1st Quarter Results - Part 1
Konami Corporation
9 August 2001
PART 1
Summary of Consolidated Financial Results
for the First Quarter Ended June 30,2001
August 9, 2001
KONAMI CORPORATION
Contact: Noriaki Yamaguchi, Representative Director and CFO
Phone: 03 (3578) 0573
1. Consolidated Financial Results for the First Quarter Ended June 30,2001
(1) Consolidated Results of Operations
(Figures truncated)
Year-on Operating Year-on- Ordinary Year-on
year Income year Income year
Net Sales Change Change Change
(Y million) (%) (Y million) (Y million) (%)
1st Quarter ended
June 30, 2001 37,723 - 2,769 - 2,993 -
Year ended
March 31, 2001 171,480 16.9 38,645 24.9 36,427 17.1
Diluted Ordinary Ordinary
Year-on Net Income Net Income Return Income Income to
Net year per share per share on to Sales
Income Change Equity Assets Ratio
Ratio
(Y Million) (%) (Y) (Y) (%) (%) (%)
1st Quarter ended
June 30, 2001 698 - 5.43 - - - 7.9
Year ended
March 31, 2001 21,781 18.7 190.91 - 19.7 18.9 21.2
Notes:
1. Equity in net income (losses) of affiliated companies
1st Quarter ended June 30,2001: Y50 million
Year ended March 31,2001: Y(583) million
2. Average number of shares issued and outstanding
1st Quarter ended June 30, 2001: 128,737,490 shares
Year ended March 31, 2001: 114,093,518 shares
3. There is no change in accounting policies.
4. Change (%) of net sales, operating income, ordinary income and net income
represents the increase or decrease ratio in relation with the same period
of the previous year.
(2) Consolidated Financial Position
Total Total Equity-Assets Total
Assets Shareholders' Ratio Shareholders'
(Y million) Equity % Equity per share
(Y million) %
June 30,2001 221,831 146,330 66.0 1,136.66
March 31, 2001 250,023 149,875 59.9 1,164.19
Notes:
Number of shares issued and outstanding
June 30.2001: 128,737,420 shares
March 31,2001: 128,737,538 shares
(3) Consolidated Cash Flows
Net cash provided by (used in) Cash and
Operating Investing Financing Cash Equivalents
Activities Activities Activities at the End
(Y million) (Y million)(Y million) (Y million)
1st Quarter ended
June 30, 2001 (15,333) (1,041) (5,296) 45,082
Year ended
March 31, 2001 21,116 (72,686) 60,440 66,812
(4) Consolidation Scope and Application of Equity Method
Consolidated subsidiaries: 32 companies
Affiliated companies applicable under equity method: 2 companies
(5) Changes in Consolidation Scope and Application of Equity Method
Increase in consolidated subsidiaries: I company
1. The financial results for the first quarter ended June 30,2001 are not
audited by independent public accountants-
2. The results for the year ended March 31, 2001 are stated for reference
since those for the first quarter ended June 30, 2000 were not announced in
the previous fiscal year.
1. Organization Structure of Konami Group
Konami group specifies its business domain as the digital entertainment
industry by providing a wide range of entertainment via computers, and is
structured by KONAMI CORPORATION (the 'company'), 32 consolidated
subsidiaries and 2 affiliated companies applicable under equity method.
The Company, the subsidiaries and the affiliated companies are categorized into
each business segment according to their operations as follows:
Business Segments Major Companies
Amusement Machines Domestic The Company, Konami Marketing, Inc.,
1 other company.
Konami of America, Inc.
Overseas Inc. Konami Amusement of Europe Ltd.,
Konami Marketing (Asia) Ltd. (*1)
2 other companies
Consumer-use Software Domestic The Company
Konami Marketing, Inc
Konami Computer Entertainment Osaka,
Inc. (*2)
KCE Tokyo, Inc
Konami Computer Entertainment Japan,
Inc.
Konami Computer Entertainment Studios,
Inc.
Konami Computer Entertainment School,
Inc.
Mobile 21 Co., Ltd (*6), Konami Style.
com Japan, Inc
3 other companies
Overseas Konami of America, Inc., Konami of
Europe GmbH.
Konami Marketing (Asia) Ltd (*1),
Konami Software Shanghai, Inc.
3 other companies
Pachinko Systems Domestic The Company, Konami Parlor Entertain-
ment, Inc
Gaming Machines Domestic The Company, Konami Marketing, Inc.
Overseas Konami Gaming, Inc., Konami Marketing
(Asia) Ltd. (*1)
4 other companies
Creative Products Domestic The Company, Konami Marketing, Inc
Konami Music Entertainment, Inc.,
Konami Style.com Japan, Inc.
Overseas Konami Marketing (Asia) Ltd. (*1),
2 other companies
Health Entertainment Domestic Konami Sports Corporation (*3)
Konami Sports Life Corporation (*4)
2 other companies (*5)
Amusement Operations Domestic Konami Amusement Operation, Inc
Finance Domestic Konami Capital, Inc,
Others Domestic Konami Capital,Inc., Konami Service
Inc., TAKARA CO., LTD. (*6)
1 other company
Overseas 3 other companies
Notes:
1. The companies that are running multiple businesses are included in each
segment respectively.
2. Changes in main companies for the first quarter ended June 30, 2001 are as
follows:
(*1) Konami (Hong Kong) Ltd, changed its company name to Konami Marketing
(Asia) Ltd- on June 1, 2001.
(*2)KCEO Inc. changed its company name to Konami Computer Entertainment Osaka,
Inc. on June 28, 2001.
(*3)PEOPLE CO., LTD. changed its company name to Konami Sports Corporation on
June 1, 2001.
(*4) NAPS CORPORATION changed its company name to Konami Sports Life
Corporation on June 1, 2001.
(*5) NISSAN SPORTS PLAZA, CO., LTD. became a wholly owned subsidiary of Konami
Sports Corporation on June 22, 2001, and changed its company name to Konami
Sports plaza Inc. on June 29,2001.
(*6) Mobile 21, Co,, Ltd. and TAKARA CO., LTD. are affiliated
companies applicable under equity method.
3.KCE Tokyo, Inc. changed its company name to Konami Computer Entertainment
Tokyo, Inc. on August 1,2001.
4.Konami Gaming, Inc., acquired 100% shares of Paradigm Gaming Systems, Inc.
on August 3, 2001, which is to be integrated as a systems division.
5.HUDSON SOFT CO., LTD. (HUDSON) will be an affiliate applicable under
equity method based on the agreement on strategic business alliance including
a capital tie-up (the Company is to acquire shares of HUDSON through a
third-party allotment of shares on August 21,2001). HUDSON will succeed a
portion (being the entire business located in Sapporo) of the business of a
subsidiary, Konami Computer Entertainment Studios, Inc. by the method of
absorption following a spin-off on December 1, 2001.
2. Consolidated Results of Operations
1. Results for the First Quarter
In the 1st quarter the entertainment industry in which our group operates,
GameBoy Advance, next generation's mobile game hardware, was released at the end
of the previous fiscal year, some new titles for playstation 2 recorded million
sales, and expectations for the release of Microsoft Corporation's Xbox and
NINTENDO GAMECUBE this fall has been growing.
In these circumstances, our major products made contribution to the sales,
particularly our branded POWERFUL PRO BASEBALL series and soccer games in the
Consumer-use Software (CS) Division, and card games in the Creative Products
(CP) Division.
As a result, the consolidated sales for the 1st quarter ended June 30,2001
amounted to Y37,723 million.
2. Performance by Division
Sales in the Amusement Machines (AM) Division benefited from wider acceptance
of products such as MAMBO A GO GO, a music simulation game, which enables you
to experience the real performance of conga, a Latin percussion instrument.
Also contributing to the results were the pop'n music series and the
variation kit of SILENT SCOPE. Consequently, the consolidated sales in the AM
Division were Y2,181 million.
In the Consumer-use Software (CS) Division, two titles made contribution to
the sales: JIKKYO POWERFUL PRO BASEBALL 2001 for playstation and WORLD SOCCER
WINNING ELEVEN 5 for playstation 2, which has maintained the popularity since
its release in last fiscal year. In overseas, new titles for GameBoy Advance
CASTLEVANIA: CIRCLE OF MOON and KONAMI KRAZY RACERS registered brisk sales,
and the robot simulation game Z.O.E (Zone of the Enders) maintained a
consistent level of sales. Consolidated sales in the CS Division were Y8,692
million.
The Pachinko Systems (PS) Division has maintained a strong reputation for the
versatile appeal of its LCD units with high playability As a result of stable
growth in sales of LCD units, consolidated sales in the PS Division amounted
to Y3,623 million.
In the Gaming Machines (GM) Division, two middle-sized token-operated
machines, CYCLONE FEVER and SLOT MONSTER registered consistently strong
sales. Consequently consolidated sales in the GM Division were Y626 million.
The Creative Products (CP) Division's consolidated sales amounted to Y5,771
million, reflecting contributions from the new YU-GI-OH! OFFICIAL CARD GAME
DUEL MONSTERS series.
In the Health Entertainment (HE) Division, fitness facilities operated by
Konami Sports Corporation and sales of fitness equipment by Konami Sports
Life Corporation made steady progress. As a result, consolidated sales in the
HE Division reached Y15.482 million.
Consolidated sales in the Amusement Operations (AO) Division and finance and
other segments amounted to Y993 million and Y350 million respectively.
Consolidated ordinary income and consolidated net income for the 1st quarter
were Y2,993 million and Y698 million respectively. This was less than the
average rate of profit in previous year due to lower sales of card games,
which have relatively high profit margins.
3. Amendment of Estimates of Financial Results
1, Amendment of Estimates of the Financial Results for the Year Ending
March 31,2002
New titles of the YU-GI-OH! OFFICIAL CARD GAME series have shown consistent
growth in sales. However, the rate of growth has slowed compared to previous
estimates (announced in May 2001), because existing card game titles released
last fiscal year have already made their full impact on the market.
Lower sales of relatively profitable card games influenced the downward revision
in income. Also, the expected extraordinary income from the initial public
offering (IPO) by Konami Computer Entertainment Japan, Inc., a consumer-use
software subsidiary, will be accounted for the 2nd half of the fiscal year
owing to the postponement of the IPO considering recent market conditions.
As a result, the estimates of consolidated results (for the six months ending
September 30, 2001 and year ending March 31, 2002) announced in May 2001 have
been amended as follows.
(Profits and losses generated by the strategic capital tie-up with HUDSON
have not been taken into consideration for this amendment).
(Millions of yen)
Net sales Ordinary Net income
income
Previous Six months 100,000 11,000 9,500
Estimates Year 250,000 40,000 24,000
Estimates after Six months 89,000 7,500 2,500
Amendment Year 233,000 31,000 17,500
Changes Six months -11,000 -3,500 -7,000
Year -17,000 -9,000 -6,500
Changes (%) Six months -11.0 -31.8 -73.7
Year -6.8 -22.5 -27.1
(Millions of yen)
CS AM GM PS CP HE AO Other Total
Previous Six 25,000 8,200 3,200 6,000 21,500 33,000 2,100 1,000 100,000
months
Estimates
Year 80,000 16,000 10,500 18,500 48,000 71,000 4,000 2,000 250,000
Estimates
After Six 25,500 5,700 2,700 6,500 12,500 33,000 2,100 1,000 89,000
months
Amendment
Year 82,000 12,500 11,000 20,500 30,000 71,000 4,000 2,000 233,000
Changes Six 500 -2,500 -500 500 -9,000 0 0 0 -11,000
months
Year 2,000 -3,500 500 2,000 -18,000 0 0 0 -17,000
2, Amendment for Estimates of Interim and Year-end Cash Dividends for the
Year Ending March 31,2002
According to the Company's basic policy of maintaining total cash dividends
at 30 percent of consolidated net income, estimated cash dividends per share
have been amended as follows as a result of the amendment for estimated
financial results above.
Interim Year-end Annual
Previous Estimates 28.0 yen 28.0 yen 56.0 yen
Estimates after Amendment 21.0 yen 21.0 yen 42.0 yen
*Cautionary Statement
These statements are based on information currently available to management
but subject to change. Actual financial results might differ due to a number
of factors, not limited to but, general global economy, foreign exchange
rates in which Konami Group trades and the Konami Group's capability to come
up with innovative and attractive products in highly competitive markets of
which we have solid confidence.
4. Strategic Perspectives
To stabilize profits, we have promoted expansion and enhancement of our scope
of business by actively taking M&A and business alliance opportunities. We
have also made our best effort to establish the systems that enable each
business segment to generate profits independently. The strategies we are
currently pursuing are as follows.
1. Enhancement of the Business Foundation of the Group -Strategic Business
Alliance with HUDSON SOFT CO., LTD. including Capital Tie-up -
We aim at the following synergy effects by welcoming HUDSON into the KONAMI
group as announced on July 26 2001.
(1) Enhancement of Group Capabilities
We are aiming to enhance total group capability and to establish and further
expand our firm foundation in the industry through the integration of
operations in Sapporo of Konami Computer Entertainment Studios, Inc. into
HUDSON, mutual utilization of technology and contents, and the joint
acquisition of major contents.
(2) Cooperation in Strategic Areas
We are aiming to achieve synergies in strategic business fields such as
On-Line, and Mobile games and business cooperation other than consumer-use game
software.
(3) Mutual Utilization of Management Resources and Know-how
HUDSON will utilize not only KONAMI's already developed domestic distribution
network but also various development support functions and financial resources-
Further, HUDSON will apply KONAMI'S management know-how.
2. Release of Major Titles by the CS Division and Expansion of the YU-GI-OH!
Series in the US
The CS Division aims at acquiring powerful content from outside while
cultivating and reinforcing own characters at the same time. This fiscal
year, we plan to expand powerful original titles such as METAL GEAR SOLID and
SILENT HILLS, launching them into overseas market.
The YU-GI-OH! OFFICIAL CARD GAME DUEL MONSTERS series will be expanded in the
US through marketing activities that aim at creating synergies with TV
broadcasts, game software and card games. The launch of the series in the US
will be timed to coincide with the Christmas season and will begin with the
distribution of GameBoy software and card games.
3. Creating New Markets in Health Entertainment Business
The KONAMI group will create new market by providing products and services
that combine elements of health and beauty with our accumulated knowledge and
experience in creating entertainment contents with regard to fitness
equipment and machines developed and distributed by Konami Sports Life
Corporation, we scheme to build an increasingly attractive product line-up by
maximizing the synergies effects on both business and home use products. We
plan to release the following new products: MARTIAL BEAT, a fitness game with
music that enables you to enjoy exercise; and FITNESS REVOLUTION and FITNESS
ORCHESTRA series, which are aimed at enabling people to realize healthy
dietary lives while enjoying games and music.
4. Gaming as the Pillar of Overseas Business
For the overseas gaming business, we pursue to increase market share by
strengthening our capacities to produce, manufacture and distribute and
enlarging the sales fields,
As announced on August 6, 2001, we acquired all of the shares of Paradigm
Gaming Systems, Inc. (Paradigm), a developer of casino management systems,
through Konami Gaming, Inc. (KGI), our wholly owned subsidiary in Las Vegas,
our aim is to achieve the following synergies by integrating Paradigm into
the KONAMI group as a gaming systems division of KGl.
(1) Improving services and promoting sales by providing unified solutions
through integration of machines and systems.
(2) Developing highly advanced and entertaining machines, such as
server-based slot machine with extensive progressive systems, which utilize
Paradigm's systems.
(3) Expanding sales by enlarging the customer base.
5. Global Expansion of Gaming Business -Inclusion of Konami Australia Pty.
Ltd.-
To expand the gaming business in countries other than the US in which casinos
are legal, KONAMI will incorporate Konami Australia Ply. Ltd. into the group,
subject to approval of gaming authorities. In this way we will aim to
strengthen our development capabilities in Australia, increase market share,
and establish footholds in new neighboring markets.
5. Consolidated Financial Statements
(1) Consolidated Balance Sheets (Unaudited)
(millions of yen)
March 31, 2001 June 30,2001
Share of Share of
total assets total assets
ASSETS:
I Current Assets Y125,278 50.1% Y97,497 44.0 %
Cash and cash equivalents 66,812 45,092
Trade notes and accounts 33,870 21,810
receivable
Inventories 13,997 20,501
Prepaid expenses 3,257 3,348
Deferred tax assets 6,421 5,318
Other 1,448 1,777
Allowance for bad debts (528) (351)
II Fixed Assets 124,744 49.9 124,334 56.0
1. Tangible fixed assets 31,865 12.7 31,526 14.2
Buildings and structures 19,137 18,791
Machinery and transportation 316 324
equipment
Tools and fixtures 3,975 4,061
Land 8,225 8,190
Construction in progress 211 158
2. Intangible fixed assets 62,736 25.1 62,083 28.0
Leaseholds 2,100 2,092
In-house software 2,267 2,417
Goodwill 57,857 57,131
Other 510 442
3. Investments and other assets 30,143 12.1 30,724 13.8
Investment securities 4,949 4,412
Lease deposits 21,696 22,270
Deferred tax assets 2,881 3,012
Other 615 1,029
TOTAL ASSETS Y250,023 100.0% Y221,831 100.0%
(Millions of yen)
March 31, 2001 June 30, 2001
Share of Share of
total liabilities total liabilities
minority interest minority interest
and and
shareholder shareholder
equity equity
LIABILITIES:
I Current Liabilities Y 77,570 31.0% Y52,954 23.9 %
Trade notes and accounts 24,651 16,660
payable
Short-term loans payable 5,686 4,776
Current portion of 2,001 1,963
long-term loans payable
Current portion of 10,000 10,000
straight bonds
Other accounts payable 8,646 5,804
Accrued expenses 3,780 2.807
Income taxes payable 14,880 1,851
Deferred tax liabilities 339 287
Advances received 2,786 3,089
Allowance for bonuses 1,964 1,606
Other 2,834 4,104
II Long-term Liabilities 8,553 3.5 8,554 3.8
Long-term loans payable 3,262 3,260
Liability for employees' 1,818 2,070
retirement benefits
Liability for directors'
retirement benefits 1,738 1,477
Other 1,733 1,747
TOTAL LIABILITIES 86,124 34.5 61,508 27.7
MINORITY INTEREST 14,023 5.6 13,992 6.3
SHAREHOLDERS' EQUITY:
I Common Stock 47,398 19.0 47,398 21.4
II Additional Paid
in Capital 47,106 18.8 47,106 21.2
III Retained Earnings 55,253 22.1 51,905 23.4
IV Unrealized Holding Gains
(Losses) on other
Investment Securities 115 0.0 (25) (0.0)
V Foreign Currency
Translation Adjustment 1 0.0 (53) (0.0)
149,875 59.9 146,330 66.0
VI Treasury Stock (0) (0.0) (0) (0.0)
TOTAL SHAREHOLDERS' EQUITY 149,875 59.9 146,330 66.0
TOTAL LIABILITIES,
MINORITY INTEREST AND
SHAREHOLDERS'EQUITY Y250,023 100.0 % Y221,831 100.0%
(2) Consolidated Statements of Income (Unaudited)
(Millions of yen)
Year ended First Quarter ended
March 31,2001 June 30, 2001
Share of Share of
net sales net sales
I Net Sales Y171,480 100,0% Y37,723 100.0%
II Cost of Sales 103,209 60.2 26,514 70.3
Gross Profit 68,270 39.8 11,208 29.7
III Selling, General
and Administrative
Expenses 29,624 17.3 8,439 22.4
Operating Income 38,645 22.5 2,769 7.3
IV Non-operating Income 897 0.5 416 1.1
Interest income 468 55
Gain on sale of treasury 16 -
Stock
Rental income 20 5
Foreign exchange gains - 29
Equity in net income of
affiliated companies - 50
Other 393 275
V Non-operating Expenses 3,115 1.8 192 0.5
Interest expenses 810 126
Foreign exchange losses 220 -
Stock issue expenses 639 -
Commission for syndicate loan 302 -
Equity in net losses of
affiliated companies 583 -
Other 558 66
Ordinary Income 36,427 21.2 2,993 7.9
VI Extraordinary Income 4,072 2.4 558 1.5
Gain on reversal of allowance
for bad debts 138
Gain on sale of fixed assets 124 4
Gain on sale of investment
securities - 416
Gain on sale of investments in.
subsidiaries 3 -
Gain on sale of minority interest
in subsidiaries 3,944 -
VII Extraordinary Losses 908 0.5 170 0.4
Loss on sale and disposal of 516 170
fixed assets
Loss on sale of investment 7 -
securities
Loss on cancellation of leasing
contracts 384 -
Net Income before Income Taxes
and Minority Interest 39,591 23.1 3,382 9.0
Income taxes - current 20,902 12.2 1,264 3.3
Income taxes - deferred (3,595) (2.1) 929 2.5
Minority interest 503 0.3 489 1.3
Net Income Y21,781 12.7% Y698 1.9%
(3) Consolidated Statements of Retained Earnings (Unaudited)
(Millions of yen)
Year ended First Quarter
March 31, 2001 June 30, 2001
I Retained Earnings, Beginning
of Period Y39,565 Y55,253
II Increase in Retained Earnings - -
III Decrease in Retained Earnings 6,094 4,046
Cash dividends 5,913 3,604
Directors' bonuses 170 442
Decrease by consolidated subsidiary's
merger with unconsolidated
subsidiary 10 -
21,781 698
IV Net Income
V Retained Earnings, End of Period Y55,253 Y51,905
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