Summary of Consolidated Financial Statements for ... - Lion

Summary of Consolidated Financial Statements for the Year Ended

December 31, 2013 [Japanese Standard]

February 10, 2014

Company name: Lion Corporation Listed stock exchanges: Tokyo Stock Exchange Code: 4912 URL: http://www.lion.co.jp/ Representative: Itsuo Hama, Representative Director and President Contact: Yoshiaki Kamao, Director of Finance Department Telephone: +81-3-3621-6211 Annual meeting of shareholders: March 28, 2014 (plan) Start date for payment of year end dividend: March 5, 2014 (plan) Scheduled date of filing of financial report: March 31, 2014 (plan) Supplementary materials prepared for quarterly results: Yes Quarterly results information meeting held: Yes (for investors and analysts, etc.) Figures in this and subsequent tables are rounded down to the nearest million.

1. Consolidated Results for the Year Ended December 31, 2013

(January 1, 2013 – December 31, 2013)

(1)Consolidated Results (cumulative total) (Percentage figures denote year-on-year change)

Net sales Operating income Ordinary income Net income

Millions of yen

% Millions of

yen %

Millions of yen

% Millions of

yen %

Fiscal 2013 352,005 5.0 10,819 50.0 12,300 43.6 6,097 44.0

Fiscal 2012 335,171 2.3 7,213 (35.4) 8,564 (29.7) 4,235 3.9

Note: Comprehensive income: December 31, 2013: ¥13,261 million (15.5%) December 31, 2012: ¥11,478 million (347.5%)

EPS Diluted EPS Return on

equity

Ratio of ordinary

income to total assets

Ratio of operating

income to net sales

Yen Yen % % %

Fiscal 2013 22.72 22.68 5.4 4.6 3.1

Fiscal 2012 15.77 15.75 4.0 3.4 2.2

Note: Equity in earnings of non-consolidated subsidiaries and affiliates: ¥696 million in FY 2013 and

¥803 million in FY 2012.

(2)Consolidated Financial Position

Total assets Net assets

Shareholders’ equity to total

assets

Net assets per share

Millions of yen Millions of yen % Yen

Fiscal 2013 282,098 124,232 42.0 441.59

Fiscal 2012 257,595 114,163 42.4 407.08

Note: Shareholders’ equity: December 31, 2013: ¥118,448 million

December 31, 2012: ¥109,261 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

Fiscal 2013 22,910 (12,819) (2,772) 48,941

Fiscal 2012 18,762 (9,172) (4,923) 40,913

2. Dividend

Cash dividends per share / Yen Total dividend

paid (annual)

Payout ratio

(consolidated)

Dividend/ Net

assets

(consolidated)

Record Date First

Quarter

Second

Quarter Third

Quarter Year-End Annual

Millions of yen

% %

Fiscal 2012 － 5.00 － 5.00 10.00 2,685 63.4 2.5

Fiscal 2013 － 5.00 － 5.00 10.00 2,683 44.0 2.4

Fiscal

2014(plan) － 5.00 － 5.00 10.00

38.3

3. Forecast of Consolidated Financial Results for the Fiscal Year Ending December 31, 2014

(January 1, 2014 – December 31, 2014)

Net sales Operating income Ordinary income Net income EPS

Millions of yen

% Millions of yen

% Millions of yen

% Millions of yen

% Yen

Interim 2014

171,000 3.0 3,000 4.4 3,500 (10.5) 1,600 (23.9) 5.96

Fiscal 2014

360,000 2.3 12,000 10.9 13,000 5.7 7,000 14.8 26.10

Notes: Percent figures for net sales, operating income, ordinary income, and net income express percentage

change over the year-ago period.

4. Notes

(1)Significant Change in Scope of Consolidation during Period: No

(2)Changes in accounting principles, procedures and presentation methods in connection with the

preparation of quarterly consolidated financial statements:

a. Changes associated with revision in accounting standards: No

b. Other changes: No

c. Changes in accounting estimates: No

d. Restatement: No

(3)Number of outstanding shares (common stock)

a. Number of outstanding shares on balance sheet dates (including treasury stocks):

As of December 31, 2013: 299,115,346 shares


b. Number of treasury stocks on balance sheet date:



c. Average shares outstanding over period (cumulative; consolidated)



*Note on Audit Process

This earnings report is out of the scope of the external auditor’s review procedure, which is required by

the “Financial Instruments and Exchange Act.” The auditing of the Company’s consolidated financial

statements has not been completed as of the disclosure of this earnings report.

Appropriate use of business forecast; other special items

The forecasts and projected operating results contained in this report are based on information available

at the time of preparation, and thus involve inherent risks and uncertainties. Accordingly, readers are

cautioned that actual results may differ materially from those projected as a result of a variety of factors.

For more details, refer to “I. Overview of Results of Operations” on page 2-10.

Lion Corporation (Code 4912): Consolidated Financial Statements for the Year Ended December 31, 2013

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Contents

I. Overview of Results of Operations ---------------------------------------------------------------------------- 2

1. Qualitative Information Concerning the Consolidated Results of Operations ------------------ 2

2. Qualitative Information Concerning Consolidated Financial Status ------------------------------ 8

3. Basic Policy on the Distribution of Earnings and Cash Dividends -------------------------------- 9

4. Business Risks ------------------------------------------------------------------------------------------------ - 10

II. Corporate Group -------------------------------------------------------------------------------------------------- 11

III. Management Policies ------------------------------------------------------------------------------------------ 16

1. Basic Management Policies -------------------------------------------------------------------------------- 16

2. Performance Targets ----------------------------------------------------------------------------------------- 16

3. Medium and Long-term Management Strategies ----------------------------------------------------- 16

4. Management Issues ----------------------------------------------------------------------------------------- - 16

IV. Consolidated Financial Reporting Statements ----------------------------------------------------------- 18

1. Consolidated Balance Sheets ----------------------------------------------------------------------------- - 18

2. Consolidated Statements of Income and

Consolidated Statements of Comprehensive Income ---------------------------------------------- - 20

3. Consolidated Statement of Changes in Shareholders’ Equity ------------------------------------- 22

4. Consolidated Statements of Cash Flows --------------------------------------------------------------- - 24

5. Segment Information ----------------------------------------------------------------------------------------- 26

6. Per Share Information --------------------------------------------------------------------------------------- - 29

7. Important Subsequent Events ----------------------------------------------------------------------------- 30

V. Other Information ------------------------------------------------------------------------------------------------ - 31


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< Qualitative Information and Financial Statements >

I. Overview of Results of Operations

1. Qualitative Information Concerning the Consolidated Results of Operations

(1) Performance Overview for the Consolidated Fiscal Year (January 1, 2013 – December 31,

2013)

1) Overall Performance

During the 2013 fiscal year (January 1, 2013–December 31, 2013), there was a sense of

recovery in the Japanese economy as corporate profits improved alongside a pickup in

personal consumption, with consumer prices bottoming out in the latter half of the year.

The business environment in the Lion Group’s main business domain, the domestic toiletries

industry, remained severe, as competition in stores remained intense, despite signs that unit

prices were ceasing to fall.

In this harsh environment, the Lion Group is implementing its medium-term management plan,

“Vision 2020 Part-1 (V-1 Plan),” centering on four strategies: (1) Qualitative growth of

domestic businesses; (2) Quantitative Expansion of Overseas Businesses; (3) Development

of New Business Value; and (4) Enhancement of Organizational Learning Capabilities.

Domestically, Lion worked to nurture high-value-added products, including products in the

Oral Care Products, Fabric Care Products and Pharmaceutical Products businesses, while

seeking to improve profitability by advancing efficiency of competition costs and reducing

costs. The Group engaged in aggressive marketing activity aimed at volume growth in

functional food and other products and worked to expand its direct-to-consumer sales product

business domain by introducing new hair care products targeted at mature women.

Overseas, the Group promoted the cultivation of products in the key oral care and laundry

detergent fields, principally in Thailand, and increased its production capacity. The Group also

moved into a new region, beginning sales in the Philippines.

Consequently, consolidated results for the period under review are as follows:

Net sales amounted to ¥352,005 million, a year-on-year increase of 5.0% (or an increase of

0.9% in terms of real net sales, which exclude the influence of exchange rate conversions).

The Company recorded operating income of ¥10,819 million, up 50.0% compared with the

same period of the previous fiscal year, and ordinary income of ¥12,300 million, up 43.6% year

on year. Net income stood at ¥6,097 million, up 43.9% compared with the previous fiscal year.


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<Consolidated Results> (Millions of yen)

FY 2013 Ratio to net sales

FY 2012 Ratio to net sales

Increase/ decrease

Change

Net sales 352,005 335,171 16,833 5.0%

Operating income 10,819

8,564

4,23511,1

69

3.1% 7,213

8,564

4,23511,1

69

2.2% 3,605 50.0%

Ordinary income 12,300 3.5% 8,564 2.6% 3,735 43.6%

Net income 6,097 1.7% 4,235 1.3% 1,861 43.9%

2) Results by Business Segment <Consolidated Business Segment> (Millions of yen)

Net sales Segment income (Operating income)

FY2013 FY2012 Increase/

decrease Change FY2013 FY2012

Increase/

decrease Change

Consumer Products

265,207 266,042 (835) (0.3%) 7,289 4,304 2,985 69.4%

Industrial Products

51,630 49,784 1,846 3.7% 778 360 417 115.8%

Overseas 76,865 59,173 17,691 29.9% 1,435 1,462 (27) (1.9%)

Other 28,723 29,798 (1,075) (3.6%) 1,016 971 44 4.6%

Subtotal 422,427 404,799 17,629 4.4% 10,519 7,098 3,421 48.2%

Adjustment (70,421) (69,627) (794) ― 300 115 184 160.0%

Total 352,005 335,171 16,833 5.0% 10,819 7,213 3,605 50.0%

3) Overview by Business Segment

<Consumer Products Business>

The Consumer Products Business segment is divided into the Oral Care Products, Beauty Care

Products, Fabric Care Products, Living Care Products, Pharmaceutical Products and Other

Products businesses. Segment net sales decreased 0.3% compared with the previous fiscal year.

Segment income increased 69.4% due in part to the cultivation of high-value-added products and

decreased competition costs, including the improved cost efficiency of sales promotion.

(Millions of yen)

FY2013 Ratio to net sales


Increase/ decrease

Change

Net sales 265,207 266,042 (835) (0.3%)

Segment income 7,289 2.7% 4,304 1.6% 2,985 69.4%

Note: Net sales include internal net sales within and among segments, which amounted to ¥22,499 million in FY 2013 and

¥21,757 million in FY 2012.


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[Net Sales by Products Segment] (Millions of yen)

FY2013 FY2012 Increase/ decrease

Change

Oral Care Products 51,628 52,917 (1,288) (2.4%)

Beauty Care Products 19,044 20,374 (1,329) (6.5%)

Fabric Care Products 80,951 80,596 354 0.4%

Living Care Products 21,620 21,851 (231) (1.1%)

Pharmaceutical Products 36,776 37,193 (416) (1.1%)

Other Products 55,185 53,108 2,076 3.9%

Oral Care Products

In toothpaste, sales of Lion’s mainstay brand Dentor Systema were firm, and those of the

new-and-improved Hitect Shoyaku no Megumi (Bountiful Herbal Medicine) were steady. However,

due in part to sluggish sales of Dentor Clear MAX, overall sales were less than those in the previous

fiscal year.

In toothbrushes, sales of Clinica Advantage toothbrushes, featuring an extremely thin head and

slender neck to clean right to the back of the molars, garnered favorable consumer reviews, and

overall sales edged up compared with the same period of the previous fiscal year.

In mouthwashes, sales of Dentor Systema dental rinses were firm, but sales of platius beautiful

teeth essence dental rinse were sluggish, resulting in overall sales that were down from those in the

same period of the previous fiscal year.

Beauty Care Products

In hand soaps, while sales of KireiKirei Medicated Foaming Hand Soap were strong, sales of regular liquid hand soaps were stagnant. As a result, overall sales remained level with those in the previous fiscal year. In antiperspirants and deodorants, new Ban Shower Deodorant, an aqueous mist spray deodorant that provides a long-lasting feeling of smooth skin thanks to proprietary micro powder ingredients, garnered favorable consumer reviews. However, sluggish sales of Lion’s mainstay Ban Deodorant Powder Spray line resulted in overall sales that were lower than those in the same period of the previous fiscal year.

Fabric Care Products

In laundry detergents, sales of super-concentrated TOP HYGIA, which enhances the antibacterial properties of laundry through washing, and TOP Clear Liquid were favorable as the market for liquid laundry detergents continued to expand. However, powder detergents were affected by market shrinkage, and overall sales were below those of the previous year. In fabric softeners, the Kaori to Deodorant no SOFLAN (SOFLAN with Fragrance and Deodorant) Aroma Rich series enjoyed strong sales and the new-and-improved Kaori to Deodorant no SOFLAN (SOFLAN with Fragrance and Deodorant) Aroma Natural series received favorable consumer reviews. As a result, overall sales were substantially greater than those in the same period of the previous fiscal year. Additionally, newly released TOP HYGIA Fabric Refresher antibacterial, antiviral deodorant, a new product that eliminates bacteria, viruses and odors with just a quick spray, garnered favorable consumer reviews.


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Living Care Products

In dishwashing detergents, although sales of the CHARMY Crysta series for dishwashers were strong, those of the CHARMY Awa no Chikara (Power of Suds) series were weak, leading to an overall year-on-year sales decline. In household cleaners, sales of bathroom fungicide LOOK Bath Antimold Fogger were favorable and new LOOK Mame-Pika Antibacterial Toilet Cleaner, containing antibacterial ingredients that fight odor-causing bacteria, garnered favorable customer reviews. As a result, overall sales were higher than those of the previous fiscal year.

Pharmaceutical Products

In analgesics, sales of Lion’s mainstay brand BUFFERIN A were affected by intensifying competition, and overall sales fell year on year. In eye drops, Smile 40 Premium, a new, effective ophthalmic remedy that helps alleviate tired, bleary eyes caused by aging and overuse, as well as Smile 40EX GOLD Mild, featuring a milder cooling sensation for gentle, comfortable application, both received favorable consumer reviews. As a result, overall sales increased substantially compared with the corresponding period of the previous fiscal year. In insecticides, sales of Lion’s mainstay Varsan fogger series were affected by market contraction, and overall sales fell year on year.

Other Products

In direct-to-consumer sales products, within functional food products, sales of Lion’s mainstay brand Nice rim essence Lactoferrin were strong, and new Fleuria, a hair care series for the mature woman that promotes healthy and beautiful hair, received favorable consumer reviews. As a result, overall sales were considerably higher than in the corresponding period of the previous fiscal year. In pet supplies, sales of Nioi wo Toru Suna (Deodorizing Cat Litter) were firm, but overall sales remained level with those in the corresponding period of the previous fiscal year.

<Industrial Products Business>

The Industrial Products Business segment engages in the manufacture and sale of activators derived from oils and fats, electro-conductive carbon, detergents for institutional use and other products. Segment net sales increased 3.7% compared with the corresponding period of the previous fiscal year. Segment income, however, increased 115.8% year on year due in part to extended sales of highly profitable products.

(Millions of yen)



Increase/ decrease

Change

Net sales 51,630 49,784 1,846 3.7%

Segment income 778 1.5% 360 0.7% 417 115.8%

Note: Net sales include internal net sales within and among segments, which amounted to ¥20,394 million in FY2013 and

¥19,625 million in FY2012

In activators derived from fats and oils, sales of raw materials for detergents and shampoos were strong, and overall sales edged up year on year. In electro-conductive carbon, overseas sales of products used in electronics devices were firm, and overall sales increased considerably year on year. In detergents for institutional use, sales of hand soaps and alcohol sanitizers for kitchen use were strong, leading to overall sales that were considerably higher than those in the same period of the


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previous fiscal year.

<Overseas Business>

The Overseas Business segment comprises business operations primarily in Thailand, South Korea

and China, with operations newly begun in the Philippines. Segment net sales increased 29.9%

year on year (or in terms of real net sales, which exclude the influence of exchange rate

conversions, increased 5.2%). Segment income decreased 1.9% due to increases in competition

costs made in order to strengthen market position.

(Millions of yen)

FY2013 Ratio to

net sales FY2012

Ratio to

net sales

Increase/

decrease Change

Net sales 76,865 59,173 17,691 29.9%

Segment income 1,435 1.9% 1,462 2.5% (27) (1.9%)

Note: Net sales include internal net sales within and among segments, which amounted to ¥4,208 million in FY2013 and

¥3,079 million in FY2012.

In Thailand, sales of Systema toothbrushes were strong and those of laundry detergents were steady. As a result, overall sales rose considerably compared with the previous fiscal year. Overall sales after yen conversions also rose significantly. In South Korea, sales of dishwashing detergents were stagnant, but sales of KireiKirei hand soap and Beat brand liquid laundry detergent were strong. As a result, overall sales increased only slightly compared with the previous fiscal year, although overall sales after yen conversions rose significantly. In China, sales of Systema toothbrushes were strong, leading to a slight year-on-year increase in overall sales. Overall sales after yen conversions were substantially increased.

<Other>

(Millions of yen)

FY2013 Ratio to

net sales FY2012

Ratio to

net sales

Increase/

decrease Change

Net sales 28,723 29,798 (1,075) (3.6%)

Segment income 1,016 3.5% 971 3.3% 44 4.6%

Note: Net sales include internal net sales within and among segments, which amounted to ¥23,318 million FY2013 and

¥25,164 million FY2012.

In Other, which includes the construction contracting business, overall sales came to ¥28,723 million, a year-on-year decrease of 3.6%. Segment income came to ¥1,016 million, up 4.6% from the previous fiscal year. (2) Qualitative Information Concerning the Forecast of Consolidated Financial Results <Consolidated> (Millions of yen)

FY 2014 forecast FY 2013 Increase/decrease Change

Net sales 360,000 352,005 7,994 2.3%

Operating income 12,000 10,819 1,180 10.9%

Ordinary income 13,000 12,300 699 5.7%

Net income 7,000 6,097 902 14.8%

EPS (yen) 26.10 22.72 3.37 14.8%

During fiscal 2014, although continued recovery is forecast for the Japanese economy, concerns remain


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due to a temporary drop expected in domestic demand, which is driven primarily by personal consumption, accompanying the coming increase in the consumption tax rate. The economic outlook for the global economy is expected to remain unclear due to such factors as trends in U.S. monetary policy and economic deceleration in emerging countries. The business environment of the domestic toiletries industry, the Lion Group’s main business domain, is expected to grow more challenging, reflecting the impact of the consumption tax rate increase, intensifying competition in stores and rises in materials costs. Amid these circumstances, the Lion Group will continue to steadily advance strategies based on the “Vision 2020 Part-1 (V-1 Plan).” In the Consumer Products Business segment, the Lion Group will release new, high-value-added products in its mainstay toothpaste, antiperspirant and deodorant and analgesics brand lines to reinforce its profit base. The Group will also work to expand its direct-to-consumer sales product business through aggressive marketing activity, particularly of hair care products released in fiscal 2013 that target mature women. As a result of these initiatives, the Lion Group expects overall sales to increase in this business segment. In the Industrial Products Business segment, the Lion Group will focus on cultivating new customers for its detergents for institutional use while strengthening market development in such key product areas as electro-conductive carbon and other highly functional products as well as activators derived from oils and fats. Sales in this business segment, however, are expected to be lower in fiscal 2014, reflecting the reorganization of segment businesses with priority on profitability. With regard to the Overseas Business segment, the Lion Group will bolster its marketing activities, primarily in the areas of oral care products and laundry detergents. In addition, the Group is aiming for business expansion in the Philippines, where it began operations in fiscal 2013, and in the MES (methyl ester sulfonate) business in Malaysia, where it recently increased its production capacity. Based on these efforts, the Group expects overall sales in this business segment to rise. As a result of the above, consolidated results forecasts for fiscal 2014 are as follows: net sales of ¥360,000 million (up 2.3% year on year), operating income of ¥12,000 million (up 10.9% year on year), ordinary income of ¥13,000 million (up 5.7% year on year) and net income of ¥7,000 million (up 14.8% year on year). (Preconditions for the Estimated Figures in Outlook for Fiscal 2014) Lion adopted the following foreign exchange rates in the calculation of the aforementioned estimated figures: ¥102 = US$1.00 ¥3.1 = 1.00 baht


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2. Qualitative Information Concerning Consolidated Financial Status

(1) Status of Assets, Liabilities, Net Assets

<Consolidated Financial Status >

FY 2013 FY 2012

Increase/

decrease

Total assets (millions of yen) 282,098 257,595 24,502

Net assets (millions of yen) 124,232 114,163 10,069

Shareholders’ equity to total assets *1 (%) 42.0 42.4 (0.4)

Net assets per share *2 (yen) 441.59 407.08 34.51

*1 Shareholders’ equity to total assets = (Net assets – Subscription rights to shares and Minority interests) / Total assets

*2 Subscription rights and minority interests were excluded from calculation of net assets per share.

Total assets rose ¥24,502 million compared with the previous consolidated fiscal year-end to

¥282,098 million. This is primarily attributable to an increase in marketable securities. Net assets

increased ¥10,069 million to ¥124,232 million. Shareholders’ equity to total assets stood at 42.0%.

(2) Status of Cash Flows

<Consolidated Cash Flows> (Millions of yen)

FY 2013 FY 2012 Increase/

decrease

Net cash provided by (used in) operating activities 22,910 18,762 4,147

Net cash provided by (used in) investment activities (12,819) (9,172) (3,647)

Net cash provided by (used in) financing activities (2,772) (4,923) 2,151

Effect of exchange rate change on cash and cash equivalents 709 602 106

Net increase (decrease) in cash and cash equivalents 8,027 5,273 2,754

Cash and cash equivalents at end of period 48,941 40,913 8,027

Net cash provided by operating activities totaled ¥22,910 million, due mainly to a decrease in notes

and accounts receivable—trade.

Net cash used in investing activities totaled ¥12,819 million, due in part to the purchase of property,

plant and equipment.

Net cash used in financing activities totaled ¥2,772 million. Major components of this reduction in

cash flows included cash dividends paid and repayments of long-term loans payable.

As a result of the above, cash and cash equivalents as of December 31, 2013 increased ¥8,027

million to ¥48,941 million compared with the consolidated fiscal year ended December 31, 2012.

(3) Forecast of Fiscal 2014 Consolidated Cash Flows

In cash flows from operating activities, Lion projects income before income taxes of approximately

¥12,500 million. Lion estimates depreciation and amortization changes of about ¥11,000 million.

In cash flows from investment activities, Lion plans to undertake capital expenditures of around

¥11,000 million during fiscal 2014.

The cash flows from financing activities are expected to decrease to about ¥25,500 million mainly


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due to cash dividends paid and the repayment of loans payable.

Based on these projections, Lion estimates that cash and cash equivalents at the end of fiscal

2014 will decrease approximately ¥13,000 million year on year.

(4) Changes in cash flow indicators

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Shareholders’ equity to total assets (%) 39.2 39.3 40.9 42.4 42.0

Shareholders’ equity to total assets on a

market value basis (%) 47.8 45.6 49.0 45.7 55.8

Debt redemption (years) 1.9 1.8 3.2 1.8 1.6

Interest coverage ratio 23.2 30.0 12.5 27.6 32.2

(Notes)

Shareholders’ equity to total assets: Net assets / Total assets

Shareholders’ equity to total assets on a market value basis: Value of shares / Total assets

Debt redemption (years): Interest-bearing liabilities / Cash flows from operating activities

Interest coverage ratio: Cash flows from operating activities / Interest payment

* All the indicators are based on consolidated financial data.

* “Value of shares” is calculated on the basis of the “closing stock price as of the end of the term” multiplied by “the number

of outstanding stocks as of the end of the term” (after the deduction of treasury stocks).

* “Cash flows from operating activities” are those in the consolidated cash flow data.

“Interest-bearing liabilities” means all liabilities that are bearing interest among the liabilities in the consolidated

balance sheet. For the amount of interest paid, figures in the consolidated cash flow data are used.

3. Basic Policy on the Distribution of Earnings and Cash Dividends

Lion considers its most important management issue to be the return of profits to shareholders on a

permanent and stable basis. To this end, the Company strives to consistently lift consolidated

earnings capacity in an effort to ensure the payment of continuous and stable cash dividends.

Taking into consideration the appropriate level of internal reserves required to secure medium- and

long-term growth, Lion also undertakes the acquisition of treasury stock. Working to reinforce the

Company’s growth potential and to develop a sustainable business foundation, Lion allocates

internal reserves to research and development, capital investment in production facilities and the

acquisition of external resources.

Taking into consideration the Company’s cash dividend payment record, as well as its dividend

payout ratio target, Lion’s Board of Directors resolved to pay an interim dividend of ¥5 per share

(payment date: September 5, 2013) and a year-end dividend of ¥5 per share (payment date: March

5, 2014) for fiscal 2013.

With regard to dividends to be paid in fiscal 2014 Lion plans to maintain both the interim and

year-end dividend at ¥5 per share each, reflecting its basic policy on the distribution of earnings and

cash dividends. As a result, the total annual dividend is expected to be ¥10 per share.


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4. Business Risks

The Lion Group’s management performance and financial status may be adversely affected by

various risks as business activities are pursued in the future. Of these risks, the following items, in

particular, may have a material impact on the decisions of investors.

Forward-looking statements are based on decisions made by the Lion Group as of February 10,

2014.

Business risks are not limited to the items listed below.

(1) Product quality and value The Lion Group plans, develops, produces, and sells products under management based on international quality standards while strictly following related laws and regulations, such as the Pharmaceutical Affairs Law, to provide worry-free, safe, convenient, and environmentally conscious products to consumers. In addition, we use consumers’ opinions received through our Consumer Service Office to improve our products and packaging as well as respective displays and text. In the event of an unforeseen and serious problem with product quality, however, the affected product and all products made by the Lion Group may lose their perceived value. This may adversely affect the Lion Group’s management performance and financial status. (2) Changes in raw material prices The Lion Group’s products use petrochemical and vegetable oils and fats as basic materials. Since these materials are easily affected by international market prices, we have measures in place to reduce costs and diversify the range of materials used. However, an increase in raw material prices may adversely affect the Lion Group’s management performance and financial status.

(3) Exchange rate fluctuations

The Lion Group translates into yen the financial statements of overseas subsidiaries when

preparing consolidated financial statements. For items denominated in foreign currency, their yen

values may be affected by prevailing foreign exchange rates when translated into yen. The Lion

Group has taken steps to minimize the risk of an increase in raw material costs by hedging against

exchange rate fluctuations. However, short-, medium-, and long-term changes in foreign exchange

rates may adversely affect the Lion Group’s management performance and financial status.

(4) Major lawsuits As of December 31, 2013, Lion is not involved in any lawsuits that may have significant impact on its business. However, if the Lion Group were to be successfully sued for significant damages, these could adversely affect the Lion Group’s management performance and financial status. (5) Earthquakes and other natural disasters In the product manufacturing process, the Lion Group has put in place safety measures against earthquakes and other natural disasters. In the event of a major disaster, however, our production equipment may be damaged, or a suspension of raw materials procurement or distribution activities may cause business activities to cease, adversely affecting the Lion Group’s management performance and financial status.


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II. Corporate Group

The Lion Group consists of Lion Corporation, 26 subsidiaries (including 25 consolidated subsidiaries and

one non-consolidated equity-method subsidiaries), and 13 affiliates (including seven equity-method

affiliates). Principal business activities consist of the manufacture and sale of consumer products,

industrial products and overseas. Other business activities involve distribution related to the above

business activities and other services.

The relationship between group business activities and business segments is shown below, which is

based on the categorization used for business segments.

Business segment Main activities Main companies

Consumer Products Business

Manufacture and sale of domestic commodities, OTC drugs and functional food products in Japan

Domestic affiliates

Lion Corporation Lion Dental Products Co., Ltd. Lion Trading Co., Ltd. Lion Packaging Co., Ltd. Lion Field Marketing Co., Ltd. issua Co. Ltd.

Industrial Products Business

Manufacture and sale of chemical raw materials, industrial products and other items in Japan and overseas

Domestic affiliates

Lion Corporation Lion Chemical Co., Ltd. Lion Hygiene Co., Ltd. Ipposha Oil Industries Co., Ltd. Lion Akzo Co., Ltd. Lion Idemitsu Composites Co., Ltd.

Overseas Business

Manufacture and sale of commodities and chemical raw materials overseas

Overseas affiliates

Lion Corporation (Hong Kong) Ltd. Lion Corporation (Singapore) Pte. Ltd. Lion Advertising Ltd. Lion Eco Chemicals Sdn. Bhd. Lion Daily Necessities Chemicals (Qingdao) Co., Ltd.

Lion (China) Home Products & Technology Co., Ltd.

PT. IPPOSHA INDONESIA CJ Lion Corporation Lion Chemical Industry (Taiwan) Co., Ltd. Lion Corporation (Thailand) Ltd. Peerless Lion Corporation Lion Service Co., Ltd. Eastern Silicate Company Limited Southern Lion Sdn. Bhd. P.T. Lion Wings

Other

Transport and storage of merchandise and finished products; design, construction, and maintenance of storage facilities; real estate management; Human resources services, etc.

Domestic affiliates

Lion Engineering Co., Ltd. Lion Cordial Support Co., Ltd. Lion Business Service Co., Ltd. Lion Logistics Service Company, Ltd. Planet Logistics Co., Ltd. Planet, Inc.

Lion Corporation (Code 4912): Summary of Financial Statements for the Year Ended December 31, 2013

12

Business Organization Chart

Sale of pet food products Sale of dental

products Sale of cosmetics and beauty equipments Manufacture and sale

of kitchen detergents Manufacture and sale of surfactants Manufacture and sale of

resin compounds

(Consolidated subsidiary) Lion Trading Co., Ltd.

(Consolidated subsidiary)

Lion Dental Products Co., Ltd.

(Consolidated

subsidiary) issua Co. Ltd.

(Consolidated

subsidiary) Lion Hygiene Co., Ltd.

(Consolidated subsidiary) Ipposha Oil Industries Co.,

Ltd.

(Equity-method subsidiary) Lion Idemitsu Composites

Co., Ltd.

Lion Corporation

Consumer Products Industrial Products

Suppliers

(Consolidated subsidiaries) Lion Packaging Co., Ltd. Lion Chemical Co., Ltd.

(Equity-method subsidiaries) Lion Akzo Co., Ltd.

Overseas customers

Note: The thick arrows represent transactions of merchandise, finished products, and raw materials. The line arrows represent provision of services, etc.

Sales promotion services

(Consolidated subsidiaries) Lion Field Marketing Co., Ltd.

Overseas business

(Consolidated subsidiaries) Lion Corporation (Hong Kong) Ltd. Lion Corporation (Singapore) Pte. Ltd. Lion Eco Chemicals Sdn. Bhd. Lion Daily Necessities Chemicals (Qingdao) Co., Ltd. CJ Lion Corporation

(Consolidated subsidiaries) Lion Chemical Industry (Taiwan) Co., Ltd. Lion Corporation (Thailand) Ltd.

(Equity-method subsidiaries) Southern Lion Sdn. Bhd. P.T. Lion Wings

Customers

Other

Real estate management and others

(Consolidated subsidiaries) Lion Business Service Co., Ltd. Lion Cordial Support Co., Ltd.

(Equity-method subsidiary) Planet, Inc.

Design, construction, and maintenance of facilities

(Consolidated subsidiary) Lion Engineering Co., Ltd.

Transport and storage of merchandise and finished products

(Consolidated subsidiary) Lion Logistics Service Co., Ltd.

(Equity-method subsidiary) Planet Logistics Co., Ltd.


13

Subsidiaries and Affiliates Consolidated Subsidiaries

Name Location Capitalization Business

Voting

shares

held by

Lion

Nature of business relationship

Shared positions Financial

support

Business

dealings

Lease of

facilities, etc. Lion

officers

Lion

employees

Lion Engineering Co.,

Ltd.

Sumida-ku,

Tokyo

Millions of yen

100 Other

%

100.0 2 6 None

Design,

construction,

and

maintenance of

facilities

Lease of part

of office

space

*1

Lion Chemical Co., Ltd.

Sumida-ku,

Tokyo 7,800 Industrial products 100.0 3 8 Loans

Purchase of raw

materials and

merchandises

Rental of part

of office

space and

land

Lion Cordial Support

Co., Ltd.

Sumida-ku,

Tokyo 20 Other 100.0 － 5 None

Human

resources

services

Lease of

office space

Lion Dental Products

Co., Ltd.

Sumida-ku,

Tokyo 10 Consumer products 100.0 1 7 None

Sale of

merchandises

and finished

products

Lease of

office space

Lion Trading Co., Ltd. Sumida-ku,

Tokyo 240 Consumer products 100.0 2 6 None －

Lease of part

of office

space

Lion Hygiene Co., Ltd. Sumida-ku,

Tokyo 300 Industrial products 100.0 2 7 None

Sales and

purchase of

merchandises

Lease of part

of office and

warehouse

space

Lion Packaging Co.,

Ltd.

Ichihara

-shi, Chiba 180 Consumer products 100.0 1 6 None

Purchase of

materials and

merchandises

Rental of part

of office

space and

lease of part

of land

Lion Business Service

Co., Ltd.

Sumida-ku,

Tokyo 490 Other 100.0 － 4 None

Rental, dealing,

and brokerage

of real estate,

and insuring

Rental of part

of office

space and

land

Lion Field Marketing

Co., Ltd.

Sumida-ku,

Tokyo 50 Consumer products 100.0 2 6 None

Sales promotion

activities

Lease of part

of office

space

Lion Logistics Service

Company, Ltd.

Sumida-ku,

Tokyo 40 Other 100.0 2 7 None

Transport and

storage of

merchandises

and finished

products

Lease of part

of office

space

issua Company, Ltd. Minato-ku,

Tokyo 20 Consumer products 100.0 1 5 Loans

Sale of

merchandises

and finished

products

Lease of part

of office

space


14


Voting

shares

held by

Lion



support

Business

dealings

Lease of


officers

Lion

employees

Ipposha Oil Industries

Co., Ltd.

Ono-shi,

Hyogo

Millions of yen

200 Industrial products 100.0 2 4 Loans

Sale of

merchandises

and finished

products and

purchase of raw

materials and

merchandises

Lease of part

of office

space

Lion Corporation (Hong

Kong) Ltd.

China

（Hong

Kong）

Thousands of

HK$

12,000

Overseas business 100.0 1 2 None

Sale of

merchandises

and finished

products

－

Lion Corporation

(Singapore) Pte. Ltd. Singapore

Thousands of

S$

9,000


Sale of

merchandises

and finished

products

－

Lion Advertising Ltd.

China

(Hong

Kong）

Thousands of

HK$

100

Overseas business

*2

100.0

(100.0)

1 1 None －－

*1

Lion Eco Chemicals

Sdn. Bhd.

Malaysia

Thousands of

M$

201,000

Overseas business 100.0 1 4 None －－

Lion Daily Necessities

Chemicals (Qingdao)

Co., Ltd.

China Millions of yen

723 Overseas business 100.0 3 4 None

Sale of

merchandises

and finished

products

and purchase of

merchandises

－

Lion (China) Home

Products & Technology

Co., Ltd.

China

Thousands of

US$

33,500


PT. IPPOSHA

INDONESIA Indonesia

Thousands of

US$

750

Overseas business

*3

100.0

(90.0)

－ 1 None －－

CJ Lion Corporation South

Korea

Thousands of

won

5,000,000


Sale of

merchandises

and finished

products

and purchase of

merchandises

－

Lion Chemical Industry

(Taiwan) Co., Ltd. Taiwan

Thousands of

NT$

218,150


Sale of

merchandises

and finished

products

－

Lion Corporation

(Thailand) Ltd. Thailand

Thousands of

baht

300,000


Sale of

merchandises

and finished

products

and purchase of

merchandises

－

Peerless Lion

Corporation Philippines

Thousands of

peso

600,000



15


Voting

shares

held by

Lion



support

Business

dealings

Lease of


officers

Lion

employees

Lion Service Co., Ltd. Thailand

Thousands of

baht

7,000

Other businesses

*3

49.0

(49.0)

－－ None －－

Eastern Silicate

Company Limited

Thailand

Thousands of

baht

500

Other businesses

*4

99.9

(99.9)

－ 2 None －－

Equity-method affiliates


Voting

shares

held by

Lion



support

Business

dealings

Lease of


officers

Lion

employees

Lion Akzo Co., Ltd. Yokkaichi-

shi, Mie

Millions of yen

1,000 Industrial products

%

50.0

3 1 None

Purchase of

fatty acid

nitrogen

derivatives

Lease of part

of office space

Lion Idemitsu

Composites Co., Ltd.

Taito-ku,

Tokyo 100 Industrial products 50.0 2 3 None

Purchase of

special synthetic

resin com-

pounds

－

Planet Logistics Co.,

Ltd.

Sumida-ku,

Tokyo 240 Other 20.8 1 1 None

Transport and

storage of

merchandises

and finished

products

－

Planet, Inc. Minato-ku,

Tokyo 436 Other 16.1 1 － None

Utilization of

VANs －

Southern Lion Sdn.

Bhd. Malaysia

Thousands of

M$

22,000


Sale of

merchandises

and finished

products

and purchase

of merchandises

－

P.T. Lion Wings Indonesia

Millions of

rupiah

64,062


Sale of

merchandises

and finished

products

and purchase

of merchandises

－

*1. Lion Chemical Co., Ltd. and Lion Eco Chemicals Sdn. Bhd. are specified subsidiary.

*2. The voting shares of Lion Advertising Ltd. are held by Lion Corporation (Hong Kong) Ltd.

*3. 90% of PT. IPPOSHA INDONESIA’s voting shares are held by Ipposha Oil Industries Co., Ltd.

*4. The voting shares of Lion Service Co., Ltd. and Eastern Silicate Company Limited are held by Lion Corporation

(Thailand) Ltd.

5. The figure in parentheses in the “Voting shares held by Lion” column is the percentage of total voting shares held

indirectly by Lion Corporation.

6. In addition to the companies listed above, there are one small-scale, non-consolidated equity-method companies

and one small-scale equity-method affiliate.


16

III. Management Policies

1. Basic Management Policies

The Lion Group positions “Fulfilling a Spirit of Love” as fundamental to its management, and thus

contributes to the enrichment of the happiness and lives of people. Based on this motto, the Lion

Group provides customers with superior products and services that are useful in securing the

healthy, clean and comfortable lifestyles of people. The Group fully recognizes its mission to make

an active contribution to society through such efforts.

The Lion Group takes continual steps to further improve its corporate value. To this end, the Group

provides products and services that place the utmost priority on customer satisfaction based on an

accurate understanding of the changes taking place in peoples’ values and the social role

companies are required to play. At the same time, Lion promotes environmental preservation

activities and enhances its corporate governance systems in order to remain a highly trustworthy

company that meets the expectations of stakeholders, including shareholders, customers, business

partners, local communities/society and employees.

2. Performance Targets

Through the thorough selection and concentration of investment in management initiatives, efforts

to reform its business structure and reinforce its earnings structure, and aggressive acquisitions and

the development of new businesses, Lion is striving to increase its corporate value with the goal of

reaching a consolidated ROE of 10%.

3. Medium and Long-term Management Strategies

In recognition of ongoing social change, the Lion Group has formulated a management vision,

“Vision 2020,” as an ideal for the Lion Group in 2020, and is advancing the “V-1 Plan” as a

medium-term management plan that comprises basic strategies to achieve this management vision.

“Vision 2020”

Management Vision: The Ideal Lion Corporation in Fiscal 2020 (Three Defining Characteristics)

1. Be a company that creates value for lifestyle and spiritual fulfillment

2. Be a company that is advanced in the area of environmental responsiveness

3. Be a company that continues to take on challenges, create and learn

【Four Strategies: Framework to Achieve “Vision 2020” 】

1. Qualitative Growth of Domestic Businesses

2. Quantitative Expansion of Overseas Businesses

3. Development of New Business Value

4. Enhancement of Organizational Learning Capabilities

4. Management Issues

As it steadily implements the four strategies of the V-1 Plan with the aim of realizing “Vision 2020,” the

Lion Group recognizes the existence of certain management issues that have a direct impact on the

achievement of its objectives.

(1) Qualitative Growth of Domestic Businesses

In the Consumer Products Business in Japan, Lion will strengthen its profitability. To this end, the

Company will implement thorough strategies to boost its brand recognition and streamline competition


17

costs in the mainstay Health Care and Household businesses. In addition, by strategically focusing

resources on R&D and strengthening outside collaborative activities, Lion will work to create the seeds

of new technology and ensure a stable, efficient supply chain.

(2) Quantitative Expansion of Overseas Businesses

Mainly in burgeoning Asian markets, Lion will place further emphasis on marketing activities and steadily

expand production capacities, primarily for oral care products and laundry detergents, with the aim of

enhancing its market presence. Furthermore, while focusing on growing its business in the Philippines,

the Lion Group will bolster efforts to explore new business areas overseas as it works to achieve

business expansion.

(3) Development of New Business Value

In pursuit of the further expansion of sales in the area of mail-order services, Lion will strengthen its

initiatives in new product development and commercialization while actively launching new businesses

that utilize its existing management resources and seeking new business opportunities.

(4) Enhancement of Organizational Learning Capabilities

In line with the new corporate message, Lion will create workplaces where a diverse workforce can

thrive and carry out human resource development initiatives, seeking to create a bolder, more

enterprising corporate culture. Lion will also concentrate on its ECO LION activities to further reinforce

and facilitate its environmental approach in order to help protect the environment.

By vigorously promoting the aforementioned four strategies, the Lion Group aims to increase profitability

and strengthen its business foundation. Simultaneously, the Group will make broad-ranging

contributions to the realization of a sustainable, recycling-oriented society and thereby enhance its

corporate value.


18

IV. Consolidated Financial Reporting Statements 1. Consolidated Balance Sheets

(Millions of yen)

Fiscal Year

Ended December 31, 2012

Fiscal Year Ended December

31, 2013

Assets

Current assets

Cash and deposits 26,149 25,559

Notes and accounts receivable-trade 51,218 57,246

Short-term investments securities 16,358 25,429

Merchandise and finished goods 20,383 23,005

Work in process 3,496 3,278

Raw materials and supplies 7,954 8,802

Deferred tax assets 3,239 2,569

Other 2,288 2,311

Allowance for doubtful accounts (41) (52)

Total current assets 131,047 148,150

Noncurrent assets

Property, plant and equipment

Buildings and structures 65,075 71,030

Accumulated depreciation (45,731) (47,556)

Buildings and structures, net 19,344 23,474

Machinery, equipment and vehicles 123,064 127,500


Machinery, equipment and vehicles, net 15,981 19,611

Land 18,853 18,891

Lease assets 438 422

Accumulated depreciation (277) (217)

Lease assets, net 161 205

Construction in progress 4,705 3,630

Other 20,377 21,142


Other, net 2,908 3,175

Total property, plant and equipment 61,955 68,989

Intangible assets

Goodwill 256 128

Right of trademark 15,301 10,577

Other 2,197 1,901

Total intangible assets 17,754 12,606

Investments and other assets

Investment securities 28,564 33,362

Long-term loans receivable 11 14

Prepaid pension cost 15,878 16,249

Deferred tax assets 1,263 1,455

Other 1,159 1,306

Allowance for doubtful accounts (39) (37)

Total Investments and other assets 46,837 52,351

Total noncurrent assets 126,547 133,948

Total assets 257,595 282,098


19

(Millions of yen)

Fiscal Year



31, 2013

Liabilities

Current liabilities

Notes and accounts payable-trade 40,530 49,918

Short-term loans payable 5,943 9,611

Current portion of long-term loans payable 2,416 22,466

Accounts payable-other and accrued expenses 39,650 39,087

Income taxes payable 1,532 3,057

Provision for bonuses 1,928 2,176

Provision for sales returns 664 603

Provision for sales promotion expenses 408 744

Provision for directors' bonuses 147 231

Asset retirement obligation 9 0

Other 2,911 3,759

Total current liabilities 96,142 131,656

Noncurrent liabilities

Long-term loans payable 22,670 204

Provision for retirement benefits 19,231 19,353

Provision for directors' retirement benefits 331 373

Asset retirement obligation 324 340

Other 4,731 5,936

Total noncurrent liabilities 47,288 26,208

Total liabilities 143,431 157,865

Net assets

Shareholders’ equity

Capital stock 34,433 34,433

Capital surplus 31,499 31,499

Retained earnings 57,996 61,410

Treasury stock (16,656) (16,755)

Total shareholders' equity 107,273 110,588

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 3,688 6,921

Deferred gains or losses on hedges 6 24

Foreign currency translation adjustment (1,708) 914

Total accumulated other comprehensive income 1,987 7,860

Subscription rights to shares 129 193

Minority interests 4,772 5,590

Total net assets 114,163 124,232

Total liabilities and net assets 257,595 282,098


20

2. Consolidated Statements of Income and Consolidated Statement of Comprehensive Income

Consolidated Statements of Income

(Millions of yen)

Fiscal year


Fiscal year Ended December

31, 2013

Net sales 335,171 352,005

Cost of sales 145,385 153,336

Gross profit 189,785 198,668

Selling, general and administrative expenses 182,572 187,849

Operating income 7,213 10,819

Non-operating income

Interest income 160 206

Dividends income 512 565

Equity in earnings of affiliates 803 696

Royalty income 205 256

Foreign exchange gains 133 216

Other 453 414

Total non-operating income 2,268 2,357

Non-operating expenses

Interest expenses 698 726

Loss on disposal of inventories 115 56

Other 104 94

Total non-operating expenses 917 876

Ordinary income 8,564 12,300

Extraordinary income

Gain on disposal of noncurrent assets 299 41

Gain on sales of investment securities 67 1,428

Other - 83

Total extraordinary income 367 1,552

Extraordinary loss

Loss on disposal of noncurrent assets 205 899

Impairment loss 131 1962

Loss on valuation of investment securities - 40

Other - 24

Total extraordinary losses 337 2,926

Income before income taxes 8,594 10,925

Income taxes-current 2,044 4,053

Income taxes-deferred 1,654 159

Total income taxes 3,699 4,213

Income before minority interests 4,895 6,712

Minority interests in income 659 615

Net Income 4,235 6,097


21

Consolidated Statement of Comprehensive Income

(Millions of yen)

Fiscal Year



31, 2013

Income before minority interests 4,895 6,712

Other comprehensive income

Valuation difference on available-for-sale securities 4,041 3,214

Deferred gains or losses on hedges 13 17

Foreign currency translation adjustment 2,318 3,147

Share of other comprehensive income of associates accounted for using equity method

209 169

Total other comprehensive income 6,583 6,548

Comprehensive income 11,478 13,261

Comprehensive income attributable to:

Comprehensive income attributable to owner of the parent

10,209 11,970

Comprehensive income attributable to minority interests

1,268 1,290


22

3. Consolidated Statement of Changes in Shareholders’ Equity Consolidated Results for the Year Ended December 31, 2012 (January 1 to December 31, 2012)

(Millions of yen)


Capital stock Capital surplus Retained earnings

Treasury stock Total shareholders' equity

Balance at the start of current period

34,433 31,499 56,755 (16,653) 106,035

Changes of items during the period

Dividends from surplus (2,954) (2,954)

Net income 4,235 4,235

Purchase of treasury stock (155) (155)

Disposal of treasury stock (40) 152 111

Net changes of items other than shareholders' equity

Total changes of items during the period

- - 1,241 (2) 1,238

Balance at the end of current period

34,433 31,499 57,996 (16,656) 107,273

(Millions of yen)


Valuation difference on available-for-sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment


Subscription rights to shares

Minority interests

Net assets


(351) (6) (3,628) (3,986) 180 3,023 105,252


Dividends from surplus

(2,954)

Net income 4,235

Purchase of treasury stock

(155)

Disposal of treasury stock

111

Net changes of items other

than shareholders' equity

4,040 13 1,919 5,973 (50) 1,749 7,672


4,040 13 1,919 5,973 (50) 1,749 8,911


3,688 6 (1,708) 1,987 129 4,772 114,163


23

Consolidated Results for the Year Ended December 31, 2013 (January 1 to December 31, 2013)

(Millions of yen)


Capital stock Capital surplus Retained earnings

Treasury stock Total shareholders' equity


34,433 31,499 57,996 (16,656) 107,273


Dividends from surplus (2,683) (2,683)

Net income 6,097 6,097


Disposal of treasury stock 0 2 2



- 0 3,413 (99) 3,314


34,433 31,499 61,410 (16,755) 110,588

(Millions of yen)


Valuation difference on available-for-sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment


Subscription rights to shares

Minority interests

Net assets


3,688 6 (1,708) 1,987 129 4,772 114,163


Dividends from surplus

(2,683)

Net income 6,097

Purchase of treasury stock

(101)

Disposal of treasury stock

2


3,232 17 2,622 5,873 63 817 6,754


3,232 17 2,622 5,873 63 817 10,069


6,921 24 914 7,860 193 5,590 124,232


24

4. Consolidated Statements of Cash Flows

(Millions of yen)

Fiscal year



31, 2013

Net cash provided by (used in) operating activities

Income before income taxes and minority interests 8,594 10,925

Depreciation and amortization 11,834 11,227

Impairment loss 131 1,962

Increase (decrease) in provision for bonuses (238) 156

Increase (decrease) in provision for retirement benefits (810) (378)

Interest and dividends income (672) (772)

Interest expenses 698 726

Loss (gain) on disposal of noncurrent assets (94) 858

Loss (gain) on sales of investment securities (67) (1,428)

Loss (gain) on valuation of investment securities - 40

Equity in (earnings) losses of affiliates (803) (696)

Decrease (increase) in notes and accounts receivable-trade 5,572 (4,167)

Decrease (increase) in inventories (725) (2,207)

Increase (decrease) in notes and accounts payable-trade (2,546) 8,440

Increase (decrease) in accounts payable-other and accrued expenses (724) 304

Increase (decrease) in other current liabilities 214 293

Decrease (increase) in other current assets (493) (281)

Other, net 91 (209)

Subtotal 19,961 24,793

Interest and dividends income received 1,199 1,068

Interest expenses paid (678) (711)

Income taxes paid (1,719) (2,240)

Net cash provided by (used in) operating activities 18,762 22,910

Net cash provided by (used in) investment activities

Decrease (increase) in time deposits (886) (69)

Purchases of property, plant and equipment (7,973) (14,649)

Proceeds from sales of property, plant and equipment 457 183

Purchase of intangible assets (907) (112)

Purchase of investment securities (73) (1,018)

Proceeds from sales of investment securities 110 2,802

Payments of loans receivable (0) (162)

Collection of loans receivable 8 157

Other, net 93 49

Net cash provided by (used in) investment activities (9,172) (12,819)


25

(Millions of yen)

Fiscal year



31, 2013

Net cash provided by (used in) financing activities

Increase in short-term loans payable 15,747 18,881

Decrease in short-term loans payable (15,441) (15,967)

Repayment of long-term loans payable (2,416) (2,416)


Proceeds from disposal of treasury stock 3 2

Cash dividends paid (2,959) (2,676)

Cash dividend to minority shareholders (239) (440)

Proceeds from minority interests in establishment of consolidated subsidiaries

545 -

Other, net (142) (52)

Net cash provided by (used in) financing activities (4,923) (2,772)

Effect of exchange rate change on cash and cash equivalents 602 709

Net increase (decrease) in cash and cash equivalents 5,269 8,027

Cash and cash equivalents at beginning of period 35,640 40,913

Increase in cash and cash equivalents from newly consolidated subsidiary

3 -

Cash and cash equivalents at end of period 40,913 48,941


26

5. Segment Information

[Segment Information]

1. Overview of Reportable Segments

The reportable segments of Lion Corporation comprise those entities for which obtaining separate

financial reports is possible and that are subject to regular review by the Board of Directors, which

decides upon the distribution of management resources to said segments.

Lion Corporation positions segments distinguished by their products within each business division.

Each segment proposes comprehensive product strategies while pursuing business expansion.

Affiliated companies in Japan undertake business activities that are in line with the characteristics

of their respective products and services.

Affiliated companies located overseas are independent management units that conduct business

activities that conform to the characteristics of the regions in which they operate.

The three reportable segments (distinguished by products, services and regions) that therefore

comprise Lion Corporation’s operations are: Consumer Products Business, Industrial Products

Business and Overseas Business.

The Company’s Reportable Segments are as follows.

1) Consumer Products Business

The Consumer Products Business engages in the manufacture and sale of commodities, OTC

drugs and functional food products primarily in Japan.

Main products: toothpaste, toothbrushes, hand soaps, analgesics, eyedrop solutions, health tonic

drinks, insecticides, laundry detergents, dishwashing detergents, fabric softeners, household

cleaners, bleaches and pet supplies

2) Industrial Products Business

The Industrial Products Business engages primarily in the manufacture and sale of chemical raw

materials, industrial products and other items in Japan and overseas.

Main products: activators, electro-conductive carbon and industrial cleaners

3) Overseas Business

The Overseas Business engages mainly in the manufacture and sale of commodities by affiliated

overseas businesses.

4) Other Business

Lion subsidiaries located in Japan primarily undertake operations of each Lion Group business.

Main products and services: construction contractor business, real estate management,

distribution/storage and temporary staffing services.

2. Methods for Calculating Net Sales, Profits, Losses, Assets, Liabilities and Other Monetary Items for

Each Reportable Segment

Profit figures for each reportable segment are based on operating income.

Intersegment transaction and transfer prices are, in principle, established based on negotiations

reflecting market prices, total supplier costs and the Company’s asking price.


27

3. Information Regarding Net Sales, Profits, Losses, Assets, Liabilities and Other Monetary Items

for Each Reportable Segment

Consolidated Results for the Year Ended December 31, 2012 (January 1 to December 31, 2012) (Millions of yen)

Reportable segments

Other Total Adjustment*2 Consolidated

total*3 Consumer

Products

Business

Industrial

Products

Business

Overseas

Business

1. Net sales

(1) Sales to

external

customers

(2)Intersegment

sales*1

244,285

21,757

30,159

19,625

56,093

3,079

4,633

25,164

335,171

69,627

-

(69,627)

335,171

-

Total 266,042 49,784 59,173 29,798 404,799 (69,627) 335,171

Segment income 4,304 360 1,462 971 7,098 115 7,213

Segment assets 107,962 39,683 39,365 21,372 208,383 49,211 257,595

Other monetary

items

Depreciation and

amortization

Investment in

equity method

affiliates

Increases in

property, plant and

equipment and

intangible assets

9,017

2,973

6,244

1,429

564

1,134

903

91

2,754

251

1,874

160

11,601

5,504

10,294

232

(73)

525

11,834

5,431

10,820

Notes: 1. Internal transactions are included within reportable segments.

2. (1) Segment income adjustments totaling ¥115 million are composed mainly of internal transaction

eliminations.

(2) Segment asset adjustments include internal transaction eliminations resulting in a ¥66,602 million

deduction and a ¥115,414 million addition that reflects Company assets not allocated to reportable

segments.

Company assets are composed mainly of financial assets (including cash and deposits, short-term

investment securities and investment securities) and administration assets, both of which are not

attributable to reportable segments.

(3) Depreciation and amortization adjustments are composed of those involving Company assets and

internal transaction eliminations.

3. Segment income is adjusted based on operating income in consolidated income statements.


28

Consolidated Results for the Year Ended December 31, 2013 (January 1 to December 31, 2013) (Millions of yen)

Reportable segments

Other Total Adjustment*2 Consolidated

total*3 Consumer

Products

Business

Industrial

Products

Business

Overseas

Business

1. Net sales

(1) Sales to

external

customers

(2)Intersegment

sales*1

242,707

22,499

31,236

20,394

72,656

4,208

5,404

23,318

352,005

70,421

-

(70,421)

352,005

-

Total 265,207 51,630 76,865 28,723 422,427 (70,421) 352,005

Segment income 7,289 778 1,435 1,016 10,519 300 10,819

Segment assets 110,188 40,605 51,391 20,740 222,926 59,172 282,098

Other monetary

items

Depreciation and

amortization

Investment in

equity method

affiliates

Increases in

property, plant and

equipment and

intangible assets

8,361

3,351

6,084

1,167

629

1,069

1,187

117

6,513

217

1,992

104

10,934

6,090

13,772

292

(145)

(63)

11,227

5,944

13,709

Notes: 1. Internal transactions are included within reportable segments.

2. (1) Segment income adjustments totaling ¥300 million are composed mainly of internal transaction

eliminations.

(2) Segment asset adjustments include internal transaction eliminations resulting in a ¥66,399 million

deduction and a ¥125,572 million addition that reflects Company assets not allocated to reportable

segments.

Company assets are composed mainly of financial assets (including cash and deposits, short-term

investment securities and investment securities) and administration assets, both of which are not

attributable to reportable segments.

(3) Depreciation and amortization adjustments are composed of those involving Company assets and

internal transaction eliminations.

3. Segment income is adjusted based on operating income in consolidated income statements.


29

6. Per Share Information

FY 2012

(January 1 to December 31, 2012)

FY 2013


Net assets per share 407.08 Yen 441.59 Yen

EPS 15.77 Yen 22.72 Yen

Diluted EPS 15.75 Yen 22.68 Yen

Basis for Calculations 1. Amount of Net Assets Per Share

Item FY 2012


FY 2013 (January 1 to

December 31, 2013)

Total amount of net assets in Consolidated Financial Reporting Statements (Millions of yen)

114,163 124,232

Amount of net assets related to common stock (Millions of yen)

109,261 118,448

Principal breakdown of balances (Millions of yen)

Subscription rights 129 193

Minority interest 4,772 5,590

Number of outstanding shares of common stock (Thousands of shares)

299,115 299,115

Numbers of shares of treasury stock as common stock (Thousands of shares)

30,713 30,882

Number of shares of common stock that are calculated based on the amount of net assets per share (Thousands of shares)

268,401 268,232

2. Net income per share (EPS) and diluted net income per share (diluted EPS)

FY 2012


FY 2013 (January 1 to

December 31, 2013)

EPS

Net income (millions of Yen) 4,235 6,097

Amount not belong to common stockholders (millions of Yen)

－－

Net Income concerning common stock (millions of Yen)

4,235 6,097

Average number of outstanding shares during the period (thousands of shares)

268,611 268,341

Diluted EPS

Net income adjustment (millions of Yen)

Increase in number of common stocks (thousands of shares)

393 460

Of which, stock options (thousands of shares) (393) (460)

Summary of residual shares not included in diluted EPS due to lack of dilution effect.

－－


30

7. Important Subsequent Events Lion reached a decision at the January 31, 2014 Board of Directors meeting to acquire additional shares

of Lion Akzo Co., Ltd. (“LACO”), a joint venture established in tandem with Akzo Nobel N.V. (“AN”), by

taking over AN’s equity stake in LACO through a share transfer.

1. Purpose: Recognizing LACO as strategically important to the Consumer Products and Industrial

Products businesses, Lion intends to make LACO a wholly owned subsidiary through this share

transfer, thereby further streamlining its use of Groupwide management resources.

2. Transferor of Shares: Akzo Nobel N.V. (the Netherlands)

3. Date of transfer: March 31, 2014 (scheduled)

4. Method: Share acquisition in exchange for cash


31

V. Other information

Personnel Changes

1. Change of Representative

There is no change.

Immediately following the Company’s Regular Shareholders’ Meeting scheduled for March 28, 2014, the

following management team is scheduled to assume office and begin exercising their duties, attending a

Board of Directors meeting following said Regular Shareholders’ Meeting.

(1) Director

Name Position

Sadayoshi Fujishige Representative Director and Chairman of the Board

Itsuo Hama Representative Director and President

Executive Officer, Chief Executive Officer

Takayasu Kasamatsu Executive Director, Executive Officer

Yuji Watari Executive Director, Executive Officer

Masazumi Kikukawa Director, Executive Officer

Kenjiro Kobayashi Director, Executive Officer

Yasuo Shimizu Director, Executive Officer

Toshio Kakui Director, Executive Officer

Mitsuaki Shimaguchi External Director

Professor Emeritus of Keio University

Hideo Yamada External Director

Attorney at Law

The notification of the nomination of Mr. Mitsuaki Shimaguchi and Mr. Hideo Yamada as independent directors has been sent to the Tokyo Stock Exchange.

(2)Corporate Auditor

Name Position

Shinjiro Iwahori Standing Corporate Auditor

Shozo Hanada Standing Corporate Auditor

Hideo Doi External Corporate Auditor

(Certified Public Accountant)

Sumiaki Nomura External Corporate Auditor

(Certified Tax Accountant)

The notification of the nomination of Mr. Hideo Doi and Mr. Sumiaki Nomura as independent directors has been sent to the Tokyo Stock Exchange.


32

(3) Substitute Corporate Auditor

Name Position

Noboru Kojima Substitute Corporate Auditor

(Certified Public Accountant, Certified Tax Accountant)

(4) Executive Officer (Excluding interlocking directors)

Name

Hideyuki Imai Sadao Hamada

Fumihiro Mikuchi Takeo Sakakibara

Shu Kawazoe Hiroyuki Chiba

Tomomichi Okano Kohei Miyauchi

Summary of Consolidated Financial Statements for ... - Lion

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