Interim Results
Konami Co Ltd
18 November 1999
For further information, please contact;
Mr Noriaki Yamaguchi, Managing Director
Phone: 03 (3432) 5678
http://www.konami.co.jp
1. The first half of fiscal 2000 results (Six months ended September 30, 1999)
(1) Performance (Figures truncated)
Net income Net income
Operating Recurring Net income per share per share
Net sales income profit (interim) (interim) (fully
(Y millions)(Y millions)(Y millions)(Y millions) (Y) diluted)
(Y)
Fiscal 2000
(interim) 78,246 19,955 19,954 14,004 249.78 246.99
Fiscal 1999
(annual) 113,413 16,735 16,176 5,104 144.38 135.98
Note: Equity method profit/loss
Y-millions (Fiscal 1999 Y - millions)
(2) Financial position
Total Equity Total
shareholders' assets shareholders'
Total assets equity ratio equity per share
(Y millions) (Y millions) (%) (Y)
Fiscal 2000 (interim) 142,924 68,754 48.1 1,209.15
Fiscal 1999 (annual) 117,383 46,907 40.0 1,300.49
(3)Consolidated subsidiaries
Consolidated subsidiaries 31
Non-consolidated
subsidiaries 0
Affiliates 0
(4) Changes in accounting policy
a. Changes in consolidation scope and applicability of equity method
Consolidated (New) 2 Equity method (New) None
(Elimination) 0 (Elimination) None
b. Changes in accounting policy None
2. Fiscal 2000 forecast (Year ending March 31, 2000)
(Millions of yen)
Net sales Recurring profit Net income
Fiscal 2000 (annual) 144,000 27,000 17,000
Note: 1. Full-year consolidated net income per share forecast for fiscal
2000 is Y299.76.
2. Full-year non-consolidated net income per share forecast for
fiscal 2000 is Y246.21.
3. These estimates are forward-looking statements based on a number
of assumptions and beliefs in light of the information currently
available to management and subject to significant risks and
uncertainties. Actual financial results may differ materially
depending on a number of factors including, without limitation:
general economic conditions in world markets; exchange rates
between the yen and other currencies in which Konami Group makes
significant sales and Konami Group's ability to continue to win
acceptance of its products, which are offered in highly competitive
markets characterized by continual new product introductions.
Non-consolidated first half of fiscal 2000 (six months ended September 30, 1999)
(Year Operating (Year Recurring (Year
on-year income on-year profit on-year
Net sales change) change) change)
profit
(Y millions) (%) (Y millions) (%) (Y millions) (%)
Fiscal 2000
(interim) 69,507 (82.8) 16,661 (432.8) 16,581 (537.7)
Year Net Total Total
on-year income Assets shareholders'
Net change) per equity
income share
(Y millions) (%) (Y) (Y millions) (Y millions)
Fiscal 2000
(interim) 11,569 (780.0) 205.80 124,800 69,027
Management Policy
1. Management Policy
Currently, Konami carries out its operations based on the primary keywords
'competition, global standards, and high profits.' In other words, Konami
innovates its operations to increase value to shareholders and maintain high
profitability by avoiding conventional business practices, ascertaining areas of
cooperation and confrontation, and evaluating its performance based on global
standards.
Konami specifies its business domain as the computer entertainment industry, or
entertainment via computer, surpassing those of conventional games. We have
received solid support from and established an excellent reputation among
consumers by providing a wide array of exciting digital offerings. Our goal is
to establish a position of respect as a company with products covering every
aspect of the computer entertainment industry, from hardware to software and
services.
2. Profit appropriation and dividend Policy
Konami believes that the best ways to return profits to shareholders are
by providing stable dividends and improving corporate value.
Our policy is to set total dividends at 30% of consolidated net income
and steadily increase dividends per share.
The reinvestment of cash flow efficiently improves shareholder value
in the fastgrowing computer entertainment industry. With the aim of
maintaining a Return on Equity higher than 15%, we work from a long-term point
of view by promoting the retirement of treasury stocks and placing investment
priority on the development of new products and businesses.
3. Midterm to Long Term Strategies
The borders between industries such as games, film, music, publishing, and
communications are steadily disappearing, significantly expanding the scope of
the computer entertainment industry. In this situation, business alliances,
outsourcing and other new methods of doing business are growing more
sophisticated. Konami believes that brand image, production capability,
marketing strength, and financial resources are the most important
factors to improve its performance. For this reason, we endeavor to make
strengthen in these areas and consider strategic merges, acquisitions and
business cooperation.
In addition, to enhance the management of the Konami Group, we are creating a
stable and robust management system and financial position while promoting the
public offering of shares of Konami Group companies and the disclosure of
information.
4. Issues
Konami has promoted a management system based on each division ensuring
its own profitability and on business diversification. In the first half
of fiscal 2000, a product strategy spanning different business divisions
added to synergy and increased our operating margin to 25.5%.
Although the computer entertainment market continues to expand in
scale around the world, our market share is obviously inclined toward the
Japanese market. However, we believe that meeting the challenge of global
competition and establishing a solid position in overseas markets will
lead to greater operational efficiency and stabilized growth and profits.
With the support of shareholders and investors, Konami Co., Ltd., the
parent company of the Konami Group, listed its shares on the London Stock
Exchange in September 1999. We are now using this achievement as an
opportunity to raise awareness of the Konami name in overseas markets.
Performance
1. Midterm Review
In the first half of fiscal 2000, ended September 30, 1999, the Japanese
economy bottomed out, with signs of recovery emerging largely as a result
of governmental measures taken to restore confidence and improve the
overall economic situation. Consumer spending, however, remained sluggish, which
negatively affected results in the computer entertainment industry. In this
environment, a major factor in deciding winners and losers in the industry was
the ability to produce and market titles that reflected recent trends and
captured consumers' hearts.
Determined to stay ahead of the competition, Konami took full advantage of
business division synergies to further solidify consumer support of its
products. For example, in the music-simulation game genre-which we pioneered
last year by introducing new, widely popular amusement machines in Japan-we
adapted existing offerings into new home video games. Also, we promoted new
consumer products, including a card game based on one of our popular home video
games. Highly evaluated for its lineup of sports games, Konami expanded sales of
its baseball, soccer, and other sports-related home video games during the
period under review. As a result, Konami was able to achieve a record high in
consolidated net sales for the first half, to Y78.2 billion.
Business results by Division
Consumer-Use Software
In the first half of fiscal 2000, we introduced new consumer-use software
titles spanning a range of genres and achieved an increase in sales.
Notably strong sellers were Dance Dance Revolution and Dance Dance
Revolution 2nd ReMIX, for the PlayStation platform, adapted from our
highly popular amusement machines. In addition, the Game Boy version of
YU-Gl-OH! DUEL MONSTERS II -DARK DUEL STORIES-, which has been a major
hit since its release in fiscal 1999, contributed significantly to sales
in this division. Other major titles introduced during the term included
JIKKYO POWERFUL PRO BASEBALL' 99, INTERNATIONAL SUPERSTAR SOCCER PRO
EVOLUTION, GUITAR FREAKS, and beatmania APPEND GOTTAMIX, for the
PlayStation platform; and J. LEAGUE 1999 PERFECT STRIKER 2 for the
Nintendo 64 platform. In this environment, first-half sales by the
Consumer-Use Software Division reached Y35.0 billion.
Amusement Machines
Strong sellers in the Amusement Machines Division included the
dance-simulation game Dance Dance Revolution 2nd MIX and the
music-simulation game DRUM MANIA. Synergistic activities with the
Consumer-Use Software Division resulted in the introduction of a special
controller for the PlayStation version of Dance Dance Revolution, which
also contributed to results. As a result, sales by this division during
the first half was Y15.9 billion.
Game Machines
The Game Machines Division posted robust sales of the music-simulation game
Pop'n Music 2 as well as of kits for beatmania 4th MIX and beatmania 5th MIX.
Also, exports to Australia of knockdown components for video slot machines sold
solidly. Overall, the division's sales was Y6.1 billion during the first half .
Pachinko Systems
During the term, Konarni's pachinko systems further built on their excellent
reputation in the marketplace for creating an atmosphere of fun and excitement.
As a result sales of this division reached Y5.8 billion.
Creative Products
Sales of YU-GI-OH! OFFICIAL CARD GAME DUEL MONSTERS, which benefited from
synergy with widely popular YU-GI-OH! offerings from the Consumer-Use
Software Division, soared during the first half owing in part to an
effective marketing campaign including magazines, games, and events. As a
result, sales by the Creative Products Division was Y12.1 billion, supported by
a higher sales performance compared with the previous period.
Amusement Operations
We opened a Konami-managed facility in Kochi Prefecture and closed two
unprofitable facilities. As a result, the total number of facilities we
manage stood at 18 at the end of first half. As a result, sales of this
division was Y2.2 billion.
Sales of Finance and Other divisions reached Y0.9 billion during the
first half of fiscal 2000.
The significant increase in net sales-boosted notably by expanded sales of high
return products as well as successful efforts throughout the Group to reduce
costs and raise management efficiency supported a record high in Recurring
profit, to Y19.9 billion. In addition, in order to achieve a more sound contents
of the Group assets, we sold some our real estates - dormitory, company house,
on which Y3.2 billion losses occurred accordingly. On the other hand, an
extraordinary profit of Y7.0 billion was realized on the initial public offering
of shares of one of our consumer software producing subsidiary. Thereby
consolidated net income for the six-month period amounted to Y14.0 billion.
Further, in recogonition of our excellent consolidated financial results during
the first half of fiscal 2000, we set midterm dividends at Y45 per share of
common stock, an increase of Y30 per share over the corresponding period of
fiscal 1999.
2. Outlook for the Year
It is still too early to be optimistic about the near-term economic climate in
Japan, particularly in light of ongoing industrial and corporate restructurings.
Moreover, imminent new hardware offerings, including the PlayStation 2, portend
higher stakes and even greater competition in the computer entertainment
industry.
Given this environment, during the Christmas/New Year and springtime peak sales
seasons Konami will introduce new and appealing products capable of attracting a
wide range of customers. At the same time, we will step up efforts to raise
management efficiency and thereby further improve our profitability.
In fiscal 2000, Konami forecasts that net sales will expand 27.0%, to
Y144.0 billion, while recurring profit is seen increasing 66.9%, to Y27.0
billion, and net income is predicted to grow 233.1%, to Y17.0 billion.
Y2K Countermeasurement
To ensure that our customer response capabilities and general operations
continue uninterrupted through the new year, Konami has prioritized a
proactive response to the year 2000 (Y2K) computer bug. In fiscal 1998,
we assigned a director in charge of dealing with Y2K issues as part of
our Y2K Response Promotion Project, which is addressing the problem
throughout the Konami Group.
In April 1997, Konami transferred all of its core business systems to
R/3, a comprehensive package management system installed with Y2K
countermeasures, developed by SAP A.G. of Germany. Even so, countermeasure
development and testing are necessary for the network environment linking
companies in the Konami Group, electronic data interchange (EDI) transferal with
customers, peripheral systems used by individual divisions, equipment with
built-in calendar management functions, and our products. In these areas, such
Y2K activities as evaluation, upgrading, testing, and response were mostly
completed for all business divisions by September 1999.
In addition, by September we had nearly completed a risk management plan that
includes a list of appropriate countermeasures as well as an instruction manual
for dealing with potential problems and damage. Through the end of 1999, we
will continue to formulate countermeasures, reconfirm our readiness, and hold
drills to sharpen our response to potential problems.
Consolidated Balance Sheets
(Millions of yen)
September 30, 1999 March 31 1999
Share of Share of
Total assets total assets
ASSETS:
I Current assets
Cash and cash equivalents Y 55,610 Y 23,526
Trade notes and accounts receivable 34,621 31,941
Marketable securities 683 1,563
Inventory 11,548 14,119
Prepaid expenses 1,255 1,243
Short-term loans 1,591 7,442
Deferred tax assets 1,780 -
Other 2,410 1,689
Allowance for doubtful receivables -361 -730
Total current assets 109,140 76.3 % 80,796 68.8 %
II Fixed Assets
1. Tangible
Buildings and structures 12,413 13,780
Machinery and transportation equipment 270 262
Tools and fixtures 2,630 2,934
Land 9,314 10,881
Construction in progress 2 76
Total tangible fixed assets 24,631 17.2 27,935 23.8
2. Intangible
In-house software 1,161 1,215
Telephone line rights 36 35
Other 53 19
Total intangible assets 1,251 0.9 1,270 1.1
3. Investments and other assets
Investment securities 129 174
Long-term prepaid expenses 127 122
Lease deposits 5,440 6,808
Deferred tax assets 1,519 -
Other 306 271
Total investments and other assets 7,524 5.3 7,377 6.3
Total fixed assets 33,407 23.4 36,583 31.2
Translation adjustments 377 0.3 3 0.0
Total assets Y 142,924 100.0 Y 117,383 100.0%
(Millions of yen)
September 30, 1999 March 31, 1999
Share of Share of
total assets total assets
LIABILITIES
I Current liabilities
Trade notes and accounts payable Y 22,176 Y 15,500
Short-term debt 3,746 4,521
Current portion of long-term debt 1,403 1,353
Current portion of straight
corporate bonds 400 400
Current portion of convertible bonds 10 5,367
Income taxes payable 10,839 8,455
Accrued expense 3,158 2,967
Allowance for bonuses 1,207 1,072
Deferred tax liabilities 24 -
Other 5,968 5,529
Total current liabilities 48,934 34.3 % 45,166 38.5 %
II Long-term liabilities
Straight corporate bonds 15,000 15,000
Long-term debt 6,881 7,415
Allowance for directors' retirement
benefits 1,258 1,020
Other 48 1,169
Total long-term liabilities 23,188 16.2 24,605 20.9
Total liabilities 72,122 50.5 69,771 59.4
MINORITY INTEREST: 2,047 1.4 704 0.6
SHAREHOLDERS' EQUITY:
I Common stock 15,787 11.0 13,014 11.1
II Additional paid-in capital 15,509 10.9 12,726 10.9
III Retained earnings 37,701 26.4 21,511 18.3
68,997 48.3 47,252 40.3
IV Treasury stock - 243 0.2 -344 0.3
Total shareholders' equity 68,754 48.1 46,907 40.0
Total liabilities, minority interest
and shareholders' equity Y 142,924 100.0% Y 117,383 100.0%
Consolidated Statement of Income
(millions of yen)
Six months ended Year ended
September 30 1999 March 31, 1999
Share of Share of
net sales net sales
I Net sales Y 78,246 100.0 % Y 113,413 100.0 %
Cost of sales 47,001 60.1 75,029 66.2
II Gross profit 31,245 39.9 38,384 33.8
Selling, general and
administrative expenses 11,290 14.4 21,649 19.1
III Operating income 19,955 25.5 16,735 14.7
IV Non-operating income 812 1.0 983 0.9
Interest and dividend income 56 141
Gain on sale of marketable securities 387 -
Foreign exchange gains - net - 337
Rents income 112 202
Other 256 302
V Non-operating expenses 813 1.0 1,541 1.3
Interest expense 334 816
Devaluation of marketable securities - 218
Bond issuance expense - 91
Foreign exchange losses - net 53 -
Other 424 414
Recurring profit 19,954 25.5 16,176 14.3
VI Extraordinary income 8,894 11.4 57 0.0
Reversal of allowance for doubtful
receivables 208 -
Gain on sale of fixed assets - 57
Gain on sale of subsidiaries share 7,021 -
Gain arising from sales by a
subsidiary of its own shares 1,665 -
VII Extraordinary losses 3,283 4.2 1,589 1.4
Loss on sale or disposal of
fixed assets 3,259 814
Loss on sale of investment securities 23 -
Loss on disposal of inventory - 775
Income before income taxes (interim)25,565 32.7 14,645 12.9
Income, local and enterprise taxes 10,949 14.0 9,326 8.2
Deferred tax adjustments 394 0.5 - -
Minority interest (subtracted) 216 0.3 214 0.2
Net income (interim) 14,004 17.9 5,104 4.5
Appropriation of Retained Earnings
(Millions of yen)
Six months ended Year ended
September 30,1999 March 31, 1999
I Retained earnings at beginning of term Y 21,511
Other retained earnings at beginning
of term - Y 17,189
Legal reserve at beginning of term - 666
Deferred tax adjustments 3,363 24,874 - 17,855
II Decrease from retained earnings
Cash dividends 1,003 1,058
Directors'bonuses 170 165
Decrease by consolidating previously
unconsolidated subsidiaries 4 1,177 225 1,449
III Net income (interim) 14,004 5,104
IV Retained earnings at end of term (interim) Y 37,701 Y 21,511
Summary of Significant Accounting Policies
(1) Scope of consolidation
Consolidated subsidiaries 31
Companies included Konami Computer Entertainment Osaka Co., Ltd.,
Konami Computer Entertainment Tokyo Co., Ltd.,
Konami Computer Entertainment Japan Co., Ltd.,
Konami Amusement of Europe Ltd.,
Konami of Europe GmbH.,
Konami of America, Inc., and 25 others.
Consolidation (New): Konami Nisshou-Bowl Entertainment Co., Ltd.
Konami Do Brasil Ltda.
Non-consolidated
subsidiaries: None
(2) No affiliates and subsidiaries are applicable under equity method.
(3) Fiscal year-end of consolidated subsidiaries
The fiscal year-end of all consolidated subsidiaries is the same as that of
the parent company (the Company).
(4) Accounting standards
The accounting standards of all consolidated subsidiaries are the same as
those of the Company, except that overseas consolidated subsidiaries adopt
partly first-in, first-out method for evaluation of inventory, and mainly
straight-line method for depreciation of fixed assets.
(5) Evaluation method on assets and liabilities of consolidated subsidiaries
All consolidated subsidiaries adopt fair market value method for evaluation
of assets and liabilities.
(6) Amortization of cost in excess of net book value of consolidated
subsidiaries
The difference between the cost and underlying net equity of investments in
subsidiaries at acquisition is included in investments in other assets and
is amortized on a straight-line basis over five years or if not significant
in amount, such difference is charged to income when incurred.
(7) Appropriation of Retained Earnings
The consolidated statement of Appropriation of Retained Earnings is
prepared based on the income/loss to be disposed of as decided during the
first half of fiscal 2000.
(Additional information)
Deferred tax accounting is adopted from the first half of fiscal 2000.
Notes:
(1) Consolidated Balance Sbeet
In-house software, which was previously included in 'Long-term prepaid
expenses', is adopted in 'In-house software' under Intangible fixed assets
from the first half of fiscal 2000. Figures for previous terms have been
recalculated accordingly.
(2) Consolidated Statements of Income
In line with the change of the deferred tax accounting from the first half
of fiscal 2000, 'Net income (interim)' is Y394 million less, than would
have been the case under accounting methods used previously.
Accounting for leases
Finance leases transactions other than those in which official ownership of
leased equipment is transferred to the lessee.
(1) Acquisition cost equivalent, accumulated depreciation equivalent and interim
term-end balance equivalent
(Millions of yen)
September 30,1999 March 31, 1999
Acquisition Accumulated Aquisition Accumulated Balance
cost depreciation Balance cost depreciation equiv.
equivalent equivalent equiv. equivalent equivalent
Tools & fixtures 4,539 2,050 2,489 4,077 1,557 2,519
Total 4,539 2,050 2,489 4,077 1,557 2,519
(2) Obligation under finance lease at interim term-end, disbursement lease
amount, and depreciation equivalent
(Millions of yen)
September 30, 1999 March 31, 1999
Obligation under finance leases at interim term end
Due within 1 year 738 1,200
Due after 1 year 1,750 1,319
Total 2,489 2,519
Disbursement lease amount 683 1,159
Depreciation equivalent 683 1,159
Notes:
1. Since the total value of unexpired leases at interim term-end occupies
only a small share of the interim term-end value of tangible fixed assets,
acquisition cost and total value of unexpired leases at interim term-end are
calculated inclusive of interest.
2. Method of calculating depreciation expenses
Calculated according to the straight-line method, whereby the lease period
is computed as useful life and the remaining payment amount is computed as
zero.
Segment Information
a. Operations in Different Division
Sales and operating income
Six months Ended September 30, 1999 Millions of yen
Consumer Amusement Game Pachinko Creative Amusement
Use Machines Machines Systems Products Operations
Software
Net sales:
To customers Y35,044 Y15,927 Y6,160 Y5,867 Y12,105 Y2,213
Intersegment 51 69 148 - 38 -
Total 35,095 15,996 6,308 5,867 12,143 2,213
Operating
expenses 23,367 11,830 5,080 4,786 7,694 2,175
Operating Income 11,727 4,166 1,227 1,080 4,449 38
Eliminations
Finance Other Total and
Net sales: Corporate Consolidated
To customers Y 41 Y 887 Y78,246 - Y 78,246
Intersegment 74 1,150 1,532 (1,532) -
Total 116 2,038 79,779 (1,532) 78,246
Operating expenses 110 1,849 56,894 1,397 58,291
Operating income 5 189 22,885 (2,930) 19,955
Notes:
1. The Companies are primarily engaged in the manufacture and sale of products
in eight major segments grouped on the basis of similarities in the type, nature
and production methods of their products.
The eight segments, namely, ConsumerUse Software, Amusement Machines, Game
Machines, Pachinko Systems, Creative Products, Amusement Operations, Finance and
Other, mainly consist of the following products:
Consumer-Use Software: Software for home video games
Amusement Machines : Coin-operated game machines and Dance simulation
game machines for amusement operations;
Game Machines : Token-operated game machines and Disc jockey
simulation game machines for amusement operations;
Pachinko Systems : Software with LCD units for pachinko game machine
makers; Sale of pachinko slot machines
Creative Products : Character goods; portable games; intellectual
property; procurement and distribution of
home use game software created by other companies
Amusement Operations : Operations of amusement centers
Finance : Loans to group companies
Other : Management of real estate, etc.
2. Unallocated operating expenses in the Eliminations and Corporate column,
mainly consisting of the administrative expenses of the Company, amounted to
Y2,841 million for the six months ended September 30, 1999.
b. Operations by Regions
Millions of yen
Six months Ended September 30,1999 Eliminations
and
Japan America Europe Asia Total Corporate Consolidated
Net sales:
To customers Y 66,253 5,415 5,237 1,340 78,246 - 78,246
Intersegment 8,326 12 10 55 8,404 (8,404) -
Total 74,580 5,427 5,247 1,395 86,651 (8,404) 78,246
Operating expenses 54,738 5,378 5,055 1,192 66,365 (8,074) 58,291
Operating income
(loss) 19,842 48 191 203 20,285 (330) 19,955
Notes:
1. Regions are categorized by geographical proximity.
2. For the six months ended September 30,1999, the operations by regions
are summarized in three segments (except Japan) by geographical area based
on the countries in which they are located. The overseas segments
consisted of the following countries:
America: United States of America, Brazil
Europe: United Kingdom, Germany, France
Asia: Hong Kong, Singapore, Republic of Korea
3. Unallocated operating expenses in the Eliminations and Corporate column,
mainly consisting of the administative expenses of the Company, amounted to
Y2,841million for the six months ended September 30,1999.
c. Overseas Sales
Millions of yen
Six months ended September 30,1999 America Europe Other Total
Overseas sales (A) Y 5,997 Y 4,876 Y 3,184 Y 14,058
Consolidated sales (B) - - - 78,246
(A)/(B) 7.7% 6.2% 4.1% 18.0%
Notes
1. Regions are categorized by geographical proximity.
2. For the six months ended September 30, 1999, the overseas sales are
summarized in three segments by geographic area on the countries in which
they are located. The overseas segments consisted of the following
countries:
America: United States of America, Canada, Brazil, others
Europe: United Kingdom, Germany, France, others
Other: HongKong, Singapore, Australia, others
3. Overseas sales consist of the sales of Konami and consolidated companies
outside Japan.
FISCAL 2000 -- INTERIM NON-CONSOLIDATED FINANCIAL RESULTS
1. Date of Board Meeting on interim financial results. November18, 1999
2. Date of commencement of interim dividend payment: December10, 1999
3. Fiscal 2000 interim results (for the six months ended September 30, 1999)
(1) Performance (Figures truncated)
(Year on Operating (Year on Recurring (Year on
Net sales year income year change) profit year
(Y millions) change)(Y millions) (%) (Y millions) change)
(%) (%)
Fiscal 2000
(interim) 69,507 (82.8) 16,661 (432.8) 16,581 (537.7)
Fiscal 1999
(interim) 38,024 (22.4) 3,127 (16.1) 2,599 (6.9)
Fiscal 1999
(annual) 100,779 14,215 12,918
(Year-on-year Net income
Net income change) per share Accounting standards
(Y millions) (%) (Y)
Fiscal 2000
(interim) 11,569 (780.0) 205.80 Interim financial
statements preparation
standards
Fiscal 1999
(interim) 1,314 (-42.2) 37.13 Interim financial
statements preparation
standards
Fiscal 1999
(annual) 5,006 141.15
Notes: 1. Average number of shares outstanding
Fiscal 2000 (interim) 56,217,159 shares
Fiscal 1999 (interim) 35,409,777 shares
Fiscal 1999 (annual) 35,466,584 sharcs
2. Changes in accounting policy: None
(2) Dividends
Cash dividends per share
Interim Annual
(Y) (Y)
Fiscal 2000 (interim) 45.00 -
Fiscal 1999 (interim) 15.00 -
Fiscal 1999 (annual) - 43.00
Note: There is no commemorative or special dividend included in interim
fiscal 2000.
(3) Financial position
Total shareholders' Equity-assets Total sharcholders'
Total assets equity ratio equity per share
(Y millions) (Y millions) (%) (Y)
Fiscal 2000
(interim) 124,800 69,027 55.3 1,213.95
Fiscal 1999
(interim) 90,542 46,547 51.4 1,314.55
Fiscal 1999
(annual) l03,527 51,705 49.9 1,433.51
Note: 1. Number of shares outstanding
September 30, 1999 56,862,074 shares
September 30, 1998 35,409,777 shares
March 31, 1999 36,069,374 shares
(Par-value stock: 100-share units)
2. Excess of market value over book value of securities at September 30, 1999
Y59,388 million.
3. Excess of market value over contract amount for financial derivatives at
September 30, 1999
Y - million.
(4) Fiscal 2000 forecast (Year ending March 31, 2000)
Cash dividends per share
Net sales Recurring profit Net income Interim Year-end
(Y millions) (Y millions) (Y millions) (Y) (Y)
Fiscal 2000 124,000 22,000 14,000 45.00 90.00
Notes:
1. Full-year net income per share forecast for fiscal 2000 is Y246.21,
2. Fluctuations may occur in dividends per share, because the Company's
objective for cash dividends per share is set at 30% of consolidated net
income.
3. These estimates are forward-looking statements based on a number
of assumptions and beliefs in light of the information currently
available to management and subject to significant risks and uncertainties.
Actual financial results may differ materially depending on a number of
factors including, without limitation: general economic conditions in world
markets; exchange rates between the yen and other currencies in which
Konami makes significant sales or in which Konami's assets and liabilities
are denominated; and Konami's ability to continue to win acceptance of
its products, which are offered in highly competitive markets
characterized by continual new product introductions.
Interim Business Performance
Overview
In the first half of fiscal 2000, Konami's net sales climbed 82.8%, to
Y69,507 million, a record-high interim result. This significant increase
in net sales - boosted by expanded sales of high-return products,
supported a 537.7% increase in recurring profit , to Y16,581 million,
another record. And net income increased significantly to Y11,569 million, equal
to a 780.0% rise.
Divisional results
Net sales Year-on-year
(Millions of yen) Change (%)
Consumer-Use Software Division 32,229 68.6
Amusement Machines Division 14,618 565.3
Game Machines Division 6,139 -1.0
Pachinko Systems Division 5,242 -14.4
Creative Products Division 11,242 436.5
Other 35 -98.5
Total 69,507 82.8
The 98.5% decline in 'Other' businesses was mainly owning to the transfer
of Amusement Operation Division (amusement center operations) to our
subsidiary ' Konami Amusement Operation Co., Ltd.' as from April, 1999,
in order to raise the efficiency of management.
Outlook for the year
In fiscal 2000 (ended March 31, 2000), the Company forecasts net sales of
Y124,000 million (a 23.0% increase), recurring profit of Y22,000 million
(a 70.3% increase), and net income of Y14,000 million (a 179.7% increase).
Non-consolidated Balance Sheets and
Non-consolidated Statements of Income
(1) Non-consolidated Balance Sheets (Millions of yen)
September 30, September 30, March 31 , 1999
1999 Share of 1998 Share Of Share of
total assets total assets total assets
ASSETS:
Current assets Y 99,479 79.7% Y 54,183 59.8% Y 70,661 68.3%
Cash and cash equivalents 47,784 14,866 19,530
Trade notes receivable 753 4,416 786
Trade accounts receivable 32,019 22,725 28,465
Marketable securities 699 986 1,469
Finished products 2,356 1,645 2,048
Raw materials and supplies 765 1,204 686
Work in process 2,052 4,552 3,265
Advances 983 1,657 1,324
Prepaid expenses 692 572 575
Accounts receivable - other 158 83 256
Short-term loans 10,164 1,291 12,369
Other 1,267 364 157
Allowance for doubtful
receivables -218 -183 -274
Fixed Assets 25,321 20.3% 36,359 40.2% 32,866 31.7 %
Tangible fixed assets 12,498 10.0 20,520 22.7 19,142 18.5
Buildings 6,489 10,763 9,481
Structures 169 413 370
Machinery 4 5 4
Transportation equipment 40 16 21
Tools and fixtures 1,095 1,283 1,227
Land 4,699 7,959 7,959
Construction in progress - 78 76
Intangible fixed assets 890 0.7 1,007 1.1 1,008 0.9
In-house software 855 968 971
Telephone line rights 20 21 20
Other 15 17 16
Investments and
other assets 11,932 9.6 14,831 16.4 12,715 12.3
Shares of subsidiaries 9,234 9,963 9,963
Treasury stock 221 338 338
Long-term loans 111 221 166
Long-term prepaid expenses 6 36 7
Lease deposits 1,712 4,025 1,991
Other 648 249 249
Allowance for doubtful
receivables -1 -2 -1
Total assets Y124,800 100.0% Y 90,542 100.0 % Y103,527 100.0%
(Millions of yen)
September 30, 1999 September 30, 1998 March 31,1999
Share of Share of Share of
total liabilities total liabilities & total liabilities
& shareholders' equity shareholders equity & shareholders
equity
LIABILITIES:
Current liabilities Y 37,035 29.7% Y 17,947 19.8 % Y 33,326 32.2%
Trade notes payable 13,590 5,712 8,296
Trade accounts payable 7,209 6,953 6,350
Short-term debt 1,037 1,000 542
Current portion of
straight corporate bonds 400 - 400
Current portion of
convertible bonds 10 - 5,367
Accounts payable - other 2,647 1,522 3,789
Income taxes payable 9,546 1,693 6,775
Accrued expenses 1,719 198 1,110
Allowance for bonuses 566 687 512
Plant and equipment notes
payable 124 81 50
Stock purchase warrants 0 21 13
Other 182 77 119
Long-term liabilities 18,738 15.0 26,047 28.8 18,494 17.8
Straight corportate bonds 15,000 15,400 15,000
Convertible bonds - 7,246 -
Long-term debt 1,000 1,000 1,000
Liability for directors'
retirement benefits 1,258 932 1,020
Allowance for loss
incurred by subsidiaries 1,430 1,430 1,430
Long-term deposits 50 39 44
Total liabilities 55,773 44.7 43,994 48.6 51,821 50.0
SHAREHOLDERS' EQUITY:
Common stock 15,787 12.6 12,020 13.3 13,014 12.6
Legal reserve 16,416 13.2 12,460 13.7 13,515 13.1
Additional paid-in
capital 15,509 11,724 12,726
Legal reserve 906 735 788
Retained earnings 36,824 29.5 22,066 24.4 25,175 24.3
General reserve 22,803 18.3 19,878 22.0 19,878 19.2
Reserve for fixed asset
reduction 225 400 400
Other general reserve 22,578 19,478 19,478
Unappropriated profits
(interim) 14,020 11.2 2,187 2.4 5,297 5.1
(Interim net income) (11,569) (1,314) (5,006)
Total shareholders'
equity 69,027 55.3 46,547 51.4 51,705 50.0
Total liabilities and
shareholders equity Y 124,800 100.0% Y 90,542 100.0 Y103,527 100.0
(2)Non-consolidated Statements of Income (Millions of yen)
Six months ended Six months ended Year ended
September 30,1999 September 30,1998 March 31,1999
Share of Share of Share of
net sales net sales net shares
I Net sales Y 69,507 100.0 % Y 38,024 100.0 % Y 100,779 100.0%
Cost of sales 44,941 64.7 27,326 71.9 71,234 70.7
II Gross profit 24,566 35.3 10,697 28.1 29,555 29.3
Selling, general and
administrative expenses 7,905 11.3 7,570 19.9 15,329 15.2
III Operating income 16,661 24.0 3,127 8.2 14,215 14.1
1V Non-operating income 910 1.3 447 1.2 469 0.5
Interest income 78 23 95
Dividend income 83 96 163
Rents income 72 70 134
Gain on sale of marketable
securities 310 - -
Foreign exchange gains-net - 224 -
Other 364 32 76
V Non-operating expenses 990 1.4 974 2.6 1,765 1.8
Interest expense 50 61 89
Bond interest expense 191 103 327
Devaluation of marketable
securities - 695 218
Bond issuance expense - 90 91
Foreign exchange losses
-net 446 - 927
Other 301 23 110
Recurring profit 16,581 23.9 2,599 6.8 12,918 12.8
VIExtraordinary income 7,871 11.3 71 0.2 500 0.5
Gain on sale of fixed
assets 51 2 2
Gain on transfer of
intellectual property rights - - 498
Gain on sale of subsidiaries'
shares 7,763 - -
Other 56 69 -
VIIExtraordinary losses 3,339 4.8 29 0.1 1,410 1.4
Loss on sale or disposal
of fixed assets 3,281 29 633
Loss on disposal of
inventory - - 776
Other 58 - -
Income before income
taxes 21,113 30.4 2,641 6.9 12,009 11.9
Income and local taxes - 1,327 3.5 -
Income, local and
enterprise taxes 9,604 13.8 - - 7,003 6.9
Income tax adjustments -61 -0.1 - - -
Net income 11,569 16.7 1,314 3.4 5,006 5.0
Unappropriated profit at
beginning of term 914 873 873
Differed tax adjustments 1,373 - -
Reversal of reserve for
fixed asset reduction
following adoption of
deferred taxation 163 - -
Interim cash dividends - - 529
Transfer to leagal reserve
interim cash dividends - - 52
Unappropriated profit at end
of term (interim) Y 14,020 Y 2,187 Y 5,297
Basic principles used in preparation of interim financial statements
1. Accounting principles and practices, and variations thereof
a. Depreciation
Depreciation of fixed assets is recognized at one-half of the amount
estimated to be incurred for the annual period on the assets that exist at
the end of each semiannual period.
b. Accrued employees'bonuses
Half of the estimated annual employees'bonuses is allocated to the
semiannual period.
c. Director's retirement benefits
Provision for directors and corporate auditors' retirement benefits are
provided for at one half of the amount estimated to be incurred for the
annual period.
d. Income taxes and enterprise taxes
Income taxes and enterprise taxes are provided based on the taxable income
for each semiannual period.
The amounts for income taxes and income tax adjustments for the interim fiscal
period under review assume that the reversal of reserve for fixed asset
reduction in the current fiscal year will be disposed through the appropriation
of retained earnings.
2. Evaluation of inventories
Finished products, raw materials and work in process ... At cost, based on
the moving average method. Work in process of goods under production is
stated at cost, based on the specific identification method.
3. Methods and standards for evaluation of securities
(1) Securities listed on stock exchanges ... Lower of cost or market, based on
moving average method. (The method of adding back the credited reserve
amount in full to the income in the period.)
(2) Other securities ... At cost, based on moving average method.
4. Depreciation of tangible fixed assets
Declining balance method, conforming to the Corporate Tax Law.
5. Accounting for Leases
Finance lease transactions other than those in which official ownership of
leased equipment is transferred to the lessee are based on accounting
methods for operating lease transactions.
6. Other significant principles corresponding to preparation of interim
financial statements
Consumption tax
In principle, consumption tax withheld by the Company on the sale of goods and
services is exclude from the 'net sales' amount in the accompanying statements.
In addition, consumption taxes borne by the Company on expenses and the purchase
of goods and services are excluded from these figures. On suspense actions,
consumption tax pay and receivables offset each other. The difference between
these two figures is included as 'Accounts payable - other'
Notes to balance sheets
(1) Accumulated depreciation of tangible assets
(Millions of yen)
September 30, 1999 September 30, 1998 March 31, 1999
5,801 7,662 7,442
(2) Liability for guarantee (Millions of yen)
September 30, 1999 September 30, 1998 March 31, 1999
9,101 - 9,212
(3) Treasure stock
September 30, 1999 September 30, 1998 March 31, 1999
Listed under current
assets 2,081 shares 80 shares 1,314 shares
Y 21 million Y 0 million Y 6 million
Listed under fixed
assets 108,150 shares 110,000 shares 110,000 shares
Y 221 million Y 338 million Y 338 million
(4) Stocks issued during the semiannual period (ended September 30, 1999)
are classified as follows:
Number of Price
Item Type shares issued per share Capitalization
Issued as result of Common stock 2,666,083 shares Y 2,009.30 Y2,679 million
million
conversion of convertible
bonds into common stock
Issued due to exercise Common stock 91,930 shares Y 2,016.70 Y92 million
of new-share warrants
Issued as result of Common stock 18,034,687 shares - -
stock split
Note: The stock split was implemented on May 20, 1999 at the rate of 0.5
shares for each outstanding share, on the total number of share issued as of
March 31, 1999.
(5) The Company has adopted the deferred tax accounting from the period
under review. In line with this change, midterm results for 'Current
Assets', and 'Investments and other assets' are Y1,032 million and
Y402 million higher, respectively than would have been the case under
the Company's previous accounting system.
(6) In-house software, which was previously included in 'Long-term prepaid
expenses, is adopted in 'in-house software' under Intangible
fixed assets from the period under review. Figures for previous terms
have been recalculated accordingly.
(7) From the fist half of fiscal 2000, enterprise taxes payable and
business office taxes payable are included in 'Income taxes payable',
and 'Accounts payable-other' respectively. Figures for previous terms
have been recalculated accordingly.
Notes to statements of income
(1) Depreciation of tangible fixed assets
(Millions of yen)
September 30, 1999 September 30, 1998 March 31,1999
651 790 1,635
(2) Enterprise taxes (Y1,979 million as of September 30, 1999), which
were previously included in 'Selling, general, and administrative
expenses', are included in 'Income, local and enterprise taxes' from the
period under review owing to the revision of interim financial
statements standards.
(3) In line with the implementation of deferred tax accounting from the
period under review, 'Net income (interim)' and 'Unappropriate profits
(interim)' are Y61 million and Y1,536 million higher, respectively,
than would have been the case under accounting methods used previously.
Accounting for leases
Finance leases transactions other than those in which official ownership of
leased equipment is transferred to the lessee.
(1) Acquisition cost equivalent, accumulated depreciation equivalent, and
interim term-end balance equivalent
(Millions of yen)
September 30, 1999 September 30,1998
Acquisition Accumu- Acquisition Accumulated Balance
cost lated Balance cost depreciation equiva-
equivalent depre- equi- equi- equivalent lent
ciation valent valent
equi-
valent
Tools and
fixtures 244 102 141 380 116 263
Total 244 102 141 380 116 263
March 31, 1999
Acquisition Accumulated
Cost depreciation Balance
Equivalent equivalent equivalent
Tools and fixtures 216 80 136
Total 216 80 136
(2) Obligation under finance lease at interim term-end, disbursement lease
amount, and depreciation equivalent
(Millions of yen)
September 30, 1999 September 30, 1998 March 31, 1999
Obligation under finance leases at interim term-end
Due within 1 year 66 112 61
Due after 1 year 75 151 74
Total 141 263 136
Disbursement lease amount 32 57 91
Depreciation equivalent 32 57 91
Notes:
1. Since the total value of unexpired leases at interim term-end occupies only a
small share of the interim term-end value of tangible fixed assets, acquisition
cost and total value of unexpired leases at interim term-end are calculated
inclusive of interest.
2. Method of calculating depreciation expenses
Calculated according to the straight-line method, whereby the lease period is
computed as useful life and the remaining payment amount is computed as zero.
PERFORMANCE BY DIVISION
(Millions of yen)
Six months ended Six months ended
September 30, 1999 September 30, 1998
Share of Share of
Division Total net sales Total net sales
Consumer-Use Software Y 32,229 46.4 % Y 19,115 50.3 %
(6,673) (20.7) (5,025) (26.3)
Amusement Machines 14,618 21.0 2,197 5.8
(1,881) (12.9) (1,031) (46.9)
Game Machines 6,139 8.8 6,199 16.3
(1,592) (25.9) (878) (14.2)
Panchinko Systems 5,242 7.5 6,125 16.1
(-) (-) (-) (-)
Creative Products 11,242 16.2 2,095 5.5
(197) (1.8) (143) (6.8)
Amusement Operations - - 2,084 5.5
(-) (-) (-) (-)
Other 35 0.1 205 0.5
(-) (-) (0) (0.0)
Total Y 69,507 100.0 % Y 38,024 100.0 %
(10,344) (14.9) (7,078) (18.6)
(Millions of yen)
Year-on-year Year ended
Change March 31, 1999
Share of
Division % Total net sales
Consumer-Use Software 6.8 % Y 53,347 52.9 %
(32.8) (16,680) (31.3)
Amusement Machines 565.3 9,367 9.3
(82.4) (2,175) (23.2)
Game Machines -1.0 13,379 13.3
(81.3) (2,060) (15.4)
Panchinko Systems -14.4 10,737 10.7
(-) (-) (-)
Creative Products 436.5 9,163 9.1
(37.8) (382) (4.2)
Amusement Operations 0.0 4,428 4.4
(-) (-) (-)
Other -82.9 354 0.3
(0.0) (0) (0.0)
Total 82.8 % Y100,779 100.0 %
(46.1) (21,299) (21.1)
Note: 1. Figures in parentheses denote export sales.
2. Amusement Operations Division was transferred to our subsidiary
'Konami Amusement Operation Co., Ltd.'. as from the first half of
fiscal 2000.
Orders Received and
Orders Outstanding for Mainstay Products
The Company does not conduct order-based production
Market Value of Securities and Derivative Transactions
1. Market Value of Securities
(Millions of yen)
September 30, 1999 September 30, 1998
Balance Market Unrealized Balance Market Unrealized
sheet value gain/loss sheet value gain/loss
amount amount
(1) Current assets
Stocks 699 1,044 344 986 994 7
Subtotal 699 1,044 344 986 994 7
(2) Fixed assets
Stocks 552 59,595 59,043 338 402 64
Subtotal 552 59,595 59,043 338 402 64
Total 1,252 60,640 59,388 1,324 1,397 72
March 31, 1999
Balance Market Unrealized
sheet value gain/loss
amount
(1) Current assets
Stocks 1,469 1,625 155
Subtotal 1,469 1,625 155
(2) Fixed assets
Stocks 338 481 143
Subtotal 338 481 143
Total 1,807 2,107 299
Notes:
1. Market value
(1) Listed securities...Principally closing prices on the Tokyo Stock Exchange.
(2) Over-the counter securities...Trading prices announced by the Japan
Securities Dealers Association
2. Figures for 'Stocks' listed under 'Current assets in the above table include
Treasury stock, Related - Unrealized gain/loss
September 30, 1999 September 30, 1998 March 31, 1999
Listed under
current assets Y 0 million Y 0 million Y 0 million
Listed under
fixed assets Y892 million Y 64 million Y 143 million
3. Securities not listed above
September 30, 1999 September 30, 1998 March 31, 1999
Included in
'Fixed assets'
(Unlisted Stocks
excluding
over-the-counter
securities) Y 8,903 million Y 9,963 million Y 9,963 million
2. Contract value, Market value and Unrealized gain(loss) of Derivative
Transaction
(Millions of yen)
September 30, 1999 September 30, 1998
Contract Market Unrealized Contract Market Unrealized
amount value gain(loss) amount value gain(loss)
(term (term
over 1 over 1
year) year)
Unlisted transactions
Interest swaps
Receive floating/ 1,000 - - 1,000 - -
pay fixed (1,000) (1,000)
Total 1,000 - - 1,000 - -
(Millions of yen)
March 31, 1999
Contract Market Unrealized
amount value gain(loss)
(term
over 1
year)
Unlisted transactions
Interest swaps
Receive floating/ 1,000 - -
pay fixed (1,000)
Total 1,000 - -
Note: Above swap transaction was arranged to hedge against interest rate
fluctuations on a (floating-rate) long-term loan. The unrealized
gain/loss related was immaterial, and had no effect on the Company's
Statement's of Income.
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