1st Quarter Results
Konami Corporation
31 July 2007
Consolidated Financial Results
for the First Quarter Ended June 30, 2007
(Prepared in Accordance with U.S. GAAP)
July 31, 2007
KONAMI CORPORATION
Address: 7-2, Akasaka 9-chome, Minato-ku, Tokyo, Japan
Stock code number, TSE: 9766
Ticker symbol, NYSE: KNM
URL: www.konami.net
Shares listed: Tokyo Stock Exchange, New York Stock Exchange, London Stock EXCHANGE and
Singapore Exchange
Representative: Kagemasa Kozuki, Representative Director and Chief Executive Officer
Contact: Noriaki Yamaguchi, Representative Director and Chief Financial Officer
(Phone: +81-3-5770-0086)
1. Consolidated Financial Results for the First Quarter Ended June 30, 2007
(Amounts are rounded to the nearest million)
(1) Consolidated Results of Operations
(Millions of Yen, except per share data)
Net revenues Income before Net income
Operating income income taxes
Three months ended June 30, 2007 Y 60,650 Y 7,010 Y 7,271 Y 3,863
% change from previous period 5.2 16.8 25.3 82.2
Three months ended June 30, 2006 57,628 6,003 5,801 2,120
% change from previous period 20.0 95.3 (41.6) (61.0)
Year ended March 31, 2007 280,279 28,145 27,567 16,211
Basic net Diluted net
income per share income per share
Three months ended June 30, 2007 Y 28.14 Y 28.13
Three months ended June 30, 2006 15.46 15.45
Year ended March 31, 2007 118.15 118.09
(2) Consolidated Financial Position
(Millions of Yen, except per share data)
Total assets Total Equity-assets Stockholders'
stockholders' ratio equity per share
Equity
June 30, 2007 Y 306,535 Y 176,453 57.6% Y 1,285.44
June 30, 2006 294,659 162,361 55.1% 1,183.77
March 31, 2007 304,657 174,662 57.3% 1,272.54
(3) Consolidated Cash Flows
(Millions of Yen)
Net cash provided by (used in) Cash and
Operating Investing Financing cash equivalents,
activities activities activities end of the period
Three months ended June 30, 2007 Y 489 Y (6,778) Y (4,277) Y 47,971
Three months ended June 30, 2006 3,029 (2,409) (4,934) 64,518
Year ended March 31, 2007 31,824 (11,098) (33,212) 57,333
2. Consolidated Financial Forecast for the Year Ending March 31, 2008
(Millions of Yen, except per share data)
Net revenues Operating Income Basic net income
income before per share
income Net income
taxes
Year ending March 31, Y 295,000 Y 33,000 Y 32,500 Y 18,300 Y 133.33
2008
% change from previous 5.3 17.3 17.9 12.9
year
Note: There has been no change in our forecast since we originally announced it
on May 22, 2007.
3. Other
(1)Changes to principal subsidiaries during the period (status changes of
specified subsidiaries due to changes in the scope of consolidation): None
(2) Adoption of simplified methods in accounting principles: None
(3) Changes in accounting principles from the nearest consolidated fiscal year
ended: None
Special Note:
In this document, forward-looking statements are based on management's assumptions and beliefs in light of information
currently available, which may contain various risks and uncertainties.
As a result, you should not place undue reliance on them. A number of important factors could cause actual results to
be materially different from those discussed in forward-looking statements. Such factors include, but are not limited
to; changes in economic conditions affecting our operations, market trends and fluctuations in currency exchange rates,
particularly with respect to the value of the Japanese yen, the U.S. dollar and the Euro.
1. Organizational Structure of the Konami Group
The Konami Group is a conglomerate engaged in the entertainment and health industry providing customers with ''High
Quality Life'' and is comprised of KONAMI CORPORATION (the ''Company''), and its 22 consolidated subsidiaries and one
equity-method affiliate. Each of the Company and its subsidiaries and affiliated companies is categorized into four
business segments based on its operations as stated below. This categorization is based on the same criteria explained
below under ''6. Segment Information (Unaudited).''
Business Segments Major Companies
Digital Entertainment Domestic Konami Digital Entertainment Co., Ltd. (Note 3)
HUDSON SOFT CO., LTD.
Konami Manufacturing & Service, Inc.
Overseas Konami Digital Entertainment, Inc.
Konami Digital Entertainment GmbH
Konami Digital Entertainment B.V.
Konami Digital Entertainment Limited
Konami Software Shanghai, Inc., One other company
Health & Fitness Domestic Konami Sports & Life Co., Ltd.
COMBI WELLNESS Corporation
Konami Manufacturing & Service, Inc.
Resort Solution Co., Ltd. (Note.2), Two other companies
Gaming & System Overseas Konami Gaming, Inc.
Konami Australia Pty Ltd., One other company
Other Domestic Konami Manufacturing & Service, Inc.
KPE, Inc. , Konami Real Estate, Inc.
Two other companies
Overseas Konami Corporation of America
Konami Digital Entertainment B.V., One other company
Notes:
1. Companies that have operations categorized into more than one segment are included in each segment in which they
operate.
2. Resort Solution Co., Ltd. is an equity-method affiliate.
3. Konami Digital Entertainment Co., Ltd. merged with Konami Career Management, Inc., Konami School, Inc. and Megacyber
Corporation on April 1, 2007.
2. Business Performance and Cash Flows
1. Business Performance
Overview
In the entertainment industry as it relates to Konami, the home video game software market has entered a new growth
phase. The industry has attracted a broad cross section of users of both sexes and all ages now that next-generation
computer entertainment systems and handheld game consoles are available from all hardware manufacturers, along with
contents that capitalize on the differing features of each. In the commercial video game market, meanwhile, the user
base is growing due to the spread of services that make use of online functions and the expansion of facilities
through scrapping and building. That in turn has generated demand for new content.
In the health industry, specific health maintenance measures so-called 'designated checkups and health guidance' are
to be launched in April 2008, with the goal of preventing life style diseases through encouraging the adopting of
regular exercise regimes and improvements in diet by health insurers. In light of the aging of Japan's population,
such measures underscore the importance of taking action to prevent the need for nursing care, with the baby boomers
now beginning to retire en masse. Greater demand and health awareness may thus drive further growth in the health
market.
With respect to our business, in our Digital Entertainment segment, and in the field of home video game software in
particular, we recorded steady sales of our baseball games, which we market on a multiplatform basis. Sales of
products for amusement arcades also remained steady, including for our mainstay video games and token-operated games.
In our Health and Fitness segment, we took steps to increase our membership rolls. Specifically, we expanded our
various health support programs catering to different ages, notably the baby boomers with their growing interest in
improving their fitness and avoiding the need for nursing care. On the service front, we strongly promoted the
installing of our proprietary IT health management system in our fitness clubs. The number of facilities outsourced to
us has increased, as our expertise and track records in running those facilities are now widely recognized throughout
Japan.
In our Gaming and System segment, we increased sales by consolidating our base and expanding content in the growing
North American market. Sales of the 'Konami Casino Management System' in particular climbed steadily. This helped
stabilize profit structure, since installing more units leads to an increase in income from maintenance and servicing.
As a result, for the three months ended June 30, 2007, net revenues was Y60,650 million, a 5.2% increase compared to
the previous same period, operating income was Y7,010 million, a 16.8% increase compared to the previous same period,
income before income taxes was Y7,271 million, a 25.3% increase compared to the previous same period and net income
was Y3,863 million, a 82.2% increase compared to the previous same period.
Performance by business segment
Summary of net revenues by business segment:
Millions of Yen
Three months Three months % change from
ended ended previous period
June 30, 2006 June 30, 2007
Digital Entertainment Y32,038 Y34,800 8.6
Health & Fitness 21,313 21,617 1.4
Gaming & System 3,501 3,572 2.0
Other and Eliminations 776 661 (14.8)
Consolidated net revenues Y57,628 Y60,650 5.2
Digital Entertainment
Computer and Video Games business. On the domestic Japanese market, baseball titles like 'PUROYAKYU SPIRITS 4' and
'JIKKYOU PAWAFURU PUROYAKYU PORTABLE 2' recorded strong sales. Overseas, the popular 'PRO EVOLUTION SOCCER' series for
the European market, as well as 'Eledees' (known in Japan as 'Elebits') and 'METAL GEAR SOLID PORTABLE OPS,' likewise
recorded strong sales.
Toy & Hobby business. The mainstay 'YU-GI-OH! TRADING CARD GAME' series continued to sell well worldwide. Meanwhile the
'BLUE DRAGON ROLE PLAYING CARD GAME' series was released to coincide with the debut of the like-named anime TV series
in April 2007. This has proved particularly popular with children of primary school age, and sales have climbed
steadily. The 'BUSOU SHINKI' series an original action figures has been synchronized more closely with the online game,
making it more fun than ever.
Amusement business. 'MAH-JONG FIGHT CLUB 6,' the latest addition to the much-praised mah-jong game series that enables
players to match wits on line, sold well upon its release. This utilizes the 'e-AMUSEMENT' system, a service networking
amusement arcades nationwide in Japan. In the area of our mainstay music games, the latest offering in the series was
released, 'pop'n music 15 ADVENTURE,' which went on to record strong sales. In the field of token-operated games,
'EUROQUEEN,' the seventh installment in the ever-popular 'GALAXYWORLD' series, was released to favorable reviews.
Online business. In April 2007, 'BUSOU SHINKI BATTLE RONDO' was launched. The game allows players to battle against
other players via the 'SHINKI NET' online game service, which is tied in with the 'BUSOU SHINKI' series of original
action figures. Another release was 'Aquanaut Online Aquarium,' a game that gives relaxation by imaginarily
transforming your home computer screen into an aquarium where you can keep menagerie of fish, is played by many users.
In terms of mobile services, 'KONAMIoMUSIC FULL,' which allows players to enjoy the theme music from Konami games, has
been enhanced with video distribution and user review features.
Multimedia business. A number of guides, books, music CDs and other merchandise tied in with popular game software were
released, and these too have sold well. The ninth installment of the 'Series of simple health rules How to take off
seven(7) years' health book series likewise sold well upon its release.
As a result, consolidated net revenues in this segment for the three months ended June 30, 2007 amounted to Y34,800
million, a 8.6% increase compared to the previous same period.
Health & Fitness
Operation of fitness clubs. At facilities that we directly manage, a new, more economically priced membership
exclusively for those sixty and above was introduced this May. The 'e-XAX Branch Membership S,' as it is called, is
designed to help baby boomers stay fit. Our 2007 Summer Campaign took place in June, as part of an effort to expand our
membership rolls. In terms of services offered at our clubs, further progress was made in installing the e-XAX health
management system, which keeps track of each individual's exercise history and manages data on his or her fitness
progress. In addition, Konami offers several lifestyle improvement and community support programs. The 'KENKO PLUS'
program is coordinated with 'health guidance' for those at risk of lifestyle diseases - the guidance that,
under the Health Insurance Reform Law, is to start being implemented in April 2008. '6 WEEKS' is a lifestyle disease
prevention program and 'HATSURATSU KENKOJYUKU' provides exercise guidance to senior citizens.
We also continued to play an active role in helping local residents get in better shape by putting our know-how and
proven record of achievement to good use in the running of public facilities outsourced to us. We added a total of
seven new facilities to the list of those outsourced to us, in such locations as Setagaya Ward (Tokyo), Wako City
(Saitama), and Kariya City (Aichi). As of June 30, 2007, the number of fitness clubs run either directly or outsourced
to us totaled 319 throughout Japan.
Health products. We continued to sell the multifunctional USB pedometer 'e-walkeylife2,' the TV-linked health
management tool 'Kenshin Keikaku TV,' and the computer software program 'Kenshin-Keikaku 2,' as well as our own
original supplements. Konami is steadily expanding its product lineup to cater to today's evolving health needs.
Konami unveiled two new items at Health & Fitness Japan 2007, which took place at Tokyo Big Sight in June 2007. 'SHIN
AEROBIKE' automatically calculates what exercise load is right for the user, enabling the user to burn fat more
efficiently. 'GROVE MOTION DDR' redefines the concept of what a digital studio program is. Both earned highly favorable
reviews. Meanwhile we inaugurated a new service that gives Konami Sports Club members preferential access to over 6,000
services offered by our financial and operational partner Resort Solution Co., Ltd. These include use of hotel and
leisure facilities, as well as medical checkups and complete health exams.
As a result, consolidated net revenues in this segment for the three months ended June 30, 2007 amounted to Y21,617
million, a 1.4% increase compared to the previous same period.
Gaming & System
A growing number of jurisdictions have legalized gaming - Pennsylvania and Oklahoma being among the latest
- and the gaming market is expanding on a global scale, with the well-established but still-growing North
American market leading the way. Konami is exploiting these trends by developing and marketing new products.
The Asia region, led my Macau, is growing particularly rapidly. In a bid to cater to this promising market, Las
Vegas-based Konami Gaming Inc. and Sydney-based Konami Australia Pty Ltd exhibited together for the first time ever at
the Global Gaming Expo Asia 2007 held in Macau in June. Among the products featured were two 'progressive' products
that have been highly popular on the North American market, 'Mystical Temple' and the 'Konami Casino Management
System.'
In North America, Konami is seeking to secure steady revenues from participation agreements (a form of equipment sale
in which profits are shared) and from maintaining and servicing the 'Konami Casino Management System.'
In the domestic Australian market, New South Wales has imposed a requirement that, from July, clubs and pubs must
establish non-smoking areas, and for this and other reasons market growth has been flat. Nonetheless, we are working to
clinch more orders in Australia and neighboring New Zealand by, among other things, bringing to market new products
that are currently awaiting licensing.
Konami intends to build a truly global development system capable of catering to developing markets in Asia, South
America, Europe, and elsewhere. We plan to pursue options like strategic alliances with other companies, such as the
OEM agreements that are already being implemented.
As a result, consolidated net revenues in this segment for the three months ended June 30, 2007 amounted to Y3,572
million, a 2.0% increase compared to the previous same period.
(2) Cash Flows
Cash flow summary for the three months ended June 30, 2007:
Millions of Yen
Three months Three months Year-on-year
ended ended change
June 30, 2006 June 30, 2007
Net cash provided by operating activities Y 3,029 Y 489 Y(2,540)
Net cash used in investing activities (2,409) (6,778) (4,369)
Net cash used in financing activities (4,934) (4,277) 657
Effect of exchange rate changes on cash and cash 138 1,204 1,066
equivalents
Net decrease in cash and cash equivalents (4,176) (9,362) (5,186)
Cash and cash equivalents, end of the period 64,518 47,971 (16,547)
Cash and cash equivalents ('cash') as of June 30, 2007, amounted to Y47,971 million, decreased by Y9,362 million
compared to the balance as of March 31, 2007, or 25.6% decrease compared to the previous same period. Each cash flow
for the three months ended June 30, 2007 is as follows:
Cash flows from operating activities:
Cash provided by operating activities amounted to Y489 million for the three months ended June 30, 2007, a 83.9%
decrease compared to the previous same period. Despite the increase in net income, this decrease primarily resulted
from increase in inventory and decreases in cash in connection with trade notes and accounts payables.
Cash flows from investing activities:
Cash used in investing activities amounted to Y6,778 million for the three months ended June 30, 2007, a 181.4%
increase compared to the previous same period. This was primarily due to an increase in lease deposits and capital
expenditures relating to Konami moving to a new office building.
Cash flows from financing activities:
Cash used in financing activities amounted to Y4,277 million for the three months ended June 30, 2007, a 13.3% decrease
compared to the previous same period, primarily due to distribution of cash dividends.
3. Consolidated Balance Sheets (Unaudited)
Millions of Yen Thousands of
U.S. Dollars
June 30, 2006 June 30, 2007 March 31, 2007 June 30, 2007
% % %
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Y 64,518 Y 47,971 Y 57,333 $ 389,186
Trade notes and accounts 24,163 25,921 29,729 210,295
receivable, net
of allowance for doubtful
accounts of
Y526 million, Y537 million
($4,357 thousand) and Y540
million at
June 30, 2006, June 30, 2007
and March 31, 2007,
respectively
Inventories 24,496 30,860 24,236 250,365
Deferred income taxes, net 16,416 13,714 14,877 111,261
Prepaid expenses and other 8,021 13,984 12,086 113,451
current assets
Total current assets 137,614 46.7 132,450 43.2 138,261 45.4 1,074,558
PROPERTY AND EQUIPMENT, net 41,188 14.0 57,990 18.9 53,294 17.5 470,469
INVESTMENTS AND OTHER ASSETS:
Investments in marketable 442 660 701 5,355
securities
Investments in affiliates 5,996 6,322 6,213 51,290
Identifiable intangible assets 38,414 38,456 38,585 311,991
Goodwill 22,606 22,710 22,738 184,245
Lease deposits 25,531 28,358 24,906 230,067
Other assets 19,173 16,760 17,366 135,972
Deferred income taxes, net 3,695 2,829 2,593 22,951
Total investments and other 115,857 39.3 116,095 37.9 113,102 37.1 941,871
assets
TOTAL ASSETS Y 294,659 100.0 Y 306,535 100.0 Y 304,657 100.0 $ 2,486,898
Millions of Yen Thousands of
U.S. Dollars
June 30, 2006 June 30, 2007 March 31, 2007 June 30, 2007
% % %
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term borrowings Y 601 - - -
Current portion of long-term 24,158 Y22,984 Y 23,073 $ 186,468
debt and
capital lease obligations
Trade notes and accounts 19,700 18,877 24,002 153,148
payable
Accrued income taxes 1,879 826 1,740 6,701
Accrued expenses 15,512 22,759 19,179 184,642
Deferred revenue 5,618 6,322 5,661 51,290
Other current liabilities 7,410 10,858 8,811 88,090
Total current liabilities 74,878 25.4 82,626 26.9 82,466 27.1 670,339
LONG-TERM LIABILITIES:
Long-term debt and capital 34,747 23,707 24,248 192,333
lease
obligations, less current
portion
Accrued pension and severance 2,577 1,365 2,708 11,074
costs
Deferred income taxes, net 12,575 12,304 12,207 99,822
Other long-term liabilities 5,191 6,942 5,669 56,320
Total long-term liabilities 55,090 18.7 44,318 14.5 44,832 14.7 359,549
TOTAL LIABILITIES 129,968 44.1 126,944 41.4 127,298 41.8 1,029,888
MINORITY INTEREST IN 2,330 0.8 3,138 1.0 2,697 0.9 25,459
CONSOLIDATED SUBSIDIARIES
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value-
Authorized 450,000,000 shares; 47,399 16.1 47,399 15.5 47,399 15.6 384,545
issued 143,555,786 shares at
June 30, 2006, June 30, 2007
and March 31, 2007
Additional paid-in capital 77,218 26.2 77,227 25.2 77,213 25.3 626,537
Legal reserve 284 0.1 284 0.1 284 0.1 2,304
Retained earnings 52,174 17.7 62,717 20.5 62,560 20.5 508,819
Accumulated other comprehensive 3,966 1.3 7,195 2.3 5,617 1.8 58,373
income
Treasury stock, at cost-
6,399,854 (18,680) (6.3) (18,369) (6.0) (18,411) (6.0) (149,027)
shares,6,285,738shares and
6,300,970 shares at June 30,
2006, June 30, 2007 and March
31, 2007, respectively
Total stockholders' equity 162,361 55.1 176,453 57.6 174,662 57.3 1,431,551
TOTAL LIABILITIES AND Y294,659 100.0 Y306,535 100.0 Y 304,657 100.0 $ 2,486,898
STOCKHOLDERS' EQUITY
4. Consolidated Statements of Income (Unaudited)
Millions of Yen Thousands of
U.S. Dollars
Three months Three months Year ended Three months
ended ended March 31, 2007 ended
June 30, 2006 June 30, 2007 June 30, 2007
% % %
NET REVENUES:
Product sales revenue Y38,062 Y40,782 Y199,620 $330,861
Service revenue 19,566 19,868 80,659 161,188
Total net revenues 57,628 100.0 60,650 100.0 280,279 100.0 492,049
COSTS AND EXPENSES:
Costs of products sold 21,007 21,372 118,806 173,390
Costs of services rendered 18,525 18,707 74,700 151,768
Selling, general and 12,093 13,561 58,628 110,019
administrative
Total costs and expenses 51,625 89.6 53,640 88.4 252,134 90.0 435,177
Operating income 6,003 10.4 7,010 11.6 28,145 10.0 56,872
OTHER INCOME (EXPENSES):
Interest income 226 266 821 2,158
Interest expense (273) (243) (985) (1,971)
Other, net (155) 238 (414) 1,930
Other income (expenses), net (202) (0.4) 261 0.4 (578) (0.2) 2,117
INCOME BEFORE INCOME TAXES, 5,801 10.0 7,271 12.0 27,567 9.8 58,989
MINORITY INTEREST AND EQUITY IN
NET INCOME OF AFFILIATED COMPANIES
INCOME TAXES 3,470 6.0 3,117 5.1 10,919 3.9 25,288
INCOME BEFORE MINORITY INTEREST 2,331 4.0 4,154 6.9 16,648 33,701
AND EQUITY IN NET INCOME OF 5.9
AFFILIATED COMPANIES
MINORITY INTEREST IN INCOME 214 0.3 438 0.7 575 0.2 3,554
OF CONSOLIDATED
SUBSIDIARIES
EQUITY IN NET INCOME OF AFFILIATED 3 0.0 147 0.2 138 0.0 1,193
COMPANIES
NET INCOME Y 2,120 3.7 Y3,863 6.4 Y16,211 5.7 $31,340
PER SHARE DATA: Yen U.S. Dollar
Three months ended Three months ended Year ended Three months ended
June 30, 2006 June 30, 2007 March 31, 2007 June 30, 2007
Basic net income per Y 15.46 Y 28.14 Y 118.15 $ 0.23
share
Diluted net income per 15.45 28.13 118.09 0.23
share
Weighted-average common
share outstanding 137,154,887 137,259,918 137,202,151
Diluted weighted-average
common shares 137,218,238 137,298,107 137,271,645
outstanding
5. Consolidated Statements of Cash Flows (Unaudited)
Millions of Yen Thousands
of
U.S.
Dollars
Three Three Year ended Three
months months March 31, months
ended ended 2007 ended
June 30, June 30, June 30,
2006 2007 2007
Cash flows from operating activities:
Net income Y 2,120 Y 3,863 Y 16,211 $ 31,340
Adjustments to reconcile net income to net
cash
provided by operating activities -
Depreciation and amortization 2,625 3,037 11,757 24,638
Provision for doubtful receivables (9) (34) (76) (275)
Equity in net income of affiliated company (3) (147) (138) (1,192)
Minority interest 214 438 575 3,553
Deferred income taxes 801 1,055 2,621 8,559
Change in assets and liabilities, net of
business acquired:
Decrease in trade notes and accounts 8,533 4,929 4,716 39,988
receivable
Increase in inventories (4,375) (6,524) (4,298) (52,928)
Increase (decrease) in trade notes and (38) (6,404) 3,354 (51,955)
accounts payable
Decrease in accrued income taxes (5,745) (42) (7,190) (340)
Increase (decrease) in accrued expenses 30 (807) 3,567 (6,547)
Increase (decrease) in deferred revenue (265) 659 309 5,346
Other, net (859) 466 416 3,780
Net cash provided by operating activities 3,029 489 31,824 3,967
Cash flows from investing activities:
Capital expenditures (2,125) (3,093) (9,308) (25,093)
Acquisition of new subsidiaries, net of (227) - (202) -
cash acquired
Increase in lease deposits, net (20) (3,604) (705) (29,239)
Acquisition of business - - (1,096) -
Other, net (37) (81) 213 (657)
Net cash used in investing activities (2,409) (6,778) (11,098) (54,989)
Cash flows from financing activities:
Net decrease in short-term borrowings (352) - (1,119) -
Repayments of long-term debt (228) (148) (1,995) (1,201)
Redemption of bonds - - (20,000) -
Principal payments under capital lease (654) (678) (2,814) (5,501)
obligations
Dividends paid (3,673) (3,476) (7,420) (28,200)
Purchases of treasury stock by parent (49) (8) (93) (65)
company
Other, net 22 33 229 268
Net cash used in financing activities (4,934) (4,277) (33,212) (34,699)
Effect of exchange rate changes on cash 138 1,204 1,125 9,768
and cash equivalents
Net decrease in cash and cash equivalents (4,176) (9,362) (11,361) (75,953)
Cash and cash equivalents, beginning of 68,694 57,333 68,694 465,139
the period
Cash and cash equivalents, end of the Y 64,518 Y 47,971 Y 57,333 $ 389,186
period
6. Segment Information (Unaudited)
a . Segment Information
Three months Digital Health & Gaming & Other, Consolidated
ended Entertainment Fitness System corporate and
June 30, 2006 Eliminations
(Millions of Yen)
Net revenue:
Customers Y 31,678 Y 21,295 Y 3,501 Y 1,154 Y 57,628
Intersegment 360 18 - (378) -
Total 32,038 21,313 3,501 776 57,628
Operating 25,469 19,545 3,094 3,517 51,625
expenses
Operating income Y 6,569 Y 1,768 Y 407 Y (2,741) Y 6,003
(loss)
Three months Digital Health & Gaming & Other, Consolidated
ended Entertainment Fitness System corporate and
June 30, 2007 Eliminations
(Millions of Yen)
Net revenue:
Customers Y 34,342 Y 21,513 Y 3,572 Y 1,223 Y 60,650
Intersegment 458 104 - (562) -
Total 34,800 21,617 3,572 661 60,650
Operating 26,300 19,833 3,177 4,330 53,640
expenses
Operating income Y 8,500 Y 1,784 Y 395 Y (3,669) Y 7,010
(loss)
Year ended Digital Health & Gaming & Other, Consolidated
March 31, 2007 Entertainment Fitness System corporate and
Eliminations
(Millions of Yen)
Net revenue:
Customers Y 163,654 Y 88,326 Y 16,744 Y 11,555 Y 280,279
Intersegment 1,206 133 - (1,339) -
Total 164,860 88,459 16,744 10,216 280,279
Operating 133,463 80,937 14,574 23,160 252,134
expenses
Operating income Y 31,397 Y 7,522 Y 2,170 Y (12,944) Y 28,145
(loss)
Three months Digital Health & Gaming & Other, Consolidated
ended Entertainment Fitness System corporate and
June 30, 2007 Eliminations
(Thousands of U.S. Dollars)
Net revenue:
Customers $ 278,614 $ 174,534 $ 28,979 $ 9,922 $ 492,049
Intersegment 3,716 843 - (4,559) -
Total 282,330 175,377 28,979 5,363 492,049
Operating 213,370 160,904 25,774 35,129 435,177
expenses
Operating income $ 68,960 $ 14,473 $ 3,205 $ (29,766) $ 56,872
(loss)
Notes: 1. Primary businesses of each segment are as follows:
Digital Entertainment Production, manufacture and sale of digital contents and
Segment: related products of our Computer & Video Games, Toy & Hobby,
Amusement, Online and Multimedia businesses.
Health & Fitness Segment: Management of fitness centers / Production, manufacture and
sale of fitness machines and health service products.
Gaming & System Segment: Production, manufacture, sale and service of gaming machines
and Konami Casino Management System for casinos.
2. 'Other'' consists of segments which do not meet the quantitative criteria for separate
presentation under SFAS No. 131 'Disclosures about Segments of an Enterprise and Related
Information.'
3. 'Corporate' primarily consists of administrative expenses of the Company.
4. 'Eliminations' primarily consist of eliminations of inter-company sales and of
inter-company profits on inventories.
5. Inter-segment revenues primarily consist of sales of hardware and components from Digital
Entertainment Segment to Health & Fitness Segment.
b . Geographic Information
Three months ended Japan North Europe Asia Total Eliminations Consolidated
June 30, 2006 America /Oceania
(Millions of Yen)
Net revenue:
Customers Y 47,753 Y 5,148 Y 2,958 Y 1,769 Y 57,628 - Y 57,628
Intersegment 3,752 200 122 35 4,109 Y (4,109) -
Total 51,505 5,348 3,080 1,804 61,737 (4,109) 57,628
Operating expenses 45,358 5,686 3,234 1,575 55,853 (4,228) 51,625
Operating income Y 6,147 Y (338) Y (154) Y 229 Y 5,884 Y 119 Y 6,003
(loss)
Three months ended Japan North Europe Asia Total Eliminations Consolidated
June 30, 2007 America /Oceania
(Millions of Yen)
Net revenue:
Customers Y 50,346 Y 4,439 Y 4,136 Y 1,729 Y 60,650 - Y 60,650
Intersegment 1,702 1,070 0 37 2,809 Y (2,809) -
Total 52,048 5,509 4,136 1,766 63,459 (2,809) 60,650
Operating expenses 45,443 5,575 3,866 1,552 56,436 (2,796) 53,640
Operating income Y 6,605 Y (66) Y 270 Y 214 Y 7,023 Y (13) Y 7,010
(loss)
Year ended Japan North Europe Asia Total Eliminations Consolidated
March 31, 2007 America /Oceania
(Millions of Yen)
Net revenue:
Customers Y 206,343 Y 34,847 Y 31,650 Y 7,439 Y 280,279 - Y 280,279
Intersegment 27,219 1,904 295 530 29,948 Y (29,948) -
Total 233,562 36,751 31,945 7,969 310,227 (29,948) 280,279
Operating expenses 205,831 40,346 28,860 7,249 282,286 (30,152) 252,134
Operating income Y 27,731 Y (3,595) Y 3,085 Y 720 Y 27,941 Y 204 Y 28,145
(loss)
Three months ended Japan North Europe Asia Total Eliminations Consolidated
June 30, 2007 America /Oceania
(Thousands of U.S. Dollars)
Net revenue:
Customers $ 408,454 $ 36,013 $ 33,555 $ 14,027 $ 492,049 - $ 492,049
Intersegment 13,808 8,681 0 300 22,789 $ (22,789) -
Total 422,262 44,694 33,555 14,327 514,838 (22,789) 492,049
Operating expenses 368,676 45,229 31,365 12,591 457,861 (22,684) 435,177
Operating income $ 53,586 $ (535) $ 2,190 $ 1,736 $ 56,977 $ (105) $ 56,872
(loss)
For the purpose of presenting its operations in geographic areas above, the Company and its subsidiaries
attribute revenues from external customers to individual countries in each area based on where products
are sold and services are provided.
North America presented in the table above substantially consists of United States.
Notes:
The consolidated financial statements presented herein were prepared in accordance with U.S. generally accepted
accounting principles (''U.S. GAAP'')
Cautionary Statement with Respect to Forward-Looking Statements:
Statements made in this document with respect to our current plans, estimates, strategies and beliefs,
including the above forecasts, are forward-looking statements about our future performance. These
statements are based on management's assumptions and beliefs in light of information currently
available to it and, therefore, you should not place undue reliance on them. A number of important
factors could cause actual results to be materially different from and worse than those discussed in
forward-looking statements. Such factors include, but are not limited to: (i) changes in economic
conditions affecting our operations; (ii) fluctuations in currency exchange rates, particularly with
respect to the value of the Japanese yen, the U.S. dollar and the Euro; (iii) our ability to continue
to win acceptance of our products, which are offered in highly competitive markets characterized by
the continuous introduction of new products, rapid developments in technology and subjective and
changing consumer preferences; (iv) our ability to successfully expand internationally with a focus on
our video game software business, card game business and gaming machine business; (v) our ability to
successfully expand the scope of our business and broaden our customer base through our health &
fitness business; (vi) regulatory developments and changes and our ability to respond and adapt to
those changes; (vii) our expectations with regard to further acquisitions and the integration of any
companies we may acquire; and (viii) the outcome of contingencies.
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