Frthr re 1st Quarter Results
Konami Corporation
08 August 2002
August 8, 2002
Summary of Consolidated Financial Results
for the First Quarter Ended June 30, 2002
(All financial information has been prepared in accordance with accounting principles generally
accepted in Japan)
KONAMI CORPORATION
Stock Code Number: 9766
Shares Listed: Tokyo Stock Exchange, Osaka Securities Exchange,
London Stock Exchange and Singapore Exchange
Contact: Noriaki Yamaguchi, Representative Director and CFO (Phone: 03-3578-0573)
URL: http://www.konami.com
1. Preparation Basis for Consolidated Financial Results for the First Quarter Ended
June 30, 2002
(1) The financial results for the first quarter ended June 30, 2001 and 2002 are based on the Preparation Standards for
Interim Consolidated Financial Statements.
There was no change in accounting policies.
There was no difference between the accounting policies adopted for the first quarter ended June 30, 2001
and 2002 and the standards used to prepare for interim consolidated financial statements.
(2) Changes in Consolidation Scope from the fourth quarter of the previous fiscal year
Increase in the number of consolidated subsidiaries: 1 company
Decrease in the number of consolidated subsidiaries: 2 companies
2. Consolidated Financial Results for the First Quarter Ended June 30, 2002
(1) Consolidated Results of Operations
(Figures truncated)
Year-on-year Operating Year-on-year Ordinary Year-on-year
Net Revenue Change Income Change Income Change
(Y million) (%) (Y million) (%) (Y million) (%)
1st Quarter ended 50,059 32.7 4,884 76.4 4,485 49.8
June 30, 2002
1st Quarter ended 37,723 - 2,769 - 2,993 -
June 30, 2001
Diluted
Net Income Year-on-year Net Income Net Income
Change per Share per Share
(Y million) (%) (Y) (Y)
1st Quarter ended 844 20.9 6.82 -
June 30, 2002
1st Quarter ended 698 - 5.43 -
June 30, 2001
Note:
Change (%) of net revenue, operating income, ordinary income and net income represents the increase or
decrease relative to the same period of the previous year.
(2) Consolidated Financial Position
Total Shareholders Equity-Assets Total Shareholders
Total Assets Equity Ratio Equity per Share
(Y million) (Y million) (%) (Y)
June 30, 2002 271,738 132,739 48.8 1,083.76
June 30, 2001 221,831 146,330 66.0 1,136.66
(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 (1,029) (2,184) (6,807) 64,888
June 30, 2002
1st Quarter ended (15,333) (1,041) (5,296) 45,082
June 30, 2001
3. Consolidated Financial Forecast for the Year Ended March 31, 2003
Ordinary Net Income
Net Revenue Income Net Income per Share
(Y million) (Y million) (Y million) (Y)
Six months ended 107,000 5,500 1,000 8.08
September 30, 2002
Year ended 235,000 22,500 7,000 56.56
March 31, 2003
Note:
The financial results for the first quarters ended June 30, 2001 and 2002 were not audited by independent
public accountants.
Cautionary Statement with Respect to Forward-Looking Statements:
Statements made in this report 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 managementfs 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 and 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.
1. Organizational Structure of Konami Group
The Konami Group is a collection of companies with global operations in the entertainment industry and is comprised of
KONAMI CORPORATION (the Company), 36 consolidated subsidiaries and 4 equity method affiliates.
The Company, its subsidiaries and affiliated companies are categorized into business segments according to their
operations as stated below.
Business segment categorization is based on the same criteria explained in the operating segment information notes to
the accompanying consolidated financial statements.
Business Segments Major Companies
Consumer Software Domestic The Company, Konami Marketing, Inc. (Note 3)
Konami Computer Entertainment Osaka, Inc.
Konami Computer Entertainment Tokyo, Inc.
Konami Computer Entertainment Japan, Inc.
Konami Computer Entertainment Studios, Inc.
Konami School, Inc. (*1)
Konami Style.com Japan, Inc. (Note 3)
Konami Mobile & Online, Inc.
HUDSON SOFT CO., LTD. (*3), Genki Co., Ltd. (*3)
3 other companies (*3)
Overseas Konami of America, Inc., Konami of Europe GmbH
Konami Marketing (Asia) Ltd.
Konami Software Shanghai, Inc., 3 other companies
Character Products Domestic The Company, Konami Marketing, Inc. (Note 3)
Konami Music Entertainment, Inc.
Konami Style.com Japan, Inc. (Note 3)
Overseas Konami of America, Inc., Konami Marketing (Asia) Ltd.
2 other companies
Amusement Contents Domestic The Company, Konami Marketing, Inc. (Note 3)
Konami Sports Life Corporation, Konami Parlor Entertainment, Inc.
2 other companies (*2, Note 3)
Overseas Konami of America, Inc.
Konami Amusement of Europe Ltd.
Konami Marketing (Asia) Ltd., 2 other companies
Gaming Contents Domestic The Company, Konami Marketing, Inc. (Note 3)
Konami Parlor Entertainment, Inc.@1 other company
Overseas Konami Gaming, Inc.
Konami Australia Pty Ltd., 1 other company
Health and Fitness Domestic Konami Sports Corporation (Note 4)
Konami Olympic Sports Club Corporation (Note 4)
2 other companies
Other Domestic Konami Capital, Inc., Konami Service, Inc.
Konami Amusement Operation, Inc. (*2, Note 3)
TAKARA CO., LTD. (*3), 1 other company
Overseas 3 other companies
Notes:
1. The companies that have multiple business segments are included in each segment respectively.
2. Changes in major companies for the first quarter ended June 30, 2002 are as follows:
(*1) Konami Computer Entertainment School, Inc. merged with Roppongi Monitoring Center, Inc. for the
purpose of improving the efficiency of their operations on May 1, 2002 and changed its name to
Konami School, Inc.
(*2) Konami Amusement Operation, Inc. spun-off its amusement facility operation business and
established a new company named KAO Co., Ltd. as a wholly-owned subsidiary on May 11,2002.
Konami Amusement Operation, Inc. then transferred all shares in KAO Co., Ltd. to Amlead Co.,
Ltd. on May 13, 2002.
(*3) These are equity method affiliates.
3. Konami Marketing, Inc. merged with Konami Style.com Japan, Inc. and Konami Amusement Operation,
Inc. to improve the efficiency of their operations on August 1, 2002.
4. Konami Sports Corporation will merge with Konami Olympic Sports Club Corporation on October
1, 2002, to improve the efficiency of their operations.
2. Business Performance and Financial Position
1. Business Review for the First Quarter Ended June 30, 2002
Overview
Within the entertainment industry in which we operate, as for home video game hardware, the Sony
PlayStation 2 achieved strong sales and the Nintendo GameCube and Microsoft Xbox also sold well in
this first quarter.
As for home video game software, soccer games made very favorable sales.
In this environment, consolidated net revenue for the first quarter ended June 30, 2002 totaled Y
50,059 million, up 32.7% compared with the corresponding period of the previous year, due primarily to
the contribution made by sales of soccer games of the Consumer Software segment, card games of the
Character Products segment and fitness club operations by the Health and Fitness segment.
Consolidated ordinary income increased by 49.8% to Y 4,485 million and consolidated net income also
increased by 20.9% to Y 844 million compared with the corresponding period of the previous year.
Performance by Business Segment
Summary of net revenue by business segment
(Millions of yen)
First Quarter ended First Quarter ended
June 30, 2001 June 30, 2002 Change (%)
Consumer Software Y8,888 Y17,437 196.2
Character Products 5,771 6,733 116.7
Amusement Contents 8,359 6,272 75.0
Gaming Contents 735 4,566 621.0
Health and Fitness 14,474 17,978 124.2
Other 1,830 1,723 94.1
Less: Intersegment Sales (2,335) (4,651) -
Consolidated Y37,723 Y50,059 132.7
Note: Each amount of the segments above include intersegment sales.
Consumer Software
In the domestic market, World Soccer Winning Eleven 6 for the PlayStation 2, the latest version of the
Winning Eleven series, was released in April 2002. At the end of June 2002, this title recorded strong
sales with more than one million copies shipped. Tennis no Oujisama: Genius Boy Academy for the Game
Boy Advance and Hikaru no Go: Heiangensoibunroku and Captain Tsubasa: Aratanaru Densetsu-Josho for the
PlayStation also made favorable sales.
As for the overseas market, Yu-Gi-Oh! achieved healthy sales in the U.S. International Superstar
Soccer 2 for the GameCube and Pro Evolution Soccer for the PlayStation 2 posted solid sales in Europe.
Consequently, consolidated revenue of the Consumer Software segment amounted to Y17,004 million, up
95.6% compared with the corresponding period of the previous year.
Character Products
The Yu-Gi-Oh! Official Card Game Duel Monsters series continued to contribute to sales of the segment.
Especially in the U.S., the card game series enjoyed popularity due to synergistic effects generated
from other content featuring Yu-Gi-Oh!, such as a highly-rated TV animation program, which has been
broadcast since last year, and home video game software. Also in the domestic market, new titles of
the standard card game series made stable sales.
As for products other than card games, the electronic toy DigiQ of the Micro IR series, which has been
distributed through Takara Co., Ltd. since the previous years made solid sales. In terms of candy
toys, which are popular for their exquisite figures, SF Movie Selection: Thunderbird 1 recorded sales
of more than one million packs and established a dominant position in the candy toy market.
Consequently, consolidated revenue of the Character Products segment amounted to Y6,678 million, up
15.7% compared with the corresponding period of the previous year.
Amusement Contents
As for amusement arcade games, Mah-Jong Fight Club, the first e-Amusement title launched in the
previous year with the catch phrase of live communication and ubiquitous game, and music simulation
games such as the Popn Music series posted stable sales.
Sales of pachinko LCD units declined compared with the corresponding quarter of the previous year
because the pachinko industry voluntarily refrained from installing new pachinko machines from the
beginning of May to the end of June, during which the World Cup Soccer tournament was held. However,
we plan to release distinctive LCD unit products after the second quarter of this year.
In terms of fitness-oriented games, we continued to work to expand sales of Dance Dance Revolution:
Famimat and Martialbeat, which were launched in the previous year. Additionally, a new type of
exercise product Bodyroop was released this April.
As a result, consolidated revenue of the Amusement Contents segment totaled Y3,215 million, down 52.8%
compared with the corresponding period of the previous year.
Gaming Contents
Since the previous year, we have enjoyed strong sales of the token-operated horse racing game machine
GI-Winning Sire, which offers live performance type entertainment, and the large-sized token-operated
game machine Fortune Orb with its exciting entertainment effects. Monster Gate II, the sequel to
Monster Gate, won popularity as a new genre of large-sized token-operated game machine and made solid
sales.
As for our overseas gaming business, we increased the number of our video slot machines installed as
well as our product line-up and made stable sales in various North America states such as Nevada,
Indiana and Michigan. In Australia, the combination of the stand-alone progressive system Wild Fire
and our existing gaming products have been well accepted by the market. With gaming licenses held in
all states of Australia, we had solid sales especially in Queensland, Victoria and New South Wales.
As a result, consolidated revenue of the Gaming Contents segment amounted to Y4,502 million, up 618.6%
compared with the corresponding period of the previous year.
Health and Fitness
We actively increased new club locations, including the acquisition of third parties existing club
businesses: 11 directly-operated clubs such as Moriguchi branch (Osaka prefecture), Nishi-funabashi
branch (Chiba prefecture) and Yamato-yagi branch (Nara prefecture), and 3 franchised clubs such as
Mihagino branch (Fukuoka prefecture). We made solid sales due to the addition of Daiei Olympic Sports
Club, Inc. (currently Konami Olympic Sports Club Corporation), which was acquired in February 2002, to
the consolidated results as well as the increase in the number of new club facilities mentioned above.
At the end of June, the number of the club facilities totaled 230 (197 directly operated clubs and 33
franchised clubs).
Consolidated revenue of the Health and Fitness segment totaled Y17,959 million, up 24.1% compared with
the corresponding quarter of the previous year.
Other
Consolidated revenue of the Other segment amounted to Y699 million, down 48.0% compared with the
corresponding period of the previous year.
2.Financial Position
Overview
(Millions of yen)
First Quarter ended First Quarter ended
June 30, 2001 June 30, 2002 Change
Net cash use in operating activities Y(15,333) Y(1,029) 14,303
Net cash used in investing activities (1,041) (2,184) (1,142)
Net cash used in financing activities (5,296) (6,807) (1,511)
Effect of exchange rate changes (59) (277) (218)
on cash and cash equivalents
Net increase in cash and cash equivalents (21,730) (10,299) 11,431
Cash and cash equivalents, 45,082 64,888 19,806
end of the period
Net cash used in operating activities for this first quarter decreased by Y14,303 million compared with
the first quarter in the previous year to Y1,029 million due primarily to an increase in Income before
income taxes and minority interest, a decrease in Increase in inventories, a decrease in Decrease in
trade notes and accounts payable and a decrease in Income taxes paid. Trade notes and accounts receivable
decreased by Y11,443 million and income tax payment amounted to Y11,761 million for this first quarter.
Net cash used in investing activities totaled Y2,184 million for this first quarter, an increase of Y
1,142 million compared to the corresponding period of the previous year, due primarily to an increase in
gPurchases of property and equipmenth and an increase in other assets. However, this increase in used
cash partly offset by proceeds from sales of subsidiary shares. Property and equipment of Y2,453 million
was purchased while subsidiary shares were sold for Y2,057 million
Net cash used in financing activities for this first quarter increased by Y1,511 million to Y6,807
million compared to the same period of the previous year due primarily to purchases of treasury stock.
However, this increase in used cash partly offset by an increase in short-term borrowings. Treasury stock
was purchased for Y5,513 million and dividends of Y2,987 million were paid for this first quarter.
As a result, cash and cash equivalents at the end of this first quarter decreased by Y10,299 million to Y
64,888 million, considering an effect of exchange rate changes of Y277 million, compared with the
beginning of this year.
3. Quarterly Consolidated Financial Statements
(1) Quarterly Consolidated Balance Sheets (Unaudited)
(Millions of yen)
June 30, 2001 June 30, 2002
Share of Share of
Total Total
Assets Assets
ASSETS:
I Current Assets Y97,497 44.0 % Y124,078 45.7 %
Cash and cash equivalents 45,092 64,928
Trade notes and accounts 21,810 23,106
receivable
Inventories 20,501 19,242
Other 10,443 17,305
Allowance for doubtful accounts (351 ) (503 )
II Fixed Assets 124,334 56.0 147,660 54.3
1. Property and equipment 31,526 38,801
Buildings and structures 18,791 22,449
Land 8,190 11,811
Other 4,544 4,539
2. Intangible assets 62,083 63,480
Goodwill 57,131 56,943
Other 4,952 6,536
3. Investments and other assets 30,724 45,378
Investment securities 4,412 13,914
Lease deposits 22,270 27,520
Other 4,041 6,557
Allowance for doubtful accounts - (2,614 )
TOTAL ASSETS Y221,831 100.0 % Y271,738 100.0 %
(Millions of yen)
June 30, 2001 June 30, 2002
Share of Share of
Total Total Liabilities,
Liabilities, Minority Interest
Minority Interest and Shareholders
and Shareholders Equity
Equity
LIABILITIES:
I Current Liabilities Y52,954 23.9 % Y65,987 24.3 %
Trade notes and accounts 16,660 19,280
payable
Short-term borrowings 4,776 12,830
Current portion of long-term debt 1,963 2,334
Current portion of straight bonds 10,000 -
Other 19,553 31,541
II Long-term Liabilities 8,554 3.8 53,184 19.6
Straight bonds - 45,000
Long-term debt 3,260 231
Liability for employeesf retirement 2,070 2,399
benefits
Liability for directorsf retirement 1,477 1,442
benefits
Other 1,747 4,111
TOTAL LIABILITIES 61,508 27.7 119,171 43.9
MINORITY INTEREST 13,992 6.3 19,827 7.3
SHAREHOLDERSf EQUITY:
I Common Stock 47,398 21.4 47,398 17.4
II Additional Paid-in Capital 47,106 21.2 47,106 17.3
III Retained Earnings 51,905 23.4 58,630 21.6
IV Revaluation of Land - - (153 ) (0.1 )
V Net Unrealized Losses on (25 ) (0.0 ) (22 ) (0.0 )
Securities Available-for-Sale
VI Foreign Currency (53 ) (0.0 ) 293 0.1
Translation Adjustments
VII Treasury Stock, at cost (0 ) (0.0 ) (20,513 ) (7.5 )
TOTAL SHAREHOLDERSf 146,330 66.0 132,739 48.8
EQUITY
TOTAL LIABILITIES,
MINORITY INTEREST AND
SHAREHOLDERS' EQUITY Y221,831 100.0 % Y271,738 100.0 %
(2) Quarterly Consolidated Statements of Income (Unaudited)
(Millions of yen)
First Quarter ended First Quarter ended
June 30, 2001 June 30, 2002
Share of Share of
net revenue net
revenue
I Net Revenues Y37,723 100.0 % Y50,059 100.0 %
II Cost of Products Sold
and Services Rendered 26,514 70.3 32,874 65.7
Gross Profit 11,208 29.7 17,185 34.3
III Selling, General and 8,439 22.4 12,301 24.6
Administrative Expenses
Operating Income 2,769 7.3 4,884 9.7
IV Non-operating Income 416 1.1 409 0.8
Interest income 55 84
Foreign exchange gains, net 29 -
Equity in net income of 50 -
affiliated companies
Other 281 325
V Non-operating Expenses 192 0.5 808 1.6
Interest expense 126 157
Foreign exchange losses, net - 290
Equity in net losses of - 253
affiliated companies
Other 66 106
Ordinary Income 2,993 7.9 4,485 8.9
VI Extraordinary Income 558 1.5 309 0.6
Gain on reversal of allowance 138 14
for doubtful accounts
Gain on sale of 4 -
property and equipment
Gain on sale of investment 416 -
securities
Gain on sale of subsidiary shares - 225
Gain on transfer of operation - 68
VII Extraordinary Losses 170 0.4 578 1.1
Loss on sale or disposal of 170 578
property and equipment
Net Income before Income 3,382 9.0 4,215 8.4
Taxes and Minority Interest
Income Taxes 2,194 5.8 2,735 5.4
Current 1,264 2,149
Deferred 929 586
Minority Interest 489 1.3 635 1.3
Net Income Y698 1.9 % Y844 1.7 %
(3) Quarterly Consolidated Statements of Additional Paid in Capital and Retained Earnings
(Unaudited)
(Millions of yen)
First Quarter ended First Quarter ended
June 30, 2001 June 30, 2002
iAdditional Paid in Capitalj
I Additional Paid in Capital, Y47,106 Y47,106
Beginning of the Period
II Additional Paid in Capital, End of the Period 47,106 47,106
(Retained Earnings)
I Retained Earnings, Beginning of the Period 55,253 61,420
II Increase in Retained Earnings 698 844
Net Income 698 844
III Decrease in Retained Earnings 4,046 3,635
Cash dividends 3,604 3,360
Directors' bonuses 442 274
IV Retained Earnings, End of the Period 51,905 58,630
(4) Quarterly Consolidated Statements of Cash Flows (Unaudited)
(Millions of yen)
First Quarter ended First Quarter ended
June 30, 2001 June 30, 2002
I OPERATING ACTIVITIES:
Income before income taxes and minority Y3,382 Y4,215
interest
Depreciation and amortization 1,204 1,509
Amortization of goodwill 726 769
Decrease in liability for (261 )
directors' retirement benefits (43 )
Decrease in allowance for doubtful accounts (109 ) (282 )
Interest and dividends income (61 ) (86 )
Interest expense 126 157
Equity in net losses (income) (50 ) 253
of affiliated companies
Loss on sale or disposal of property and 170 578
equipment
Gain on sale of subsidiary shares - (225 )
Decrease in trade notes and accounts 10,843 11,443
receivable
Increase in inventories (6,147 ) (3,446 )
Decrease in trade notes and accounts payable (7,362 ) (710 )
Other - net (3,537 ) (3,765 )
Sub-total (1,077 ) 10,368
Interest and dividends received 94 407
Interest paid (54 ) (44 )
Income taxes paid (14,295 ) (11,761 )
Net cash used in operating activities (15,333 ) (1,029 )
II INVESTING ACTIVITES:
Decrease (increase) in time deposits (10 ) 537
Purchases of property and equipment (757 ) (2,453 )
Proceeds from sales of property and 148 19
equipment
Purchases of intangible assets (317 ) (767 )
Purchases of investment securities (72 ) (305 )
Purchases of shares in subsidiaries (24 ) (181 )
Proceeds from sale of investment in - 2,057
subsidiaries
Decrease (increase) in short-term loans 12 (249 )
receivable
Decrease (increase) in lease deposits (584 ) 343
Other - net 563 (1,185 )
Net cash used in investing activities (1,041 ) (2,184 )
III FINANCING ACTIVITES:
Increase (decrease) in short-term borrowing (1,038 ) 2,091
Repayment of long-term debt (30 ) (239 )
Purchases of treasury stock (1 ) (5,513 )
Dividends paid (3,604 ) (2,987 )
Dividends paid to minority shareholders (492 ) (159 )
Other - net (129 ) 0
Net cash used in financing activities (5,296 ) (6,807 )
IV EFFECT OF EXCHANGE RATE CHANGES (59 ) (277 )
ON CASH AND CASH EQUIVALENTS
V NET INCREASE IN CASH AND CASH (21,730 ) (10,299 )
EQUIVALENTS
VI CASH AND CASH EQUIVALENTS, 66,812 75,187
BEGINNING OF THE PEROID
VII CASH AND CASH EQUIVALENTS, Y45,082 Y64,888
END OF THE PERIOD
Summary of Significant Accounting Policies
1. Scope of Consolidation
(1) The consolidated financial statements include the accounts of KONAMI CORPORATION
(the Company) and its 36 consolidated subsidiaries (See 1. Organizational Structure
of Konami Group, which shows major subsidiaries).
In the first quarter ended June 30, 2002, Konami Computer Entertainment School, Inc.
merged with Roppongi Monitoring Center, Inc. and changed its name to Konami School,
Inc.
In addition, Konami Amusement Operation, Inc. spun-off its amusement facility
operation business and established a new company named KAO Co., Ltd. as a
wholly-owned subsidiary. Konami Amusement Operation, Inc. then transferred all
shares in KAO Co., Ltd. to Amlead Co., Ltd.
(2) KCE Enterprise, Inc. is excluded from the scope of consolidation since each of its
total assets, net revenue, net income, and retained earnings is immaterial, and has
no significant effect as a whole on the consolidated financial statements.
2. Application of Equity Method
(1) Four affiliated companies, TAKARA CO., LTD., HUDSON SOFT CO., LTD., Genki Co.,
Ltd., and Mobile 21 Co., Ltd. are accounted for by the equity method.
(2) The equity method is not applied to one unconsolidated subsidiary because it has
no significant effect on the consolidated net income and retained earnings, and is
immaterial as a whole.
3. Fiscal Year-end of Consolidated Subsidiaries
The fiscal year-end for Konami Olympic Sports Club Corporation is September 30, 2002, which is different
from that of the Company. The fiscal year ending September 30, 2002 includes only seven months irregularly.
Therefore the pro forma financial statements as of June 30, 2002 are used for the consolidated financial
statements.
All other consolidated subsidiaries use the same balance sheet date as that of the Company.
4. Accounting Standards
a. Valuation of Assets
(1) Marketable and Investment Securities
Available-for-sale securities for which the market value is readily determinable are
stated at fair value as of the balance sheet date. Net unrealized gain or loss on
securities available-for-sale is reported as a separate component of shareholders
equity.
The cost of securities sold is determined primarily by the moving average method.
gAvailable-for-sale securitiesh for which the market value is not readily
determinable are stated at cost based on the moving average method.
(2) Derivative Financial Instruments
Derivative financial instruments are stated at fair value.
(3) Inventories
Inventories other than merchandise and work in process are stated at cost determined
by the moving average method.
Merchandise is stated at the lower of cost or market, cost being determined mainly
by the first-in, first-out method.
Work in process consisting of hardware products is stated at cost determined by the
moving average method while work in process consisting of software products is
stated at cost determined by the specific identification method.
b. Depreciation Methods
Property and equipment are depreciated mainly using the declining balance method
while intangible assets are amortized mainly using the straight-line method. For
in-house software, amortization is computed using the straight-line method based on
the estimated useful life of 5 years.
c. Provisions
(1) Allowance for doubtful accounts
The allowance for doubtful accounts is provided in an amount sufficient to cover
possible losses on collection by estimating individually uncollectible amounts and
by applying a percentage based on collection experience to the remaining amounts.
(2) Liability for employees' retirement benefits
Liability for employees' retirement benefits to be paid to employees is calculated
based on the estimated amount of the projected benefit obligation and the plan
assets at the fiscal year-end.
Unrecognized net transition asset or obligation is amortized over 13 years.
Unrecognized actuarial net gain or loss will be amortized from the following fiscal
year within the average remaining service period, primarily 13 years, on a
straight-line basis.
(3) Liability for directors' retirement benefits
Liability for directors' retirement benefits represents accrued benefits for
directors and corporate auditors of the Company, Konami Sports Corporation, Konami
Sports Life Corporation and Konami Olympic Sports Club Corporation and is provided
for at such amounts as would be required if all such individuals retired at each
balance sheet date.
d. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated
into Japanese yen at the current exchange rate at each balance sheet date, and the
translation gains and losses are credited or charged to income. Assets and
liabilities of foreign subsidiaries are translated into Japanese yen at the current
exchange rate at each balance sheet date while revenue and expenses are translated
at the average exchange rate for the period.
Differences arising from such translation are included in minority interest and
shareholdersf equity as foreign currency translation adjustments.
e. Leases
Finance leases other than those that deem to transfer ownership of the leased
property to the lessee are accounted for as operating lease transactions.
f. Consumption Tax
Consumption tax is excluded from the stated amount of revenue and expenses.
g. Income Taxes
Current and deferred income taxes for the first quarter ended June 30, 2002 are
calculated on the assumption of the reversal of reserve for advanced depreciation in
appropriations of retained earnings planned at the fiscal year-end.
5. Amortization of Goodwill
The difference between the cost and underlying fair value of the net equity of investments in subsidiaries
at acquisition is stated as goodwill and, if significant in amount, is amortized on a straight-line basis
over the periods benefited ranging from 1 to 20 years.
6. Appropriation of Retained Earnings
The consolidated statement of retained earnings is prepared based on the actual appropriation in the
period.
7. Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an initial maturity of three months or
less.
Segment Information
1. Operating Segment Information
First Quarter ended June 30, 2001
(Millions of yen)
Eliminations
and
CS CP AC GC HF Other Total Corporate Consolidated
Net revenue:
Customers Y8,692 Y5,771 Y6,814 Y626 Y14,474 Y1,344 Y37,723 - Y37,723
Intersegment 195 0 1,545 108 - 485 2,335 Y(2,335) -
Total 8,888 5,771 8,359 735 14,474 1,830 40,059 (2,335) 37,723
Operating 8,052 3,135 6,817 1,244 14,170 1,821 35,242 (288) 34,954
expenses
Operating 835 2,635 1,541 (509) 303 9 4,816 (2,046) 2,769
income
(losses)
First Quarter ended June 30, 2002
(Millions of yen)
Eliminations
and
CS CP AC GC HF Other Total Corporate Consolidated
Net revenue:
Customers Y17,004 Y6,678 Y3,215 Y4,502 Y17,959 Y699 Y50,059 - Y50,059
Intersegment 433 54 3,056 63 18 1,024 4,651 Y(4,651) -
Total 17,437 6,733 6,272 4,566 17,978 1,723 54,711 (4,651) 50,059
Operating 13,428 4,050 5,648 4,077 18,506 1,616 47,328 (2,152) 45,175
expenses
Operating 4,009 2,683 623 488 (528) 106 7,382 (2,498) 4,884
income
(losses)
Notes:
1. Business segments are determined as components of an enterprise that is regularly evaluated by the chief
operating decision maker in deciding how to allocate resources and in assessing performance on the basis
of similarities in the type, nature and production methods of products. Primary products and services of
each segment are defined as follows:
Consumer Software: Software for home-use video game machines
Procurement and distribution of home-use video game software
Character Products: Card games
Character goods
Portable game machines
Amusement Contents: Coin-operated game machines for amusement arcade operations
Dance-simulation game machines
Music-simulation game machines
Disc jockey-simulation game machines
LCD units for pachinko game machines
Entertainment-oriented health-related products
Entertainment-oriented fitness machines
Home-use fitness games
Gaming Contents: Parts for video slot machines for casinos
Token-operated game machines for amusement arcade operations
Pachinko slot machines
Health and Fitness: Operation of fitness facilities
Other: Operation of amusement centers
Financial services
Management of the group companiesf real estate
2. Unallocated operating expenses in the Eliminations and Corporate column mainly consist
of the administrative expenses of the parent company, which amounted to Y1,898 million
and Y2,194 million for the first quarter ended June 30, 2001 and 2002 respectively.
3. Numbers in parentheses represent negative values.
2. Geographic Information
First Quarter ended June 30, 2001
(Millions of yen)
Eliminations
Asia/ and
Japan Americas Europe Oceania Total Corporate Consolidated
Net revenue:
Customers Y32,581 Y2,803 Y2,032 Y306 Y37,723 - Y37,723
Intersegment 3,157 10 0 0 3,168 Y(3,168 ) -
Total 35,739 2,814 2,032 306 40,892 (3,168 ) 37,723
Operating expenses 32,559 3,460 1,894 321 38,236 (3,281 ) 34,954
Operating income 3,180 (646) 137 (15) 2,656 113 2,769
(losses)
First Quarter ended June 30, 2002
(Millions of yen)
Eliminations
Asia/ and
Japan Americas Europe Oceania Total Corporate Consolidated
Net revenue: -
Customers Y41,053 Y4,288 Y2,739 Y1,979 Y50,059 Y50,059
Intersegment 5,345 222 25 134 5,727 Y(5,727 ) -
Total 46,398 4,510 2,764 2,114 55,787 (5,727 ) 50,059
Operating expenses 40,033 4,848 2,498 1,610 48,991 (3,815 ) 45,175
Operating income 6,364 (337) 265 503 6,796 (1,912 ) 4,884
(losses)
Notes:
1. Geographic areas are categorized by geographical proximity.
2. Each overseas segment consists primarily of the following countries:
Americas: United States of America
Europe: United Kingdom, Germany and France
Asia/Oceania: Hong Kong, Singapore, Korea and Australia
3. Unallocated operating expenses in the Eliminations and Corporate column mainly consist of the
administrative expenses of the parent company, which amounted to Y1,898 million and Y2,194 million
for the first quarter ended June 30, 2001 and 2002 respectively.
4. Numbers in parentheses represent negative values.
3. Overseas Sales
First Quarter ended June 30, 2001
(Millions of yen)
Americas Europe Other Total
Overseas sales Y2,407 Y2,057 Y435 Y4,901
Consolidated revenue - - - 37,723
Overseas portion in consolidated 6.4% 5.5% 1.1% 13.0%
revenue
First Quarter ended June 30, 2002
(Millions of yen)
Americas Europe Other Total
Overseas sales Y4,288 Y2,732 Y1,985 Y9,006
Consolidated revenue - - - 50,059
Overseas portion in consolidated 8.6% 5.4% 4.0% 18.0%
revenue
Notes:
1. Geographic areas are categorized by geographical proximity.
2. Each overseas segment consists primarily of the following countries:
Americas: United States of America and Canada
Europe: United Kingdom, Germany and France
Other: Hong Kong, Singapore and Australia
3. Overseas sales consist of the revenue outside Japan of the Company and its consolidated subsidiaries.
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