東日本旅客鉄道（9020） – Fiscal 2022 Financial Results (Japanese GAAP)

Fiscal 2022 Financial Results (Japanese GAAP) (Unaudited) Fiscal 2022(Year ended March 31, 2022) All financial information has been prepared in accordance with accounting principles generally accepted in Japan. “JR East” refers to East Japan Railway Company on a consolidated basis, or if the context so requires, on a non-consolidated basis. English translation from the original Japanese-language document. East Japan Railway Company April 27, 2022 Stock Exchange Listing Securities Code URL Representative Contact Person Tokyo 9020 https://www.jreast.co.jp/e Yuji Fukasawa, President and CEO Dan Tsuchizawa, General Manager, Public Relations Department (Tel. +81-3-5334-1300) June 22, 2022 Scheduled Date of Ordinary General Meeting of Shareholders Scheduled Date of Dividend Payment Commencement Scheduled Date for Release of Annual Securities Report June 23, 2022 June 22, 2022 Preparation of Supplementary Explanations of Financial Results: No Financial Results Presentation to Be Held: Yes 1. Consolidated Results for Fiscal 2022 (Year Ended March 31, 2022) (Amounts less than one million yen, except for per share amounts, are omitted.) (1) Consolidated financial results (Percentages represent percentage changes as compared with the previous fiscal year.) Operating revenues Operating income Millions of yen % Millions of yen Fiscal 2022 1,978,967 12.1 Fiscal 2021 1,764,584 (40.1) (153,938) (520,358) Ordinary income Profit attributable to owners of parent % — — Millions of yen (179,501) (579,798) % — — Millions of yen 0(94,948) (577,900) % — — Note: Comprehensive income – Fiscal 2022: (100,543) million yen (—%), Fiscal 2021: (565,771) million yen (—%) Earnings per share－ Diluted Return on average equity Ratio of ordinary income to average assets Ratio of operating income to operating revenues Yen — — % 0(3.9) (20.3) % (2.0) (6.6) % 0(7.8) (29.5) Fiscal 2022 Fiscal 2021 Earnings per share－ Basic Yen 0(251.69) (1,531.91) (2) Consolidated financial position Reference: Equity in net income (losses) of affiliated companies – Fiscal 2022: 12,015 million yen, Fiscal 2021: (13,417) million yen Total assets Net assets Equity ratio Fiscal 2022 Fiscal 2021 Millions of yen 9,091,424 8,916,420 Millions of yen 2,418,110 2,557,361 % 26.3 28.4 Reference: Shareholders’ equity – Fiscal 2022: 2,394,928 million yen, Fiscal 2021: 2,535,027 million yen (3) Consolidated cash flows Shareholders’ equity per share Yen 6,348.57 6,719.93 Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Cash and cash equivalents at end of year Fiscal 2022 Fiscal 2021 Millions of yen 190,506 (189,968) Millions of yen Millions of yen 304,642 983,385 171,023 197,960 Millions of yen (526,358) (749,397) 1 % 1.3 1.5 2. Dividends (Year Ended March 31, 2021 and 2022 and Year Ending March 31, 2023) Dividends per share (Record date) 1st quarter end 2nd quarter end 3rd quarter end Year end Total annual Total dividends (annual) Dividend ratio (consolidated) Ratio of dividends to shareholders’ equity (consolidated) Fiscal 2021 Fiscal 2022 (Forecast) Fiscal 2023 Yen － － － Yen 50.00 50.00 50.00 Yen － － － Yen Yen Millions of yen 50.00 50.00 100.00 100.00 37,760 37,759 50.00 100.00 % － － 62.9 3. Forecasts for Fiscal 2023 (Year Ending March 31, 2023) (Percentages represent percentage changes as compared with the previous corresponding fiscal period or fiscal year, as applicable.) Operating revenues Operating income Ordinary income Millions of yen % Millions of yen Millions of yen Millions of yen Six-month period ending September 30, 2022 1,158,000 31.9 75,000 Fiscal 2023 2,453,000 24.0 153,000 % － － 42,000 98,000 Profit attributable to owners of parent % － － 26,000 60,000 % － － Earnings per share－ Basic Yen 68.92 159.05 ※ Notes (1) Changes to principal subsidiaries during the period (status changes of specified subsidiaries due to changes in the scope of consolidation): No Newly consolidated － excluded － (2) Changes in accounting policies, changes in accounting estimates, and restatement of revisions i Changes in accounting policies with revision of accounting standards : Yes ii Changes in accounting policies other than the above : No iii Changes in accounting estimates : No iv Restatement of revisions : No (3) Number of issued shares (common stock) i Issued shares at period-end (including treasury stock) iii Average number of shares during period Fiscal 2022 377,932,400 sharesFiscal 2021 377,932,400 sharesii Treasury stock at period-end Fiscal 2022 693,666 sharesFiscal 2021 692,286 sharesFiscal 2022 377,239,488 sharesFiscal 2021 377,240,648 shares2 (Reference) Overview of the Non-consolidated Financial Results 1. Non-consolidated Results for Fiscal 2022 (Year Ended March 31, 2022) (Amounts less than one million yen, except for per share amounts, are omitted.) (1) Non-consolidated financial results (Percentages represent percentage changes as compared with the previous fiscal year.) Operating revenues Operating income Millions of yen % Millions of yen Fiscal 2022 1,424,150 20.3 Fiscal 2021 1,184,145 (42.5) (149,583) (478,535) Ordinary income Profit % — — Millions of yen (177,718) (517,715) % — — Millions of yen 0(99,159) (506,631) % — — Earnings per share－ Basic Yen 0((262.60) (1,341.71) Total assets Millions of yen 8,334,994 8,172,474 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 (2) Non-consolidated financial position Earnings per share－ Diluted Yen — — Net assets Millions of yen 1,872,184 2,014,228 Equity ratio % 22.5 24.6 Shareholders’ equity per share Yen 4,958.12 5,334.28 Reference: Shareholders’ equity – Fiscal 2022: 1,872,184 million yen, Fiscal 2021: 2,014,228 million yen 2. Forecasts for Fiscal 2023 (Year Ending March 31, 2023) (Percentages represent percentage changes as compared with the previous corresponding fiscal period or fiscal year, as applicable.) Operating revenues Operating income Ordinary income Profit Millions of yen % Millions of yen Millions of yen Millions of yen Six-month period ending September 30, 2022 Fiscal 2023 0,852,000 36.2 62,000 1,794,000 26.0 100,000 % — — 39,000 51,000 % — — 30,000 41,000 % — — ※ Financial results are not subject to auditing. ※ Explanation of appropriate use of forecasts of business results; other important items The forecasts of business results and other forward-looking statements in this document are based on information available as of the date of this document and on certain assumptions that JR East viewed as reasonable as of the date of this document. Actual results may differ from such forward-looking statements for a variety of reasons. Regarding the forecasts of business results, please refer to “Outlook for the Year Ending March 31, 2023” on page 8 of this document. JR East is scheduled to hold an analysts’ conference on April 28, 2022, to present its operating results for Fiscal 2022. JR East plans to upload the presentation materials distributed at such conference to its website upon its conclusion. Earnings per share－ Basic Yen 79.45 108.58 3 Contents of Attachments 1. Operating Results and Financial Position ………………………………………………… 5 (1) Analysis of Operating Results …………………………………………………………………………………………………… 5 (2) Analysis of Financial Position ……………………………………………………………………………………………………. 9 (3) Basic Dividend Policy and Dividends for Fiscal 2022 and Fiscal 2023 ……………………………………………. 9 2. Status of the Group ………………………………………………………………………… 10 3. Management Policies ……………………………………………………………………… 13 (1) Basic Management Policies ……………………………………………………………………………………………………. 13 (2) Medium- to Long-Term Management Strategies and Issues to Be Addressed ………………………………. 13 4. Basic Policy for Selection of Accounting Standards …………………………………… 14 5. Consolidated Financial Statements and Main Notes ………………………………….. 15 (1) Consolidated Balance Sheets (Unaudited) ……………………………………………………………………………….. 15 (2) Consolidated Statements of Income and Comprehensive Income (Unaudited) ……………………………… 17 (3) Consolidated Statements of Changes in Net Assets (Unaudited) ………………………………………………… 19 (4) Consolidated Statements of Cash Flows (Unaudited) ………………………………………………………………… 21 (5) Notes to Consolidated Financial Statements (Unaudited) …………………………………………………………… 22 (Notes on Going Concern Assumption (Unaudited)) ……………………………………………………………….. 22 (Changes in Accounting Policies, Changes in Accounting Estimates and Restatement of Revisions (Unaudited)) ……………………………………………………………………………………………………………………… 22 (Segment Information (Unaudited)) ………………………………………………………………………………………. 22 (Per Share Information (Unaudited)) …………………………………………………………………………………….. 24 (Subsequent Events (Unaudited)) ………………………………………………………………………………………… 25 (Additional Information (Unaudited)) ……………………………………………………………………………………… 25 6. Non-consolidated Financial Statements ………………………………………………… 26 (1) Non-consolidated Balance Sheets (Unaudited) …………………………………………………………………………. 26 (2) Non-consolidated Statements of Income (Unaudited) ………………………………………………………………… 29 (3) Non-consolidated Statements of Changes in Net Assets (Unaudited) ………………………………………….. 31 (Additional Information Regarding Operating Results (Unaudited)) ……………………. 35 4 1. Operating Results and Financial Position (Unless otherwise stated, all comparisons are between the fiscal year under review and the previous fiscal year.) (1) Analysis of Operating Results (i) Summary of the Fiscal Year Ended March 31, 2022 Overview In the consolidated fiscal year ended March 31, 2022, despite signs of recovery seen temporarily, the Japanese economy continued to be sluggish due to the ongoing spread of COVID-19. Moreover, the Fukushima Prefecture offshore earthquake that occurred on March 16, 2022 caused damage to railcars and equipment of the Tohoku Shinkansen, forcing suspension of operation in some segments. We apologize for the inconvenience. However, as a result of the hard efforts of the relevant parties for recovery, operations resumed on all lines from April 14, 2022. In light of this situation, the Group made its utmost efforts to prevent the spread of COVID-19 to its customers and employees and to ensure the safety and reliability of transportation and the quality of its services. Under Speed Up “Move Up” 2027 announced in September 2020 as a policy tailored to the post-COVID-19 society, the Group worked to enhance profitability, fundamentally strengthen our management foundation, and implement ESG management, thereby accelerating our progress toward the achievement of “Move Up” 2027 management vision. During the fiscal year under review, operating revenues increased 12.1%, to ¥1,978.9 billion, due mainly to revenue increases, which were attributable to the recovery from decreased sales impacted by the spread of COVID-19 during the previous fiscal year and sales realized in the real estate business leveraging its “rotational business model”. As a result of such increase in operating revenues, we recorded operating loss of ¥153.9 billion (operating loss of ¥520.3 billion in fiscal 2021), ordinary loss of ¥179.5 billion (ordinary loss of ¥579.7 billion in fiscal 2021), and loss attributable to owners of parent of ¥94.9 billion (loss attributable to owners of parent of ¥577.9 billion in fiscal 2021). Safety is Our Top Priority Based on the “Group Safety Plan 2023,” the JR East Group united as one group toward the enhancement and innovation of “safety conduct” and “safety management” by each employee as well as the installation of safety equipment that actively leverages new technologies. (Specific measures) Acceleration of seismic reinforcement of elevated concrete pillars along the railway tracks of the Shinkansen due to damages incurred from the February 2021 earthquake off the coast of Fukushima Prefecture Construction work between fiscal 2022 and fiscal 2024 at approximately 200 locations on the Shinkansen lines along embankment, cutting, and natural slopes where a mudslide may occur as a result of record-breaking rainfall and other factors Installation of automatic platform gates completed at 80 railway stations (92 railway stations on a line-by-line basis) as of March 31, 2022 Preparation for introducing new testing equipment for performance and durability of bogies at the JR East Research and Development Center in anticipation of the start of operations around summer 2024, in order to verify reliability and evaluate durability of bogies Implementation of education and training programs to prepare for terrorist attacks, tsunami, etc. with the aim of improving the ability of station staff and train crew to respond to emergencies, as well as installation of self-defence tools on train cars Enhancing Profitability (Restructuring our growth and innovation strategies) While the business environment surrounding the railway business becomes increasingly severe, we believe the diversification of lifestyles presents a significant opportunity for the Group. Accordingly, the Group reestablished its growth and innovation strategies, combined physical networks, an area of the Group’s strength, with digital technologies, and made efforts to propose new lifestyles and take on the challenge of entering new fields. (Specific measures) Implementation of the TOHOKU Destination Campaign for six months from April 2021 to highlight attractions of the six Tohoku prefectures, and continuation of the promotion for the fall and winter season after the end of the campaign Launch of the SHINKANSEN YEAR 2022 campaign in January 2022 using CG videos showing the futuristic appeal of Shinkansen, etc. for promotion Receipt of order by Japan Transport Engineering Company to supply 304 railcars for extension of the North-South Commuter Railway in the Philippines and conclusion of agreement in March 2022 Establishment of JR East Real Estate Asset Management Co., Ltd. in April 2021 to strengthen real estate business through the provision of asset management services Establishment of JRE MALL showrooms within railway stations and promotion of online consultations and sales Naming of cargo transport railway service as Hakobyun (Train Parcel Service) and increasing cargo handling capacity as part of full-fledged expansion as new business Expansion to 503 locations as part of the STATION WORK shared office business by March 2022, including the introduction of STATION BOOTH in West Japan Railway Company stations Conclusion of agreement for business alliance with HIKKY Co., Ltd. in the XR (extended reality technology) field in August 2021, and opening of Virtual AKIBA World, the first metaverse station in the world, in March 2022 5 Fundamental Strengthening of Management Foundation (Reforming the corporate structure) The Group forged ahead with its three reforms “operational reform,” “working style reform” and “worksite reform” to enhance the job satisfaction of all Group employees, while further accelerating our digital transformation efforts, which include the use of new technology and the promotion of Smart Maintenance, to enhance productivity. (Specific measures) Introduction of new E131 Series railcars on the Sagami Line in November 2021, and on the Utsunomiya Line and the Nikko Line in March 2022, and commencement of their conductorless operations in March 2022 along with the Hachiko Line and the Kawagoe Line Introduction of an overhead wire condition monitoring system to automatically assess the condition of wires and other equipment from November 2021 and a snow detection system for image analysis to detect snow remaining on the water-sprinkler snow-melting equipment of the Joetsu Shinkansen from December 2021, utilizing cameras and AI installed on the electricity and track general inspection cars (East-i) Trial operations along Kesennuma Line BRT (between Yanaizu Station and Rikuzen-Yokoyama Station) in pursuit of level 3 self-driving, with a test-ride event to offer first-hand experience of self-driving held in September 2021 Implementation of test runs for introduction of automated operations during operating hours of the Joetsu Shinkansen (between Niigata Station and the Niigata Shinkansen Rolling Stock Center) in October 2021 and the Yamanote Line in February 2022 Establishment of CalTa Inc. in July 2021 through subsidiaries JR East Start UP Co., Ltd. and JR East Consultants Company and other parties with the aim of acquiring point cloud data through compact drones for use in construction and maintenance work Introduction of a monitoring system in November 2021 for railway infrastructure designed to prevent the tilting of railway electric poles, in collaboration with Sonas, Inc. Establishment of JR East Cross Station Co., Ltd. and merger of the subsidiaries JR East Retail Net Co., Ltd., JR East Foods Co., Ltd., JR East Water Business Co., Ltd. and Tetsudo Kaikan Co., Ltd. in April 2021 in order to maximize station value Commencement of COVID-19 vaccinations to employees in June 2021 Commencement of a moonlighting program at Group companies in July 2021 Implementing ESG Management To achieve net zero CO2 emissions for the entire JR East Group by fiscal 2051, JR East promoted the introduction of energy-saving equipment and development of renewable energy sources. While working to realize regional revitalization through co-creation with communities, the Group provided safe and stable transportation throughout the period of the Tokyo 2020 Olympic and Paralympic Games as an Official Partner (Passenger and Rail Transportation Services). (Specific measures) With respect to the JR East Group “Zero-Carbon Challenge 2050,” setting of a new CO2 emissions reduction target for the entire JR East Group of 50% by fiscal 2031 compared to fiscal 2014, and expansion of the scope of application of internal carbon pricing Promotion of development of renewable energy sources, and commencement of operations of Ichikai Solar Power Plant (Tochigi) in April 2021, Daigo Solar Power Plant (Ibaraki) in November 2021, and Noheji-Shibasaki Wind Power Plant (Aomori) in March 2022 Completion of replacement of No. 1 unit at Kawasaki Thermal Power Station and commencement of operations in June 2021, contributing to reduced CO2 emissions due to its highly efficient facility fueled by natural gas Commencement in March 2022 of verification tests for the hydrogen-powered hybrid train HYBARI on the Nambu Line (Kawasaki-Noborito), the Tsurumi Line and the Nambu Line Shitte Branch Line Investment in Ensen Marugoto Co., Ltd. in December 2021 to roll out the Ensen Marugoto HOTEL business through the use of old Japanese-style houses Implementation of measures to enhance railway security during the Tokyo 2020 Olympic and Paralympic Games, such as baggage checks that include the use of detection dogs to sniff out hazardous materials and security cameras designed to detect suspicious individuals and objects, and the adoption of wearable cameras in security services Revision of the Company’s corporate governance guidelines in November 2021 in line with the amendment of the TSE Corporate Governance Code in June 2021 Finalization of transition to Prime Market in the new market segments of TSE starting in April 2022 pursuant to the Company’s selection and application made in November 2021 Segment Information Transportation In the Transportation segment, JR East made concerted groupwide efforts to enforce rigorous measures in response to COVID-19 while ensuring the provision of safe and reliable transportation and high-quality services. (Specific measures) Renewal of eki-net service in June 2021 to enable linkage with JRE POINT and support for reserving and purchasing discount tickets, and commencement in March 2022 of a service to show a link to eki-net on Google 6 Maps Introduction of E7 Series Hokuriku Shinkansen railcars equipped with wheelchair-designated free spaces in July 2021 Promotion of measures to increase users of the Off-Peak Point Service for customers who commute during off-peak times using the Suica commuter pass Commemorative campaign marking the 30th anniversary of JR SKISKI to spur demand for snow-related activities Merger of the Yamanote Line Outer Loop platform and the Keihin-Tohoku Line Northbound platform at Shinagawa Station in December 2021 to enable easier transfers and to reduce congestion of the Yamanote Line platform Revision of the Green Car Fees of the Shinkansen and limited express trains, and making all cars of the Yamagata Shinkansen reserved-seats-only in March 2022 Implementation from March 2022 of a system in which train crew helps customers in wheelchairs get on/off trains by using a portable slope at certain stations of the Senseki Line, the Ban-etsu-West Line, the Koumi Line, etc. As a result, operating revenues in the Transportation segment increased 15.8%, to ¥1,332.8 billion, due mainly to increases in passenger revenues, which were attributable to the recovery from decreased sales impacted by the spread of COVID-19 during fiscal 2021, and operating loss was ¥285.3 billion (operating loss of ¥548.5 billion in fiscal 2021). Retail & Services In the Retail & Services segment, JR East pressed forward with the “Beyond Stations” concept to transform railway stations from transportation hubs to lifestyle platforms designed to connect people, things, and experiences. (Specific measures) Opening of new KINOKUNIYA stores in Hiroshima in May 2021, in Nagoya in November 2021, and in Osaka in March 2022 Full-scale opening of new stores of ecute EDITION at Iidabashi Station in July 2021 and at Shinbashi Station in March 2022 Trial operation of JRE Passport, a subscription-based service for use of coffee, eki soba (noodles served at stations) and shared office spaces, from July to September 2021, and promotion of preparations for full-scale commencement of the service in April 2022 Launch of EKITOMA TICKET, JRE MALL’s electronic ticket service in October 2021 usable for dining, shopping and other purposes in local communities Promotion of preparations for opening of a Hybrid Clinic that provides comprehensive medical examination for multiple clinical categories not only in person but also online on the platform of Nishi-Kokubunji Station of the Chuo Line in April 2022 As a result, despite the increase in the sales at stores in stations, which were attributable to the recovery from decreased sales impacted by the spread of COVID-19 during fiscal 2021, operating revenues in the Retail & Services segment decreased 17.8%, to ¥312.2 billion due to the application of “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, revised on March 31, 2020) (hereinafter “Accounting Standard for Revenue Recognition”), and operating income increased 440.3%, to ¥14.1 billion. Real Estate & Hotels In the Real Estate & Hotels segment, JR East proceeded with the lifestyle development (town development) such as development of large-scale terminal stations and in line-side areas and enhanced the appeal of local towns and communities. (Specific measures) Full-scale opening of KAWASAKI DELTA (Kanagawa), a large-scale mixed-use development of buildings with offices, commercial facilities, and a hotel, in May 2021 Opening of HOTEL METROPOLITAN AKITA North Wing (Akita) in May 2021 Opening of HOTEL METROPOLITAN PREMIER TAIPEI (Taiwan), the JR East Group’s first hotel established overseas, in August 2021 vaccination since July 2021 Campaign at subsidiary Nippon Hotel Co., Ltd. to provide hotel gift certificates to those with proof of COVID-19 Commencement of its “rotational business model” in the real estate business and liquidation of real estate held by the Company in December 2021 Launch of hotel packages by NIPPON HOTEL Co., Ltd. that include admission tickets to Yokohama Hakkeijima Seaparadise and Seibuen Amusement Park as part of comprehensive partnership with SEIBU HOLDINGS INC. Completion in March 2022 of JR MEGURO MARC BUILDING , the office building of MEGURO MARC (Tokyo), which is an urban development complex consisting of three buildings for rental apartments, condominiums, and offices As a result, operating revenues in the Real Estate & Hotels segment increased 28.9%, to ¥375.6 billion, due mainly to increased sales at station buildings, which were attributable to the recovery from decreased sales impacted by the spread of COVID-19 during fiscal 2021, and to increased income from office building leases as well as sales realized in the real estate business leveraging the “rotational business model”, and operating income increased 611.3%, to ¥107.8 billion. 7 Others In the Others segment, JR East promoted measures such as the enhancement of the MaaS Platform, which realizes seamless and stress-free mobility, and further expanded the scope of use of Suica. (Specific measures) Issuance of approximately 89.6 million Suica cards in total, achievement of 16.6 million members for Mobile Suica, and expansion of store network accepting Suica electronic payment to 1.3 million stores by March 31, 2022, as a result of promoting a shared platform for Suica Commencement of commemorative campaign in November 2021 marking the 20th anniversary of the launch of Suica service Expansion of the multi-function regional IC card service areas to nine areas, where a single card can be used to receive both unique regional services, including bus commuter pass services, and Suica services, by March 31, 2022, to expand the Suica user base in local areas Preparation of Eki Karte, a formal report on Suica-related statistical information, aimed to be utilized for town development and regional revitalization, and promotion of preparations for commencement of sales in May 2022 Launch of regional and tourism-oriented MaaS services in six Tohoku prefectures and Karuizawa, and commencement of operation of Tabi-CONNECT, a regional and tourism-oriented MaaS package available outside of the JR East area, in November 2021 Revision of VIEW Plus service, which provides VIEW card users with additional JRE POINTs, in July 2021 resulting in increase in rate of points awarded for eki-net and other services Promotion of establishment of 5G base stations inside train stations as an infrastructure sharing business for telecommunications carriers, and completion of establishment of 19 base stations in total by March 31, 2022 However, with the decline in the sales from the IC card business and effect of the application of Accounting Standard for Revenue Recognition, operating revenues from Others decreased 14.4%, to ¥208.4 billion. In addition, operating income declined 21.1%, to ¥11.6 billion. Note: JR East applies the Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (Accounting Standards Board of Japan Statement No.17, June 30, 2010) and the Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information (Accounting Standards Board of Japan Guidance No.20, March 21, 2008). The operating income (loss) of each segment of JR East corresponds to the segment income (loss) under the said Accounting Standard and Guidance. (ii) Outlook for the Year Ending March 31, 2023 The spread of COVID-19 has significantly impacted the entire Japanese economy, and we recognize that we will continue to face a severe situation such as the decline in demand for transportation associated with the spread of the infection. In addition, transformation in people’s behavior and values in the “post-COVID-19” society is changing the Group’s external business environment in a dramatic and rapid manner, and as a result, we do not believe that we will see customer use of railways return to the pre-COVID-19 pandemic level. In view of this situation, the JR East Group will do its utmost to ensure safe and stable transportation as well as service quality, while placing the highest priority on preventing infection among customers and employees, and will provide new value through the fusion of services in the three areas of transportation, life-style, and IT & Suica and enhance our management structure by fundamentally reviewing business operations. JR East’s consolidated performance outlook for the fiscal year ending March 31, 2023, as of the publication date of this document is as follows. Fiscal 2023 Performance Forecasts Full fiscal year Operating Revenues: ¥2,453.0 billion (24.0% year-on-year increase) Operating Income: ¥153.0 billion Ordinary Income: ¥98.0 billion Profit Attributable to Owners of Parent: ¥60.0 billion Six-month period ending September 30, 2022 Operating Revenues: ¥1,158.0 billion (31.9% year-on-year increase) Operating Income: ¥75.0 billion Ordinary Income: ¥42.0 billion Profit Attributable to Owners of Parent: ¥26.0 billion 8 (2) Analysis of Financial Position In the fiscal year ended March 31, 2022, operating activities provided net cash of ¥190.5 billion, a ¥380.4 billion change from net cash used in the previous fiscal year. This result was mainly because loss before income taxes decreased. Investing activities used net cash of ¥526.3 billion, ¥223.0 billion less than in the previous fiscal year. This result was mainly due to a decrease in payments for the acquisition of property, plant and equipment and intangible assets. Financing activities provided net cash of ¥304.6 billion, ¥678.7 billion less than in the previous fiscal year. This result was due in part to a decrease in incurring interest-bearing debt. Consequently, cash and cash equivalents as of March 31, 2022, were ¥171.0 billion, a decrease of ¥26.9 billion from March 31, 2021. In addition, net interest-bearing debt was ¥4,532.7 billion as of March 31, 2022. Please note that net interest-bearing debt represents the balance of consolidated interest-bearing debt minus the balance of consolidated cash and cash equivalents at the fiscal year-end. Cash flow indicators of JR East are presented in the table below: Equity ratio (%) ···········································································Equity ratio on market-value basis (%) ·············································Interest-bearing debt / net cash provided by operating activities (times) ······················································································Interest coverage ratio (times) ························································ Notes: Equity ratio: Shareholders’ equity / Total assets Notes: Equity ratio on market-value basis: Market capitalization / Total assets Notes: Interest coverage ratio: Net cash provided by operating activities / Payments of interest 6.0 9.0 Fiscal 2020 36.9 36.1 Fiscal 2021 28.4 33.2 Fiscal 2022 26.3 29.5 － － 24.7 3.1 1. Indicators are derived from the consolidated financial statements. 2. Market capitalization is calculated by multiplying the closing share price at the fiscal year-end by the total number of shares issued (less treasury shares). 3. Interest-bearing debt / net cash provided by operating activities and Interest coverage ratio in fiscal 2021 are not stated because net cash provided by operating activities was negative. (3) Basic Dividend Policy and Dividends for Fiscal 2022 and Fiscal 2023 JR East’s basic approach to capital policy is to keep shareholders’ equity at the level required to maintain and grow operational foundations in a sustainable way while paying stable cash dividends and implementing share repurchases flexibly in light of performance to steadily increase returns to shareholders. With respect to shareholder returns, JR East will implement share repurchases in a flexible manner, in addition to achieving stable increases in dividends, with the aim of realizing a total return ratio of 40% and dividend payout ratio of 30% over the medium to long term in accordance with its management vision “Move Up” 2027. As a basic policy, the repurchased shares will be canceled. (Reference) Calculation of total return ratio Total return ratio in a FY (%)＝ (total amount of dividend paid in such FY) + (total repurchase price of repurchased shares in the next FY) profit attributable to owners of parent in such FY ×100 Based on this policy, JR East plans to pay (payment scheduled to begin on June 23, 2022) year-end cash dividends of ¥50 per share, which are in addition to the interim cash dividends of ¥50 per share, for full-year cash dividends of ¥100 per share. JR East plans to pay cash dividends of ¥100 per share, including interim dividends of ¥50 per share in the same amount as the current fiscal year, for the fiscal year ending March 31, 2023. Further, JR East does not plan to pay dividends other than with respect to the record date as of the end of the second quarter and the record date as of the end of the fiscal year. JR East will use retained earnings to enhance returns to shareholders and also actively use them for necessary capital expenditures, such as investments to realize sustainable growth and strengthen operational foundations. Going forward, JR East will strive to strengthen its business foundation and enhance its corporate value further by its best efforts to achieve early recovery of its business performance and increase operating cash flow. 9 2. Status of the Group The JR East Group consists of East Japan Railway Company, 69 consolidated subsidiaries, and 6 equity-method affiliated companies (as of March 31, 2022). The JR East Group has four business segments: Transportation, Retail & Services, Real Estate & Hotels, and Others. The relationship of East Japan Railway Company and other related companies to each business segment are as shown below. The classification below is the same as the business segment classification presented in “5. Consolidated Financial Statements and Main Notes, (5) Notes to Consolidated Financial Statements (Segment Information)”. (i) Transportation The Transportation segment includes passenger transportation operations centered on railway operations, as well as travel agency services, cleaning services, station operations, facilities maintenance operations, railcar manufacturing operations, and railcar maintenance operations. With a service area mainly covering Tokyo and the combined 16 prefectures of the Kanto and Tohoku regions, JR East’s railway operations comprise 1,628 railway stations, 6,108.5 operating kilometers of conventional lines, and 1,194.2 kilometers of Shinkansen lines, spanning a total of 7,302.7 kilometers. Main related companies: East Japan Railway Company (passenger transportation operations, etc.) (Bus services and railway passenger transport services) JR BUS KANTO CO., LTD. * TOKYO MONORAIL CO., LTD.* (Travel agency services) JR EAST VIEW Travel Service Co., Ltd.* JTB Corp.** (Cleaning services) JR East Environment Access Co., Ltd. * (Station operations) JR East Station Service Co., Ltd.* (Facilities maintenance operations) JR East Facility Management Co., Ltd. * NIPPON DENSETSU KOGYO CO., LTD. ** NIPPON RIETEC CO., LTD. ** Total Electric Management Service Co., Ltd. ** (Railcar manufacturing operations) Japan Transport Engineering Company* (Railcar maintenance operations) JR East Rail Car Technology & Maintenance Co., LTD.* etc.) (Retail and restaurant operations) JR East Cross Station Co., Ltd.* JR EAST TOUHOKU SOUGOU SERVICE COMPANY* (Wholesale business) EAST JAPAN RAILWAY TRADING CO., LTD. * (Truck transportation business) JR East Logistics Co., Ltd. * (Advertising and publicity) East Japan Marketing & Communications, Inc.* hotel operations, sales of real estate) (Shopping center operations) LUMINE Co., Ltd.* atré Co., Ltd.* JR East Urban Development Corporation* (Leasing of office buildings) JR East Building Co., Ltd.* (Hotel operations) 10 (ii) Retail & Services This segment consists of the part of JR East’s life-style service business that includes retail sales and restaurant operations, a wholesale business, a truck transportation business, and advertising and publicity. Main related companies: East Japan Railway Company (creation of new commercial spaces within railway stations, (iii) Real Estate & Hotels This segment consists of the part of JR East’s life-style service business that includes shopping center operations, leasing of office buildings and other properties, and hotel operations, as well as development and sales of real estate for such operations. Main related companies: East Japan Railway Company (development of shopping centers and office buildings, etc., NIPPON HOTEL Co., Ltd. * Sendai Terminal Building Co., Ltd. * (iv) Others JR East conducts IT and Suica businesses, which include credit card operations, and information processing, among others. Main related companies: East Japan Railway Company (IT and Suica operations, others) (IT and Suica operations) Viewcard Co., Ltd.* JR East Mechatronics Co., Ltd.* (Information processing) JR East Information Systems Company* (Others) UQ Communications Inc.** Central Security Patrols Co., Ltd.** Notes: 1. * indicates a consolidated subsidiary, ** indicates an equity-method affiliated company. In addition, company names are listed in the business in which they are mainly involved. 2. On April 1, 2022, JR EAST VIEW Travel Service Co., Ltd. was renamed JR EAST VIEW TOURISM AND SALES COMPANY LIMITED. 11 The following is a schematic of JR East’s business network. Retail & Services (Cleaning services) (Station operations) (Wholesale business) (Travel agency services) (Railcar maintenance operations) JR East Station Service Co., Ltd.* (Facilities maintenance operations) (Railcar manufacturing operations) JR East Environment Access Co., Ltd.* Transportation Japan Transport Engineering Company* Creating new commercial spaces EAST JAPAN RAILWAY TRADING CO., LTD. * Passenger transportation operations, etc. JR East Rail Car Technology & Maintenance Co., LTD.* East Japan Railway Company JR BUS KANTO CO., LTD. * TOKYO MONORAIL CO., LTD.* JR EAST VIEW Travel Service Co., Ltd.* JTB Corp. ** (Bus services and railway passenger transport services) (Retail and restaurant operations) JR East Cross Station Co., Ltd.* JR EAST TOUHOKU SOUGOU SERVICE COMPANY* JR East Facility Management Co., Ltd. * NIPPON DENSETSU KOGYO CO., LTD. ** NIPPON RIETEC CO., LTD. ** Total Electric Management Service Co., Ltd. ** Notes: 1. * indicates a consolidated subsidiary, ** indicates an equity-method affiliated company. In addition, company names are listed in the business in Notes: 1. which they are mainly involved. (Shopping center operations) LUMINE Co., Ltd.* atré Co., Ltd.* JR East Urban Development Corporation* (IT and Suica operations) Viewcard Co., Ltd.* JR East Mechatronics Co., Ltd.* Developing shopping centers and office buildings Hotel operation NIPPON HOTEL Co., Ltd. * Sendai Terminal Building Co., Ltd. * UQ Communications Inc. ** Central Security Patrols Co., Ltd. ** Real Estate & Hotels East Japan Marketing & Communications, Inc.* IT and Suica operations Others JR East Information Systems Company * (Truck transportation business) JR East Logistics Co., Ltd. * (Leasing of office buildings) JR East Building Co., Ltd.* (Advertising and publicity) (Information processing) (Hotel operations) (Others) Others 2. Arrows show the flow of main transactions and offering of services. 3. On April 1, 2022, JR EAST VIEW Travel Service Co., Ltd. was renamed JR EAST VIEW TOURISM AND SALES COMPANY LIMITED. Customers and Counterparty companies 12 3. Management Policies (1) Basic Management Policies We will earn the trust of our customers as a whole group by aiming for ultimate safety levels as our top priority. We will strengthen our network capabilities focusing on technologies and information, and we are committed to helping our customers and people in communities to realize affluent lives. (2) Medium- to Long-Term Management Strategies and Issues to Be Addressed As the Japanese economy has been significantly affected by the spread of COVID-19, although we expect customer use of railways will steadily recover, we believe it is unlikely to return to the pre-COVID-19 pandemic level due to the transformation in people’s lifestyles. Faced also by the situation in Ukraine and other uncertainties, there are concerns about a rise in raw materials prices and fluctuations in financial and capital markets. In addition, over the medium to long term, Japan’s population is anticipated to further decline and age. At the same time, significant changes to the business environment are expected, including automated driving and other technological innovations as well as changes in globalization. Further, as more than 30 years have passed since its establishment, the JR East Group faces various changes, including changes to railway systems and the rapid transition to the next generation of employees. ① Medium- Term Management Strategies The Group had been managing its operations in line with the “Move Up” 2027 management vision in anticipation of changes to its business environment, but in September 2020, based on our belief that customer use of railways will not return to the pre-COVID-19 pandemic level, the Group announced Speed Up “Move Up” 2027, a policy tailored to the post-COVID-19 society. By increasing the level and pace of its various initiatives, the Group will work to expedite its progress toward the achievement of “Move Up” 2027. The Group will combine physical networks, in which the Group has an advantage, and digital technologies. In conjunction, the Group will evolve the railway-centered business model by placing greater emphasis on people and promote to reform the corporate structure to realize sustainable growth of the Group. We will maximize the Group’s capabilities and create new value through the fusion of services in the three areas of transportation, life-style, and IT & Suica, so that the Transportation segment covers 60% of operating revenues by fiscal 2026 (with the other segments accounting for the remaining 40%). The Group will continue to invest management resources in growth areas in an effort to decrease the Transportation segment’s share of operating revenues to 50% as swiftly as possible. 3,090.0 Actual Fiscal 2022 Plans for Fiscal 2022 Billions of Yen Fiscal 2026 Targets ② Management Benchmarks In the wake of a drastic downturn to its business environment, in January 2021 the Group has established the following numerical targets for the fiscal year ending March 31, 2026, and we will continue to work as a united group to achieve our goals. Operating Revenues ········································ Transportation·················································· Retail & Services ·············································· Real Estate & Hotels ········································· Others ···························································· Operating Income ··········································· Transportation·················································· Retail & Services ·············································· Real Estate & Hotels ········································· Others ···························································· Adjustment ······················································ Consolidated operating cash flow ························ Consolidated ROA (%) ······································ Net interest-bearing debt / EBITDA (times) (Note2) ···· (115.0) (257.0) 24.0 106.0 14.0 (2.0) – – – (153.9) (285.3) 14.1 107.8 11.6 (2.1) – – 58.8% 101.7% 83.2% – (Rate of Progress) 5.2% – – 3,693.0(Note1) Around 4.5 5 or less 450.0 252.0 57.0 113.0 30.0 (2.0) 95.6% 95.9% 97.7% 101.5% 1,336.0 290.0 361.0 70.0 1,277.0 278.1 352.6 71.0 1,970.0 550.0 480.0 90.0 (as of October 2021) 2,057.0 190.5 (1.7) 19.0 Actual/Plan Fiscal 2022 1,978.9 96.2% Notes: 1. 2. Total amount covering five years from the fiscal year ending March 31, 2022 to the fiscal year ending March 31, 2026 Net interest-bearing debt means Balance of consolidated interest-bearing debt minus Balance of consolidated cash and cash equivalents EBITDA means Consolidated operating income plus Consolidated depreciation expense 13 Issues to Address ③ With the aim of realizing its management vision “Move Up” 2027, the Group will pursue efforts to enhance profitability (restructuring of growth and innovation strategies), reform the corporate structure (fundamental strengthening of management foundation), and implement ESG management, while continuing to position safety at the top of its management priorities. ○Safety is Our Top Priority The Group will further refine our safe and stable transportation and earn deeper trust from customers and communities, which is fundamental to the Group’s entire operations. In addition, each employee will work while being cognizant of the nature of his or her duties and proactively address risks, and we will devote our resources to reducing disaster-related risks given the increasing severity of natural disasters in recent years. Through these efforts, the Group will minimize the risk of occurrence of major accidents and will aim to achieve zero accidents involving passenger injuries or fatalities and zero accidents involving employee fatalities. The Group will also expand and accelerate installation of automatic platform gates and other features by using the fare system established by the government to make train stations barrier-free. ○Enhancing profitability (restructuring our growth and innovation strategies) While working to recover railway users by stimulating their demand for travel and movement, the Group will also launch new products and services that match the changes in lifestyles of people and venture into new fields taking advantage of the Group’s strengths. The Group will implement the group-wide “RAILWAY 150th Anniversary” project and promote the “Beyond Stations” concept, such as showrooming of stations and making stations the customer pickup sites for JRE MALL products. The Group will also promote town-building toward the partial opening of the “Takanawa Gateway City (temporary name)” scheduled at the end of fiscal 2025 while working to launch sustainable international businesses by combining our Group capabilities. ○Reforming the corporate structure (fundamental strengthening of management foundation) The Group will aim to establish a flexible cost structure through reduction of operation costs in railway business and other efforts. The Group will also work on its structural reform by thoroughly implementing use of new technologies, streamlining of equipment, and revision of work processes. The Group will conduct review to achieve more flexible management of the fundamentals for the operation of the railway business, such as train fare systems and train schedules, based on how services are used. At the same time, for local lines, we will advance discussions with local municipalities, etc. in areas alongside the railway lines to establish sustainable transportation systems. Moreover, JR East will restructure its organization in June 2022 and thereafter with the aim of flexibly responding to the rapidly changing business environment and enhancing management structure through the improvement of each employee’s motivation for work and the improvement of productivity. We will promote the transfer of authority and integration among systems or between on-site work locations and planning departments in order to create value and solve problems more speedily and at locations closer to customers. ○Implementing ESG management From the environment, social, and governance perspectives, the JR East Group will pursue ESG management and make efforts to contribute to the sustainable development of local communities by solving social issues through its businesses. At the same time, the Group will promote efforts geared toward achieving the Sustainable Development Goals (SDGs). With respect to the environment, the Group will pursue reducing CO2 emissions by fiscal 2031 to zero in the Tohoku Region toward “Zero-Carbon Challenge 2050”. With respect to regional revitalization, the Group will promote a range of initiatives, including opening of new stations, town-building centered around regional core stations, and promoting sextic industrialization to stimulate local economies. With respect to internal controls, we will adopt the broad concept of risk management from a viewpoint of improving the Group’s value, and support and encourage employees taking on challenges for their development. 4. Basic Policy for Selection of Accounting Standards As of now, the JR East Group’s plan is to continue using Japanese GAAP. However, in light of developments in the Group’s overseas businesses and general trends in Japan and overseas in the selection of accounting standards, it will consider the adoption of International Financial Reporting Standards (IFRS). 14 5. Consolidated Financial Statements and Main Notes (1) Consolidated Balance Sheets (Unaudited) EAST JAPAN RAILWAY COMPANY AND SUBSIDIARIES ASSETS Current Assets ······················································································· ¥0,898,406 ¥0,907,001 Millions of Yen Fiscal 2021 Fiscal 2022 Cash and time deposits ·······································································Notes and accounts receivable-trade ···················································Notes, accounts receivable-trade and contract assets ··························Fares receivable ·················································································Securities ····························································································Real estate for sale ·············································································Inventories ··························································································Other ··································································································Allowance for doubtful accounts ··························································Fixed Assets ···························································································Property, plant and equipment, net of accumulated depreciation ··········Buildings and fixtures (net) ·······························································Machinery, rolling stock and vehicles (net) ········································Land ································································································Construction in progress ··································································Other (net) ·······················································································Investments and other assets ·······························································Investments in securities ···································································Long-term loans receivable ·······························································Deferred tax assets ···········································································Net defined benefit assets ································································Other ································································································Allowance for doubtful accounts ························································ 198,130 470,611 － 38,536 137 4,081 83,646 105,833 (2,572) 8,018,013 7,118,150 3,789,310 742,251 2,145,694 361,626 79,266 749,037 314,500 2,035 344,825 531 88,169 (1,024) Intangible assets ·················································································150,825 169,970 Total Assets ····························································································¥8,916,420 ¥9,091,424 Note: Amounts less than one million yen are omitted. 171,194 － 503,581 53,246 100 18,006 94,213 69,459 (2,802) 8,184,423 7,177,855 3,861,442 747,230 2,164,997 334,610 69,575 836,597 301,490 1,987 442,562 803 90,968 (1,214) 15 Millions of Yen Fiscal 2021 ¥2,032,849 Fiscal 2022 ¥1,688,558 52,909 433,320 90,000 4,215 477,546 7,856 22,074 33,992 77,526 62,128 12,439 － 758,840 4,326,209 1,930,308 1,158,872 318,873 5,221 120,000 85 1,131 482,221 309,494 200,000 96,522 (5,553) 62,487 54,322 2,137 (433) (25) 6,486 22,334 47,876 202,249 111,000 3,806 422,653 34,654 10,938 27,847 69,598 52,715 22,465 128 682,624 4,984,754 2,431,665 1,309,950 315,067 2,309 144,000 2,591 － 465,346 313,823 ¥2,338,255 200,000 96,411 2,047,407 (5,563) 56,672 47,830 2,464 (256) 257 6,377 23,182 LIABILITIES Current Liabilities ···················································································Notes and accounts payable-trade ·······················································Short-term loans and current portion of long-term loans ························Current portion of bonds ······································································Current portion of long-term liabilities incurred for purchase of railway facilities ···········································Payables ·····························································································Accrued consumption taxes ·······························································Accrued income taxes ·········································································Fare deposits received with regard to railway connecting services ················Prepaid railway fares received ·····························································Allowance for bonuses to employees ···················································Allowance for disaster-damage losses··················································Allowance for partial transfer costs of railway operation ····························Other ··································································································Long-Term Liabilities ··············································································Bonds ································································································Long-term loans ··················································································Long-term liabilities incurred for purchase of railway facilities ·················Deferred tax liabilities ··········································································Provision for large-scale renovation of Shinkansen infrastructure ·····························································Allowance for disaster-damage losses·····················································Allowance for partial transfer costs of railway operation ····························Net defined benefit liabilities ································································Other 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