Saizeriya Co., Ltd. Annual Report. Year Ended August 31, 2008

Transcription

1 Saizeriya Co., Ltd. Annual Report 28 Year Ended August 31, 28

2 About Saizeriya Beijing Saizeriya Beijing 1 Guangzhou Saizeriya Guangzhou 2 Shanghai Saizeriya Shanghai 2 Taiwan Saizeriya Taiwan 1 Overseas outlets 24 Hyogo Plant (Ono City) Domestic outlets 775 Koshinetsu area 38 Tokai area 16 Kinki and Chugoku area 124 Hokkaido and Tohoku area 28 Fukushima Plant (Shirakawa City) North Kanto area 55 Tokyo Metropolitan area 424 Yoshikawa Plant / Head Office (Yoshikawa City, Saitama Prefecture) Number of outlets and plants by area (as of August 31, 28) The total number includes 6 new fast-food-style * restaurants (SAIZERIYA EXPRESS, etc.) figure. Kanagawa Plant (Yamato City) Mission Statement Saizeriya: bringing happiness to even more people s lives through our food. Saizeriya Co., Ltd., a company involved in the restaurant business, has been aiming to provide healthy and tasty Italian meals at affordable prices to everyone since its establishment. Aiming to achieve higher quality at lower prices, the Company has established a uniform production and sales system covering everything from the procurement of ingredients to service at our 775 chain restaurants throughout Japan. Hoping to offer richer and more various food to more people around the world, the Company opened its first overseas restaurant in China in 23, and now operates a total of 24 restaurants in Shanghai, Guangzhou, Beijing and Taiwan. On the domestic front, the Company has also launched the fast-food-style restaurants SAIZERIYA EXPRESS and Eat Run, in order to meet the tastes and needs of our customers, which are diversifying as society matures. We will continuously contribute to the creation of a rich society by offering our healthy and tasty meals to more customers. 1 Saizeriya

3 With the aim of achieving higher quality at lower prices, the Company carefully selects ingredients from around the world, employing a vertical merchandising process from production to supply. Under the basic concept of serving meals that bring out the natural taste of their ingredients, the Company does not rely on trading companies when procuring ingredients. Rather, it visits production areas all over the world, directly sampling the actual food that local people eat and then carefully selecting them, in order to take personal responsibility for their quality. Australia Plant (Melton City, State of Victoria) Trends in number of customers and number of restaurants Burgers, sauces and soups are produced entirely at Saizeriya s plant in Australia and shipped out as they are. Our freshly picked vegetables are cultivated at our domestic farms beginning with breed development, and constant quality control ensures that they are kept at a temperature of 4 degrees Celsius from when they are picked to when they are used at our restaurants, thus delivering the fresh taste of the ingredients straight to our customers plates. Number of customers Number of existing restaurants Number of new restaurants (thousand customers) (stores) 12, 16, , , ,748 16, , , 6, 4, 2, Ingredients carefully selected around the world are processed and cooked every day at the Company s commissaries around Japan and delivered to each outlet. All operating formats of outlets provided by Saizeriya are operated directly. This way, we have established a system wherein the Company assumes responsibility for management of the entire process up to food consumption by our customers. Saizeriya 2

4 Financial Highlights Saizeriya Co., Ltd. and its Consolidated Subsidiaries Years Ended August 31, 28 and Millions of Yen Thousands of U.S. Dollars Operation Data: Net Sales Income before Income Taxes Net Income Financial Data: Total Assets Net Assets Per Share Data (Yen and U.S. Dollars): 84,949 7,149 4,11 63,951 54,354 82,866 7,678 4,411 62,619 53,156 $776,783 65,371 36, , ,19 Basic Net Income Cash Dividends Applicable to the Year $ Note: The U.S. dollar amounts represent translations of Japanese yen amounts at the rate of 19.36=US$1, the approximate rate of exchange on August 31, 28. Net Sales (millions of yen) 1, Net Income (millions of yen) 6, 8, 6, 4, 74,62 78,976 82,866 84,949 5, 4, 3, 2, 2,391 3,563 4,411 4,11 2, 1, Total Assets (millions of yen) 7, 59,653 6, 5, 4, 3, 2, 1, 59,87 62,619 63,951 Net Assets and Equity Ratio (millions of yen) 6, 5, 4, 3, 2, 1, Net Assets Equity Ratio 44, , ,156 54, (%) Contents About Saizeriya Our Network Financial Highlights To Our Shareholders Measures Taken for Further Growth Operating Format of Saizeriya Operating Format of SAIZERIYA EXPRESS Five-Year Summary Review of Operations Consolidated Financial Statements Balance Sheets, Statements of Income, Statements of Changes in Net Assets, and Statements of Cash Flows Corporate Data & Shareholders Information Disclaimer This annual report contains forward-looking statements related to management s expectations about future business conditions. Actual business conditions may differ significantly from management s expectations and accordingly affect the corporation s sales and profitability. Actual results may differ as a result of factors over which the corporation has no control, including unexpected changes in competitive and economic conditions, government regulations, technology and other factors. 3 Saizeriya

5 To Our Shareholders The year ended August 31, 28 was marked by the beginning of a period of severe culling in restaurant chains, with companies intensifying competition to attract customers. Market conditions were also severe for Saizeriya, where sales at existing restaurants declined for the ninth consecutive month in comparison with the previous year. In the face of slowing consumer spending, our competitors tried to attract customers through advertising and promotional campaigns, aiming to guarantee their sales. Under these conditions, Saizeriya put effort into enhancing its competitiveness by further improving the vertical direct-toconsumer production and sales systems that are unique to the Company, such as by refining its core products, strengthening outlet operations and promoting efficient production and logistics systems. As a result, the Company booked consolidated net sales of 84,949 million in the fiscal year under review, up 2.5% from the previous year, ordinary income of 7,853 million, down 5.4%, and net income of 4,11 million, down 9.1%. I would like to explain the following three points in regard to our business performance for the current period, along with the issues we have to tackle in the future. Yasuhiko Shogaki President 1. Enhancement of core products Amid intensifying competition in the dining-out industry, our competitors tried to attract customers through advertising and marketing campaigns such as TV commercials and discount cards. Saizeriya considered it most important to create products that are priced reasonably enough for our customers to be genuinely willing to choose them. From this viewpoint, the Company worked on creating core products through refining our products. The Company s efforts to improve the quality of its products by further refining popular products and narrowing down targeted items are well under way, and current sales at our existing restaurants have picked up on a year-on-year basis. We expect that per-customer spending, the number of customers and sales will slowly grow together in and after the next fiscal term. 2. Response to surge in the prices of ingredients The Company procures most of its ingredients by itself and employs vertical merchandising from production up to the point at which food is consumed by customers. If ingredients are purchased from other companies, the main effect of surges in material costs is an increase in menu prices. In contrast, the direct-to-consumer production and sales system operated by the Company allows for numerous improvements at every stage of the process, such as enhancing productivity by focusing product lines at plants and curbing shipping costs by improving transport efficiency and transportation methods. Given this, we believe that Saizeriya is the company best able to hammer out reform and improvement measures, as it employs a more vertical direct-to-customer production and sales system than any other food service provider. With shortage of ingredients due to the surge in prices, the Company will strive to offer its products at unchanged prices by taking full advantage of its direct-to-customer production and sales system, as well as absorbing the increasing cost of ingredients by streamlining the entire process. 3. Overseas operations and future outlook for the domestic market Our overseas operations, primarily in cities across China, have been performing well. Thanks to strong business performance in Shanghai, where 2 stores are now being operated, we opened new restaurants in Guangzhou, Beijing and Taiwan during the current fiscal year. For the year ending August 29, the Company will strive to further enhance its restaurant management, lower costs and improve productivity. The Company expects to achieve an increase in per-customer sales by improving the side-dish items that complement popular products. The refinement of core products will improve productivity at plants, as well as increase gross profits. In the fiscal year ending August 29, its profits are expected to show an upward trend through the strengthening of management ability. We ask for your understanding of Saizeriya s corporate efforts for the future, and look forward to enjoying continued support from you, our shareholders. Saizeriya 4

6 Measures Taken for Further Growth From soil to tables The Company will continue to provide tasty while meeting the new tastes and needs of outlets operating under the direct production Refinement of core products Saizeriya s strategy for new openings Creating core products through refinement means selecting core products in each meal category, such as Salad, Doria and Gratin. As meals are usually served as a combination of separate menu items, rather than choosing only one menu item, we will select core products by choosing targeted items in a manner like, for instance, Burger for the Meat, Doria with Meat Sauce for the Doria and Gratin, and Shrimp Salad for the Salad. Efforts will then be focused on increasing the value of such core products and improving their flavor. The areas of improvement range from production efficiency, foodstuff selection and flavoring to packaging. We will achieve such improvements through a daily trial-and-error process. Creating core products requires discriminating the Company s products from its competitors and developing the original signature products that will become customers first choices. Such improvements achieved through the selection of menu items will make it easier to control productivity as well as enhance productivity, which in turn will lead to strengthened management. The Company s existing business, Saizeriya, is operated in a restaurant format and currently numbers 769 outlets (as of August 31, 28). It aims to expand its chain to 1, outlets a figure computed according to population in domestic market areas. Based on investment efficiency, the Company will launch new restaurants in populated and extremely convenient areas, like those surrounding railway stations in cities and shopping centers in suburbs. Towards 21, it is expected that the dining-out industry will go through an even more intense culling phase and enter into an era of increasing oligopoly. Thereafter, the concentration of the industry is expected to accelerate, and the Company s new openings will be in better shape than today. The Company will actively engage in the development of new sites, in order to respond to market areas that vary across the ages. In its restaurant format, the Company will devote effort to its overseas operations, using its business development in China as a stepping stone. Although the Company currently operates in Shanghai, Beijing, Guangzhou and Taiwan, it aims to expand its business to countries in Southeast Asia by adopting the same operation strategies used at Saizeriya restaurants in Japan. 5 Saizeriya

7 meals at affordable prices our customers, with more and sales system. Future direction of the dining-out industry New operating formats The Company considers that the restaurant format is an almost oversaturated market. In the future, if people s daily lifestyles become busier as the number of working woman increases, and if their lives become richer as society ages, their eating habits will also change, increasing the frequency with which they make do with quick and convenient bites. Such emerging needs will be met by the fast-food and fast-casual formats, as those operating formats enable freshly-cooked light meals to be served quickly at affordable prices. To add one more point, one of the buzz-words for 21st-century dining will be food that is good for the body healthy food. The Company envisions that fast-food and fast-casual formats that can offer convenient dining, along with gratifying, delicious, healthy food, will be the fastest-growing dining-out market from now on. This healthy fast-food and fast-casual format is the area on which we will place special focus from now on. The Company envisions growth in the market for fast-food and fast-casual restaurants that serve healthy and tasty food. Based on this belief, for several years, it has been implementing experiments on feasibility of new formats of restaurants that operate in the fast-food and fast-casual restaurant format using home-grown ingredients at the Company s farms and processed in its plants. The Company s hamburger restaurant, Eat Run, and its pasta restaurant, SAIZERIYA EXPRESS, have already been in operation as experimental restaurants. Improvements in the productivity of these restaurants have been achieved by reducing the work tasks at restaurants, through the use of commissaries that collectively process the patties produced at our Australia plant and the fresh vegetables, such as tomato and lettuce, which are farmed from seeds at our domestic farms. SAIZERIYA EXPRESS has established a system for offering menu items within a minute from ordering. It offers freshly cooked pasta at just 18 yen. The Company is delighted with the ability of fast-casual restaurants to provide healthy meals at such unprecedented, affordable prices. The Company aims to launch full-scale multi-store operations in the fiscal year ending August 31, 29. To this end, we will first begin by opening SAIZERIYA EXPRESS outlets in the best possible locations in inner-city areas. Saizeriya 6

8 Operating Format of Saizeriya Offering tasty food that cannot be found anywhere else Prosciutto Doria with Meat Sauce Country-style Minestrone Testing the marketing feasibility of packaged Doria with Meat Sauce Doria with Meat Sauce, Saizeriya s best-selling menu item, has established itself as a core product on the menu. The Company is now considering launching popular items like this via distribution channels such as supermarkets, to expand its sales channels. The Company has already started developing the sales packaging for the product and is improving it by referring to the various opinions of its employees. The meal is designed to be heated in its packaging in a microwave and served. The day may soon come when Saizeriya-branded best-selling menu items are sold on the shelves of supermarkets and convenience stores and eaten casually at home. Good reputation of Real Taste of Italy menu Saizeriya has created a menu entitled Real Taste of Italy to introduce its menu items. This menu has received a positive response from our customers. It carries a Real Taste of Italy ranking for products that are selected by Italians from Saizeriya s menu and introduces the best-rated product, Prosciutto, as well as the three other top-rated products, Rib Steak, Focaccia, and Salad with Fresh Cheese and Tomato, along with comments from Italians. We will continue to deliver enjoyable dining experiences to our customers in a variety of ways in the future. 7 Saizeriya

9 Restaurant in Taiwan Restaurant in Taiwan Overseas operations History 23 Shanghai December The Company opened its first Shanghai restaurant. Having won the hearts of sophisticated Shanghai customers, the restaurant is thriving, with over 1, customers visiting each day. 27 Guangzhou December The Company opened its first Guangzhou restaurant. The restaurant is becoming widely recognized as a restaurant that serves Italian meals at affordable prices. 28 Beijing July The Company opened its first Beijing restaurant in a shopping center, Ito Yokado. The restaurant experienced a steady increase in customers during the Beijing Olympics and has sustained this trend to date. July Taiwan The Company opened its first Taiwanese restaurant in a shopping center in Taipei. Since the opening, the restaurant has not been seen without a line of eager customers waiting outside. Menu served in China (Shanghai) Overseas operations Restaurant in Shanghai In Shanghai operations, which commenced in 23, the Company opened five outlets in the fiscal year under review, bringing the total number of its outlets in the region to 2. Saizeriya in Shanghai is operated in a similar format to Saizeriya in Japan and is steadily increasing the number of chain restaurants. All of the outlets in Shanghai have become popular among locals, with eager customers constantly waiting in line outside. The success of its Shanghai operations encouraged the Company to expand its business across China, resulting in the launch of two outlets in Guangzhou and one in Beijing in the current period. The Company also opened an outlet in Taipei, Taiwan, and is satisfying many Taiwanese customers. We believe that we can make a major contribution to society by providing food-service technologies overseas, which make it possible to serve high-quality food at affordable prices. Thus, we aim to expand Saizeriya s food-service business in Southeast Asian countries such as Hong Kong, Singapore, Vietnam, Thailand and Indonesia in a style identical to restaurants in Japan, following in the steps of our business expansion in China and Taiwan. Saizeriya 8

10 Operating Format of SAIZERIYA EXPRESS Fast service, healthy food! Providing fast-casual food Soup Pasta Salad Regional Breakdown of SAIZERIYA EXPRESS (as of August 31, 28) The Company has entered the fast-casual restaurant industry, where future growth is expected. It launched fast-food business operations in a new operating format, which is positioned as the second core business after its core business, restaurant Saizeriya. SAIZERIYA EXPRESS, a small-size restaurant, is operated to meet the changing tastes and needs of customers We want to eat healthy food more casually. Having conducted several years of experiments, the Company will start to open SAIZERIYA EXPRESS outlets in more attractive inner-city parts of Tokyo in the fiscal year ending August 31, 29. It currently operates a total of 5 outlets in food courts in shopping centers and roadside areas. In September, a new outlet in a food court was added to the list. SAIZERIYA EXPRESS VIVA MALL Saitama-Oi SAIZERIYA EXPRESS Green Walk Tama SAIZERIYA EXPRESS Kawaguchi SAIZERIYA EXPRESS Jujo SAIZERIYA EXPRESS Aeon Tsudanuma 9 Saizeriya

11 Tasty, healthy food at affordable prices SAIZERIYA EXPRESS aims to meet consumers emerging needs for more casual and convenient meals, by adopting a new operating format while utilizing the Company s ingredients supply capability according to its policy To provide fresher food at more reasonable prices. To this end, SAIZERIYA EXPRESS significantly reduced the operating time at a store level by simplifying its store operations. It was able to achieve such improvements by serving products from Saizeriya s popular menu items and utilizing the commissaries. SAIZERIYA EXPRESS s menu is comprised of its core products: pasta, fresh salad, soup and drinks. A single pasta dish costs 18 yen, while a combination meal of pasta and fresh salad costs 35 yen. This way, we can make our casual and affordable meals available for everyone. Store operations targeting health-conscious customers The Company s fast-casual service formats are designed to provide tasty, light meals quickly and at low prices. The sales point of SAIZERIYA EXPRESS s, which uses this format, is its healthy, low-calorie food using a generous amount of fresh vegetables. SAIZERIYA EXPRESS s menu displays the calories and salt content of its products, emphasizing their health benefits. The demand for such products will grow even more in the future as a result of increasing health concerns among customers. We are actively seeking opportunities to open SAIZERIYA EXPRESS outlets in such areas as business districts, downtown areas and shopping centers in inner-city areas. Three advantages of a new operating format, SAIZERIYA EXPRESS SAIZERIYA EXPRESS is characterized first by its high productivity. This higher productivity, compared to its conventional fast-food competitors, is advantageous in its location which has the strong potential to attract more customers. The second advantage is its low investment costs. SAIZERIYA EXPRESS can readily use the existing system of its s company, Saizeriya. SAIZERIYA EXPRESS can access Saizeriya s intangible assets, such as its food supply capability and product appeal, and tangible assets, such as its plants and commissaries. The third advantage is its ability to serve menu items within a minute from ordering, as a result of fewer work tasks being performed at a store level. These three advantages make us a restaurant that serves tasty food at lower prices than anywhere else. Saizeriya 1

12 Five-Year Summary In millions of yen and thousands of U.S. dollars except for per share information Thousands of U.S. Dollars (1) Years ended August Net Sales Operating Income Net Income Per Share Data (Yen and U.S. Dollars): Net Income (2) Cash Dividends 72,821 4,85 2, ,62 4,385 2, ,976 5,616 3, ,866 7,444 4, ,949 7,51 4, $ 776,783 68,59 36, Total Assets Long-term Debt Net Assets 61,932 4,575 42,478 59, ,742 59,87 49,267 62,619 53,156 63,951 54, , ,19 Capital Expenditures Depreciation and Amortization Number of Full-time Employees Number of Restaurants 4,12 2,565 1, ,898 2,596 1, ,117 2,453 1, ,796 2,41 1, ,384 2,477 1, ,944 22,65 Notes: (1) The U.S. dollar amounts represent translations of Japanese yen amounts at the rate of 19.36=US$1, the rate of exchange on August 31, 28. (2) The computation of net income per share is based on the weighted average number of shares outstanding during each year, retroactively adjusted for stock splits. On 18th October, 22, the Company made a stock split by way of a free share distribution at the rate of 1.3 shares for each outstanding share. (3) Figures at the last digit in the past may have been slightly moved due to changes in calculation at less than a unit. Net Sales Ordinary Income / Ordinary Income Margin Net Income (millions of yen) 1, 8, 72,821 6, 4, 2, 74,62 78,976 82,866 84,949 (millions of yen) Ordinary Income (%) Ordinary Income Margin 1, 2 8, 6, 4, 2, 4, ,722 8,298 7,853 4,498 3, 1. 2, , (millions of yen) 6, 5, 4, 1, 2,391 3,563 4,411 4, Total Assets / ROA Total Assets ROA (millions of yen) (%) 7, 15 61,932 62,619 63,951 59,653 59,87 6, , 4, , 6 2, 3 1, Net Assets / ROE Net Assets ROE (millions of yen) (%) 6, 3 53,156 54,354 49,267 5, 44,742 42,478 4, , 15 2, , 5 8, 6, 4, 2, Cash Flows (=Net Income + Depreciation and Amortization) (millions of yen) 5,96 4,987 6,16 6,822 6, Saizeriya

13 Review of Operations Saizeriya Co., Ltd. and its Consolidated Subsidiaries Operating Results for this Term The Japanese economy in the fiscal year under review has gradually slowed down. This economic slowdown stemmed from such issues as the U.S. subprime loan crisis and a surge in prices of crude oil and raw materials, which also caused the appreciation of the yen and a fall in share prices. The major reasons for the increase in operating income are as follows: a. In Japan, 28 new restaurants opened (including two fast food restaurants), while 21 restaurants were closed (including three fast food restaurants), resulting in an increase of the total number of restaurants by seven. Accordingly, an increasingly tough operating climate is expected in the dining-out industry as a result of issues such as the high level of labor costs in addition to the increasing reluctance of consumers to dine out, caused by heightening concern about maintaining their current standard of living, triggered by a wave of price increases in gas and daily essentials. b. The Company made efforts to refine its products and upgrade management quality by placing particular focus on several menu items. c. The Company differentiated its restaurants from its competitors by effectively launching seasonal vegetables menus and special extra menus. In the meantime, the Company has invested great effort in improving quality by continuously implementing its production development and distribution plans, while refining its popular products and maintaining and enhancing service quality at a store level. Under such circumstances, the Company booked consolidated net sales of 84,949 million in the fiscal year under review, up 2.5% from the previous year, operating income of 7,51 million, up.8%, ordinary income of 7,853 million, down 5.4%, and net income of 4,11 million, down 9.1%. While the operating income recorded an increase, both ordinary income and net income decreased from the previous year, partially due to a fall in exchange gain. d. Customers began to recognize the Company s efforts to ensure consumer safety and assurance. Such efforts include the use of the Company s own farms and commissaries and development imports. The Company s price advantage was strengthened by absorbing a surge in ingredient costs through the continuous implementation of projects aiming to improve production, purchase and waste. Outlook for the Next Term We basically expect the current tough operating climate, which began in the previous fiscal year, to continue in the next fiscal year. Accordingly, our earnings targets are consolidated net sales of 87, million, operating income of 8, million, ordinary income of 8, million, and net income of 4,2 million. Saizeriya 12

14 Consolidated Financial Statements Millions of Yen Thousands of U.S. Dollars August 31, 28 and ASSETS CURRENT ASSETS: Cash and deposits with banks 15,245 11,982 $139,42 Accounts receivable - tenants ,514 Inventories 3,37 3,932 3,816 Deferred tax assets ,925 Other 1,833 3,587 16,761 Total current assets 21,7 2,49 198,427 FIXED ASSETS: Tangible fixed assets Buildings and structures 17,651 17, ,43 Machinery, vehicle and equipment 2,599 2,961 23,766 Furniture and fixtures 1,69 9,775 Land 5,4 5,4 49,378 Construction in progress ,49 Other 876 Total tangible fixed assets 26,884 26, ,83 Intangible fixed assets ,414 Investments and other assets Investment securities ,32 Caution and guarantee money 6,496 6,282 59,4 Cooperative advances for construction 5,15 5,779 46,681 Deferred tax assets ,97 Other 2,628 2,733 24,31 Allowance for doubtful accounts (17) (17) (155) Total investments and other assets 15,12 15, ,94 Total fixed assets 42,251 42,57 386,348 TOTAL 63,951 62,619 $584,775 Notes: (1) The U.S. dollar amounts represent translations of Japanese yen amounts at the rate of 19.36=US$1, the rate of exchange on August 31, 28. (2) The financial statements are translation of Japanese annual security report's financial statement. 13 Saizeriya

15 Consolidated Balance Sheets Millions of Yen Thousands of U.S. Dollars August 31, 28 and LIABILITIES CURRENT LIABILITIES: Accounts payable - trade 3,45 3,121 $ 31,547 Corporation and inhabitants taxes payable 1,598 2,64 14,612 Accrued bonuses ,41 Allowance for special benefit for shareholders ,48 Other 3,52 3,196 32,187 Total current liabilities 9,494 9,197 86,814 LONG-TERM LIABILITIES: Deferred tax liabilities Other Total long-term liabilities Total liabilities 9,596 9,463 87,747 NET ASSETS SHAREHOLDERS EQUITY: Capital stock 8,612 8,612 78,749 Capital surplus 9,7 9,7 82,361 Retained earnings 35,883 32,89 328,118 Treasury stock (1,27) (297) (11,613) Total shareholders equity 52,232 5, ,615 VALUATION AND TRANSLATION ADJUSTMENTS: Valuation difference on available-for-sale securities (66) (64) Deferred hedging gains (losses) 793 Translation adjustments 2,189 2,232 2,16 Total valuation and translation adjustments 2,122 3,25 19,44 Total net assets 54,354 53, ,19 TOTAL LIABILITIES AND NET ASSETS 63,951 62,619 $584,775 Saizeriya 14

16 Consolidated Statements of Income Saizeriya Co., Ltd. and its Consolidated Subsidiaries Millions of Yen Thousands of U.S. Dollars Years Ended August 31, 28 and NET SALES 84,949 82,866 $776,783 COST OF SALES 3,163 29, ,814 Gross profit 54,786 52,955 5,969 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 47,284 45,51 432,37 Operating income 7,51 7,444 68,59 NON-OPERATING INCOME: 1, ,854 Interest income ,195 Exchange gain ,522 Other NON-OPERATING EXPENSES: ,635 Interest expenses 3 Loss on valuation of derivatives 831 7,599 Other 4 37 Ordinary income 7,853 8,298 71,89 SPECIAL INCOME: Compensation income SPECIAL LOSS: ,767 Impairment loss ,5 Loss on retirement of fixed assets ,981 Store closure loss ,76 Other INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 7,149 7,678 65,371 Corporation, inhabitants and enterprise taxes 3,117 3,258 28,52 Deferred income taxes and other NET INCOME 4,11 4,411 $ 36, Saizeriya

17 Consolidated Statements of Changes in Net Assets Saizeriya Co., Ltd. and its Consolidated Subsidiaries Millions of Yen Year Ended August 31, 28 Capital stock Capital surplus Shareholders equity Retained earnings Treasury stock Total shareholders equity Valuation difference on available-for-sale securities (losses) Valuation and translation adjustments Deferred hedging gains (losses) Translation adjustments Total valuation and translation adjustments Total net assets BALANCE AS OF AUGUST 31, 27 8,612 9,7 32,89 (297) 5, ,232 3,25 53,156 Changes during the term Dividends (936) (936) (936) Net income 4,11 4,11 4,11 Acquisition of treasury stock (973) (973) (973) Net changes of items other than shareholders equity (66) (793) (43) (93) (93) Total changes during the term 3,74 (973) 2,11 (66) (793) (43) (93) 1,198 BALANCE AS OF AUGUST 31, 28 8,612 9,7 35,883 (1,27) 52,232 (66) 2,189 2,122 54,354 Thousands of U.S. Dollars Year Ended August 31, 28 Capital stock Capital surplus Shareholders equity Retained earnings Treasury stock Total shareholders equity Valuation difference on available-for-sale securities (losses) Valuation and translation adjustments Deferred hedging gains (losses) Translation adjustments Total valuation and translation adjustments Total net assets BALANCE AS OF AUGUST 31, 27 $78,749 $82,361 $3,9 $(2,716) $458,43 $ $7,251 $2,41 $27,661 $486,64 Changes during the term Dividends (8,559) (8,559) (8,559) Net income 36,677 36,677 36,677 Acquisition of treasury stock (8,897) (8,897) (8,897) Net changes of items other than shareholders equity (64) (7,251) (393) (8,257) (8,257) Total changes during the term 28,19 (8,897) 19,212 (64) (7,251) (393) (8,257) 1,955 BALANCE AS OF AUGUST 31, 28 $78,749 $82,361 $328,118 $(11,613) $477,615 $(64) $ $2,16 $19,44 $497,19 Saizeriya 16

18 Consolidated Statements of Cash Flows Saizeriya Co., Ltd. and its Consolidated Subsidiaries Millions of Yen Thousands of U.S. Dollars Years Ended August 31, 28 and OPERATING ACTIVITIES: Income before income taxes and minority interests Depreciation Increase in allowance for doubtful accounts Increase in accrued bonuses Increase (decrease) in reserve for special benefit for shareholders Interest income Interest expenses Exchange gain Loss on valuation of derivatives Loss on retirement of fixed assets Store closure loss Impairment loss Loss on preparation for store openings Compensation income Increase on accounts receivable - tenants Increase in inventories Increase (decrease) in other current assets Increase (decrease) in accounts payable - trade Increase in other current liabilities Other Subtotal Interest and dividends received Interest paid Payments of income taxes, etc. Net cash provided by operating activities INVESTING ACTIVITIES: Purchase of investment securities Purchase of investments in subsidiaries Increase in long-term time deposits Proceeds from long-term time deposits Purchases of tangible fixed assets Purchases of intangible fixed assets Payments for caution money, guaranty money and cooperative advances for construction Proceeds from collection of caution, guarantee money and cooperative advances for construction Payments for (proceeds from) other investments Net cash used in investing activities FINANCING ACTIVITIES: Proceeds from short-term borrowings Repayment of short-term borrowings Repayment of long-term borrowings Purchase of treasury stock Dividends paid Net cash used in financing activities TRANSLATION DIFFERENCES ON CASH AND CASH EQUIVALENTS INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD DECREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM EXCLUSION OF SUBSIDIARIES FROM CONSOLIDATION CASH AND CASH EQUIVALENTS AT END OF PERIOD 7,149 2, (24) (36) (137) 565 (92) (234) 11, (3,585) 8,313 (316) (2,818) (58) (497) 796 (6) (2,954) (973) (936) (1,99) (185) 3,263 11,982 15,245 7,678 2, (66) (183) (29) 71 (168) (159) (137) (21) 1,97 17 (4) (3,196) 7,4 (5) (1,) 5 (2,527) (9) (572) 782 (66) (3,393) 1, (1,) (482) (3) (676) (1,162) 68 2,516 9,481 (15) 11,982 $ 65,371 22, (2,195) 978 7,599 2,981 2,76 1,5 (329) (1,253) 5,166 (841) 3,27 1,545 (2,14) 17,169 1,628 (32,782) 76,15 (2,89) (25,768) (53) (4,545) 7,279 (549) (27,12) (8,897) (8,559) (17,456) (1,692) 29,837 19,565 $139,42 17 Saizeriya

19 Corporate Data & Shareholders Information Saizeriya Co., Ltd. and its Consolidated Subsidiaries Corporate Data As of August 31, 28 Company Name Saizeriya Co., Ltd. President and Representative Yasuhiko Shogaki Head Office 2-5, Asahi, Yoshikawa-city, Saitama 342-8, Japan Established May 1, 1973 Capital Stock 8,612,5 thousand Number of Employees 1,481 Number of Outlets 775 Consolidated Subsidiaries Saizeriya Australia Pty. Ltd. Shanghai Saizeriya Co., Ltd. Board of s and Statutory Auditors Yasuhiko Shogaki Ryohei Shibata President Jiro Yamamoto Akira Higashi Yasunori Hotta Yukihisa Takayama Nobuyuki Masuoka Minoru Orido Kazuhiko Shogaki Minoru Kojima Hideharu Matsutani Sakae Abe Standing Statutory Auditor Noboru Nagaoka Hiroyuki Matsumoto Statutory Auditor Issei Horino Hiromu Otaka Statutory Auditor Shareholders Information As of August 31, 28 Total Number of Shares Authorized 73,28, Principal Shareholders Number of Shares Held (Unit: 1, shares) Percentage of Total Shares (%) Number of Shares Issued 52,272,342 Shares Listed On The First Section of the Tokyo Stock Exchange Yasuhiko Shogaki Babette Co., Ltd. Japan Trustee Services Bank, Ltd. (Trust Account) 15,953 4,455 4, Number of Shareholders 33,744 Saizeriya Employees Stock Holding Association HSBC-FUND Services, Sparx Asset Management Corporated 1,751 1, The Nomura Trust and Banking Co., Ltd. (Investment Account) 1, Saizeriya Co., Ltd. 1, Bank of New York GCM Client Account JPRD (GE-AC) 1,8 2.6 The Master Trust Bank of Japan, Ltd. (Trust Account) Kunio Shogaki The Ownership of the Shares by Category Number of Shareholders Number of Shares Held (Unit: 1 shares) Percentage of Total Shares (%) Japanese Financial Institutions 41 91, Japanese Securities Companies 28 2,87.5 Other Japanese Corporations , Foreign Corporations and Individuals , Japanese Individuals and Others 33,48 322, Total 33, , Saizeriya 18

20 Saizeriya Co., Ltd. 2-5, Asahi, Yoshikawa-city, Saitama 342-8, Japan Phone: Fax: URL Printed in Japan