented as “Subsidy income” under non-operating income in the consolidated statement of income for the previous fiscal year has been reclassified as “Other.” – 16 – Additional information Share remuneration plan for Directors Based on the resolution at the 64th Annual General Meeting of Shareholders held on May 23, 2019, the Company introduced a Trust Plan for Delivering Shares to Directors (the “Plan”) for the purpose of further clarifying the linkage between remuneration for Directors (excluding outside Directors; the same applies below) and the Company’s share price, and increasing the Directors’ motivation to contribute to improving medium-to-long-term performance and increasing corporate value by not only enjoying the benefits of an increased share price but also bearing the risk of a falling share price and sharing with shareholders the benefits and risks associated with share price fluctuations. Under the Plan, shares of the Company’s stock are delivered to Directors through a trust based on the number of points granted pursuant to the Director Performance-Linked Share Distribution Regulations set by the Board of Directors of the Company. The Company acquires the shares to be delivered to Directors, including those for future delivery, with the money entrusted in advance, and manages them separately as trust assets. For the accounting related to the trust agreement, the Company applied the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc. through Trusts” (ASBJ PITF No. 30, March 26, 2015), recognizes the difference on disposal at the time of disposing treasury shares to the trust and records the net amount of dividends from the Company on the shares held by the trust and various expenses related to the trust on the consolidated balance sheets. The Company’s shares held by Custody Bank of Japan, Ltd. as of the end of the current fiscal year are presented as treasury shares under net assets, and the book value of such treasury shares was ¥199 million in the previous fiscal year and ¥199 million in the current fiscal year, and the number of shares was 90,300 shares in the previous fiscal year and 90,300 shares in the current fiscal year. Accounting estimates related to the impact of the spread of the COVID-19 The Group makes accounting estimates, such as impairment of non-current assets and recoverability of deferred tax assets, based on information available at the time of preparation of the consolidated financial statements. In the Retail Business, although there is benefit from increased demand for eating at home caused by COVID-19, this trend is waning. Although accounting estimates are based on the assumption that the impact of COVID-19 will continue for a certain period of time in the next fiscal year (ending February 28, 2023), actual results may differ from these estimates because of the uncertainty involved in estimating the timing of convergence of the infection and other factors. – 17 – Consolidated balance sheet *1 Items related to non-consolidated subsidiaries and associates are as follows. As of February 28, 2021 As of February 28, 2022 ¥50 million ¥62 million Shares of subsidiaries and associates (Investments and other assets, other) *2 Pledged assets and secured liabilities Assets pledged as collateral are as follows. Buildings Land Guarantee deposits Total As of February 28, 2021 As of February 28, 2022 ¥4,341 million 6,693 479 11,514 ¥3,970 million 6,266 463 10,700 In addition to the above, real estate owned by third parties (Sogotaxi Holdings Co., Ltd. and others) has been pledged as collateral. Secured liabilities are as follows. Long-term borrowings (including current portion of long-term borrowings) As of February 28, 2021 As of February 28, 2022 ¥12,433 million ¥9,470 million *3 Assets for which ownership is reserved by installment payments are as follows Tools, furniture and fixtures ¥164 million ¥– million As of February 28, 2021 As of February 28, 2022 The corresponding liabilities are as follows. Accounts payable – installment purchase (current liabilities, other) As of February 28, 2021 As of February 28, 2022 ¥204 million ¥– million – 18 – *4 Revaluation of land In accordance with the Act on Revaluation of Land (Act No. 34, March 31, 1998) and the Act Partially Amending the Act on Revaluation of Land (Act No. 24, March 31, 1999), land used for business purposes was revalued, and the amount equivalent to taxes on the valuation difference is recorded as “deferred tax liabilities for land revaluation” in liabilities and the amount less this is recorded as “revaluation reserve for land” in net assets. Method of revaluation The value is determined by making reasonable adjustments to the value calculated based on National Tax Agency Basic Instructions on Evaluation of Assets for calculating the value of land as the basis for calculating the taxable value of land for land-holding tax purposes, as provided for in Article 16 of Land-holding Tax Act, as stipulated in Article 2, item (iv) of the Order for Enforcement of the Act on Revaluation of Land (Government Ordinance No. 119, March 31, 1998). Date of revaluation February 28, 2001 Difference between the total market value of the revalued land at the end of the fiscal year and the total book value of the land after revaluation As of February 28, 2021 As of February 28, 2022 ¥(3,002) million ¥(2,964) million – 19 – Consolidated statement of income *1 Impairment losses The Group recorded impairment losses on the following asset groups. Fiscal year ended February 28, 2021 Use Type Place Stores, etc. Buildings and structures; machinery, equipment and Osaka Prefecture 7 stores vehicles; tools, furniture and fixtures; land, etc. Kyoto Prefecture 1 store Nara Prefecture 2 stores Tokyo 2 stores Impairment losses (Millions of yen) 267 242 1,247 816 Saitama Prefecture 1 store The Group groups its assets mainly based on stores as the smallest unit that generates cash flow. For stores with continuous loss from operating activities and stores whose land market value has declined significantly, the book value is reduced to the recoverable amount if the recoverable amount is less than the book value, and the reduced amount is recorded as an impairment loss under extraordinary losses. 20 The breakdown is as follows. Buildings and structures Machinery, equipment and vehicles Tools, furniture and fixtures Land Other (*) Total ¥1,390 million 3 122 1,070 8 2,595 (*) “Other” consists of leasehold interests in land, software, right to use facilities, and long-term prepaid expenses. The recoverable value of this asset group is measured by net realizable value or value in use. Net realizable value is determined based on real estate appraisal value or roadside land price, taking materiality into consideration. The value in use is calculated by discounting future cash flows at a rate of 3.4%. In cases where future cash flows are negative, the recoverable value is calculated as zero. – 20 – Fiscal year ended February 28, 2022 Use Type Place Stores, etc. Buildings and structures; Osaka Prefecture machinery, equipment and vehicles; tools, furniture 2 stores Kyoto Prefecture and fixtures, etc. Impairment losses (Millions of yen) 519 13 558 118 31 1 store Tokyo 2 stores Saitama Prefecture 1 store Chiba Prefecture 1 store The Group groups its assets mainly based on stores as the smallest unit that generates cash flow. For stores with continuous loss from operating activities and stores whose land market value has declined significantly, the book value is reduced to the recoverable amount if the recoverable amount is less than the book value, and the reduced amount is recorded as an impairment loss under extraordinary losses. – 21 – The breakdown is as follows. Buildings and structures Machinery, equipment and vehicles Tools, furniture and fixtures Other (*) Total ¥1,060 million 3 167 10 1,241 (*) “Other” consists of leasehold interests in land, software, and long-term prepaid expenses. The recoverable value of this asset group is measured by net realizable value or value in use. Net realizable value is determined based on real estate appraisal value or roadside land price, taking materiality into consideration. The value in use is calculated by discounting future cash flows at a rate of 3.3%. In cases where future cash flows are negative, the recoverable value is calculated as zero. *2 Details of loss on retirement of non-current assets are as follows. Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 ¥255 million ¥111 million 13 148 1 419 1 73 0 187 Buildings and structures Machinery, equipment and vehicles Tools, furniture and fixtures Other (*) Total (*) Other is long-term prepaid expenses. *3 Losses on COVID-19 Fiscal year ended February 28, 2021 The Company recorded a loss on COVID-19 of ¥106 million in extraordinary losses resulting from the loss on abandonment of goods, disinfection expenses, and tenant support through rent concessions incurred in stores and other facilities caused by the spread of COVID-19. Fiscal year ended February 28, 2022 The Company recorded a loss on COVID-19 of ¥70 million in extraordinary losses resulting from the loss on abandonment of goods, disinfection expenses, and tenant support through rent concessions incurred in stores and other facilities caused by the spread of COVID-19. – 22 – Consolidated statement of comprehensive income *1 Reclassification adjustments and tax effects related to other comprehensive income Fiscal year ended February 28, 2021 Fiscal year ended February 28, 2022 Amount accrued in the current fiscal year ¥12 million ¥173 million securities Valuation difference on available-for-sale Reclassification adjustments Before tax effect adjustments Tax effects securities Valuation difference on available-for-sale Remeasurements of defined benefit plans, net of tax Amount accrued in the current fiscal year Reclassification adjustments Before tax effect adjustments Tax effects Remeasurements of defined benefit plans, net of tax Total other comprehensive income – 12 (9) 2 674 26 701 (214) 486 489 (241) (68) 50 (18) 171 19 191 (58) 132 114 Consolidated statement of changes in equity Fiscal year ended February 28, 2021 1. Class and total number of issued shares, and class and number of treasury shares Number of shares at beginning of the fiscal year (Shares) Increase (Shares) Decrease (Shares) Number of shares at end of the fiscal year (Shares) Issued shares Note: The number of treasury shares at end of the fiscal year includes the Company’s shares of 90,300 shares held by Custody Ordinary shares Total